<PAGE>
As filed with the Securities and Exchange Commission on March 27, 2000
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
WIND RIVER SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
-----------------
DELAWARE 94-2873391
(State of Incorporation) (I.R.S. Employer
Identification No.)
-----------------
500 WIND RIVER WAY
ALAMEDA, CALIFORNIA 94501
(510) 748-4100
(Address of principal executive offices)
INTEGRATED SYSTEMS, INC. 1988 STOCK OPTION PLAN
DR. DESIGN, INC. 1991 STOCK OPTION PLAN
INTEGRATED SYSTEMS, INC. 1994 DIRECTORS STOCK OPTION PLAN
EPILOGUE TECHNOLOGY CORPORATION 1994 STOCK OPTION PLAN
INTEGRATED SYSTEMS, INC. 1998 EQUITY INCENTIVE PLAN
WIND RIVER SYSTEMS, INC. 1998 EQUITY INCENTIVE PLAN
--------------------------------------
RICHARD W. KRABER
CHIEF FINANCIAL OFFICER
WIND RIVER SYSTEMS, INC.
500 WIND RIVER WAY
ALAMEDA, CALIFORNIA 94501
(510) 748-4100
--------------------------------------
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------------
Copies to:
ANDREA VACHSS, ESQ. RICHARD W. KRABER
COOLEY GODWARD LLP CHIEF FINANCIAL OFFICER
5 PALO ALTO SQUARE WIND RIVER SYSTEMS, INC.
3000 EL CAMINO REAL 500 WIND RIVER WAY
PALO ALTO, CALIFORNIA 94306 ALAMEDA, CALIFORNIA 94501
(650) 843-5000 (510) 748-4100
-----------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES TO OFFERING PRICE PER AGGREGATE OFFERING PRICE
BE REGISTERED AMOUNT TO BE SHARE (1) (1) AMOUNT OF
REGISTERED REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stock Options and Common
Stock (par value $.001) 4,066,898 $1.1306 - $49.00 $181,439,271.48 $48,182
============================================================================================================================
============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) and (h)(1) under the
Securities Act of 1933, as amended (the "Act"). The offering price per
share and aggregate offering price are based upon (a) the weighted
average exercise price for shares subject to outstanding options
granted under the Integrated Systems, Inc. ("ISI") 1988 Stock Option
Plan (the "ISI 1988 Plan"), Dr. Design, Inc. 1991 Stock Option Plan
(the "Dr. Design Plan"), ISI 1994 Directors Stock Option Plan (the "ISI
Directors Plan"), Epilogue Technology Corporation 1994 Stock Option
Plan (the "Epilogue Plan") and ISI 1998 Equity Incentive Plan (the "ISI
Incentive Plan") (pursuant to Rule 457(h) under the Act) or (b) the
average of the high and low prices of Registrant's Common Stock as
reported on the Nasdaq National Market on March 22, 2000, for shares
reserved for future grant pursuant to the Wind River Systems, Inc.
("Registrant" or "Company") 1998 Equity Incentive Plan (the "Wind River
Incentive Plan") (pursuant to Rule 457(c) under the Act). The following
chart illustrates the calculation of the registration fee:
<TABLE>
<CAPTION>
============================================================================================================================
TITLE OF SHARES NUMBER OF SHARES OFFERING PRICE PER AGGREGATE OFFERING
SHARE PRICE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares issuable pursuant to outstanding stock 1,738,345 $13.79(1)(a) $23,971,777.55
options under the ISI 1988 Plan
- ----------------------------------------------------------------------------------------------------------------------------
Shares issuable pursuant to outstanding stock 27,824 $1.13(1)(a) $31,441.12
options under the Dr. Design Plan
- ----------------------------------------------------------------------------------------------------------------------------
Shares issuable pursuant to outstanding stock 211,600 $13.34(1)(a) $2,882,744.00
options under the ISI Directors Plan
- ----------------------------------------------------------------------------------------------------------------------------
Shares issuable pursuant to outstanding stock 27,317 $8.05(1)(a) $219,901.85
options under the Epilogue Plan
- ----------------------------------------------------------------------------------------------------------------------------
Shares issuable pursuant to outstanding stock 2,061,812 $13.58(1)(a) $27,999,406.96
options under the ISI Incentive Plan
- ----------------------------------------------------------------------------------------------------------------------------
Shares reserved for future grant under the Wind 2,600,000 $49.00(1)(b) $127,400,000.00
River Incentive Plan
- ----------------------------------------------------------------------------------------------------------------------------
Proposed Maximum Aggregate Offering Price $182,505,271.48
- ----------------------------------------------------------------------------------------------------------------------------
Registration Fee $48,182
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</TABLE>
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Wind River Systems, Inc. (the
"Company") with the Securities and Exchange Commission are incorporated by
reference into this Registration Statement:
(a) The Company's Annual Report on Form 10-K for the fiscal year
ended January 31, 1999;
(b) The Company's quarterly reports on Form 10-Q for the quarters
ended April 30, July 1 and October 31, 1999;
(c) The Company's Current Reports in Form 8-K dated April 22, June
30, September 7 and October 21, 1999 and February 15 and February 28, 2000; and
(d) The description of the Company's Common Stock set forth in its
Registration Statement on Form 8-A filed with the Commission on March 12, 1993.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the
filing of a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference herein and to be a part of this
registration statement from the date of the filing of such reports and
documents.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law the Company
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act"). The Company's By-laws also
provide that the Company will indemnify its directors and executive officers,
and may indemnify its other officers, employees and other agents, to the fullest
extent not prohibited by Delaware law.
