<PAGE>
As filed with the Securities and Exchange Commission on September 28, 1999
Registration No. 333- ______
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
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.
1998 EQUITY INCENTIVE PLAN
1999 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
(Full title of the plan)
Charles M. Boesenberg
President and Chief Executive Officer
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>
<CAPTION>
- -------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
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 1,800,000 $11.99 $21,582,000 $6,000.00
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(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 22, 1999.
<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, 1999, 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,
1999;
2. The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended May 31, 1999 filed pursuant to Section 13(a) of the Exchange Act;
3. The Registrant's Current Report on Form 8-K dated July 21, 1999;
and
4. 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
II-1
<PAGE>
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
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 (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 1999 Employee Stock Purchase Plan.
4.04 Registrant's 1998 Equity Incentive Plan and related
documents.
4.05 Certificate of Amendment of Bylaws
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.
II-2
<PAGE>
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 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.
II-3
<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 24, 1998.
INTEGRATED SYSTEMS, INC.
By: /s/ William C. Smith
-----------------------------------
William C. Smith
Vice President, Finance
and Chief Financial Officer
II-4
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Charles M. Boesenberg 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.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------------------- ------------------------------------- -------------------------------------
Principal Executive Officer:
<S> <C> <C>
/s/ Charles M. Boesenberg President, Chief Executive Officer September 24, 1999
- ------------------------------------ and Director
Charles M. Boesenberg
Principal Financial Officer and
Principal Accounting Officer:
/s/ William C. Smith Vice President, Finance and Chief September 24, 1999
- ------------------------------------ Financial Officer
William C. Smith
Additional Directors:
/s/ Narendra K. Gupta Chairman of the Board of Directors September 24, 1999
- ------------------------------------
Narendra K. Gupta
/s/ Thomas Kailath Director September 24, 1999
- ------------------------------------
Thomas Kailath
/s/ Vinita Gupta Director September 24, 1999
- ------------------------------------
Vinita Gupta
/s/John C. Bolger Director September 24, 1999
- ------------------------------------
John C. Bolger
/s/Richard C. Murphy Director September 24, 1999
- ------------------------------------
Richard C. Murphy
/s/Michael A. Brochu Director September 24, 1999
- ------------------------------------
Michael A. Brochu
/s/James E.Challenger Director September 24, 1999
- ------------------------------------
James E. Challenger
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- --------
<S> <C>
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 (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 1999 Employee Stock Purchase Plan.
4.04 Registrant's 1998 Equity Incentive Plan and related
documents.
4.05 Certificate of Amendment of Bylaws
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)
</TABLE>
<PAGE>
INTEGRATED SYSTEMS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
As Adopted March 24, 1999
1. ESTABLISHMENT OF PLAN. Integrated Systems, Inc., Inc. (the
"COMPANY") proposes to grant options for purchase of the Company's Common Stock
to eligible employees of the Company and its Participating Subsidiaries (as
hereinafter defined) pursuant to this Employee Stock Purchase Plan (this
"PLAN"). For purposes of this Plan, "PARENT CORPORATION" and "SUBSIDIARY" shall
have the same meanings as "parent corporation" and "subsidiary corporation" in
Sections 424(e) and 424(f), respectively, of the Internal Revenue Code of 1986,
as amended (the "CODE"). "PARTICIPATING SUBSIDIARIES" are Parent Corporations or
Subsidiaries that the Board of Directors of the Company (the "BOARD") designates
from time to time as corporations that shall participate in this Plan. The
Company intends this Plan to qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments to or replacements of such
Section), and this Plan shall be so construed. Any term not expressly defined in
this Plan but defined for purposes of Section 423 of the Code shall have the
same definition herein. A total of 800,000 shares of the Company's Common Stock
is reserved for issuance under this Plan plus any shares authorized but not yet
issued under the Company's 1990 Employee Stock Purchase Plan (the "PRIOR PLAN")
on the First Offering Date (as defined in Section 5 below). Such share numbers
shall be subject to adjustments effected in accordance with Section 14 of this
Plan.
2. PURPOSE. The purpose of this Plan is to provide eligible employees
of the Company and Participating Subsidiaries with a convenient means of
acquiring an equity interest in the Company through payroll deductions, to
enhance such employees' sense of participation in the affairs of the Company and
Participating Subsidiaries, and to provide an incentive for continued
employment.
3. ADMINISTRATION. This Plan shall be administered by the Compensation
Committee of the Board (the "COMMITTEE"). Subject to the provisions of this Plan
and the limitations of Section 423 of the Code or any successor provision in the
Code, all questions of interpretation or application of this Plan shall be
determined by the Committee and its decisions shall be final and binding upon
all participants. Members of the Committee shall receive no compensation for
their services in connection with the administration of this Plan, other than
standard fees as established from time to time by the Board for services
rendered by Board members serving on Board committees. All expenses incurred in
connection with the administration of this Plan shall be paid by the Company.
