<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 1998.
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
1998 NON-OFFICER EMPLOYEE STOCK OPTION PLAN
(Full Title of the Plan)
CHARLES D. KISSNER
CHAIRMAN OF THE BOARD 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
- --------------------------------------------------------------------------------
<PAGE>
Calculation of Registration Fee
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Proposed Proposed
Title of Number of Maximum Maximum Amount of
Securities to shares to be Offering Price Aggregate Registration
be Registered Registered Per Share Offering Price Fee
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 500,000 $13.72* $6,860,000 $2,023.70
- --------------------------------------------------------------------------------
</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 March 23, 1998.
<PAGE>
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 latest prospectus filed pursuant to Rule 424(b) under
the Act on February 5, 1998.
(b) The Registrant's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997 filed with the SEC on June 27, 1997.
(c) The Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1997 filed with the SEC on August 8, 1997.
(d) The Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1997 filed with the SEC on November 14, 1997.
(e) The Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1997 filed with the SEC on February 13, 1998.
(f) 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
II-1
<PAGE>
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 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.
II-2
<PAGE>
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8. EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
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 1998 Non-Officer Employee Stock
Option Plan.
</TABLE>
ITEM 9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include any prospectus
required by Section 10(a)(3) of the Securities Act of 1933, as amended (the
"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 1998 Non-Officer Employee
Stock Option 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
II-3
<PAGE>
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.
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
March 24, 1998.
DIGITAL MICROWAVE CORPORATION
By: /s/ CHARLES D. KISSNER
-----------------------
Charles D. Kissner
Chairman of the Board and Chief Executive
Officer
II-4
<PAGE>
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 and March 24, 1998
Chief Executive Officer
/s/ RICHARD C. ALBERDING
------------------------------
Richard C. Alberding Director March 24, 1998
/s/ JOHN W. COMBS
------------------------------
John W. Combs Director March 24, 1998
/s/ CLIFFORD H. HIGGERSON
------------------------------
Clifford H. Higgerson Director March 24, 1998
/s/ JAMES D. MEINDL
------------------------------
James D. Meindl Director March 24, 1998
/s/ BILLY B. OLIVER
------------------------------
Billy B. Oliver Director March 24, 1998
------------------------------
Howard Oringer Director
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------- ----------------------------- --------------------
<S> <C> <C>
/s/ CARL A. THOMSEN
------------------------------
Carl A. Thomsen Vice President, Chief Financial March 24, 1998
Officer and Secretary (Principal
Financial and Accounting Officer)
</TABLE>
II-6
<PAGE>
EXHIBIT 5.1
March 24, 1998
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 500,000
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 500,000 shares of the Common
Stock to be reserved for issuance under the Company's 1998 Non-Officer
Employee Stock Option Plan.
It is our opinion that the 500,000 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>
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 27, 1997
included in or incorporated by reference in Digital microwave Corporation's
Form 10-K for the year ended March 31, 1997.
/s/ ARTHUR ANDERSEN LLP
San Jose, California
March 20, 1998.
<PAGE>
DIGITAL MICROWAVE CORPORATION
1998 NON-OFFICER EMPLOYEE STOCK OPTION PLAN
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1998 Non-Officer Employee Stock Option Plan (the "Plan") is
intended to promote the interests of Digital Microwave Corporation, a
Delaware corporation (the "Corporation"), by providing key employees
(excluding officers) of the Corporation (or its Parent or Subsidiary
corporations) who are responsible for the management, growth and financial
success of the Corporation 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 subsidiary or parent corporations).
B. The Effective Date of the Plan is January 2, 1998.
C. Capitalized terms shall, except as otherwise specifically defined
within the provisions of the Plan, have the meanings assigned to such terms
in the Glossary.
II. ADMINISTRATION OF THE PLAN
A. The Committee shall have sole and exclusive authority to administer
the Discretionary Option Grant Program. Members of the Committee shall serve
for such period as the Corporation's Board of Directors (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 Program and to make such
determinations under, and issue such interpretations of, the provisions of
such program and any outstanding option grants 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 the program or any
outstanding option thereunder.
