As filed with the Securities and Exchange Commission on September 29, 1998
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
INTEGRATED SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
California 94-2658153
(State of Incorporation) (I.R.S. Employer Identification No.)
201 Moffett Park Drive, Sunnyvale, California 94089
(Address of Principal Executive Office Including Zip Code)
INTEGRATED SYSTEMS, INC.
1988 STOCK OPTION PLAN
1998 EQUITY INCENTIVE PLAN
(Full title of the plan)
Narendra K. Gupta
Integrated Systems, Inc., 201 Moffett Park Drive
Sunnyvale, California 94089
(408) 542-1500
(Name, address and telephone number of agent for service)
Copy to:
Katherine Tallman Schuda
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
<TABLE>
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CALCULATION OF REGISTRATION FEE
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Proposed
Maximum
Title of Amount Offering Proposed Maximum
Securities to to be Price per Aggregate Offering Amount of
Be Registered Registered Share (1) Price Registration Fee
- ----------------------- ---------------------- ---------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
Common Stock 2,000,000 $9.50 $19,000,000 $5,605
- ----------------------- ---------------------- ---------------------- --------------------- ----------------------
<FN>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rules 457(h) and 457(c) under the Securities Act of
1933 and based upon an average of the high and low prices reported on
the Nasdaq National Market on September 24, 1998.
</FN>
</TABLE>
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed with the Securities and Exchange
Commission (the "Commission") are incorporated by reference in this Registration
Statement:
1. The Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1998, filed pursuant to Section 13(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which Annual Report
contains audited financial statements for the fiscal year ended February 28,
1998;
2. The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended May 31, 1998 filed pursuant to Section 13(a) of the Exchange Act;
and
3. The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A filed with the Commission under
Section 12(g) of the Exchange Act, including any amendment or report filed for
the purpose of updating such description.
All documents filed by the Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date of this Registration
Statement, and prior to the filing of a post-effective amendment which indicates
that all securities registered hereby 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 a part hereof from the date
of the filing of such documents.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
The provisions of Section 317 of the California Corporations Code,
Article V of the Registrant's Amended and Restated Articles of Incorporation and
Article VI of the Registrant's Bylaws provide for indemnification for expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with any proceeding arising by reason of the fact that any person
is or was a director or officer of the Registrant. The Registrant's directors
and executive officers have also entered into Indemnity Agreements with the
Registrant that give such directors and executive officers contractual
assurances regarding the scope of the indemnification and liability limitations
set forth in the Registrant's Amended and Restated Articles of Incorporation and
Bylaws. The indemnification may be sufficiently broad to permit indemnification
of the Registrant's executive officers and directors for liabilities arising
under the Securities Act. In addition, Article IV of the Registrant's Amended
and Restated Articles of Incorporation provides that the liability of the
Registrant's directors shall be eliminated to the fullest extent permissible
under California law. The Registrant maintains a director and officer liability
insurance policy.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or controlling persons of the Company pursuant
to the foregoing provisions, the Company has been informed that, in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and is therefore unenforceable.
II-1
<PAGE>
Item 7. Exemption From Registration Claimed.
Not applicable.
Item 8. Exhibits.
The following exhibits are filed herewith:
Exhibit No. Description
- ----------- -----------
4.01 Registrant's Amended and Restated Articles of
Incorporation (incorporated by reference to
Exhibit 3.01(i) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
February 28, 1996).
4.02 Registrant's Bylaws, as amended to date
(incorporated by reference to Exhibit 4.02 to
the Registrant's Registration Statement on
Form S-8, File No. 333-12799).
4.03 Registrant's 1988 Stock Option Plan and
related documents, as amended to date.
4.04 Registrant's 1998 Equity Incentive Plan.
5.01 Opinion of Fenwick & West LLP
23.01 Consent of Counsel (included in Exhibit 5.01)
23.02 Consent of PricewaterhouseCoopers LLP
24.01 Power of Attorney (See page II-5)
Item 9. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereto) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;
(c) 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.
Provided, however, that paragraphs (1)(a) and (1)(b) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished
II-2
<PAGE>
to the Commission by the registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) 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.
(5) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X is not set
forth in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Integrated Systems, Inc., 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 Sunnyvale, State of
California, on September 25, 1998.
INTEGRATED SYSTEMS, INC.
By: /s/ Narendra K. Gupta
-------------------------
Narendra K. Gupta
Secretary
II-4
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Narendra K. Gupta and William C. Smith and each of them, his true and lawful
attorneys-in-fact and agents, each with full power of substitution, for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
and to file the same, with exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, granting to
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<PAGE>
<TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<CAPTION>
Signature Title Date
- -------------------------------------- ------------------------------------- -------------------------------------
Principal Executive Officers:
<S> <C> <C>
/s/ Narendra K. Gupta Secretary and Chairman of the Board September 25, 1998
- ------------------------------------ of Directors
Narendra K. Gupta
/s/ Joseph Addiego Interim Chief Executive Officer September 25, 1998
- ------------------------------------
Joseph Addiego
Principal Financial Officer and
Principal Accounting Officer:
/s/ William C. Smith Vice President, Finance and Chief September 25, 1998
- ------------------------------------ Financial Officer
William C. Smith
Additional Directors:
Director September __, 1998
- ------------------------------------
David St. Charles
/s/ Thomas Kailath Director September 25, 1998
- ------------------------------------
Thomas Kailath
/s/ Vinita Gupta Director September 25, 1998
- ------------------------------------
Vinita Gupta
/s/John C. Bolger Director September 25, 1998
- ------------------------------------
John C. Bolger
/s/Richard C. Murphy Director September 25, 1998
- ------------------------------------
Richard C. Murphy
/s/Michael A. Brochu Director September 25, 1998
- ------------------------------------
Michael A. Brochu
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Exhibit
- -------------- -------
4.01 Registrant's Amended and Restated Articles of
Incorporation (incorporated by reference to
Exhibit 3.01(i) to the Registrant's Annual Report
on Form 10-K for the fiscal year ended February
28, 1996).
4.02 Registrant's Bylaws, as amended to date
(incorporated by reference to Exhibit 4.02 to the
Registrant's Registration Statement on Form S-8,
File No. 333-12799)
4.03 Registrant's 1988 Stock Option Plan and related
documents, as amended to date.
4.04 Registrant's 1998 Equity Incentive Plan.
5.01 Opinion of Fenwick & West LLP
23.01 Consent of Counsel (included in Exhibit 5.01)
23.02 Consent of PricewaterhouseCoopers LLP
24.01 Power of Attorney (See page II-5)
INTEGRATED SYSTEMS, INC.
1988 Stock Option Plan
As Adopted September 26, 1988
As Amended through March 28, 1997
1. PURPOSE. This Stock Option Plan ("Plan") is established to provide
incentive for selected persons to promote the financial success and progress of
Integrated Systems, Inc. (the "Company") by granting such persons options to
purchase shares of common stock of the Company.