4. ELIGIBILITY. Any employee of the Company or the Participating
Subsidiaries is eligible to participate in an Offering Period (as hereinafter
defined) under this Plan except the following:
(a) employees who are not employed by the Company or a
Participating Subsidiary three (3) months before the beginning of such Offering
Period;
(b) employees who are customarily employed for twenty (20) hours or
less per week;
(c) employees who are customarily employed for five (5) months or
less in a calendar year;
(d) employees who, together with any other person whose stock would
be attributed to such employee pursuant to Section 424(d) of the Code, own stock
or hold options to purchase stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Company or
any of its Participating Subsidiaries or who, as a result of being granted an
option under this Plan with respect to such Offering Period, would own stock
or hold options to purchase stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Company or
any of its Participating Subsidiaries; and
(e) individuals who provide services to the Company or any of its
Participating Subsidiaries as independent contractors who are reclassified as
common law employees for any reason EXCEPT FOR federal income and employment tax
purposes.
<PAGE>
Integrated Systems, Inc.
1999 Employee Stock Purchase Plan
As Adopted March 24, 1999
5. OFFERING DATES. The offering periods of this Plan (each, an
"OFFERING PERIOD") shall be of twenty-four (24) months duration commencing on
April 1 and October 1 of each year and ending on March 31 and September 30. The
first Offering Period under the Plan shall commence on October 1, 1999 (the
"FIRST OFFERING DATE"). Each Offering Period shall consist of four (4) six month
purchase periods (individually, a "PURCHASE PERIOD") during which payroll
deductions of the participants are accumulated under this Plan. The first
business day of each Offering Period is referred to as the "OFFERING DATE". The
last business day of each Purchase Period is referred to as the "PURCHASE DATE".
The Committee shall have the power to change the duration of Offering Periods
with respect to offerings without stockholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected.
6. PARTICIPATION IN THIS PLAN. Eligible employees may become
participants in an Offering Period under this Plan on the first Offering Date
after satisfying the eligibility requirements by delivering a subscription
agreement to the Company's treasury department (the "TREASURY DEPARTMENT") not
later than fifteen (15) days before such Offering Date. Notwithstanding the
foregoing, the Committee may set a later time for filing the subscription
agreement authorizing payroll deductions for all eligible employees with respect
to a given Offering Period. An eligible employee who does not deliver a
subscription agreement to the Treasury Department by such date after becoming
eligible to participate in such Offering Period shall not participate in that
Offering Period or any subsequent Offering Period unless such employee enrolls
in this Plan by filing a subscription agreement with the Treasury Department not
later than fifteen (15) days preceding such subsequent Offering Date. Once an
employee becomes a participant in an Offering Period, such employee will
automatically participate in the Offering Period commencing immediately
following the last day of the prior Offering Period unless the employee
withdraws or is deemed to withdraw from this Plan or terminates further
participation in the Offering Period as set forth in Section 11 below. Such
participant is not required to file any additional subscription agreement in
order to continue participation in this Plan.
7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee in
this Plan with respect to an Offering Period will constitute the grant (as of
the Offering Date) by the Company to such employee of an option to purchase on
the Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing (a) the amount accumulated in such employee's payroll
deduction account during such Purchase Period by (b) the lower of (i)
eighty-five percent (85%) of the fair market value of a share of the Company's
Common Stock on the Offering Date (but in no event less than the par value of a
share of the Company's Common Stock), or (ii) eighty-five percent (85%) of the
fair market value of a share of the Company's Common Stock on the Purchase Date
(but in no event less than the par value of a share of the Company's Common
Stock), PROVIDED, HOWEVER, that the number of shares of the Company's Common
Stock subject to any option granted pursuant to this Plan shall not exceed the
lesser of (x) the maximum number of shares set by the Committee pursuant to
Section 10(c) below with respect to the applicable Purchase Date, or (y) the
maximum number of shares which may be purchased pursuant to Section 10(b) below
with respect to the applicable Purchase Date. The fair market value of a share
of the Company's Common Stock shall be determined as provided in Section 8
below.
8. PURCHASE PRICE. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
(A) The fair market value on the Offering Date; or
(B) The fair market value on the Purchase Date.
For purposes of this Plan, the term "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 last trading date prior to 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 last trading date prior to the date of
determination on the
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<PAGE>
principal national securities exchange on which the
Common Stock is listed or admitted to trading as
reported in THE WALL STREET JOURNAL;
(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or
admitted to trading on a national securities exchange,
the average of the closing bid and asked prices on the
last trading date prior to the date of determination as
reported in THE WALL STREET JOURNAL; or
(d) if none of the foregoing is applicable, by the Board in
good faith.
9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE
OF SHARES.
(a) The purchase price of the shares is accumulated by regular
payroll deductions made during each Offering Period. The deductions are made as
a percentage of the participant's compensation in one percent (1%) increments
not less than two percent (2%), nor greater than ten percent (10%) or such lower
limit set by the Committee. Compensation shall mean a participant's base salary
or wages, including, commissions, overtime, shift premiums and bonuses, plus
draws against commissions, provided, however, that for purposes of determining a
participant's compensation, any election by such participant to reduce his or
her regular cash remuneration under Sections 125 or 401(k) of the Code shall be
treated as if the participant did not make such election. Payroll deductions
shall commence on the first payday of the Offering Period and shall continue to
the end of the Offering Period unless sooner altered or terminated as provided
in this Plan.
