<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 4, 1996.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
DIGITAL MICROWAVE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 77-0016028
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
170 ROSE ORCHARD WAY, SAN JOSE, CA 95134
(Address of Principal Executive Offices) (Zip Code)
DIGITAL MICROWAVE CORPORATION
1994 STOCK INCENTIVE PLAN
(Full Title of the Plan)
CHARLES D. KISSNER
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
DIGITAL MICROWAVE CORPORATION
170 ROSE ORCHARD WAY
SAN JOSE, CA 95134
(Name and Address of Agent For Service)
408/943-0777
(Telephone Number, Including Area Code,
of Agent For Service)
With a copy to:
Bruce Alan Mann, Esq.
Morrison & Foerster LLP
345 California Street
San Francisco, CA 94104
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<PAGE> 2
<TABLE>
<CAPTION>
Calculation of Registration Fee
- ------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Title of Securities Number of shares Offering Price Per Aggregate Amount of
to be Registered to be Registered Share Offering Price Registration Fee
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par 1,000,000 $16.28* $16,280,000 $5,613.79
value per share
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933 on the basis of the average of the high and low price per
share of Digital Microwave Corporation's Common Stock on the Nasdaq National
Market on August 27, 1996.
<PAGE> 3
Part II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Digital Microwave Corporation (the "Registrant") hereby
incorporates by reference into this Registration Statement the following
documents previously filed with the Securities and Exchange Commission (the
"SEC").
(a) The Registrant's Annual Report on Form 10-K for the fiscal
year ended March 31, 1996 filed with the SEC on June 28,
1996.
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1996 filed with the SEC on August 14,
1996.
(c) The Registrant's Registration Statement No. 0-15895 on Form
8-A filed with the SEC on May 22, 1987, in which there is
described the terms, rights and provisions applicable to the
Registrant's outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 (the "1934 Act") after the date of this Registration Statement and prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then remaining
unsold shall be deemed to be incorporated by reference into this Registration
Statement and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document which also is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTOR AND OFFICERS
The Registrant's Restated Certificate of Incorporation provides
that no director of the Registrant will be personally liable to the Registrant
or any of its stockholders for monetary damages arising from the director's
II-1
<PAGE> 4
breach of his fiduciary duties. However, such exemption from liability does not
apply with respect to any action in which the director would be liable under
Section 174 of Title 8 of the Delaware General Corporation Law ("Delaware Law"),
nor does it apply with respect to any liability in which the director (i)
breached his duty of loyalty to the Registrant; (ii) did not act in good faith
or, in failing to act, did not act in good faith; (iii) acted in a manner
involving intentional misconduct or knowing violation of law or, in failing to
act, acted in a manner involving intentional misconduct or knowing violation of
law; or (iv) derived an improper personal benefit.
Pursuant to the provisions of Section 145 of Delaware Law, the
Registrant as a Delaware corporation has the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding (other than an action by or in the right
of the Registrant) by reason of the fact that he is or was a director, officer,
employee or agent of the Registrant or of any corporation, partnership, joint
venture, trust or other enterprise for which he is or was serving in such
capacity at the request of the Registrant, against any and all expenses,
judgments, fines and amounts paid in settlement which were reasonably incurred
by him in connection with such action, suit or proceeding. The power to
indemnify applies only if such person acted in good faith and in a manner he
reasonably believed to be in the best interests, or not opposed to the best
interests, of the Registrant and, with respect to any criminal action or
proceeding, if he had no reasonable cause to believe his conduct was unlawful.
The power to indemnify also applies to actions brought by or in
the right of the Registrant, but only to the extent of defense and settlement
expenses and not to the satisfaction of a judgment or settlement of the claim
itself. In such actions, however, no indemnification will be made if there is
any adjudication of negligence or misconduct, unless the court, in its
discretion, finds that in the light of all the circumstances indemnification
should apply.
To the extent any such person is successful in the defense of the
actions referred to above, such person is entitled pursuant to Section 145 of
Delaware Law to indemnification as described above. Section 145 also grants the
power to advance litigation expenses upon receipt of an undertaking to reply
such advances in the event no right to indemnification is subsequently shown. A
corporation may also obtain insurance at its expense to protect anyone who might
be indemnified, or has a right to insist on indemnification, under the statute.
The Registrant has entered into indemnification agreements with
its directors and certain officers which provide for indemnification to the
fullest extent permitted by Delaware Law, including Section 145 thereof. The
Registrant may also enter into similar agreements from time to time with future
directors and/or present or future officers of the Registrant.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
II-2
<PAGE> 5
ITEM 8. EXHIBITS
Exhibit No. Description
5.1 Opinion of Morrison & Foerster LLP as to the legality of the
securities being registered.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.2 Consent of Morrison & Foerster LLP (contained in the opinion of
counsel filed as Exhibit 5.1 to this Registration Statement).
24.1 Power of Attorney (set forth on the signature page of this
Registration Statement).
99.1 Digital Microwave Corporation 1994 Stock Incentive Plan.
ITEM 9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes: (1) to file, during
any period in which offers or sales are being made, a post-effective amendment
to this Registration Statement (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the "1933 Act"), (ii) to
reflect in the prospectus any facts or events arising after the effective date
of this Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement, and (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change to
such information in this Registration Statement, provided, however, that clauses
(1)(i) and (1)(ii) shall not apply if the information required to be included in
a post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act
that are incorporated by reference into this Registration Statement; (2) that
for the purpose of determining any liability under the 1933 Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold upon the termination of the
Registrant's 1994 Stock Incentive Plan.
B. The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into this 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.
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<PAGE> 6
C. Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers or controlling persons of the
Registrant pursuant to the indemnity provisions summarized in Item 6 above or
otherwise, the Registrant has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the 1933 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 1933 Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose, State of California, on September 4, 1996.
DIGITAL MICROWAVE CORPORATION
By: /s/ CHARLES D. KISSNER
----------------------
Charles D. Kissner
Chairman of the Board, President and Chief
Executive Officer
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<PAGE> 7
POWER OF ATTORNEY AND ADDITIONAL SIGNATURES
Each person whose signature appears below constitutes and appoints
Charles D. Kissner and Carl A. Thomsen, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this Registration Statement,
including post-effective amendments, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do so and perform each and every act and thing requisite and
necessary to be done in and about the premises, 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 their substitutes, may lawfully do or
cause to be done by virtue thereof.
Further, 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 date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------- --------------------------------- -----------------
<S> <C> <C>
/s/ CHARLES D. KISSNER
- -------------------------
Charles D. Kissner Chairman of the Board, President September 4, 1996
and Chief Executive Officer
/s/ RICHARD C. ALBERDING
- -------------------------
Richard C. Alberding Director September 4, 1996
/s/ CLIFFORD H. HIGGERSON
- -------------------------
Clifford H. Higgerson Director September 4, 1996
/s/ JAMES D. MEINDL
- -------------------------
James D. Meindl Director September 4, 1996
/s/ BILLY B. OLIVER
- -------------------------
Billy B. Oliver Director September 4, 1996
</TABLE>
II-5
<PAGE> 8
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------- --------------------------------- -----------------
<S> <C> <C>
/s/ CARL A. THOMSEN
- -------------------------
Carl A. Thomsen Vice President, Chief Financial September 4, 1996
Officer and Secretary (Principal
Financial and Accounting Officer)
</TABLE>
II-6
<PAGE> 9
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
5.1 Opinion of Morrison & Foerster LLP as to the legality of the
securities being registered.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.2 Consent of Morrison & Foerster LLP (contained in the opinion of
counsel filed as Exhibit 5.1 to this Registration Statement).
24.1 Power of Attorney (set forth on the signature page of this
Registration Statement).
99.1 Digital Microwave Corporation 1994 Stock Incentive Plan.
<PAGE> 1
EXHIBIT 5.1
OPINION OF MORRISON & FOERSTER LLP
September 3, 1996
Digital Microwave Corporation
170 Rose Orchard Way
San Jose, California 95134
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form
S-8 to be filed by Digital Microwave Corporation, a Delaware corporation (the
"Company"), with the Securities and Exchange Commission in connection with
the registration under the Securities Act of 1933, as amended, of 1,000,000
additional shares of the Company's Common Stock, $0.01 par value (the "Common
Stock").
As counsel to the Company, we have examined the proceedings taken by
the Company in connection with the issuance of the 1,000,000 additional shares
of the Common Stock to be reserved for issuance under the Company's 1994 Stock
Incentive Plan.