2. ADOPTION AND SHAREHOLDER APPROVAL. This Plan shall be approved by
the shareholders of the Company, in any manner permitted by applicable corporate
law, within twelve (12) months before or after the date this Plan is adopted by
the Board of Directors of the Company (the "Board") and after the date of
certain amendments to the Plan. In addition, no later than twelve (12) months
after the Company becomes subject to Section 16(b) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") the Company will comply with the
requirements of Rule 16b-3 with respect to shareholder approval.
3. TYPES OF OPTIONS AND SHARES. Options granted under this Plan (the
"Options") may be either (a) incentive stock options ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986 (the "Code"), or (b)
nonqualified stock options ("NQSOs"), as designated at the time of grant. The
shares of stock that may be purchased upon exercise of Options granted under
this Plan (the "Shares") are shares of the common stock of the Company.
4. NUMBER OF SHARES. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan is Six Million (6,000,000) Shares,
subject to adjustment as provided in this Plan. If any Option is terminated for
any reason without being exercised in whole or in part, the Shares thereby
released from such Option shall be available for purchase under other Options
subsequently granted under this Plan. At all times during the term of this Plan,
the Company shall reserve and keep available such number of Shares as shall be
required to satisfy the requirements of outstanding Options under this Plan.
5. ADMINISTRATION. This Plan may be administered by the Board or a
Committee appointed by the Board (the "Committee"). If, at the time the Company
registers under the Exchange Act, a majority of the Board is not comprised of
Disinterested Persons, the Board shall appoint a Committee consisting of not
less than three persons (who need not be members of the Board), each of whom is
a "Disinterested Person" (as defined in Section 6(b)(iv) of the Plan) and an
"Outside Director" (as defined in Section 6(b)(vi) of the Plan) or qualifies
under transition rules as an Outside Director. As used in this Plan, references
to the "Committee" shall mean either such Committee or the Board if no Committee
has been established. After registration of the Company under the Exchange Act,
Board members who are not Disinterested Persons may not vote on any matters
affecting the administration of this Plan or on the grant of any Options
pursuant to this Plan to any officer or director of the Company or other person
(in each case, an "Insider") whose transactions in the Company's common stock
are subject to Section 16(b) of the Exchange Act, but any such member may be
counted for determining the existence of a quorum at any meeting of the Board
during which action is taken with respect to Options or administration of this
Plan and may vote on the grant of any Options pursuant to this Plan other than
to Insiders. The interpretation by the Committee of any of the provisions of
this Plan or any Option granted under this Plan shall be final and binding upon
the Company and all persons having an interest in any Option or any Shares
purchased pursuant to an Option. The Committee may delegate the authority to
officers of the Company to grant Options under this Plan to Optionees who are
not Insiders of the Company. No Optionee shall be eligible to receive more than
250,000 Shares at any time during the term of this Plan pursuant to the grant of
Options hereunder.
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6. ELIGIBILITY. Options may be granted only to such employees,
officers, directors and consultants of the Company or any Parent, Subsidiary or
Affiliate of the Company (as defined below) as the Committee shall select from
time to time in its sole discretion ("Optionees"), provided that only employees
of the Company or a Parent or Subsidiary of the Company shall be eligible to
receive ISOs. An Optionee may be granted more than one Option under this Plan.
(a) Assumption of Options. The Company may, from time to time,
assume outstanding options granted by another company, whether in connection
with an acquisition of such other company or otherwise, by either (i) granting
an option under this Plan in replacement of the option assumed by the Company,
or (ii) treating the assumed 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 assumption shall be permissible if the holder of the assumed
option would have been eligible to be granted an option hereunder if the other
Company had applied the rules of this Plan to such grant.
(b) Definitions. As used in the Plan, the following terms
shall have the following meanings:
(i) "Parent" means any corporation (other than
the Company) in an unbroken chain of corporations ending with the Company if, at
the time of the granting of the Option, each of 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.
(ii) "Subsidiary" means any corporation (other
than the Company) in an unbroken chain of corporations beginning with the
Company if, at the time of granting of the Option, each of the corporations
other than the last corporation in the unbroken chain owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
(iii) "Affiliate" means any corporation that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with another corporation, where
"control" (including the terms "controlled by" and "under common control with")
means the possession, direct or indirect, of the power to cause the direction of
the management and policies of the corporation, whether through the ownership of
voting securities, by contract or otherwise.
(iv) "Disinterested Person" shall have the
meaning set forth in Rule 16b-3(d)(3) as promulgated by the Securities and
Exchange Commission ("SEC") under Section 16(b) of the Exchange Act, as such
rule is amended from time to time and as interpreted by the SEC.
(v) "Fair Market Value" shall mean the fair
market value of the Shares as determined by the Committee from time to time in
good faith. If a public market exists for the Shares, the Fair Market Value
shall be the average of the last reported bid and asked prices for Common Stock
of the Company on the last trading day prior to the date of determination or, in
the event the Common Stock of the Company is listed on a stock exchange or the
Nasdaq National Market, the Fair Market Value shall be the closing price on such
exchange or quotation system on the last trading day prior to the date of
determination.
(vi) "Outside Director" shall mean any director
who is not (i) a current employee of the Company or any Parent, Subsidiary or
Affiliate of the Company, (ii) a former employee of the Company or any Parent,
Subsidiary or Affiliate of the Company who is receiving compensation for prior
services (other than benefits under a tax-qualified pension plan), (iii) a
current or former officer of the Company or any Parent, Subsidiary or Affiliate
of the Company or (iv) currently receiving compensation for personal services in
any capacity, other than as a director, from the Company or any Parent,
Subsidiary or Affiliate of the Company; provided, however, that at such time as
the term "Outside Director", as used in Section 162(m) of the Code, is defined
in the regulations promulgated under Section 162(m), "Outside Director" shall
have the meaning set forth in such regulations, as amended from time to time and
as interpreted by the Internal Revenue Service.
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7. TERMS AND CONDITIONS OF OPTIONS. The Committee shall determine
whether each Option is to be an ISO or an NQSO, the number of Shares for which
the Option shall be granted, the exercise price of the Option, the periods
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following terms and conditions:
(a) Form of Option Grant. Each Option granted under this Plan
shall be evidenced by a written Stock Option Grant ("Grant") in such form (which
need not be the same for each Optionee) as the Committee shall from time to time
approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
(b) Exercise Price. The exercise price of an Option shall be
not less than the Fair Market Value of the Shares, at the time that the Option
is granted. The exercise price of any Option granted to a person owning 10% or
more of the total combined voting power of all classes of stock of the Company
or any Parent or Subsidiary of the Company ("Ten Percent Shareholder") shall not
be less than 110% of the Fair Market Value of the Shares at the time of the
grant, as determined by the Committee in good faith.
(c) Exercise Period. Options shall be exercisable within the
times or upon the events determined by the Committee as set forth in the option
grant; provided, however, that no Option shall be exercisable after the
expiration of ten years from the date the option is granted, and provided
further that no Option granted to a Ten Percent Shareholder shall be exercisable
after the expiration of five years from the date the Option is granted.