(b) A participant may increase or decrease the rate of payroll
deductions during an Offering Period by filing with the Treasury Department a
new authorization for payroll deductions, in which case the new rate shall
become effective for the next payroll period commencing more than fifteen (15)
days after the Treasury Department's receipt of the authorization and shall
continue for the remainder of the Offering Period unless changed as described
below. Such change in the rate of payroll deductions may be made at any time
during an Offering Period, but not more than one (1) change may be made
effective during any Purchase Period. A participant may increase or decrease the
rate of payroll deductions for any subsequent Offering Period by filing with the
Treasury Department a new authorization for payroll deductions not later than
fifteen (15) days before the beginning of such Offering Period.
(c) A participant may reduce his or her payroll deduction
percentage to zero during an Offering Period by filing with the Treasury
Department a request for cessation of payroll deductions. Such reduction shall
be effective beginning with the next payroll period commencing more than fifteen
(15) days after the Treasury Department's receipt of the request and no further
payroll deductions will be made for the duration of the Offering Period. Payroll
deductions credited to the participant's account prior to the effective date of
the request shall be used to purchase shares of Common Stock of the Company in
accordance with Section (e) below. A participant may not resume making payroll
deductions during the Offering Period in which he or she reduces his or her
payroll deductions to zero.
(d) All payroll deductions made for a participant are credited to
his or her account under this Plan and are deposited with the general funds of
the Company. No interest accrues on the payroll deductions. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.
(e) On each Purchase Date, so long as this Plan remains in effect
and provided that the participant has not submitted a signed and completed
withdrawal form which is effective pursuant to Section 11 before that date which
notifies the Company that the participant wishes to withdraw from that Offering
Period under this Plan and have all payroll deductions accumulated in the
account maintained on behalf of the participant as of that date returned to the
participant, the Company shall apply the funds then in the participant's account
to the purchase of whole shares of Common Stock reserved under the option
granted to such participant with respect to the Offering Period to the extent
that such option is exercisable on the Purchase Date. The purchase price per
share shall be as specified in Section 8 of this Plan. Any cash remaining in a
participant's account after such purchase of shares shall be refunded to such
participant in cash, without interest; provided, however that any amount
remaining in such
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<PAGE>
Integrated Systems, Inc.
1999 Employee Stock Purchase Plan
As Adopted March 24, 1999
participant's account on a Purchase Date which is less than the amount necessary
to purchase a full share of Common Stock of the Company shall be carried
forward, without interest, into the next Purchase Period or Offering Period, as
the case may be. In the event that this Plan has been oversubscribed, all funds
not used to purchase shares on the Purchase Date shall be returned to the
participant, without interest. No Common Stock shall be purchased on a Purchase
Date on behalf of any employee whose participation in this Plan has terminated
prior to such Purchase Date.
(f) As promptly as practicable after the Purchase Date, the Company
shall issue shares for the participant's benefit representing the shares
purchased upon exercise of his or her option.
(g) During a participant's lifetime, his or her option to purchase
shares hereunder is exercisable only by him or her. The participant will have no
interest or voting right in shares covered by his or her option until such
option has been exercised.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) No participant shall be entitled to purchase stock under this
Plan at a rate which, when aggregated with his or her rights to purchase stock
under all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $15,000 in fair market value, determined as of the Offering Date (or
such other lesser limit as may be imposed by the Code) for each calendar year in
which the employee participates in this Plan. The Company shall automatically
suspend the payroll deductions of any participant as necessary to enforce such
limit provided that when the Company automatically resumes such payroll
deductions, the Company must apply the rate in effect immediately prior to such
suspension.
(b) No more than two hundred percent (200%) of the number of
shares determined by using eighty-five percent (85%) of the fair market value of
a share of the Company's Common Stock on the Offering Date as the denominator
may be purchased by a participant on any single Purchase Date.
(c) No participant shall be entitled to purchase more than the
Maximum Share Amount (as defined below) on any single Purchase Date. Not less
than thirty (30) days prior to the commencement of any Offering Period, the
Committee may, in its sole discretion, set a maximum number of shares which may
be purchased by any employee at any single Purchase Date (hereinafter the
"MAXIMUM SHARE AMOUNT"). In no event shall the Maximum Share Amount exceed the
amounts permitted under Section 10(b) above. If a new Maximum Share Amount is
set, then all participants must be notified of such Maximum Share Amount prior
to the commencement of the next Offering Period. The Maximum Share Amount shall
continue to apply with respect to all succeeding Purchase Dates and Offering
Periods unless revised by the Committee as set forth above.
(d) If the number of shares to be purchased on a Purchase Date by
all employees participating in this Plan exceeds the number of shares then
available for issuance under this Plan, then the Company will make a pro rata
allocation of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Committee shall determine to be equitable. In such event,
the Company shall give written notice of such reduction of the number of shares
to be purchased under a participant's option to each participant affected.