It is our opinion that the 1,000,000 shares of Common Stock which may
be issued and sold by the Company, when issued and sold in the manner referred
to in the Registration Statement, will be legally and 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 in the
Registration Statement and any further amendments thereto.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated April 22, 1996
included or incorporated by reference in Digital Microwave Corporation's Form
10-K for the year ended March 31, 1996.
/s/ ARTHUR ANDERSEN LLP
San Jose, California
September 3, 1996
<PAGE> 1
EXHIBIT 99.1
DIGITAL MICROWAVE CORPORATION 1994 STOCK INCENTIVE PLAN
(amended and restated May 1, 1996)
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1994 Stock Incentive Plan (the "Plan") is intended to
promote the interests of Digital Microwave Corporation, a Delaware corporation
(the "Corporation"), by providing (i) key employees (including officers) of the
Corporation (or its Parent or Subsidiary corporations) who are responsible for
the management, growth and financial success of the Corporation, (ii) the
non-employee members of the Corporation's Board of Directors (the "Board") or
the board of directors of any Parent or Subsidiary corporation and (iii) those
consultants and other independent contractors who provide valuable services to
the Corporation (or its Parent or Subsidiary corporations) with the opportunity
to acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Corporation as an incentive for them to remain in the service
of the Corporation (or its Parent or Subsidiary corporations).
B. The Plan shall become effective upon approval by the
Corporation's stockholders at the 1994 Annual Meeting to be held on July 27,
1994. Such date is hereby designated as the Effective Date of the Plan.
II. STRUCTURE OF THE PLAN
A. Stock Programs. The Plan shall be divided into five
separate components:
- The Discretionary Option Grant Program under which eligible
individuals may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock in accordance with
the provisions of Article Two.
- The Automatic Option Grant Program under which non-employee
Board members shall automatically receive special option grants at
periodic intervals to purchase shares of Common Stock in accordance
with the provisions of Article Three.
- The Stock Fee Program under which the non-employee Board
members may elect to apply all or a portion of their annual cash
retainer fee to the acquisition of shares of Common Stock in accordance
with the provisions of Article Four.
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- The Salary Reduction Grant Program under which eligible
individuals may, pursuant to the provisions of Article Five, elect to
have a portion of their base salary reduced each year in return for
options to purchase shares of Common Stock at an aggregate discount
from the Fair Market Value of the option shares on the grant date equal
to the salary reduction amount.
- The Stock Issuance Program under which eligible individuals
may, pursuant to the provisions of Article Six, be issued shares of
Common Stock directly, through the immediate purchase of such shares at
a price not less than eighty-five percent (85%) of their Fair Market
Value at the time of issuance, as a bonus tied to the performance of
services or the Corporation's attainment of financial objectives, or
pursuant to the individual's election to receive such shares in lieu of
base salary.
B. General Provisions. Unless the context clearly indicates
otherwise, the provisions of Articles One and Seven shall apply to the
Discretionary Option Grant, Automatic Option Grant, Salary Reduction Grant,
Stock Issuance and Stock Fee Programs and shall accordingly govern the interests
of all individuals under the Plan.
C. Glossary. Capitalized terms shall, except as otherwise
specifically defined within the provisions of the Plan, have the meanings
assigned to such terms in the Glossary.
III. ADMINISTRATION OF THE PLAN
A. The Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant, Salary Reduction Grant and Stock
Issuance Programs. No Board member shall be eligible to serve on the Committee
if such individual has, within the twelve (12)-month period immediately
preceding the date such individual is to be appointed to the Committee, received
an option grant or stock issuance under this Plan or any other stock option,
stock appreciation, stock bonus or other stock plan of the Corporation (or any
Subsidiary), other than pursuant to the Automatic Option Grant Program specified
in Article Three or the Stock Fee Program specified in Article Four or the
predecessor automatic option grant program in effect under the Corporation's
1984 Stock Option Plan. Members of the Committee shall serve for such period as
the Board may determine and shall be subject to removal by the Board at any
time.
B. The Committee as Plan Administrator shall have full power
and discretion (subject to the express provisions of the Plan) to establish such
rules and regulations as it may deem appropriate for the proper administration
of the Discretionary Option Grant, Salary Reduction Grant and Stock Issuance
Programs and to make such determinations under, and issue such interpretations
of, the provisions of each such program and any outstanding option grants or
stock issuances thereunder as it may deem necessary or advisable. Decisions of
the Plan Administrator shall be final and binding on all parties who have an
interest in those programs or any outstanding option or stock issuance
thereunder.
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<PAGE> 3
C. Service on the Committee shall constitute service as a
Board member, and members of the Committee shall accordingly be entitled to full
indemnification and reimbursement as Board members for their service on the
Committee. No member of the Committee shall be liable for any act or omission
made in good faith with respect to the Plan or any option grants or share
issuances under the Plan.
D. Administration of the Automatic Option Grant and Stock Fee
Programs shall be self-executing in accordance with the express terms and
conditions of those programs, and the Plan Administrator shall not exercise any
discretionary functions with respect to the option grants or stock issuances
made pursuant to such programs.
E. Notwithstanding the foregoing provisions of this Part III,
the Subcommittee shall have sole and exclusive authority to administer the
participation of Covered Employees in the Discretionary Option Grant, Salary
Deduction Grant and Stock Issuance Programs to the extent necessary to qualify
the grants under such programs as "performance-based compensation" under
Section 162(m) of the Code. In the case of such grants to Covered Employees,
references to the "Plan Administrator" shall be deemed to be references to the
Subcommittee.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary
Option Grant, Salary Reduction Grant and Stock Issuance Programs are as follows:
- officers and other key employees of the Corporation (or any
Parent or Subsidiary) who render services which contribute to the
management, growth and financial success of the Corporation; and
- those consultants or other independent contractors who
provide valuable services to the Corporation (or any Parent or
Subsidiary).
B. Non-employee Board members shall not be eligible to
participate in the Discretionary Option Grant, Salary Reduction Grant or Stock
Issuance Program or in any other stock option, stock purchase, stock bonus or
other stock plan of the Corporation (or its Subsidiaries). Such non-employee
Board members shall, however, be eligible to participate in the Automatic Option
Grant and Stock Fee Programs.
C. The Plan Administrator shall have full authority to
determine, (i) with respect to grants made under the Discretionary Option Grant
and Salary Reduction Grant Programs, which eligible individuals are to receive
such grants, the number of shares to be covered by each such grant, the status
of any granted option as either an Incentive Option or a Non-Statutory Option,
the time or times at which each granted option is to become exercisable and the
maximum term for which the option may remain outstanding and (ii) with respect
to stock issuances under the Stock Issuance Program, which eligible individuals
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<PAGE> 4
are to be selected for participation, the number of shares to be issued to each
selected individual, the vesting schedule (if any) to be applicable to the
issued shares and the consideration to be paid for such shares.
V. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under
the Plan and shall be drawn from either the Corporation's authorized but
unissued shares of Common Stock or from reacquired shares of Common Stock,
including shares repurchased by the Corporation on the open market. The number
of shares of Common Stock reserved for issuance over the term of the Plan shall
be fixed at 2,183,330 shares, subject to adjustment as provided below.
B. The number of shares of Common Stock available for issuance
under the Plan shall automatically increase on the first trading day of each
calendar year during each of the first five years of the term of the Plan,
beginning with the 1995 calendar year, by an amount equal to one percent (1%) of
the shares of Common Stock outstanding on December 31 of the immediately
preceding calendar year; but in no event shall any such annual increase exceed
150,000 shares. None of the additional shares resulting from such annual
increases may be made the subject of Incentive Options granted under the Plan.
C. No one individual participating in the Plan may be granted
stock options, separately exercisable stock appreciation rights and receive
direct stock issuances for more than 500,000 shares in the aggregate over the
term of the Plan.