(d) Limitations on ISOs. The aggregate Fair Market Value
(determined as of the time an Option is granted) of stock with respect to which
ISOs are exercisable for the first time by an Optionee during the calendar year
(under this Plan or under any other incentive stock option plan of the Company
or any Parent or Subsidiary of the Company) shall not exceed $100,000. If the
Fair Market Value of stock with respect to which ISOs are first exercised
exceeds $100,000, the Options for the first $100,000 worth of stock shall be
ISOs and options for the amount in excess of $100,000 shall be NQSOs.
(e) Date of Grant. The date of grant of an Option shall be the
date on which the Committee makes the determination to grant such Option unless
otherwise specified by the Committee. The Grant representing the Option shall be
delivered to the Optionee within a reasonable time after the granting of the
Option.
(f) Assumed Options. In the event the Company assumes an
option granted by another company, the terms and conditions of such option shall
remain unchanged (except the exercise price and the number and nature of shares
issuable upon exercise, which will be adjusted appropriately pursuant to Section
425(c) of the Code). In the event the Company elects to grant a new option
rather than assuming an existing option (as specified in Section 6(a), such new
option need not be granted at Fair Market Value on the date of grant and may
instead be granted with a similarly adjusted exercise price.
8. EXERCISE OF OPTIONS.
(a) Notice. Options may be exercised only by delivery to the
Company of a written notice and exercise agreement in a form approved by the
Committee, stating the number of Shares being purchased, the restrictions
imposed on the Shares and such representations and agreements regarding the
Optionee's investment intent and access to information as may be required by the
Company to comply with applicable securities laws together with payment in full
of the exercise price for the number of Shares being purchased.
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(b) Payment. Payment for the Shares may be made (i) in cash
(by check); (ii) by surrender of shares of common stock of the Company that have
been owned by Optionee for more than six (6) months (and which 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 were obtained by the Optionee in the open public
market, having a Fair Market Value equal to the exercise price of the Option;
(iii) where permitted by applicable law and approved by the Committee in its
sole discretion, by tender of a full recourse promissory note having such terms
as may be approved by the Committee; (iv) provided that a public market for the
Company's stock exists, through a "same day sale" commitment from the Optionee
and a broker-dealer that is a member of the National Association of Securities
Dealers (a "NASD Dealer") whereby the Optionee 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 (v) by any
combination of the foregoing where approved by the Committee in its sole
discretion. Optionees who are not employees or directors of the Company shall
not be entitled to purchase Shares with a promissory note unless the note is
adequately secured by collateral other than the Shares.
(c) Withholding Taxes. Prior to issuance of the Shares upon
exercise of an Option, the Optionee shall pay or make adequate provision for any
federal or state withholding obligations of the Company, if applicable.
(d) Limitations on Exercise. Notwithstanding the exercise
periods set forth in the Grant, exercise of an Option shall always be subject to
the following limitations:
(i) If an Optionee ceases to be employed by the
Company or any Parent, Subsidiary or Affiliate of the Company for any reason
except death or disability, the Optionee may exercise such Optionee's Options to
the extent (and only to the extent) that it would have been exercisable upon the
date of termination, within three (3) months after the date of termination (or
such shorter time period as may be specified in the Grant), provided that, if
Optionee is an Insider and the Company is subject to Section 16(b) of the
Exchange Act, the Optionee's Option will be exercisable for a period of time
sufficient to allow such Optionee from having a matching purchase and sale under
Section 16(b), with any extension beyond three (3) months from termination of
employment in the case of an Option constituting an ISO being deemed to be as an
NQSO, and provided further that in no event may an Option be exercisable later
than the expiration date of the Option.
(ii) If an Optionee's employment with the Company
or any Parent, Subsidiary or Affiliate of the Company is terminated because of
the death of the Optionee or disability of Optionee within the meaning of
Section 22(e)(3) of the Code, such Optionee's Options may be exercised to the
extent (and only to the extent) that it would have been exercisable by the
Optionee on the date of termination, by the Optionee (or the Optionee's legal
representative) within twelve (12) months after the date of termination (or such
shorter time period as may be specified in the Grant), but in any event no later
than the expiration date of the Options.
(iii) The Committee shall have discretion to
determine whether the Optionee has ceased to be employed by the Company or any
Parent, Subsidiary or Affiliate of the Company and the effective date on which
such employment terminated.
(iv) In the case of an Optionee who is a
director, independent consultant, contractor or advisor, the Committee will have
the discretion to determine whether the Optionee is "employed by the Company or
any Parent, Subsidiary or Affiliate of the Company" pursuant to the foregoing
Sections.
(v) An Option shall not be exercisable unless
such exercise is in compliance with the Securities Act of 1933, as amended, and
all applicable state securities laws, as they are in effect on the date of
exercise.
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(vi) The Committee may specify a reasonable
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent the Optionee from exercising
the full number of Shares as to which the Option is then exercisable.
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee. No Option may be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent and distribution.
10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the
rights of a shareholder with respect to any Shares subject to an Option until
the Option has been validly exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
of exercise, except as provided in this Plan. The Company shall provide to each
Optionee a copy of the annual financial statements of the Company, at such time
after the close of each fiscal year of the Company as they are released by the
Company to its shareholders.
11. ADJUSTMENT OF OPTIONS SHARES. In the event that the number of
outstanding shares of common stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration,
the number of Shares available under this Plan and the number of Shares subject
to outstanding Options and the exercise price per share of such Options shall be
proportionately adjusted, subject to any required action by the Board or
shareholders of the Company and compliance with applicable securities; provided,
however, that no certificate or scrip representing fractional shares shall be
issued upon exercise of any Option and any resulting fractions of a Share shall
be ignored.
12. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan shall confer on any Optionee any right to continue in the employ
of the Company or any Parent, Subsidiary or Affiliate of the Company or limit in
any way the right of the Company or any Parent, Subsidiary or Affiliate of the
Company to terminate the Optionee's employment at any time, with or without
cause.
13. COMPLIANCE WITH LAWS. The grant of Options and the issuance of
Shares upon exercise of any Options shall be subject to and conditioned upon
compliance with all applicable requirements of law, including without limitation
compliance with the Securities Act of 1933, as amended, any required approval by
the Commissioner of Corporations of the State of California, compliance with all
other applicable state securities laws and compliance with the requirements of
any stock exchange on which the Shares may be listed. The Company shall be under
no obligation to register the Shares with the SEC or to effect compliance with
the registration or qualification requirements of any state securities laws or
stock exchange.
14. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself or its assignee(s) in the Grant (a) a right of
first refusal to purchase any Shares that an Optionee (or a subsequent
transferee) may propose to transfer to a third party and (b) a right to
repurchase all Shares held by an Optionee upon the Optionee's termination of
employment or service with the Company or its Parent, Subsidiary or Affiliate of
the Company for any reason within a specified time as determined by the
Committee at the time of grant at (i) the Optionee's original purchase price
(provided that the right to repurchase at such price shall lapse at the rate of
at least 20% per year from the date of grant), (ii) the Fair Market Value of
such Shares as determined by the Committee in good faith or (iii) a price
determined by a formula or other provision set forth in the Grant.
15. ASSUMPTION OF OPTIONS BY SUCCESSORS. In the event of a dissolution
or liquidation of the Company, a merger in which the Company is not the
surviving corporation, or the sale of substantially all of the assets of the
Company, any or all outstanding Options shall, notwithstanding any contrary
terms of the Grant, accelerate and become exercisable in full at least ten days
prior to (and shall expire on) the consummation of such dissolution,
liquidation, merger or sale of stock or sale of assets on such conditions as the
Committee shall determine unless the successor corporation assumes the
outstanding Options or substitutes substantially equivalent options. The
aggregate Fair Market Value (determined at the time an Option is granted) of
stock with respect to ISOs which first become exercisable in the year of such
dissolution, liquidation, merger, sale of stock or sale of
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assets cannot exceed $100,000. Any remaining accelerated ISOs shall be NQSOs.
16. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time
terminate or amend this Plan in any respect (including, but not limited to, any
form of Grant, agreement or instrument to be executed pursuant to this Plan);
provided, however, that the Committee shall not, without the approval of the
holders of a majority of the outstanding voting shares of the Company, amend
this Plan in any manner that requires such shareholder approval pursuant to the
Code or the regulations promulgated thereunder as such provisions apply to
incentive stock option plans or pursuant to the Exchange Act or Rule 16b-3 (or
its successor) promulgated thereunder.
17. TERM OF PLAN. Options may be granted pursuant to this Plan from
time to time within a period of ten years from the date this Plan is adopted by
the Board.
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STOCK OPTION GRANT
Optionee:
Address:
Grant Number:
Total Options Granted:
Date of Grant:
Vesting Commencement Date:
Expiration Date:
Type of Stock Option:
1. Grant of Option. Integrated Systems, Inc. (the "Company"), a
California corporation, hereby grants to the optionee named on the previous page
("Optionee") an option (this "Option") to purchase the total number of shares of
common stock of the Company (the "Shares") at the exercise price per Share (the
"Exercise Price"), subject to all of the terms and conditions of this Grant and
the Company's 1988 Stock Option Plan as adopted September 26, 1988 and as
amended through May 25, 1994 (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 422A of the Internal Revenue Code of 1986
(the "Code").
2. Exercise Period of Option. Subject to the terms and conditions of
the Plan and this Grant, this Option shall become exercisable as follows:
(a) 25% of the Shares shall become exercisable one year after
the Vesting Commencement Date; and
(b) 1/48th of the Shares shall become exercisable at the end
of every one-month period thereafter;
provided, however, that this Option may not be exercised as to any fraction
of a Share and no compensation will be paid for any fractional Share; and
provided further that this Option shall expire on the Expiration Date and
must be exercised, if at all, on or before the Expiration Date.
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3. Restrictions on Exercise. Exercise of this Option is subject to the
following limitations:
(a) This Option may not be exercised unless such exercise is in
compliance with the Securities Act of 1933, as amended, and
all applicable state securities laws as they are in effect
on the date of exercise, any standback restrictions, and
the requirements of any stock exchange or national market
system on which the Company's Common Stock may be listed at
the time of exercise.
(b) This Option may not be exercised as to fewer than 100
Shares unless it is exercised as to all Shares as to which
this Option is then exercisable.
4. Termination of Option. Except as provided below in this Section,
this Option shall terminate and may not be exercised if Optionee ceases to be
employed by the Company or any Parent or Subsidiary of the Company (or in the
case of a nonqualified stock option, an Affiliate of the Company). Optionee
shall be considered to be employed by the Company if Optionee is an officer,
director or full-time employee of the Company, or any Parent, Subsidiary or
Affiliate of the Company or if the Board of Directors determines that Optionee
is rendering substantial services as a part-time employee, consultant or
independent contractor to the Company or any Parent, Subsidiary or Affiliate of
the Company. The Board of Directors of the Company shall have discretion to
determine whether Optionee has ceased to be employed by the Company or any
Parent, Subsidiary or Affiliate of the Company and the effective date on which
such employment terminated (the "Termination Date").
(a) If Optionee ceases to be employed by the Company or any
Parent, Subsidiary or Affiliate of the Company for any
reason except death or disability, this Option, to the
extent (and only to the extent) that it would have been
exercisable by Optionee on the Termination Date, may be
exercised by Optionee within three months after the
Termination Date; provided that if the Optionee is an
officer or director of the Company or other person (in
each case, an "Insider"), whose transactions in the
Company's Common Stock are subject to Section 16(b) of the
Exchange Act of 1934, as amended (the "Exchange Act") and
the Company is subject to Section 16(b) of the Exchange
Act, the Optionees's option will be exercisable for a
period of time sufficient to prevent such Optionee from
having a matching purchase and sale under Section 16(b).
Any extension beyond three (3) months from termination of
employment will be deemed to be an NQSO. In no event,
however, may an Option be exercisable later than the
Expiration Date.
(b) If Optionee's employment with the Company or any Parent,
Subsidiary or Affiliate of the Company is terminated
because of the death of Optionee or disability of Optionee
within the meaning of Section 22(e)(3) of the Code, this
Option, to the extent that it is exercisable by Optionee
on the Termination Date, may be exercised by Optionee (or
Optionee's legal representative)
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within twelve months after the Termination Date, but in
any event no later than the Expiration Date.
Nothing in this Plan or this Grant shall confer on Optionee any right
to continue in the employ of the Company or any Parent, Subsidiary or Affiliate
of the Company or limit in any way the right of the Company or any Parent,
Subsidiary or Affiliate of the Company to terminate Optionee's employment at any
time, with or without cause.
5. Manner of Exercise.
(a) This Option shall be exercisable by delivery to the Company
of an executed written Stock Option Exercise Form in the
form attached hereto as Exhibit A, or in such other form as
may be approved by the Company, which shall set forth
Optionee's election to exercise this Option, the number of
Shares being purchased, any restrictions imposed on the
Shares and such other representations and agreements
regarding Optionee's investment intent and access to
information as may be required by the Company to comply
with applicable securities laws.
(b) Such Stock Option Exercise Form shall be accompanied by
full payment of the Exercise Price for the Shares being
purchased (i) in cash (by check); (ii) where permitted by
applicable law and approved by the Committee in its sole
discretion, by tender of a full recourse promissory note
having such terms as may be approved by the Committee;
(iii) by any combination of the foregoing where approved by
the Committee in its sole discretion. Optionees who are not
employees or directors of the Company shall not be entitled
to purchase Shares with a promissory note unless the note
is adequately secured by collateral other than the Shares.