(e) Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in this Section 10
shall be returned to the participant as soon as practicable after the end of the
applicable Purchase Period, without interest.
11. WITHDRAWAL.
(a) Each participant may withdraw from an Offering Period under
this Plan by signing and delivering to the Treasury Department a written notice
to that effect on a form provided for such purpose. Such withdrawal may be
elected at any time at least fifteen (15) days prior to the end of an Offering
Period.
(b) Upon withdrawal from this Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest, and
his or her interest in this Plan shall terminate. In the event a participant
vol-
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<PAGE>
Integrated Systems, Inc.
1999 Employee Stock Purchase Plan
As Adopted March 24, 1999
untarily elects to withdraw from this Plan, he or she may not resume his or
her participation in this Plan during the same Offering Period, but he or she
may participate in any Offering Period under this Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth in Section 6 above for initial
participation in this Plan.
(c) If the Fair Market Value on the first day of the current
Offering Period in which a participant is enrolled is higher than the Fair
Market Value on the first day of any subsequent Offering Period, the Company
will automatically enroll such participant in the subsequent Offering Period.
Any funds accumulated in a participant's account prior to the first day of such
subsequent Offering Period will be applied to the purchase of shares on the
Purchase Date immediately prior to the first day of such subsequent Offering
Period. A participant does not need to file any forms with the Company to
automatically be enrolled in the subsequent Offering Period
12. TERMINATION OF EMPLOYMENT. Termination of a participant's
employment for any reason, including retirement, death or the failure of a
participant to remain an eligible employee of the Company or of a Participating
Subsidiary, immediately terminates his or her participation in this Plan. In
such event, the payroll deductions credited to the participant's account will be
returned to him or her or, in the case of his or her death, to his or her legal
representative, without interest. For purposes of this Section 12, an employee
will not be deemed to have terminated employment or failed to remain in the
continuous employ of the Company or of a Participating Subsidiary in the case of
sick leave, military leave, or any other leave of absence approved by the Board;
PROVIDED that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's interest
in this Plan is terminated by withdrawal, termination of employment or
otherwise, or in the event this Plan is terminated by the Board, the Company
shall deliver to the participant all payroll deductions credited to such
participant's account. No interest shall accrue on the payroll deductions of a
participant in this Plan.
14. CAPITAL CHANGES. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under this Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under this Plan but have
not yet been placed under option (collectively, the "RESERVES"), as well as the
price per share of Common Stock covered by each option under this Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock of the
Company resulting from a stock split or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
issued and outstanding shares of Common Stock effected without receipt of any
consideration by the Company; PROVIDED, HOWEVER, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the
Committee, whose determination shall be final, binding and conclusive. Except as
expressly provided herein, no issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
Unless otherwise provided by the Committee, the Offering Period will
terminate immediately prior to the consummation of any of the following proposed
actions: (i) 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 options under this Plan are
assumed, converted or replaced by the successor corporation, which assumption
will be binding on all participants), (ii) 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, (iii)
the sale of all or substantially all of the assets of the Company; (iv) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of the
Company by tender offer or similar transaction; or (v) a dissolution or
liquidation of the Company. The Committee may, in the exercise of its sole
discretion in such instances, declare that this Plan shall terminate as of a
date fixed by the Committee and give each participant the right to purchase
shares under this Plan prior to such termination.
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Integrated Systems, Inc.
1999 Employee Stock Purchase Plan
As Adopted March 24, 1999
The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, or in the event of the Company being consolidated with or merged into any
other corporation.
15. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 below) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.
16. REPORTS. Individual accounts will be maintained for each
participant in this Plan. Each participant shall receive promptly after the end
of each Purchase Period a report of his or her account setting forth the total
payroll deductions accumulated, the number of shares purchased, the per share
price thereof and the remaining cash balance, if any, carried forward to the
next Purchase Period or Offering Period, as the case may be.
17. NOTICE OF DISPOSITION. Each participant shall notify the Company in
writing if the participant disposes of any of the shares purchased in any
Offering Period pursuant to this Plan if such disposition occurs within two (2)
years from the Offering Date or within one (1) year from the Purchase Date on
which such shares were purchased (the "NOTICE PERIOD"). The Company may, at any
time during the Notice Period, place a legend or legends on any certificate
representing shares acquired pursuant to this Plan requesting the Company's
transfer agent to notify the Company of any transfer of the shares. The
obligation of the participant to provide such notice shall continue regardless
of whether any such legend is placed on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant
of any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Participating Subsidiary, or restrict the right of
the Company or any Participating Subsidiary to terminate such employee's
employment.
19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have
equal rights and privileges with respect to this Plan so that this Plan
qualifies as an "employee stock purchase plan" within the meaning of Code
Section 423 or any successor provision of the Code and the related regulations.
Any provision of this Plan which is inconsistent with Code Section 423 or any
successor provision of the Code shall, without further act or amendment by the
Company, the Committee or the Board, be reformed to comply with the requirements
of Code Section 423. This Section 19 shall take precedence over all other
provisions in this Plan.