D. Should one or more outstanding options under this Plan
expire or terminate for any reason prior to exercise in full, then the shares
subject to the portion of each option not so exercised shall be available for
subsequent issuance under the Plan. Shares subject to any stock appreciation
rights exercised under the Plan and all share issuances under the Plan (other
than issuances in payment of exercised stock appreciation rights), whether or
not the issued shares are subsequently repurchased by the Corporation pursuant
to its repurchase rights under the Plan, shall reduce on a share-for-share basis
the number of shares of Common Stock available for subsequent issuance under the
Plan. In addition, should the exercise price of an outstanding option under the
Plan be paid with shares of Common Stock or should shares of Common Stock
otherwise issuable under the Plan be withheld by the Corporation in satisfaction
of the withholding taxes incurred in connection with the exercise of an
outstanding option under the Plan or the vesting of a share issuance under the
Plan, then the number of shares of Common Stock available for issuance under the
Plan shall be reduced by the gross number of shares for which the option is
exercised or which vest under the share issuance, and not by the net number of
shares of Common Stock actually issued to the holder of such option or share
issuance.
E. Should any change be made to the Common Stock issuable under
the Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
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<PAGE> 5
consideration, then appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan, (ii) the maximum
number and/or class of securities for which the share reserve is to increase
automatically each year over the first five years of the term of the Plan, (iii)
the maximum number and/or class of securities for which any one individual
participating in the Plan may be granted stock options, separately exercisable
stock appreciation rights and direct stock issuances in the aggregate over the
term of the Plan, (iv) the number and/or class of securities for which automatic
option grants are to be subsequently made to each newly elected or continuing
non-employee Board member under the Automatic Option Grant Program and (v) the
number and/or class of securities and price per share in effect under each
option outstanding under the Plan. Such adjustments to the outstanding options
are to be effected in a manner which shall preclude the enlargement or dilution
of rights and benefits under those options. The adjustments determined by the
Plan Administrator shall be final, binding and conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Grant Program
shall be authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or Non-Statutory
Options. Individuals who are not Employees may only be granted Non-Statutory
Options. Each granted option shall be evidenced by one or more instruments in
the form approved by the Plan Administrator; provided, however, that each such
instrument shall comply with the terms and conditions specified below. Each
instrument evidencing an Incentive Option shall, in addition, be subject to the
provisions of the Plan applicable to such grants.
A. Exercise Price.
1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
The exercise price per share of Common Stock subject to an
Incentive Option shall in no event be less than one hundred percent
(100%) of the Fair Market Value of such Common Stock on the grant date.
The exercise price per share of Common Stock subject to a
Non-Statutory Option shall in no event be less than one hundred percent
(100%) of the Fair Market Value of such Common Stock on the grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one of the alternative forms
specified below:
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(i) full payment in cash or check made payable to the
Corporation's order,
(ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the date the
option is exercised,
(iii) full payment in a combination of shares of Common
Stock held for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at Fair
Market Value on the date the option is exercised and cash or check made payable
to the Corporation's order, or
(iv) to the extent the option is exercised for vested
shares, full payment through a broker-dealer sale and remittance procedure
pursuant to which the Optionee shall provide concurrent irrevocable written
instructions (I) to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of the
sale proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be withheld by
the Corporation in connection with such purchase and (II) to the Corporation to
deliver the certificates for the purchased shares directly to such brokerage
firm in order to complete the sale transaction.
B. Term and Exercise of Options. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
instrument evidencing such option. No option shall, however, have a maximum term
in excess of ten (10) years. During the lifetime of the Optionee, the option,
together with any stock appreciation rights pertaining to such option, shall be
exercisable only by the Optionee and shall not be assignable or transferable
except for a transfer of the option effected by will or by the laws of descent
and distribution following the Optionee's death; provided, however, that
effective as of August 15, 1996, any Non-Statutory Option shall be assignable or
transferable to the extent determined by the Plan Administrator and provided in
the agreement evidencing such option. However, any assignee or transferee shall
be entitled to exercise any such Non-Statutory Option or any related Tandem
Rights or Limited Rights in the same manner and only to the same extent as the
Optionee or right holder would have been entitled to exercise such option or
such related rights had it not been transferred and shall be subject to the same
restrictions, repurchase rights, and other limitations that bound the Optionee
or right holder, unless otherwise determined by the Plan Administrator.
C. Termination of Service.
1. Except to the extent otherwise expressly authorized by the
Plan Administrator, no Optionee shall have more than a thirty-six (36)-month
period measured from the date of such individual's cessation of Service in which
to exercise his or her outstanding options under the Plan.
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<PAGE> 7
2. Any option exercisable in whole or in part by the Optionee
at the time of death may be subsequently exercised by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution. However, no such option shall remain
exercisable for more than thirty-six (36) months after the date of the
Optionee's death.
3. Under no circumstances shall any such option be exercisable
after the specified expiration date of the option term.
4. During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of shares
(if any) in which the Optionee is vested at the time of his or her cessation of
Service. Upon the expiration of the limited post-Service exercise period or (if
earlier) upon the specified expiration date of the option term, each such option
shall terminate and cease to remain outstanding with respect to any vested
shares for which the option has not otherwise been exercised. However, each
outstanding option shall immediately terminate and cease to remain outstanding,
at the time of the Optionee's cessation of Service, with respect to any shares
for which the option is not otherwise at that time exercisable or in which the
Optionee is not otherwise vested.
5. Should the Optionee's Service be terminated for Misconduct,
all outstanding options held by that individual shall terminate immediately and
cease to remain outstanding.
6. The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding:
- to permit one or more options to be exercised not only
with respect to the number of vested shares of Common Stock for which
each such option is exercisable at the time of the Optionee's cessation
of Service but also with respect to one or more subsequent installments
of vested shares for which the option would otherwise have become
exercisable had such cessation of Service not occurred;
- to extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service or
death from the limited period otherwise in effect for that option to
such greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the specified expiration date of
the option term.
D. Stockholder Rights. An Optionee shall have none of the
rights of a stockholder with respect to any option shares until such individual
shall have exercised the option and paid the exercise price for the purchased
shares.
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<PAGE> 8
E. Repurchase Rights. The shares of Common Stock acquired
under this Discretionary Grant Program may be subject to repurchase by the
Corporation in accordance with the following provisions:
1. The Plan Administrator shall have the discretion to grant
options which are exercisable for unvested shares of Common Stock. Should the
Optionee cease Service while holding any unvested shares purchased under such
options, then the Corporation shall have the right to repurchase any or all of
those unvested shares at the exercise price paid per share. The terms and
conditions upon which such repurchase right shall be exercisable (including the
period and procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan Administrator and set forth
in the instrument evidencing such repurchase right.
2. All of the Corporation's outstanding repurchase rights shall
automatically terminate, and all shares subject to such terminated rights shall
immediately vest in full, upon the occurrence of a Corporate Transaction, except
to the extent: (i) any such repurchase right is expressly assigned to the
successor corporation (or parent thereof) in connection with the Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
3. The Plan Administrator shall have the discretionary
authority, exercisable either before or after the Optionee's cessation of
Service, to cancel the Corporation's outstanding repurchase rights with respect
to one or more shares purchased or purchasable by the Optionee under the Plan
and thereby accelerate the vesting of such shares in whole or in part at any
time.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to
all Incentive Options granted under the Plan. Incentive Options may only be
granted to individuals who are Employees. Options which are specifically
designated as Non-Statutory Options when issued under the Plan shall not be
subject to such terms and conditions.
A. Dollar Limitation. The aggregate Fair Market Value
(determined as of the respective date or dates of grant) of the Common Stock for
which one or more options granted to any Employee under this Plan (or any other
option plan of the Corporation or its Subsidiaries) may for the first time
become exercisable as incentive stock options under the Federal tax laws during
any one calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as incentive stock options
under the Federal tax laws shall be applied on the basis of the order in which
such options are granted. Should the number of shares of Common Stock for which
any Incentive Option first becomes exercisable in any calendar year exceed the
applicable One Hundred Thousand Dollar ($100,000) limitation, then the option
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<PAGE> 9
may nevertheless be exercised in that calendar year for the excess number of
shares as a Non-Statutory Option under the Federal tax laws.
B. 10% Stockholder. If any individual to whom an Incentive
Option is granted is the owner of stock (as determined under Section 424(d) of
the Code) possessing ten percent (10%) or more of the total combined voting
power of all classes of stock of the Corporation or any one of its Subsidiaries,
then the exercise price per share shall not be less than one hundred ten percent
(110%) of the Fair Market Value per share of Common Stock on the grant date and
the option term shall not exceed five (5) years measured from the grant date.