(c) Prior to the issuance of the Shares upon exercise of this
Option, Optionee must pay or make adequate provision for
any applicable federal or state withholding obligations of
the Company.
(d) Provided that such notice and payment are in form and
substance satisfactory to counsel for the Company, the
Company shall issue the shares registered in the name of
Optionee or Optionee's legal representative.
6. Notice of Disqualifying Disposition of ISO Shares. If the Option
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the date of this Grant, and (2) the date
one year after transfer of such Shares to the Optionee upon the exercise of the
ISO, the Optionee shall immediately notify the Company in writing of such
disposition. Optionee agrees that Optionee may be subject to income tax
withholding by the Company on the compensation income recognized by the Optionee
from the early disposition by payment in cash or out of the current earnings
paid to the Optionee.
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<PAGE>
7. Compliance with Laws and Regulations. The issuance and transfer of
Shares shall be subject to compliance by the Company and the Optionee 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. Optionee
understands that the Company is under no obligation to register or qualify the
Shares with the Securities and Exchange Commission, any state securities
commission or any stock exchange to effect such compliance.
8. Nontransferability of Option. This 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 the Optionee only by the Optionee. The terms
of this Option shall be binding upon the executors, administrators, successors
and assigns of the Optionee.
9. Tax Consequences. Set forth below is a brief summary as of the date
of this Option 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.
Optionee should consult a tax adviser before exercising this Option or disposing
of the shares.
(a) Exercise of ISO. If this Option qualifies as an ISO, there
will be no regular 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 federal income tax purposes and may subject the
Optionee to the alternative minimum tax in the year of
exercise.
(b) Exercise of Nonqualified Stock Option. If this Option does
not qualify as an ISO, there may be a regular federal
income tax liability and a California income tax liability
upon the exercise of the Option. The Optionee 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. The Company will be
required to withhold from Optionee's compensation or
collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this
compensation income at the time of exercise.
(c) Disposition of Shares. In the case of an NQSO, if Shares
acquired pursuant to the Option are held for at least one
year, any gain realized on disposition of the Shares will
be treated as long term capital gain for federal and
California income tax purposes. In the case of an ISO, if
Shares transferred pursuant to the Option are held for at
least one year after exercise and are disposed of at least
two years after the Date of Grant, any gain realized on
disposition of the Shares will also be treated as long
term capital gain for federal and California income tax
purposes. If Shares purchased under an ISO are disposed of
within
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<PAGE>
such one year period or within two years after the Date of
Grant, 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.
10. Interpretation. Any dispute regarding the interpretation of this
agreement shall be submitted by Optionee or the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the
Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or committee shall be final and
binding on the Company and on Optionee.
11. Entire Agreement. The Plan and the Stock Option Exercise Form
attached as Exhibit A are incorporated herein by reference. This Grant, the
Plan and the Stock Option Exercise Form constitute the entire agreement of the
parties and supersede all prior undertakings and agreements with respect to
the subject matter hereof.
INTEGRATED SYSTEMS, INC.
By:____________________________
David St. Charles
President and CEO
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<PAGE>
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan and the Form S-8
Prospectus relating thereto, represents that Optionee had read and understands
the terms and provisions thereof, and accept this option, Grant Number _____,
dated ______, subject to all the terms and conditions of the Plan and this Stock
Option Grant. Optionee acknowledges that there may be adverse tax consequences
upon exercise of this Option or disposition of the Shares and that Optionee
should consult a tax advisor prior to such exercise or disposition.
Optionee: __________________________
6
INTEGRATED SYSTEMS, INC.
1998 EQUITY INCENTIVE PLAN
As Adopted March 30, 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, Restricted Stock and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to
Sections 2.2 and 18, the total number of Shares reserved and available for grant
and issuance pursuant to this Plan will be 1,000,000 Shares plus (a) any
authorized shares not issued or subject to outstanding grants under the
Company's 1988 Stock Option Plan the ("Prior Plan") on the Effective Date (as
defined in Section 19 below); (b) shares that are subject to issuance upon
exercise of an option granted under the Prior Plan but cease to be subject to
such option for any reason other than exercise of such option; and (c) shares
that were issued under the Prior Plan which are repurchased by the Company at
the original issue price or forfeited. Subject to Sections 2.2 and 18, Shares
that are subject to: (x) issuance upon exercise of an Option but cease to be
subject to such Option for any reason other than exercise of such Option; (y) an
Award granted hereunder but are forfeited or are repurchased by the Company at
the original issue price; and (z) an Award that otherwise terminates without
Shares being issued, will again be available for grant and issuance in
connection with future Awards under this Plan. At all times the Company shall
reserve and keep available a sufficient number of Shares as shall be required to
satisfy the requirements of all outstanding Options granted under this Plan and
all other outstanding but unvested Awards granted under this Plan.
2.2 Adjustment of Shares. In the event that the
number of outstanding shares 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, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities laws; provided, however, that
fractions of a Share will not be issued but will either be replaced by a cash
payment equal to the Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.
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. All other
Awards may be granted to employees, officers, directors, consultants,
independent contractors and advisors of the Company or any Parent or Subsidiary
of the Company; provided such consultants, contractors and advisors render bona
fide services not in connection with the offer and sale of securities in a
capital-raising transaction. No person will be eligible to receive more than
200,000 Shares in any calendar year under this Plan pursuant to the grant of
Awards hereunder, other than new employees of the Company or of a Parent or
Subsidiary of the Company (including new employees who are also officers and
directors of the Company or any Parent or Subsidiary of the Company), who are
eligible to receive up to a maximum of 1,000,000 Shares in the calendar year in
which they commence their employment. A person may be granted more than one
Award under this Plan.
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be
administered by the Committee or by the Board acting as the Committee. Subject
to the general purposes, terms and conditions of this Plan, and to the direc-
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Integrated Systems, Inc.
1998 Equity Incentive Plan
tion of the Board, the Committee will have full power to implement and carry out
this Plan. Without limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement
and any other agreement or document executed pursuant
to this Plan;
(b) prescribe, amend and rescind rules and regulations
relating to this Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or
as alternatives to, other Awards under this Plan or any
other incentive or compensation plan of the Company or
any Parent or Subsidiary of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of
Awards;
(i) correct any defect, supply any omission or reconcile
any inconsistency in this Plan, any Award or any Award
Agreement;
(j) determine whether an Award 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 Award will be made in its sole discretion
at the time of grant of the Award or, unless in contravention of any express
term of this Plan or Award, at any later time, and such determination will be
final and binding on the Company and on all persons having an interest in any
Award under this Plan. The Committee may delegate to one or more officers of the
Company the authority to grant an Award under this Plan to Participants who are
not Insiders of the Company.
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 ("ISO") 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 Award 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.
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.
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Integrated Systems, Inc.
1998 Equity Incentive Plan
5.3 Exercise Period. Options 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 Stockholder") will be exercisable after
the expiration of five (5) years from the date the ISO is granted. The Committee
also 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.