20. NOTICES. All notices or other communications by a participant to
the Company under or in connection with this Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. TERM; STOCKHOLDER APPROVAL. After this Plan is adopted by the
Board, this Plan will become effective on the First Offering Date (as defined
above). This Plan shall be approved by the stockholders of the Company, in any
manner permitted by applicable corporate law, within twelve (12) months after
the date this Plan is adopted by the Board. No purchase of shares pursuant to
this Plan shall occur prior to such stockholder approval. This Plan shall
continue until the earlier to occur of (a) termination of this Plan by the Board
(which termination may be effected by the Board at any time), (b) issuance of
all of the shares of Common Stock reserved for issuance under this Plan, or (c)
ten (10) years from the adoption of this Plan by the Board.
22. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under this Plan in the event of such participant's death
subsequent to the end of an Purchase Period but prior to delivery to him of such
shares and cash. In addition, a participant may file a
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Integrated Systems, Inc.
1999 Employee Stock Purchase Plan
As Adopted March 24, 1999
written designation of a beneficiary who is to receive any cash from the
participant's account under this Plan in the event of such participant's death
prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under this
Plan who is living at the time of such participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver such
shares or cash to the spouse or to any one or more dependents or relatives of
the participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended and the Securities
Exchange Act of 1934, as amended, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange or automated quotation
system upon which the shares may then be listed, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.
24. APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of California.
25. AMENDMENT OR TERMINATION OF THIS PLAN. The Board may at any time
amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendment make any change in an option previously granted which would
adversely affect the right of any participant, nor may any amendment be made
without approval of the stockholders of the Company obtained in accordance with
Section 21 above within twelve (12) months of the adoption of such amendment (or
earlier if required by Section 21) if such amendment would:
(a) increase the number of shares that may be issued under this Plan;
or
(b) change the designation of the employees (or class of employees)
eligible for participation in this Plan.
Notwithstanding the foregoing, the Board may make such amendments to
the Plan as the Board determines to be advisable, if the continuation of the
Plan or any Offering Period would result in financial accounting treatment for
the Plan that is different from the financial accounting treatment in effect on
the date this Plan is adopted by the Board.
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INTEGRATED SYSTEMS, INC.
1998 EQUITY INCENTIVE PLAN
As Adopted March 30, 1998
As Amended March 24, 1999
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 2,000,000 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
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Integrated Systems, Inc.
1998 Equity Incentive Plan
direction 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
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<PAGE>
Participant 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.
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Integrated Systems, Inc.
1998 Equity Incentive Plan
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 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
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Integrated Systems, Inc.
1998 Equity Incentive Plan
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.
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.
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Integrated Systems, Inc.
1998 Equity Incentive Plan
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 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
-8-
<PAGE>
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 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
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<PAGE>
stockholder approval. This Plan and all agreements thereunder shall be governed
by and construed in accordance with the laws of the State of California.
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
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<PAGE>
securities exchange on which the Common Stock
is listed or admitted to trading as reported in THE
WALL STREET JOURNAL;
(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or
admitted to trading on a national securities exchange,
the average of the closing bid and asked prices on the
date of determination as reported 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
(d) 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.
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<PAGE>
"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.
"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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<PAGE>
No.____
INTEGRATED SYSTEMS, INC.
1998 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "AGREEMENT") is made and entered
into as of the date of grant set forth below (the "DATE OF GRANT") by and
between Integrated Systems, Inc., a California corporation (the "COMPANY"), and
the participant named below ("PARTICIPANT"). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Company's 1998 Equity
Incentive Plan (the "PLAN").
PARTICIPANT:
---------------------------------
SOCIAL SECURITY NUMBER:
---------------------------------
PARTICIPANT'S ADDRESS:
---------------------------------
TOTAL OPTION SHARES:
---------------------------------
EXERCISE PRICE PER SHARE:
---------------------------------
DATE OF GRANT:
---------------------------------
VESTING START DATE:
---------------------------------
EXPIRATION DATE:
---------------------------------
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Participant an
option (this "OPTION") to purchase up to the total number of shares of Common
Stock of the Company set forth above (collectively, the "SHARES") at the
Exercise Price Per Share set forth above (the "EXERCISE PRICE"), subject to all
of the terms and conditions of this Agreement and the Plan. If designated as an
Incentive Stock Option above, this Option is intended to qualify as an
"incentive stock option" ("ISO") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "CODE").
2. VESTING; EXERCISE PERIOD.
2.1 VESTING OF RIGHT TO EXERCISE OPTION. This Option
shall become exercisable as to portions of the Shares as follows: (a) this
Option shall not be exercisable with respect to any of the Shares until
_____________, 199_ (the "FIRST VESTING DATE"); (b) on the First Vesting Date
this Option shall become exercisable as to 25%of the Shares, if Participant
has continuously provided services to the Company or any Subsidiary or Parent
of the Company
<PAGE>
Stock Option Agreement
from the Date of Grant through the First Vesting Date and has
not been Terminated on or before the First Vesting Date; and (c) this Option
shall become exercisable as to an additional 2.083% of the Shares upon the
expiration of each successive full month after the First Vesting Date, so
long as Participant continuously provides services to the Company or any
Subsidiary or Parent of the Company and is not Terminated; PROVIDED that this
Option shall in no event ever become exercisable with respect to more than
100% of the Shares.