III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the specified effective date for such Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for all
or any portion of such shares. However, an outstanding option shall not so
accelerate if and to the extent: (i) such option is, in connection with the
Corporate Transaction, either to be assumed by the successor corporation or
parent thereof or to be replaced with a comparable option to purchase shares of
the capital stock of the successor corporation or parent thereof, (ii) such
option is to be replaced with a cash incentive program of the successor
corporation which preserves the option spread existing at the time of the
Corporate Transaction and provides for subsequent payout in accordance with the
same vesting schedule applicable to such option or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.
B. The Plan Administrator shall have the discretionary
authority, exercisable either at the time the option is granted or at any time
while the option remains outstanding, to provide for the automatic acceleration
of one or more outstanding options upon the occurrence of a Corporate
Transaction, whether or not those options are to be assumed or replaced in the
Corporate Transaction. Alternatively, the Plan Administrator shall have the
authority to provide for the subsequent acceleration of any outstanding options
which do not otherwise accelerate at the time of the Corporate Transaction, or
the subsequent termination of any of the Corporation's outstanding repurchase
rights which do not otherwise terminate at the time of the Corporate
Transaction, should the Optionee's Service terminate through an Involuntary
Termination effected within a designated period following the effective date of
such Corporate Transaction.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate, except to the extent
assumed by the successor corporation or its parent company.
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<PAGE> 10
D. Each outstanding option under this Discretionary Grant
Program that is assumed in connection with the Corporate Transaction or is
otherwise to continue in effect shall be appropriately adjusted, immediately
after such Corporate Transaction, to apply and pertain to the number and class
of securities which would have been issued to the option holder, in consummation
of such Corporate Transaction, had such person exercised the option immediately
prior to such Corporate Transaction. Appropriate adjustments shall also be made
to the exercise price payable per share, provided the aggregate exercise price
payable for such securities shall remain the same. In addition, the class and
number of securities available for issuance under the Plan on both an aggregate
and per individual basis following the consummation of the Corporate Transaction
shall be appropriately adjusted.
E. The Plan Administrator shall have the discretionary
authority, exercisable either at the time the option is granted or at any time
while the option remains outstanding, to provide for the automatic acceleration
of one or more outstanding options (and the termination of one or more of the
Corporation's outstanding repurchase rights) upon the occurrence of a Change in
Control. The Plan Administrator shall also have full power and authority to
condition any such option acceleration (and the termination of any outstanding
repurchase rights) upon the subsequent termination of the Optionee's Service
through an Involuntary Termination effected within a specified period following
the Change in Control.
F. Any options accelerated in connection with the Change in
Control shall remain fully exercisable until the expiration or sooner
termination of the option term.
G. The grant of options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
H. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an incentive stock option under the Federal tax laws only to the
extent the applicable One Hundred Thousand Dollar limitation is not exceeded. To
the extent such dollar limitation is exceeded, the accelerated portion of such
option shall be exercisable as a Non-Statutory Option under the Federal tax
laws.
IV. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority,
exercisable in its sole discretion, to grant to selected Optionees: (i) Tandem
Stock Appreciation Rights ("Tandem Rights") and/or Limited Stock Appreciation
Rights ("Limited Rights").
B. The following terms and conditions shall govern the grant
and exercise of Tandem Rights:
1. One or more Optionees may be granted the Tandem Right,
exercisable upon such terms and conditions as the Plan Administrator
may establish, to elect between the exercise of the underlying stock
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<PAGE> 11
option for shares of Common Stock and the surrender of that option in
exchange for a distribution from the Corporation in an amount equal to
the excess of (i) the Fair Market Value (on the option surrender date)
of the number of shares in which the Optionee is at the time vested
under the surrendered option (or surrendered portion thereof) over (ii)
the aggregate exercise price payable for such vested shares.
2. No such option surrender shall be effective unless it
is approved by the Plan Administrator. If the surrender is so approved,
then the distribution to which the Optionee shall accordingly become
entitled may be made in shares of Common Stock valued at Fair Market
Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion
deem appropriate.
3. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at
any time prior to the later of (i) five (5) business days after the
receipt of the rejection notice or (ii) the last day on which the
option is otherwise exercisable in accordance with the terms of the
instrument evidencing such option, but in no event may such rights be
exercised more than ten (10) years after the date of the option grant.
C. The following terms and conditions shall govern the grant
and exercise of Limited Rights:
1. One or more officers of the Corporation subject to the
short-swing profit restrictions of the federal securities laws may, in
the Plan Administrator's sole discretion, be granted Limited Rights
with respect to their outstanding options.
2. Upon the occurrence of a Hostile Take-Over, each such
officer holding one or more options with such a Limited Right shall
have the unconditional right (exercisable for a thirty (30)-day period
following such Hostile Take-Over) to surrender each such option to the
Corporation, to the extent the option is at the time exercisable for
fully vested shares of Common Stock. The officer shall in return be
entitled to a cash distribution from the Corporation in an amount equal
to the excess of (i) the Take-Over Price of the vested shares of Common
Stock at the time subject to each surrendered option (or surrendered
portion of such option) over (ii) the aggregate exercise price payable
for such vested shares. Such cash distribution shall be made within
five (5) days following the option surrender date.
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<PAGE> 12
3. Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option
surrender and cash distribution. Any unsurrendered portion of the
option shall continue to remain outstanding and become exercisable in
accordance with the terms of the instrument evidencing such grant.
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
A. Eligible Optionees. The individuals eligible to receive
automatic option grants pursuant to the provisions of this Automatic Grant
Program shall be limited to (i) those individuals who are first elected as
non-employee Board members at the 1994 Annual Meeting of Stockholders, (ii)
those individuals who are first elected or appointed as non-employee Board
members after the date of such Annual Meeting, whether through appointment by
the Board or election by the Corporation's stockholders, and (iii) those
individuals who are reelected to serve as non-employee Board members at one or
more Annual Stockholder Meetings beginning with the 1995 Annual Meeting. Only
individuals who have not been in the prior Service of the Corporation (or any
Parent or Subsidiary) may receive an automatic option grant under clause (i) or
(ii) above. Any non-employee Board member eligible to participate in the
Automatic Grant Program pursuant to the foregoing criteria is hereby designated
an Eligible Director for purposes of such program.
B. Limitation. Except for the option grants to be made
pursuant to the provisions of this Automatic Option Grant Program and any share
issuance to be made pursuant to the provisions of the Stock Fee Program,
non-employee Board members shall not be eligible to receive any option grants or
stock issuances under this Plan or any other stock plan of the Corporation (or
any Parent or Subsidiary).
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants shall be made on the dates
specified below:
1. Each individual first elected as an Eligible Director at the
1994 Annual Stockholders Meeting shall automatically be granted on the date of
such Meeting a Non-Statutory Option to purchase 15,000 shares of Common Stock.
2. Each individual who first becomes an Eligible Director after
the date of the 1994 Annual Stockholders Meeting, whether through election by
the Corporation's stockholders or appointment by the Board, shall automatically
be granted, at the time of such initial election or appointment, a Non-Statutory
Option to purchase 15,000 shares of Common Stock.
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<PAGE> 13
3. On the date of each Annual Stockholders Meeting, beginning
with the 1995 Annual Meeting, each individual who is at that time re-elected as
a non-employee Board member and who has not otherwise received any prior
automatic option grants during the two immediately preceding calendar years
shall automatically be granted a Non-Statutory Option to purchase an additional
5,000 shares of Common Stock, provided such individual has served as a Board
member for at least twelve (12) months.
B. No Limitation. There shall be no limit on the number of
such 5,000-share annual option grants any one Eligible Director may receive at
successive three-year intervals over his or her period of Board service.
C. Exercise Price. The exercise price per share of Common
Stock of each automatic option grant shall be equal to one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the automatic grant
date.
D. Payment. The exercise price shall be payable in any of the
alternative forms authorized under the Discretionary Option Grant Program. To
the extent the option is exercised for any unvested shares, the Optionee must
execute and deliver to the Corporation a stock purchase agreement for those
unvested shares which provides the Corporation with the right to repurchase, at
the exercise price paid per share, any unvested shares held by the Optionee at
the time of cessation of Board service and which precludes the sale, transfer or
other disposition of the purchased shares at any time while those shares remain
subject to such repurchase right.
E. Option Term. Each automatic grant shall have a maximum term
of ten (10) years measured from the grant date.