5.4 Exercise Price. The Exercise Price of an
Option will be determined by the Committee when the Option is granted and may be
not 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 be not less than 100% of
the Fair Market Value of the Shares on the date of grant; and (ii) the Exercise
Price of any ISO granted to a Ten Percent Stockholder will not be less than 110%
of the Fair Market Value of the Shares on the date of grant. Payment for the
Shares purchased may be made in accordance with Section 8 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 for the number of Shares
being purchased.
5.6 Termination. 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 or Disability, then the Participant may exercise
such Participant's Options only to the extent that such
Options would have been exercisable upon the
Termination Date no later than three (3) months after
the Termination Date (or such shorter or longer time
period not exceeding five (5) years as may be
determined by the Committee, with any exercise beyond
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.
(b) If the Participant is Terminated because of
Participant's death or Disability (or the Participant
dies within three (3) months after a Termination other
than for Cause or because of Participant's Disability),
then Participant's Options may be exercised only to the
extent that such Options would have been exercisable by
Participant on the Termination Date and must be
exercised by Participant (or Participant's legal
representative or authorized assignee) no later than
twelve (12) months after the Termination Date (or such
shorter or longer time period not exceeding five (5)
years as may be determined by the Committee, with any
such 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, or
(b) twelve (12) months after the Termination Date when
the Termination is for Participant's death or
Disability, deemed to be an NQSO), but in any event no
later than the expiration date of the Options.
(c) Notwithstanding the provisions in paragraph 5.6(a)
above, if a Participant is terminated for Cause,
neither the Participant, the Participant's estate nor
such other person who may then hold the Option shall be
entitled to exercise any Option with respect to any
Shares whatsoever, after termination of service,
whether or not after termination of service the
Participant
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Integrated Systems, Inc.
1998 Equity Incentive Plan
may receive payment from the Company or Subsidiary for
vacation pay, for services rendered prior to
termination, for services rendered for the day on which
termination occurs, for salary in lieu of notice, or
for any other benefits. In making such determination,
the Board shall give the Participant an opportunity to
present to the Board evidence on his behalf. For the
purpose of this paragraph, termination of service shall
be deemed to occur on the date when the Company
dispatches notice or advice to the Participant that his
service is terminated.
5.7 Limitations on Exercise. The Committee may
specify a reasonable minimum number of Shares that may be purchased on any
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 ISO. The aggregate Fair Market
Value (determined as of the date of grant) of Shares with respect to which ISO
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,
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 ISO 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 ISO 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 of this Plan to provide for a different limit on the
Fair Market Value of Shares permitted to be subject to ISO, 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. 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 ISO 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. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases
under a Restricted Stock Award made pursuant to this Plan will be evidenced by
an Award Agreement ("Restricted Stock Purchase Agreement") that will be in such
form (which need not be the same for each Participant) as the Committee will
from time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The offer of Restricted Stock will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30) days,
then the offer will terminate, unless otherwise determined by the Committee.
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Integrated Systems, Inc.
1998 Equity Incentive Plan
6.2 Purchase Price. The Purchase Price of Shares
sold pursuant to a Restricted Stock Award will be determined by the Committee on
the date the Restricted Stock Award is granted, except in the case of a sale to
a Ten Percent Stockholder, in which case the Purchase Price will be 100% of the
Fair Market Value. Payment of the Purchase Price may be made in accordance with
Section 8 of this Plan.
6.3 Terms of Restricted Stock Awards. Restricted
Stock Awards shall be subject to such restrictions as the Committee may impose.
These restrictions may be based upon completion of a specified number of years
of service with the Company or upon completion of the performance goals as set
out in advance in the Participant's individual Restricted Stock Purchase
Agreement. Restricted Stock Awards may vary from Participant to Participant and
between groups of Participants. Prior to the grant of a Restricted Stock Award,
the Committee shall: (a) determine the nature, length and starting date of any
Performance Period for the Restricted Stock Award; (b) select from among the
Performance Factors to be used to measure performance goals, if any; and (c)
determine the number of Shares that may be awarded to the Participant. Prior to
the payment of any Restricted Stock Award, the Committee shall determine the
extent to which such Restricted Stock Award has been earned. Performance Periods
may overlap and Participants may participate simultaneously with respect to
Restricted Stock Awards that are subject to different Performance Periods and
having different performance goals and other criteria.
6.4 Termination During Performance Period. If a
Participant is Terminated during a Performance Period for any reason, then such
Participant will be entitled to payment (whether in Shares, cash or otherwise)
with respect to the Restricted Stock Award only to the extent earned as of the
date of Termination in accordance with the Restricted Stock Purchase Agreement,
unless the Committee will determine otherwise.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an
award of Shares (which may consist of Restricted Stock) for services rendered to
the Company or any Parent or Subsidiary of the Company. A Stock Bonus may be
awarded for past services already rendered to the Company, or any Parent or
Subsidiary of the Company pursuant to an Award Agreement (the "Stock Bonus
Agreement") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. A Stock Bonus may
be awarded upon satisfaction of such performance goals as are set out in advance
in the Participant's individual Award Agreement (the "Performance Stock Bonus
Agreement") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent or Subsidiary and/or
individual performance factors or upon such other criteria as the Committee may
determine.
7.2 Terms of Stock Bonuses. The Committee will
determine the number of Shares to be awarded to the Participant. If the Stock
Bonus is being earned upon the satisfaction of performance goals pursuant to a
Performance Stock Bonus Agreement, then the Committee will: (a) determine the
nature, length and starting date of any Performance Period for each Stock Bonus;
(b) select from among the Performance Factors to be used to measure the
performance, if any; and (c) determine the number of Shares that may be awarded
to the Participant. Prior to the payment of any Stock Bonus, the Committee shall
determine the extent to which such Stock Bonuses have been earned. Performance
Periods may overlap and Participants may participate simultaneously with respect
to Stock Bonuses that are subject to different Performance Periods and different
performance goals and other criteria. The number of Shares may be fixed or may
vary in accordance with such performance goals and criteria as may be determined
by the Committee. The Committee may adjust the performance goals applicable to
the Stock Bonuses to take into account changes in law and accounting or tax
rules and to make such adjustments as the Committee deems necessary or
appropriate to reflect the impact of extraordinary or unusual items, events or
circumstances to avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock
Bonus may be paid currently or on a deferred basis with such interest or
dividend equivalent, if any, as the Committee may determine. Payment
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Integrated Systems, Inc.
1998 Equity Incentive Plan
may be made in the form of cash or whole Shares or a combination thereof, either
in a lump sum payment or in installments, all as the Committee will determine.
8. PAYMENT FOR SHARE PURCHASES.
8.1 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:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that either: (1) have been owned
by 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 (2) were obtained by
Participant in the public market;
(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) with respect only to purchases upon exercise of an
Option, and 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 a 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.
8.2 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.