2.2 EXPIRATION. This Option shall expire on the Expiration
Date set forth above and must be exercised, if at all, on or before the earlier
of the Expiration Date or the date on which this Option is earlier terminated in
accordance with the provisions of Section 3.
3. TERMINATION.
3.1 TERMINATION FOR ANY REASON EXCEPT DEATH, DISABILITY OR
CAUSE. If Participant is Terminated for any reason, except Participant's death,
Disability or Cause, then this Option, to the extent (and only to the extent)
that it would have been exercisable by Participant on the date of Termination,
may be exercised by Participant no later than three (3) months after the date of
Termination, but in any event no later than the Expiration Date.
3.2 TERMINATION BECAUSE OF DEATH OR DISABILITY. If
Participant is Terminated because of death or Disability of Participant (or the
Participant dies within three (3) months after a Termination other than for
Cause or due to Disability), then this Option, to the extent that it is
exercisable by Participant on the date of Termination, may be exercised by
Participant (or Participant's legal representative) no later than twelve (12)
months after the date of Termination, but in any event no later than the
Expiration Date.
3.3 TERMINATION FOR CAUSE. If Participant is Terminated
for Cause, this Option will expire on Participant's Termination Date.
3.4 NO OBLIGATION TO EMPLOY. Nothing in the Plan or this
Agreement shall confer on Participant any right to continue in the employ of, or
other relationship with, the Company or any Parent or Subsidiary of the Company,
or limit in any way the right of the Company or any Parent or Subsidiary of the
Company to terminate Participant's employment or other relationship at any time,
with or without cause.
4. MANNER OF EXERCISE.
4.1 STOCK OPTION EXERCISE AGREEMENT. To exercise this
Option, Participant (or in the case of exercise after Participant's death,
Participant's executor, administrator, heir or legatee, as the case may be) must
deliver to the Company an executed stock option exercise agreement in the form
attached hereto as EXHIBIT A, or such other documentation as may be reasonably
acceptable to the Company (the "EXERCISE AGREEMENT"), which shall set forth,
INTER ALIA, Participant's election to exercise this Option, the number of Shares
being purchased, any restrictions imposed on the Shares and any representations,
warranties and agreements regarding Participant's investment intent and access
to information as may be
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<PAGE>
Stock Option Agreement
required by the Company to comply with applicable securities laws. If someone
other than Participant exercises this Option, then such person must submit
documentation reasonably acceptable to the Company that such person has the
right to exercise this Option.
4.2 LIMITATIONS ON EXERCISE. This Option may not be
exercised unless such exercise is in compliance with all applicable federal and
state securities laws, as they are in effect on the date of exercise.
4.3 PAYMENT. The Exercise Agreement shall be accompanied
by full payment of the Exercise Price for the Shares being purchased in cash (by
check), or where permitted by law:
(a) provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from Participant and a
broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD DEALER") whereby Participant
irrevocably elects to exercise this Option and to sell a portion
of the Shares so purchased to pay for the exercise price and
whereby the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the exercise price directly to the Company; OR
(2) through a "margin" commitment from Participant and a NASD
Dealer -- whereby Participant irrevocably elects to exercise
this Option and to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a loan from the NASD
Dealer in the amount of the exercise price, and whereby the NASD
Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; or
(b) by any combination of the foregoing.
4.4 TAX WITHHOLDING. Prior to the issuance of the Shares
upon exercise of this Option, Participant must pay or provide for any applicable
federal or state withholding obligations of the Company. If the Committee
permits, Participant may provide for payment of withholding taxes upon exercise
of this Option by requesting that the Company retain Shares with a Fair Market
Value equal to the minimum amount of taxes required to be withheld. In such
case, the Company shall issue the net number of Shares to the Participant by
deducting the Shares retained from the Shares issuable upon exercise.
4.5 ISSUANCE OF SHARES. Provided that the Exercise
Agreement and payment are in form and substance satisfactory to counsel for the
Company, the Company shall issue the Shares registered in the name of
Participant, Participant's authorized assignee, or Participant's legal
representative, and shall deliver certificates representing the Shares with the
appropriate legends affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If this
Option is an ISO, and if Participant sells or otherwise disposes of any of the
Shares acquired pursuant to the ISO on or before the later of (a) the date two
(2) years after the Date of Grant, and (b) the date
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<PAGE>
Stock Option Agreement
one (1) year after transfer of such Shares to Participant upon exercise of this
Option, then Participant shall immediately notify the Company in writing of such
disposition.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this
Option and the issuance and transfer of Shares shall be subject to compliance by
the Company and Participant with all applicable requirements of federal and
state securities laws and with all applicable requirements of any stock exchange
on which the Company's Common Stock may be listed at the time of such issuance
or transfer. Participant understands that the Company is under no obligation to
register or qualify the Shares with the Securities and Exchange Commission, any
state securities commission or any stock exchange to effect such compliance.