F. Exercisability/Vesting. Each automatic grant shall be
immediately exercisable for any or all of the option shares. However, any shares
purchased under the option shall be subject to repurchase by the Corporation, at
the exercise price paid per share, upon the Optionee's cessation of Board
service prior to vesting in those shares. Each automatic grant shall vest, and
the Corporation's repurchase right shall lapse, in a series of three (3) equal
and successive annual installments over the Optionee's period of continued
service as a Board member, with the first such installment to vest upon
Optionee's completion of one (1) year of Board service measured from the
automatic grant date.
G. Transferability. Prior to August 15, 1996, during the
lifetime of the Optionee, the automatic option grant, together with the limited
stock appreciation right pertaining to such option, shall be exercisable only by
the Optionee and shall not be assignable or transferable except for a transfer
of the option effected by will or by the laws of descent and distribution
following the Optionee's death. Effective as of August 15, 1996, the automatic
option grant, together with the limited stock appreciation right pertaining to
such option, shall be fully assignable and transferable notwithstanding any
contrary provision of the agreement evidencing such option and related stock
appreciation right; provided, however, that any assignee or transferee shall be
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<PAGE> 14
entitled to exercise such option and any related stock appreciation right in the
same manner and only to the same extent as the Optionee would have been entitled
to exercise such option and the related stock appreciation right had it not been
transferred and shall be subject to the same restrictions, repurchase rights,
and other limitations that bound the Optionee, unless otherwise determined by
the Plan Administrator.
H. Termination of Board Service.
1. Should the Optionee cease to serve as a Board member for any
reason (other than death or Permanent Disability) while holding one or more
automatic option grants, then such individual shall have a six (6)-month period
following the date of such cessation of Board service in which to exercise each
such option for any or all of the option shares in which the Optionee is vested
at the time of such cessation of Board service. However, each such option shall
immediately terminate and cease to remain outstanding, at the time of such
cessation of Board service, with respect to any option shares in which the
Optionee is not otherwise at that time vested under such option.
2. Should the Optionee die within six (6) months after
cessation of Board service, then any automatic option grant held by the Optionee
at the time of death may subsequently be exercised, for any or all of the option
shares in which the Optionee is vested at the time of his or her cessation of
Board service (less any option shares subsequently purchased by the Optionee
prior to death), by the personal representative of the Optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution. The
right to exercise each such option shall lapse upon the expiration of the twelve
(12)-month period measured from the date of the Optionee's death.
3. Upon the Optionee's death or Permanent Disability while
serving as a Board member, the shares of Common Stock at the time subject to
each automatic option grant held by the Optionee shall immediately vest in full
(and the Corporation's repurchase right with respect to such shares shall
terminate), and the Optionee (or the representative of the Optionee's estate or
the person or persons to whom the option is transferred upon the Optionee's
death) shall have a twelve (12)-month period following the date of such
cessation of Board service in which to exercise such option for any or all of
those vested shares of Common Stock.
4. In no event shall any automatic grant remain exercisable
after the expiration date of the ten (10)-year option term. Upon the expiration
of the applicable post-service exercise period provided above or (if earlier)
upon the expiration of the ten (10)-year option term, the automatic grant shall
terminate and cease to be outstanding for any option shares in which the
Optionee was vested at the time of his or her cessation of Board service but for
which such option was not otherwise exercised.
I. Stockholder Rights. The holder of an automatic option grant
under this Automatic Grant Program shall have none of the rights of a
stockholder with respect to any shares subject to that option until such
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<PAGE> 15
individual shall have exercised the option and paid the exercise price for the
purchased shares.
J. Remaining Terms. The remaining terms and conditions of each
automatic option grant shall be as set forth in the form Automatic Stock Option
Agreement attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. The shares of Common Stock subject to each automatic option
grant outstanding at the time of any Corporate Transaction but not otherwise
vested shall automatically vest in full and the Corporation's repurchase right
with respect to those shares shall terminate, so that each such option shall,
immediately prior to the specified effective date for the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the time
subject to that option and may be exercised for all or any portion of such
shares as fully vested shares of Common Stock. Immediately following the
consummation of the Corporate Transaction, all automatic option grants shall
terminate and cease to remain outstanding, except to the extent assumed by the
successor entity or its parent corporation.
B. The shares of Common Stock subject to each automatic option
grant outstanding at the time of any Change in Control but not otherwise vested
shall automatically vest in full and the Corporation's repurchase right with
respect to those shares shall terminate, so that each such option shall,
immediately prior to the specified effective date for the Change in Control,
become fully exercisable for all of the shares of Common Stock at the time
subject to that option and may be exercised for all or any portion of such
shares as fully vested shares of Common Stock. Each option shall remain so
exercisable for all the option shares following the Change in Control until the
expiration or sooner termination of the option term.
C. Upon the occurrence of a Hostile Take-Over, the Optionee
shall also have a thirty (30) day period in which to surrender to the
Corporation each automatic option grant held by him or her. The Optionee shall
in return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the shares of Common Stock at
the time subject to the surrendered option over (ii) the aggregate exercise
price payable for such shares. Such cash distribution shall be paid within five
(5) days following the surrender of the option to the Corporation. Neither the
approval of the Plan Administrator nor the consent of the Board shall be
required in connection with such option surrender and cash distribution. The
shares of Common Stock subject to each option surrendered in connection with the
Hostile Take-Over shall not be available for subsequent issuance under the Plan.
D. The automatic option grants outstanding under the Plan shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
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<PAGE> 16
IV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
The provisions of this Automatic Option Grant Program, together
with the outstanding automatic option grants, may not be amended at intervals
more frequently than once every six (6) months, other than to the extent
necessary to comply with applicable Federal income tax laws, the Employee
Retirement Income Security Act of 1974, as amended, or any applicable rules and
regulations thereunder; provided, however, that effective as of August 15, 1996,
this limitation on amendments of the Automatic Option Grant Program shall no
longer apply.
ARTICLE FOUR
STOCK FEE PROGRAM
I. ELIGIBILITY
Each individual serving as a non-employee Board member shall
be eligible to elect to apply all or any portion of the annual retainer fee
otherwise payable to such individual in cash to the acquisition of unvested
shares of Common Stock upon the terms and conditions of this Stock Fee Program.
II. ELECTION PROCEDURE
A. Filing. The non-employee Board member must make the
stock-in-lieu-of-fee election prior to the start of the calendar year for which
the election is to be effective. The first calendar year for which any such
election may be filed shall be the 1995 calendar year. The election, once filed,
shall be irrevocable. The election for any upcoming calendar year may be filed
at any time prior to the start of that year, but in no event later than December
31 of the immediately preceding calendar year. The non-employee Board member may
file a standing election to be in effect for two (2) or more consecutive
calendar years or to remain in effect indefinitely until revoked by written
instrument filed with the Plan Administrator at least six (6) months prior to
the start of the first calendar year for which such standing election is no
longer to remain in effect.
B. Election Form. The election must be filed with the Plan
Administrator on the appropriate form provided for this purpose. On the election
form, the non-employee Board member must indicate the percentage or dollar
amount of his or her annual retainer fee to be applied to the acquisition of
unvested shares.
III. SHARE ISSUANCE
A. Issue Date. On the first trading day in January of the
calendar year for which the election is effective, the portion of the retainer
fee subject to such election shall automatically be applied to the acquisition
of shares of Common Stock by dividing the elected dollar amount by the Fair
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<PAGE> 17
Market Value per share of Common Stock on that trading day. The number of
issuable shares shall be rounded down to the next whole share, and the issued
shares shall be held in escrow by the Secretary of the Corporation as
partly-paid shares until the non-employee Board member vests in those shares.
The non-employee Board member shall have full shareholder rights, including
voting, dividend and liquidation rights, with respect to all issued shares held
in escrow on his or her behalf, but such shares shall not be assignable or
transferable while they remain unvested.
B. Vesting. Upon completion of each calendar month of Board
service during the year for which the election is in effect, the non-employee
Board member shall vest in one-twelfth (1/12) of the issued shares, and the
stock certificate for those shares shall be released from escrow. Immediate
vesting in all the issued shares shall occur in the event (i) the non-employee
Board member should die or become Permanently Disabled during his or her period
of Board service or (ii) there should occur a Corporate Transaction or Change in
Control while such individual remains in Board service. Should such individual
cease Board service prior to vesting in one or more monthly installments of the
issued shares, then those unvested shares shall be canceled by the Corporation,
and the non-employee Board member shall not be entitled to any cash payment or
other consideration from the Corporation with respect to the canceled shares and
shall have no further shareholder rights with respect to such shares.