9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to
be issued in satisfaction of Awards 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 Awards are to be made in cash, such payment will be
net of an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
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Integrated Systems, Inc.
1998 Equity Incentive Plan
9.2 Stock Withholding. When, under applicable tax
laws, a Participant incurs tax liability in connection with the exercise or
vesting of any Award 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
10. PRIVILEGES OF STOCK OWNERSHIP.
10.1 Voting and Dividends. No Participant will have
any of the rights of a stockholder 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 stockholder and have all the rights of a stockholder 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 if
such Shares are Restricted Stock, then any new, additional or different
securities the Participant may become entitled to receive with respect to such
Shares by virtue of a stock dividend, stock split or any other change in the
corporate or capital structure of the Company will be subject to the same
restrictions as the Restricted Stock; provided, further, that the Participant
will have no right to retain such stock dividends or stock distributions with
respect to Shares that are repurchased at the Participant's Purchase Price or
Exercise Price pursuant to Section 12.
10.2 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 Awards outstanding; provided, however, the Company will not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
11. TRANSFERABILITY. Awards 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 or as determined by the
Committee and set forth in the Award Agreement with respect to Awards that are
not ISOs. During the lifetime of the Participant an Award will be exercisable
only by the Participant, and any elections with respect to an Award may be made
only by the Participant unless otherwise determined by the Committee and set
forth in the Award Agreement with respect to Awards that are not ISOs.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Award Agreement
a right to repurchase a portion of or all Unvested Shares held by a Participant
following such Participant's Termination at any time within ninety (90) days
after the later of Participant's Termination Date and the date Participant
purchases Shares under this Plan, for cash and/or cancellation of purchase money
indebtedness, at the Participant's Exercise Price or Purchase Price, as the case
may be.
13. 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.
14. 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
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Integrated Systems, Inc.
1998 Equity Incentive Plan
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.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any
time or from time to time, authorize the Company, with the consent of the
respective Participants, to issue new Awards in exchange for the surrender and
cancellation of any or all outstanding Awards. The Committee may at any time buy
from a Participant an Award previously granted with payment in cash, Shares
(including Restricted Stock) or other consideration, based on such terms and
conditions as the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award
will not be effective unless such Award 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 Award 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) 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 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.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award
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.
18. CORPORATE TRANSACTIONS.
18.1 Assumption or Replacement of Awards 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
(other than a merger or consolidation with a wholly-owned subsidiary, a
reincorporation of the Company in a different jurisdiction, or other transaction
in which there is no substantial change in the stockholders of the Company or
their relative stock holdings and the Awards granted under this Plan are
assumed, converted or replaced by the successor corporation, which assumption
will be binding on all Participants), (c) a merger in which the Company is the
surviving corporation but after which the stockholders of the Company
immediately prior to such merger (other than any stockholder that merges, or
which owns or controls another corporation that merges, with the Company in such
merger) cease to own their shares or other equity interest in the Company, (d)
the sale of substantially all of the assets of the Company, or (e) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of the
Company by tender offer or similar transaction, any or all outstanding Awards
may be assumed, converted or replaced by the successor corporation (if any),
which assumption, conversion or replacement will be binding on all Participants.
In the alternative, the successor corporation may substitute equivalent Awards
or provide substantially similar consideration to Participants as was provided
to stockholders (after taking into account
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Integrated Systems, Inc.
1998 Equity Incentive Plan
the existing provisions of the Awards). In the event such successor or acquiring
corporation (if any) does not assume, convert, replace or substitute Awards, as
provided above, pursuant to a transaction described in this Section 18.1, then
notwithstanding any other provision in this Plan to the contrary, the vesting of
such Awards will accelerate and the Options will become exercisable in full
prior to the consummation of such event at such times and on such conditions as
the Committee determines, and if such Options are not exercised prior to the
consummation of the corporate transaction, they shall terminate in accordance
with the provisions of this Plan. The successor 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 no less favorable to the Participant.
The Committee may, in its sole discretion, provide that
the vesting of any or all Awards granted pursuant to this Plan will accelerate
even if Options would otherwise be assumed, converted, replaced or substituted
for. If the Committee exercises such discretion with respect to Options, such
Options will become exercisable in full prior to the consummation of such event
at such time and on such conditions as the Committee determines, and if such
Options are not exercised prior to the consummation of the corporate
transaction, they shall terminate at such time as determined by the Committee.
18.2 Other Treatment of Awards. Subject to any
greater rights granted to Participants under the foregoing provisions of this
Section 18, in the event of the occurrence of any transaction described in
Section 18.1, any outstanding Awards will be treated as provided in the
applicable agreement or plan of merger, consolidation, dissolution, liquidation,
or sale of assets.
18.3 Assumption of Awards by the Company. The
Company, from time to time, also may substitute or assume outstanding awards
granted by another company, whether in connection with an acquisition of such
other company or otherwise, by either; (a) granting an Award under this Plan in
substitution of such other company's award; or (b) assuming such award as if it
had been granted under this Plan if the terms of such assumed award could be
applied to an Award granted under this Plan. Such substitution or assumption
will be permissible if the holder of the substituted or assumed award would have
been eligible to be granted an Award under this Plan if the other company had
applied the rules of this Plan to such grant. In the event the Company assumes
an award granted by another company, the terms and conditions of such award 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.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become
effective upon the expiration date of the Prior Plan (the "Effective Date").
This Plan shall be approved by the stockholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with applicable laws, within twelve
(12) months before or after the date this Plan is adopted by the Board. Upon the
Effective Date, the Committee may grant Awards pursuant to this Plan; provided,
however, that: (a) no Option may be exercised prior to initial stockholder
approval of this Plan; (b) no Option granted pursuant to an increase in the
number of Shares subject to this Plan approved by the Board will be exercised
prior to the time such increase has been approved by the stockholders of the
Company; and (c) in the event that stockholder approval of such increase is not
obtained within the time period provided herein, all Awards granted pursuant to
such increase will be canceled, any Shares issued pursuant to any Award granted
pursuant to such increase will be canceled, and any purchase of Shares pursuant
to such increase will be rescinded.
20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as
provided herein, this Plan will terminate ten (10) years from the date this Plan
is adopted by the Board or, if earlier, the date of stockholder approval. This
Plan and all agreements thereunder shall be governed by and construed in
accordance with the laws of the State of California.
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Integrated Systems, Inc.
1998 Equity Incentive Plan
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; provided, however, that the Board will not, without the approval
of the stockholders of the Company, amend this Plan in any manner that requires
such stockholder approval.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this
Plan by the Board, the submission of this Plan to the stockholders 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 and bonuses otherwise than under this
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.
23. DEFINITIONS. As used in this Plan, the following terms will
have the following meanings:
"Award" means any award under this Plan, including any
Option, Restricted Stock or Stock Bonus.
"Award Agreement" means, with respect to each Award,
the signed written agreement between the Company and the Participant setting
forth the terms and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Cause" means the commission of an act of theft,
embezzlement, fraud, dishonesty or a breach of fiduciary duty to the Company or
a Parent or Subsidiary of the Company.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Committee" means the Compensation Committee of the
Board.