7. 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 Participant only by
Participant. The terms of this Option shall be binding upon the executors,
administrators, successors and assigns of Participant.
8. TAX CONSEQUENCES. Set forth below is a brief summary as of
the date the Board adopted the Plan of some of the federal and California tax
consequences of exercise of this Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.
8.1 EXERCISE OF INCENTIVE STOCK OPTION. To the extent
this Option qualifies as an ISO, there will be no regular federal or California
income tax liability upon the exercise of this Option, although the excess, if
any, of the fair market value of the Shares on the date of exercise over the
Exercise Price will be treated as a tax preference item for federal income tax
purposes and may subject the Optionee to the alternative minimum tax in the year
of exercise.
8.2 EXERCISE OF NONQUALIFIED STOCK OPTION. To the extent
this Option does not qualify as an ISO, there may be a regular federal and
California income tax liability upon the exercise of this Option. 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 may 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.
8.3 DISPOSITION OF SHARES. The following tax consequences
may apply upon disposition of the Shares.
a. INCENTIVE STOCK OPTIONS. If the Shares are held
for more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an ISO and are disposed of more than two (2) years
after the Date of Grant, any gain realized on
-4-
<PAGE>
Stock Option Agreement
disposition of the Shares will be treated as long-term capital gain for federal
and California income tax purposes. If Shares purchased under an ISO are
disposed of within the applicable one (1) year or two (2) year period, any gain
realized on such disposition will be treated as compensation income (taxable at
ordinary income rates) to the extent of the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price.
b. NONQUALIFIED STOCK OPTIONS. If the Shares are
held for more than twelve (12) months after the date of the transfer of the
Shares pursuant to the exercise of an NQSO, any gain realized on disposition of
the Shares will be treated as long-term capital gain.
9. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any
of the rights of a shareholder with respect to any Shares until Participant
exercises this Option and pays the Exercise Price.
10. INTERPRETATION. Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant or the Company to the Committee
for review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.
11. ENTIRE AGREEMENT. The Plan is incorporated herein by
reference. This Agreement and the Plan and the Exercise Agreement constitute the
entire agreement and understanding of the parties hereto with respect to the
subject matter hereof and supersede all prior understandings and agreements with
respect to such subject matter.
12. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: personal delivery;
three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested); one (1) business day after deposit
with any return receipt express courier (prepaid); or one (1) business day after
transmission by rapifax or telecopier.
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement. This Agreement shall be binding upon and inure to
the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding upon
Participant and Participant's heirs, executors, administrators, legal
representatives, successors and assigns.
14. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California,
without regard to that body of law pertaining to choice of law or conflict of
law.
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<PAGE>
Stock Option Agreement
15. ACCEPTANCE. Participant hereby acknowledges receipt of a
copy of the Plan and this Agreement. Participant has read and understands the
terms and provisions thereof, and accepts this Option subject to all the terms
and conditions of the Plan and this Agreement. Participant acknowledges that
there may be adverse tax consequences upon exercise of this Option or
disposition of the Shares and that the Company has advised Participant to
consult a tax advisor prior to such exercise or disposition.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in duplicate by its duly authorized representative and Participant has
executed this Agreement in duplicate as of the Date of Grant.
INTEGRATED SYSTEMS, INC. PARTICIPANT
By:
------------------------------- ----------------------------------
(Signature)
- ----------------------------------- -----------------------------------
(Please print name) (Please print name)
- ----------------------------------- -----------------------------------
(Please print title)
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<PAGE>
EXHIBIT A
STOCK OPTION EXERCISE AGREEMENT
INTEGRATED SYSTEMS, INC.
1998 EQUITY INCENTIVE PLAN (THE "PLAN")
STOCK OPTION EXERCISE AGREEMENT
I hereby elect to purchase the number of shares of Common Stock of
INTEGRATED SYSTEMS, INC. (the "COMPANY") as set forth below:
<TABLE>
<S> <C>
Participant_____________________________ Number of Shares Purchased:________________________
Social Security Number: ________________ Purchase Price per Share:__________________________
Address:________________________________ Aggregate Purchase Price:__________________________
________________________________ Date of Option Agreement:__________________________
Type of Option: [ ] Incentive Stock Option Exact Name of Title to Shares: ____________________
[ ] Nonqualified Stock Option ___________________________________________________
</TABLE>
1. DELIVERY OF PURCHASE PRICE. Participant hereby delivers to the Company the
Aggregate Purchase Price, to the extent permitted in the Option Agreement (the
"OPTION AGREEMENT") in cash (by check) in the amount of $_____________________,
receipt of which is acknowledged by the Company.