IV. AMENDMENT OF THE STOCK FEE PROGRAM PROVISIONS
The provisions of this Stock Fee Program, together with any
outstanding unvested share issuances, may not be amended at intervals more
frequently than once every six (6) months, other than to the extent necessary to
comply with applicable Federal income tax laws, the Employee Retirement Income
Security Act of 1974, as amended, or any applicable rules and regulations
thereunder; provided, however, that effective as of August 15, 1996, this
limitation on amendments of the Stock Fee Program shall no longer apply.
ARTICLE FIVE
SALARY REDUCTION GRANT PROGRAM
I. ELIGIBILITY
The Plan Administrator shall have plenary authority to select,
prior to the start of each calendar year, the particular key employees who shall
be eligible for participation in the Salary Reduction Grant Program for that
calendar year. In order to participate for a particular calendar year, each
selected individual must, prior to the start of that calendar year, file with
the Plan Administrator (or its designate) an irrevocable authorization directing
the Corporation to reduce his or her base salary for that calendar year by a
designated multiple of one percent (1%), but in no event less than five percent
(5%).
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<PAGE> 18
The Plan Administrator shall review the filed authorizations and
determine whether to approve, in whole or in part, one or more of those
authorizations. To the extent the Plan Administrator approves one or more
authorizations, the individuals who filed those authorizations shall be granted
options under this Salary Reduction Grant Program.
Options granted under the Salary Reduction Grant Program, such
options shall be Non-Statutory Options evidenced by instruments in such form as
the Plan Administrator shall from time to time approve; provided, however, that
each such instrument shall comply with and incorporate the terms and conditions
specified below.
II. TERMS AND CONDITIONS OF OPTION
A. Exercise Price.
1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in any of the alternative forms
authorized under the Discretionary Grant Program.
B. Number of Option Shares. The number of shares of Common
Stock for which each grant is to be made to a selected Optionee shall be
determined pursuant to the following formula (rounded down to the nearest whole
number):
X = A divided by (B x 66-2/3%), where
X is the number of option shares,
A is the dollar amount of the approved reduction in the
Optionee's base salary for the calendar year, and
B is the Fair Market Value per share of Common Stock on the
date of the grant.
C. Term and Exercise of Options.
1. Each option shall have a maximum term of ten (10) years
measured from the grant date. Provided the Optionee continues in Service, the
option shall become exercisable for (i) fifty percent (50%) of the option shares
on the last day of June in the calendar year for which the option is granted and
for (ii) the balance of the option shares in a series of six (6) successive
equal monthly installments on the last day of each of the next six (6) calendar
months.
2. Prior to August 15, 1996, the option shall be exercisable
only by the Optionee and shall not be assignable or transferable other than by
transfer of the option effected by will or by the laws of descent and
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<PAGE> 19
distribution following the Optionee's death. However, effective as of August 15,
1996, the option shall be assignable or transferable to the extent determined by
the Plan Administrator and provided in the agreement evidencing such option.
However, any assignee or transferee shall be entitled to exercise the option in
the same manner and only to the same extent as the Optionee would have been
entitled to exercise the option had it not been transferred and shall be subject
to the same restrictions, repurchase rights, and other limitations that bound
the Optionee or right holder, unless otherwise determined by the Plan
Administrator.
D. Effect of Termination of Service.
1. Should an Optionee cease Service for any reason after his or
her outstanding option has become exercisable in whole or in part, then that
option shall remain exercisable, for any or all of the shares for which the
option is exercisable on the date of such cessation of Service, until the
expiration of the ten (10) year option term or any sooner termination in
connection with a Corporate Transaction. Following the Optionee's death, such
option may be exercised, for any or all of the shares for which the option is
exercisable at the time of the Optionee's death, by the personal representative
of the Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the laws of
descent and distribution. Such right of exercise shall lapse, and the option
shall terminate, upon the expiration of the ten (10)-year option term or any
sooner termination in connection with a Corporate Transaction.
2. Should the Optionee die before his or her outstanding
option becomes exercisable for any of the option shares, then the personal
representative of the Optionee's estate or the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution shall nevertheless have the right to exercise
such option for up to that number of option shares equal to (i) one-twelfth
(1/12) of the total number of option shares multiplied by (ii) the number of
full calendar months which have elapsed between the first day of the calendar
year for which the option is granted and the last day of the calendar month
during which the Optionee ceases Service. Such right of exercise shall lapse,
and the option shall terminate, upon the earliest to occur of (i) the specified
expiration date of the option term, (ii) the termination of the option in
connection with a Corporate Transaction or (iii) the third anniversary of the
date of the Optionee's death. However, the option shall, with respect to any and
all option shares for which it is not exercisable at the time of the Optionee's
cessation of Service, terminate immediately upon such cessation of Service and
shall cease to remain outstanding with respect to those option shares.
3. Should the Optionee become Permanently Disabled and cease by
reason thereof to remain in Service before his or her outstanding option becomes
exercisable for any of the option shares, then the Optionee shall nevertheless
have the right to exercise such option for up to that number of option shares
equal to (i) one-twelfth (1/12) of the total number of option shares multiplied
by (ii) the number of full calendar months which elapse between the first day of
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the calendar year for which the option is granted and the last day of the
calendar month during which the Optionee ceases Service. Such right of exercise
shall lapse, and the option shall terminate, upon the expiration of the ten
(10)-year option term or any sooner termination in connection with a Corporate
Transaction. However, the option shall, with respect to any and all option
shares for which it is not exercisable at the time of the Optionee's cessation
of Service, terminate immediately upon such cessation of Service and shall cease
to remain outstanding with respect to those option shares.
4. Except to the limited extent specifically provided above,
should the Optionee cease for any reason to remain in Service before his or her
outstanding option first becomes exercisable for one or more option shares, then
that option shall immediately terminate upon such cessation of Service and shall
cease to remain outstanding.
E. Stockholder Rights. The Optionee shall have none of the
rights of a stockholder with respect to any option shares until such individual
shall have exercised the option and paid the exercise price for those shares.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. Should any Corporate Transaction occur while the Optionee
remains in Service, then each outstanding option held by such Optionee under
this Salary Reduction Program shall become exercisable, immediately prior to the
specified effective date of such Corporate Transaction, for all of the shares at
the time subject to such option and may be exercised for any or all of such
shares as fully-vested shares of Common Stock. Immediately following the
consummation of the Corporate Transaction, each such option shall terminate
unless assumed by the successor entity or its parent corporation.
B. Upon the Involuntary Termination of the Optionee's Service
following a Change in Control, each outstanding option held by such Optionee
under this Salary Reduction Program shall immediately become exercisable for all
of the shares at the time subject to such option and may be exercised for any or
all of such shares as fully-vested shares of Common Stock. The option shall
remain so exercisable until the expiration of the ten (10)-year option term.
C. Option grants under this Salary Reduction Program shall not
affect the Corporation's right to adjust, reclassify, reorganize or change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer any or all of its assets.
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ARTICLE SIX
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate purchases without any intervening stock
option grants. The issued shares shall be evidenced by a Stock Issuance
Agreement ("Issuance Agreement") that complies with the terms and conditions
below.
A. Consideration
1. Newly Issued Shares shall be issued under the Stock Issuance
Program for one or more of the following items of consideration that the Plan
Administrator may deem appropriate in each individual instance:
(i) full payment in cash or check made payable to the
Corporation's order,
(ii) a promissory note payable to the Corporation's order
in one or more installments, which may be subject to cancellation in
whole or in part upon terms and conditions established by the Plan
Administrator, or
(iii) past services rendered to the Corporation or any
Parent or Subsidiary.
2. Newly Issued Shares must be issued for consideration with a
value not less than eighty-five percent (85%) of the Fair Market Value of such
shares at the time of issuance.
3. Treasury Shares may be issued under the Stock Issuance
Program for such consideration (including one or more of the items of
consideration specified above) as the Plan Administrator may deem appropriate,
whether such consideration is in an amount less than, equal to or greater than
the Fair Market Value of the Treasury Shares at the time of issuance. Treasury
Shares may, in lieu of any cash consideration, be issued subject to such vesting
requirements tied to the Participant's period of future Service or the
Corporation's attainment of specified performance objectives as the Plan
Administrator may establish at the time of issuance.