"Company" means Integrated Systems, Inc. or any
successor corporation.
"Disability" means a disability, whether temporary or
permanent, partial or total, as determined by the Committee.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"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
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Integrated Systems, Inc.
1998 Equity Incentive Plan
closing bid and asked prices on the date of
determination as reported in The Wall Street Journal;
(d) in the case of an Award made on the Effective Date, the
price per share at which shares of the Company's Common
Stock are initially offered for sale to the public by
the Company's underwriters in the initial public
offering of the Company's Common Stock pursuant to a
registration statement filed with the SEC under the
Securities Act; or
(e) if none of the foregoing is applicable, by the
Committee in good faith.
"Insider" means an officer or director of the Company
or any other person whose transactions in the Company's Common Stock are subject
to Section 16 of the Exchange Act.
"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 Award
under this Plan.
"Performance Factors" means the factors selected by the
Committee from among the following measures to determine whether the performance
goals established by the Committee and applicable to Awards have been satisfied:
(a) Net revenue and/or net revenue growth;
(b) Earnings before income taxes and
amortization and/or earnings before income
taxes and amortization growth;
(c) Operating income and/or operating income
growth;
(d) Net income and/or net income growth;
(e) Earnings per share and/or earnings per share
growth;
(f) Total shareholder return and/or total
shareholder return growth;
(g) Return on equity;
(h) Operating cash flow return on income;
(i) Adjusted operating cash flow return on
income;
(j) Economic value added; and
(k) Individual confidential business objectives.
"Performance Period" means the period of service
determined by the Committee, not to exceed five years, during which years of
service or performance is to be measured for Restricted Stock Awards or Stock
Bonuses.
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Integrated Systems, Inc.
1998 Equity Incentive Plan
"Plan" means this Integrated Systems, Inc. 1998 Equity
Incentive Plan, as amended from time to time.
"Restricted Stock Award" means an award of Shares
pursuant to Section 6.
"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
18, and any successor security.
"Stock Bonus" means an award of Shares, or cash in lieu
of Shares, pursuant to Section 7.
"Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if each
of the corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
"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, consultant,
independent contractor, or advisor to the Company or a Parent or Subsidiary of
the Company. An employee 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 90 days, unless 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 to employees in writing. In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the 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
the Award Agreement.
"Vested Shares" means "Vested Shares" as defined in the
Award Agreement.
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EXHIBIT 5.01
September 25, 1998
Integrated Systems, Inc.
201 Moffett Park Drive
Sunnyvale, California 94089
Gentlemen/Ladies:
At your request, we have examined the Registration Statement on Form
S-8 (the "Registration Statement") to be filed by you with the Securities and
Exchange Commission (the "Commission") on or about September 28, 1998 in
connection with the registration under the Securities Act of 1933, as amended,
of an aggregate of 2,000,000 shares of your Common Stock (the "Stock"),
1,000,000 of which are subject to issuance by you upon the exercise of stock
options granted or to be granted by you under your 1988 Stock Option Plan, as
amended (the "1988 Plan"), and 1,000,000 of which are subject to issuance by you
upon the exercise of stock options granted or to be granted by you under your
1998 Equity Incentive Plan (the "1998 Plan"). The 1988 Plan and the 1998 Plan
are collectively referred to in this letter as the "Plans"). In rendering this
opinion, we have examined the following:
(1) your registration statement on Form S-8 (File Number
333-12799) filed with and declared effective by the Commission
on September 27, 1996, together with the Company's Bylaws
filed as a part thereof;
(2) your registration statement on Form 8-A (File Number 0-18268)
filed with the Commission on January 29, 1990, as amended by
Amendment No. 1 filed with the Commission on March 1, 1990,
together with the order of effectiveness issued by the
Commission therefor on March 5, 1990;
(3) the Registration Statement, together with the Exhibits filed
as a part thereof;
(4) the Prospectuses prepared in connection with the Registration
Statement;
(5) the minutes of meetings and actions by written consent of the
shareholders and Board of Directors that are contained in your
minute books that are in our possession; and
(6) the stock records that you have provided to us (consisting of
a letter dated September 24, 1998 from your transfer agent,
ChaseMellon Shareholder Services, stating the number of shares
of your capital stock issued and outstanding on such date and
a report of the number of options that are outstanding
respecting your capital stock and of any other rights
outstanding to your purchase capital stock that was prepared
by you and dated September 23, 1998).
(7) a Management Certificate addressed to us and dated of even
date herewith executed by the Company containing certain
factual and other representations.
We have also confirmed the continued effectiveness of the Company'
registration under the Securities Exchange Act of 1934, as amended, by telephone
call to the offices of the Commission and have confirmed your eligibility to use
Form S-8.
<PAGE>
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness of all signatures on
original documents, the authenticity of all documents submitted to us as
originals, the conformity to originals of all documents submitted to us as
copies, the legal capacity of all natural persons executing the same, the lack
of any undisclosed terminations, modifications, waivers or amendments to any
documents reviewed by us and the due execution and delivery of all documents
where due execution and delivery are prerequisites to the effectiveness thereof.
As to matters of fact relevant to this opinion, we have relied solely
upon our examination of the documents referred to above and have assumed the
current accuracy and completeness of the information obtained from public
officials and records referred to above. We have made no independent
investigation or other attempt to verify the accuracy of any of such information
or to determine the existence or non-existence of any other factual matters;
however, we are not aware of any facts that would cause us to believe that the
opinion expressed herein is not accurate.
We are admitted to practice law in the State of California, and we
express no opinion herein with respect to the application or effect of the laws
of any jurisdiction other than the existing laws of the United States of America
and the State of California.
Based upon the foregoing, it is our opinion that the 2,000,000 shares
of Stock that may be issued and sold by you upon the exercise of (a) stock
options granted or to be granted under the 1988 Plan or the 1998 Plan, when
issued and sold in accordance with the applicable plan and stock option
agreements to be entered into thereunder, and in the manner referred to in the
relevant Prospectus associated with the Registration Statement, will be validly
issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us, if any, in the
Registration Statement, the Prospectus constituting a part thereof and any
amendments thereto.
This opinion speaks only as of its date and we assume no obligation to
update this opinion should circumstances change after the date hereof. This
opinion is intended solely for the your use as an exhibit to the Registration
Statement for the purpose of the above sale of the Stock and is not to be relied
upon for any other purpose.
Very truly yours,
FENWICK & WEST LLP
2
EXHIBIT 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement of Integrated Systems, Inc. on Form S-8 our reports dated March 26,
1998, on our audits of the consolidated financial statements and financial
statement schedule of Integrated Systems, Inc. as of February 28, 1997 and 1998,
and for each of the three years in the period ended February 28, 1998, which
reports are included in the Registrant's Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
San Jose, California
September 25, 1998