2. MARKET STANDOFF AGREEMENT. Participant, if requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company held by Participant during the period requested by the managing
underwriter following the effective date of a registration statement of the
Company filed under the Securities Act, provided that all officers and directors
of the Company are required to enter into similar agreements. Such agreement
shall be in writing in a form satisfactory to the Company and such underwriter.
The Company may impose stop-transfer instructions with respect to the shares (or
other securities) subject to the foregoing restriction until the end of such
period.
3. TAX CONSEQUENCES. PARTICIPANT UNDERSTANDS THAT PARTICIPANT MAY SUFFER ADVERSE
TAX CONSEQUENCES AS A RESULT OF PARTICIPANT'S PURCHASE OR DISPOSITION OF THE
SHARES. PARTICIPANT REPRESENTS THAT PARTICIPANT HAS CONSULTED WITH ANY TAX
CONSULTANT(S) PARTICIPANT DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT PARTICIPANT IS NOT RELYING ON THE COMPANY FOR
ANY TAX ADVICE.
4. ENTIRE AGREEMENT. The Plan and Option Agreement are incorporated herein by
reference. This Exercise Agreement, the Plan and the Option Agreement constitute
the entire agreement and understanding of the parties and supersede in their
entirety all prior understandings and agreements of the Company and Participant
with respect to the subject matter hereof, and are governed by California law
except for that body of law pertaining to choice of law or conflict of law.
Date:
---------------------------------- -----------------------------
SIGNATURE OF PARTICIPANT
<PAGE>
SPOUSAL CONSENT
I acknowledge that I have read the foregoing Stock Option Exercise
Agreement (the "AGREEMENT") and that I know its contents. I hereby consent to
and approve all the provisions of the Agreement, and agree that the shares of
the Common Stock of Integrated Systems, Inc. purchased thereunder (the "SHARES")
and any interest I may have in such Shares are subject to all the provisions of
the Agreement. I will take no action at any time to hinder operation of the
Agreement on these Shares or any interest I may have in or to them.
------------------------------------- Date:__________________
SIGNATURE OF PARTICIPANT'S SPOUSE
-------------------------------------
SPOUSE'S NAME - TYPED OR PRINTED
-------------------------------------
PARTICIPANT'S NAME - TYPED OR PRINTED
<PAGE>
EXHIBIT 4.05
CERTIFICATE OF AMENDMENT OF BYLAWS
OF
INTEGRATED SYSTEMS, INC.
(A CALIFORNIA CORPORATION)
I, Narendra K. Gupta, certify that:
(i) I am currently acting as Secretary of Integrated Systems, Inc.,
a California corporation (the "COMPANY");
(ii) I am duly authorized to make, execute and deliver this
certificate;
(iii) Section 2.2 of the Company's Bylaws was amended, by way of the
Company's annual shareholder meeting held on August 3, 1999, to read in
full as follows:
"SECTION 2.2: NUMBER. The number of directors of
this Company shall not be less than five (5) nor more than
nine (9) with the exact number of directors to be fixed from
time to time by resolution of the Board of Directors of this
Company. There shall be eight (8) directors until such
number is changed by resolution of the Board of Directors.
The number of directors of this Company shall be so variable
until changed by an amendment of this Article II, Section 2.2
adopted by the affirmative vote or written consent of holders
of a majority of the outstanding shares of the Company
entitled to vote. No amendment may change the stated maximum
number of authorized directors to a number greater than two
(2) times the stated minimum number of directors minus one (1).
(iv) Section 2.2 is in full force and effect as of the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this certificate as
of August 3, 1999.
By: /s/ Naren K. Gupta
----------------------------
Narendra K. Gupta, Secretary
<PAGE>
EXHIBIT 5.01
September 28, 1999
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, 1999 in
connection with the registration under the Securities Act of 1933, as amended,
of an aggregate of 1,800,000 shares of the Common Stock (the "STOCK") of
Integrated Systems, Inc., a California corporation ("the Company"),
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,
as amended (the "1998 PLAN"), and 800,000 of which are subject to issuance by
you under your 1999 Employee Stock Purchase Plan (the "1999 PLAN"). The 1998
Plan and the 1999 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;
(6) the stock records that you have provided to us (consisting of
a letter dated September 23, 1999 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, 1999); and
(7) a Management Certificate addressed to us and dated of even date
herewith executed by the Company containing certain factual and
other representations.
<PAGE>
We have also confirmed the continued effectiveness of the Company's
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.
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 1,000,000 shares
of Stock that may be issued and sold by you upon the exercise of stock options
granted or to be granted under the 1998 Plan and the 800,000 shares of Stock
that may be issued and sold by you under the 1999 Plan, when issued and sold in
accordance with the applicable plan and stock option or other 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
By:
/s/ Fred M. Greguras, a Partner
2
<PAGE>
EXHIBIT 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-8 of our reports dated March 25, 1999
relating to the financial statements and financial statement schedule of
Integrated Systems, Inc., which appears in Integrated Systems, Inc.'s Annual
Report on Form 10-K for the year ended February 28, 1999.
/s/ PricewaterhouseCoopers LLP
San Jose, California
September 28, 1999