4. Shares of Common Stock may also, in the Plan Administrator's
absolute discretion, be issued pursuant to an irrevocable election by the
Participant to receive a portion of his or her base salary in shares of Common
Stock in lieu of such base salary. Any such issuance shall be effected in
accordance with the following guidelines:
- On the first trading day in January of the calendar year for
which the election is effective, the portion of base salary subject to
such election shall automatically be applied to the acquisition of
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Common Stock by dividing the elected dollar amount by the Fair Market
Value per share of the Common Stock on that trading day. The number of
issuable shares shall be rounded down to the next whole share, and the
issued shares shall be held in escrow by the Secretary of the
Corporation as partly-paid shares until the Participant vests in those
shares. The Participant shall have full stockholder rights, including
voting, dividend and liquidation rights, with respect to all issued
shares held in escrow on his or her behalf, but such shares shall not
be assignable or transferable while they remain unvested.
- Upon completion of each calendar month of Service during the
year for which the election is in effect, the Participant shall vest in
one-twelfth (1/12) of the issued shares, and the stock certificate for
those shares shall be released from escrow. All the issued shares shall
immediately vest upon (i) the consummation of a Corporate Transaction
or (ii) the Involuntary Termination of the Participant's Service
following a Change in Control. Should the Participant otherwise cease
Service prior to vesting in one or more monthly installments of the
issued shares, then those unvested shares shall immediately be
surrendered to the Corporation for cancellation, and the Participant
shall not be entitled to any cash payment or other consideration from
the Corporation with respect to the canceled shares and shall have no
further stockholder rights with respect to such shares.
B. Vesting Provisions
1. The shares of Common Stock issued under the Stock Issuance
Program (other than shares issued in lieu of salary) may, in the absolute
discretion of the Plan Administrator, be fully and immediately vested upon
issuance or may vest in installments over the Participant's period of Service.
The elements of the vesting schedule applicable to any unvested shares of Common
Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the Participant
or the performance objectives to be achieved by the Corporation,
(ii) the number of installments in which the shares are to
vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
(iv) the effect which death, Permanent Disability or other
event designated by the Plan Administrator is to have upon the vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Issuance
Agreement executed by the Corporation and the Participant at the time such
unvested shares are issued.
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2. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to him or her under the Stock
Issuance Program, whether or not his or her interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares. Any new, additional or
different shares of stock or other property (including money paid other than as
a regular cash dividend) which the Participant may have the right to receive
with respect to his or her unvested shares by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration shall be issued, subject to (i) the same
vesting requirements applicable to the Participant's unvested shares and (ii)
such escrow arrangements as the Plan Administrator shall deem appropriate.
3. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock under the Stock Issuance
Program, then those shares shall be immediately canceled by the Corporation, and
the Participant shall have no further stockholder rights with respect to those
shares. To the extent the canceled shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money promissory note), the Corporation shall repay to
the Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to such canceled shares. The canceled shares may,
at the Plan Administrator's discretion, be retained by the Corporation as
Treasury Shares or may be retired to authorized but unissued share status.
4. The Plan Administrator may in its discretion elect to waive
the cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the non-completion of the
vesting schedule applicable to such shares. Such waiver shall result in the
immediate vesting of the Participant's interest in the shares of Common Stock as
to which the waiver applies. Such waiver may be effected at any time, whether
before or after the Participant's cessation of Service or the attainment or
non-attainment of the applicable performance objectives.
II. CORPORATE TRANSACTIONS/CHANGE IN CONTROL
A. Upon the occurrence of any Corporate Transaction, all
unvested shares of Common Stock at the time outstanding under this Stock
Issuance Program shall immediately vest in full and the Corporation's repurchase
rights shall terminate, except to the extent: (i) any such repurchase right is
expressly assigned to the successor corporation (or parent thereof) in
connection with the Corporate Transaction or (ii) such termination is precluded
by other limitations imposed in the Issuance Agreement.
B. The Plan Administrator shall have the discretionary
authority, exercisable at any time while unvested shares remain outstanding
under this Stock Issuance Program, to provide for the immediate and automatic
vesting of those shares in whole or in part upon the occurrence of a Change in
Control. The Plan Administrator shall also have full power and authority to
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condition any such accelerated vesting upon the subsequent termination of the
Participant's Service through an Involuntary Termination effected within a
specified period following the Change in Control.
III. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Unvested shares may, in the Plan Administrator's
discretion, be held in escrow by the Corporation until the Participant's
interest in such shares vests or may be issued directly to the Participant with
restrictive legends on the certificates evidencing such unvested shares. To the
extent an escrow arrangement is utilized, the unvested shares and any securities
or other assets issued with respect to such shares (other than regular cash
dividends) shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such shares (or other securities or assets) vests.
Alternatively, if the unvested shares are issued directly to the Participant,
the restrictive legend on the certificates for such shares shall read
substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE
SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND (II) CANCELLATION OR
REPURCHASE IN THE EVENT THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR
IN INTEREST) CEASES TO REMAIN IN THE CORPORATION'S SERVICE. SUCH
TRANSFER RESTRICTIONS AND THE TERMS AND CONDITIONS OF SUCH CANCELLATION
OR REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE AGREEMENT BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN
INTEREST) DATED ______________, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE CORPORATION."
B. The Participant shall have no right to transfer any unvested
shares of Common Stock issued to him or her under the Stock Issuance Program.
For purposes of this restriction, the term "transfer" shall include (without
limitation) any sale, pledge, assignment, encumbrance, gift, or other
disposition of such shares, whether voluntary or involuntary. Upon any such
attempted transfer, the unvested shares shall immediately be canceled, and
neither the Participant nor the proposed transferee shall have any rights with
respect to such canceled shares. However, the Participant shall have the right
to make a gift of unvested shares acquired under the Stock Issuance Program to
the Participant's spouse or issue, including adopted children, or to a trust
established for such spouse or issue, provided the transferee of such shares
delivers to the Corporation a written agreement to be bound by all the
provisions of the Stock Issuance Program and the Issuance Agreement applicable
to the transferred shares.
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ARTICLE SEVEN
MISCELLANEOUS
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any
Optionee or Participant (including an Optionee or Participant who is an officer
of the Corporation), in the exercise of one or more options granted to such
Optionee under the Discretionary Grant Program or the Salary Reduction Grant
Program or the purchase of one or more shares issued to such Participant under
the Stock Issuance Program, including the satisfaction of any Federal, state and
local income and employment tax obligations arising therefrom, by (i)
authorizing the extension of a loan from the Corporation to such Optionee or
Participant or (ii) permitting the Optionee or Participant to pay the exercise
price or purchase price for the acquired shares in installments over a period of
years. The terms of any loan or installment method of payment (including the
interest rate and terms of repayment) shall be upon such terms as the Plan
Administrator specifies in the applicable option or issuance agreement or
otherwise deems appropriate under the circumstances. Loans or installment
payments may be authorized with or without security or collateral. However, the
maximum credit available to the Optionee or Participant may not exceed the
exercise or purchase price of the acquired shares (less the par value of such
shares) plus any Federal, state and local income and employment tax liability
incurred by the Optionee or Participant in connection with the acquisition of
such shares.
B. The Plan Administrator may, in its absolute discretion,
determine that one or more loans extended under this financial assistance
program shall be subject to forgiveness by the Corporation in whole or in part
upon such terms and conditions as the Plan Administrator may deem appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to
amend or modify the Plan (or any component thereof) in any or all respects
whatsoever. However, no such amendment or modification shall adversely affect
rights and obligations with respect to stock options, stock appreciation rights
or unvested stock issuances at the time outstanding under the Plan, unless the
Optionee or Participant consents to such amendment. In addition, the Board may
not, without the approval of the Corporation's stockholders, amend the Plan to
(i) materially increase the maximum number of shares issuable under the Plan,
the number of shares for which options may be granted to newly elected or
continuing non-employee Board members under the Automatic Grant Program or the
maximum number of shares for which any one individual participating in the Plan
may be granted stock options, separately exercisable stock appreciation rights
and direct stock issuances in the aggregate over the term of the Plan, except
for permissible adjustments in the event of certain changes in the Corporation's
capitalization, (ii) materially modify the eligibility requirements for Plan
participation or (iii) materially increase the benefits accruing to Optionees or
Participants. Effective as of August 15, 1996, the Plan Administrator shall
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have the discretion to amend any outstanding agreement evidencing a
Non-Statutory Option or stock appreciation right granted under the Discretionary
Option Grant or Salary Deduction Grant Programs to provide for such
assignability and transferability of such option or stock appreciation right as
the Plan Administrator in its discretion deems advisable.