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
under the Plan.
1
<PAGE>
III. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant Program are Employees (other than officers) of the Corporation (or any
Parent or Subsidiary) who render services which contribute to the management,
growth and financial success of the Corporation.
B. The Plan Administrator shall have full authority to determine, with
respect to grants made under the Discretionary Option Grant Program, which
eligible individuals are to receive such grants, the number of shares to be
covered by each such grant, the time or times at which each granted option is
to become exercisable and the maximum term for which the option may remain
outstanding.
IV. 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
initially be fixed at 500,000 shares.
B. Should one or more outstanding options under this Plan expire or
terminate for any reason prior to its 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, 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, 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, and not by the net
number of shares of Common Stock actually issued to the holder of such option.
C. 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
consideration, then appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan and (ii) 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.
2
<PAGE>
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 shall be 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.
A. EXERCISE PRICE.
1. The exercise price per share of Common Stock subject to a
Non-Statutory Option shall be fixed by the Plan Administrator and in no event
shall be less than eighty-five percent (85%) 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:
(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 sales 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,
3
<PAGE>
have a maximum term in excess of ten (10) years. The option, together with
any stock appreciation rights pertaining to such option, shall be assignable
or transferable to the extent provided in the option agreement or as the Plan
Administration may otherwise provide.
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.
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
4
<PAGE>
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.
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. CORPORATE TRANSACTIONS/CHANGES IN CONTROL
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
5
<PAGE>
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.
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.
6
<PAGE>
III. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority,
exercisable in its sole discretion, to grant to selected Optionees Tandem
Stock Appreciation Rights ("Tandem 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
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.
ARTICLE THREE
MISCELLANEOUS
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any Optionee in
the exercise of one or more options granted to such Optionee under the
Discretionary Grant 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
(ii) permitting the Optionee 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
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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 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 may not
exceed the exercise 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 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
The Plan Administrator has complete 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 or stock appreciation rights at the
time outstanding under the Plan, unless the Optionee consents to such
amendment.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of stock options or stock appreciation rights 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 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 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 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 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.
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IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants under the Plan may be used for general corporate
purposes.
V. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option or stock
appreciation right under the Plan, 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.
VI. 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 individual) may terminate such individual's Service at any time and for
any reason, with or without cause.
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GLOSSARY
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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 Board members appointed by
the Board to administer the Plan.
COMMON STOCK: the common stock of the Corporation.
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
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immediately prior to such merger; provided, however,
that if such merger is preceded by a Change in
Control (other than a Change in Control described as a
change in the composition of the Board) within six (6)
months of the merger then a Corporate Transaction will be
deemed to have occurred if securities possessing more than
fifty percent (50%) of the total combined voting power of
the Company's outstanding securities are transferred
pursuant to the merger to a person or persons different from
those who held such securities immediately prior to such
Change in Control.
EMPLOYEE: an individual who performs services while in the employ of
the Corporation or one or more Subsidiaries or Parents, 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.
INVOLUNTARY TERMINATION: the termination of the Service of any Optionee
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, 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, 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 or other individual in the Service of the Corporation or any Parent
or Subsidiary.
NEWLY ISSUED SHARES: shares of Common Stock drawn from the
Corporation's authorized but unissued shares of Common Stock.
1934 ACT: the Securities Exchange Act of 1934, as amended.
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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 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.
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of the
Optionee 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 Board members
appointed by the Board to administer the Discretionary Option Grant Program.
SERVICE: the provision of services on a periodic basis to the
Corporation or any Parent or Subsidiary in the capacity of an Employee,
except to the extent otherwise specifically provided in the applicable stock
option agreement.
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.
TREASURY SHARES: shares of Common Stock reacquired by the Corporation
and held as treasury shares.
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