B. Options to purchase shares of Common Stock may be granted
under the Discretionary Grant Program and the Salary Reduction Grant Program and
shares of Common Stock may be issued under the Stock Issuance Program, which are
in excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under those programs are held in
escrow until stockholder approval is obtained for a sufficient increase in the
number of shares available for issuance under the Plan. If such stockholder
approval is not obtained within twelve (12) months after the date the first such
excess option grants or excess share issuances are made, then (i) any
unexercised excess options shall terminate and cease to be exercisable and (ii)
the Corporation shall promptly refund the purchase price paid for any excess
shares actually issued under the Plan and held in escrow, together with interest
(at the applicable short term federal rate) for the period the shares were held
in escrow.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of stock options or stock appreciation rights or the
direct issuance or vesting of such shares under the Plan shall be subject to the
satisfaction of all applicable Federal, state and local income tax and
employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any
or all holders of Non-Statutory Options (other than the automatic option grants
made pursuant to the Automatic Grant Program) or unvested shares under the Stock
Issuance Program with the right to use shares of Common Stock in satisfaction of
all or part of the Federal, state and local income and employment tax
liabilities (the "Taxes") incurred by such holders in connection with the
exercise of their options or the vesting of their shares. Such right may be
provided to any such holder in either or both of the following formats:
- Stock Withholding: The holder of the Non-Statutory Option or
unvested shares may be provided with the election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the Taxes
(up to one hundred percent (100%)) specified by such holder.
- Stock Delivery: The holder of the Non-Statutory Option or
the unvested shares may be provided with the election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised or the shares
vest, one or more shares of Common Stock previously acquired by such individual
(other than in connection with the option exercise or share vesting triggering
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the Taxes) with an aggregate Fair Market Value equal to the percentage of the
Taxes (up to one hundred percent (100%)) specified by such holder.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan shall become effective immediately upon approval
by the Corporation's stockholders at the 1994 Annual Meeting.
B. The Plan shall terminate upon the earlier of (i) April 28,
2004 or (ii) the date on which all shares available for issuance under the Plan
shall have been issued or canceled pursuant to the exercise of options or stock
appreciation rights or the issuance of shares (whether vested or unvested) under
the Plan. If the date of termination is determined under clause (i) above, then
all option grants and unvested stock issuances outstanding on such date shall
thereafter continue to have force and effect in accordance with the provisions
of the instruments evidencing such grants or issuances.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to option grants or stock issuances under the Plan shall be used
for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
or stock appreciation right under the Plan, the issuance of any shares under the
Stock Issuance Program, and the issuance of Common Stock upon the exercise of
the stock options and stock appreciation rights granted hereunder shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
and stock appreciation rights granted under it and the Common Stock issued
pursuant to it.
B. No shares of Common Stock or other assets shall be issued
or delivered under this Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws, including
the filing and effectiveness of the Form S-8 registration statement for the
shares of Common Stock issuable under the Plan, and all applicable listing
requirements of any securities exchange on which the Common Stock is then listed
for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan,
nor any action taken by the Plan Administrator hereunder, nor any provision of
the Plan shall be construed so as to grant any individual the right to remain in
the Service of the Corporation (or Subsidiary) for any period of specific
duration, and the Corporation (or any Subsidiary retaining the services of such
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individual) may terminate such individual's Service at any time and for any
reason, with or without cause.
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GLOSSARY
The following definitions shall be in effect under the Plan:
CHANGE IN CONTROL: a change in ownership or control of the
Corporation effected through any of the following transactions:
- the direct or indirect acquisition by any person or related
group of persons (other than the Corporation or a person that directly
or indirectly controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept, or
- a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the Board
members (rounded up to the next whole number) ceases, by reason of one
or more contested elections for Board membership, to be comprised of
individuals who either (a) have been Board members continuously since
the beginning of such period or (b) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (a) who were still in office at
the time such election or nomination was approved by the Board.
CODE: the Internal Revenue Code of 1986, as amended.
COMMITTEE: a committee of two (2) or more non-employee Board
members appointed by the Board to administer the Plan.
CORPORATE TRANSACTION: any of the following stockholder-approved
transactions to which the Corporation is a party:
- a merger or consolidation in which the Corporation is not
the surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Corporation is incorporated,
- a sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation, or
- any reverse merger in which the Corporation is the surviving
entity but in which securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's outstanding
securities are transferred to a person or persons different from the
persons holding those securities immediately prior to such merger.
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COVERED EMPLOYEE: an individual defined as a "Covered Employee"
under Section 162(m) of the Code and the regulations thereunder.
EMPLOYEE: an individual who performs services while in the employ
of the Corporation or one or more Subsidiaries, subject to the control and
direction of the employer entity not only as to the work to be performed but
also as to the manner and method of performance.
FAIR MARKET VALUE: the closing selling price per share on the
date in question on the NASDAQ National Market. If there is no reported closing
selling price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for which
such quotation exists.
HOSTILE TAKE-OVER: a change in ownership of the Corporation
effected through the following transaction:
- the direct or indirect acquisition by any person or related
group of persons of securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board does not recommend such
stockholders to accept, and
- more than fifty percent (50%) of the acquired securities are
accepted from holders other than the officers and directors of the
Corporation subject to the short-swing profit restrictions of Section
16 of the 1934 Act.
INCENTIVE OPTION: a stock option which satisfies the requirements
of Code Section 422.
INVOLUNTARY TERMINATION: the termination of the Service of any
Optionee or Participant which occurs by reason of:
- such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
- such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially
reduces his or her level of responsibility, (B) a reduction in his or
her level of compensation (including base salary, fringe benefits and
any non-discretionary and objective-standard incentive payment or bonus
award) by more than five percent (5%) or (C) a relocation of such
individual's place of employment by more than fifty (50) miles,
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provided and only if such change, reduction or relocation is effected
by the Corporation without the individual's consent.
MISCONDUCT: the commission of any act of fraud, embezzlement or
dishonesty by the Optionee or Participant, any unauthorized use or disclosure by
such individual of confidential information or trade secrets of the Corporation
or any Parent or Subsidiary, or any other intentional misconduct by such
individual adversely affecting the business or affairs of the Corporation in a
material manner. The foregoing definition shall not be deemed to be inclusive of
all the acts or omissions which the Corporation or any Parent or Subsidiary may
consider as grounds for the dismissal or discharge of any Optionee, Participant
or other individual in the Service of the Corporation.
NEWLY ISSUED SHARES: shares of Common Stock drawn from the
Corporation's authorized but unissued shares of Common Stock.
1934 ACT: the Securities and Exchange Act of 1934, as amended.
NON-STATUTORY OPTION: a stock option not intended to meet the
requirements of Code Section 422.
OPTIONEE: any person to whom an option is granted under the
Discretionary Grant, Automatic Grant or Salary Reduction Grant Program in effect
under the Plan.
PARENT: each corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each such
corporation (other than the Corporation) in the unbroken chain owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in any other corporation in such
chain.
PARTICIPANT: any person who receives a direct issuance of Common
Stock under the Stock Issuance Program in effect under the Plan.
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of
the Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
PLAN ADMINISTRATOR: the committee of two (2) or more non-employee
Board members appointed by the Board to administer the Discretionary Option
Grant, the Salary Reduction and the Stock Issuance Programs.
SERVICE: the provision of services on a periodic basis to the
Corporation or any Parent or Subsidiary in the capacity of an Employee, a
non-employee member of the board of
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directors or an independent consultant or advisor, except to the extent
otherwise specifically provided in the applicable stock option or stock issuance
agreement.
SUBCOMMITTEE: a subcommittee of the Committee comprised solely of
two or more "outside directors" within the meaning of Section 162(m) of the Code
and the regulations thereunder.
SUBSIDIARY: each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
such corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in any other
corporation in such chain.
TAKE-OVER PRICE: the greater of (i) the Fair Market Value per
share of Common Stock on the date the option is surrendered to the Corporation
in connection with a Hostile Take-Over or (ii) the highest reported price per
share of Common Stock paid by the tender offer or in effecting such Hostile
Take-Over. However, if the surrendered option is an Incentive Option, the
Take-Over Price shall not exceed the clause (i) price per share.
TREASURY SHARES: shares of Common Stock reacquired by the
Corporation and held as treasury shares.
32