The Company's Restated Certificate of Incorporation (the "Restated
Certificate") provides that the liability of its directors for monetary damages
shall be eliminated to the fullest extent permissible under Delaware law.
Pursuant to Delaware law, this includes elimination of liability for monetary
damages for breach of the directors' fiduciary duty of care to the Company and
its stockholders. These provisions do not eliminate the directors' duty of care
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Company, for acts omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
any transaction from which the director derived an improper personal benefit,
and for payment of dividends or approval of stock repurchases or redemptions
that are unlawful under Delaware law. The provision also does not affect a
director's responsibilities under any other laws, such as the federal securities
laws or state or federal environmental laws.
The Company has been authorized by the Board to enter into agreements
with its directors and officers that require the Company to indemnify such
persons to the fullest extent authorized or permitted by the provisions of the
Restated Certificate and Delaware law against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred (including
expenses of a derivative action) in connection with any proceeding, whether
actual or threatened, to which any such person may be made a party by reason of
the fact that such person is or was a director, officer, employee or other agent
of the Company or any of its affiliated enterprises. Delaware law permits such
indemnification provided such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interest of the
Company and, with respect to any criminal proceeding, had o reasonable cause to
believe his or her conduct was unlawful. The indemnification agreements also set
forth certain procedures that will apply in the event of a claim for
indemnification thereunder.
At present, there is no pending litigation or proceeding involving a
director or officer of the Company as to which indemnification is being sought
nor is the Company aware of any threatened litigation that may result in claims
for indemnification by any officer or director.
<PAGE>
EXHIBITS
EXHIBIT
NUMBER
5.1 Opinion of Cooley Godward LLP
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Cooley Godward LLP is contained in
Exhibit 5.1 to this Registration Statement
24.1 Power of Attorney is contained on the signature page
99.1 Integrated Systems, Inc. 1988 Stock Option Plan
99.2 Dr. Design, Inc. 1991 Stock Option Plan
99.3 Integrated Systems, Inc. 1994 Directors Stock
Option Plan
99.4 Epilogue Technology Corporation 1994 Stock Option
Plan
99.5 Integrated Systems, Inc. 1998 Equity Incentive Plan
99.6 Wind River Systems, Inc. 1998 Equity Incentive Plan
UNDERTAKINGS
1. The undersigned registrant hereby undertakes:
(a) 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;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) (Section
230.424(b) of this chapter) if, in the aggregate,
the changes in volume and price represent no more
than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(i) and (a)(ii) do 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 issuer pursuant to section 13 or section 15(d) of the Exchange Act
that are incorporated by reference herein.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
<PAGE>
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to section 15(d) of the Exchange
Act) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities 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
Securities Act and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 Alameda, State of
California, on March 27, 2000.
WIND RIVER SYSTEMS, INC.
By: /s/ Thomas St. Dennis
--------------------------------------
Thomas St. Dennis
Chief Executive Officer and
Director
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Thomas St. Dennis and Richard W. Kraber,
and each or any one of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Thomas St. Dennis Chief Executive Officer March 27, 2000
- -------------------------------------------- and Director (Principal Executive
(Thomas St. Dennis) Officer)
/s/ Richard W. Kraber Vice President and Chief Financial March 27, 2000
- -------------------------------------------- Officer (Principal Financial Officer)
(Richard W. Kraber)
/s/ Jerry L. Fiddler Chairman of the Board March 27, 2000
- --------------------------------------------
(Jerry L. Fiddler)
/s/ Narenda K. Gupta Director March 27, 2000
- --------------------------------------------
(Narenda K. Gupta)
/s/ John Bolger Director March 27, 2000
- --------------------------------------------
(John Bolger)
/s/ William B. Elmore Director March 27, 2000
- --------------------------------------------
(William B. Elmore)
/s/ Grant M. Inman Director March 27, 2000
- --------------------------------------------
(Grant M. Inman)
/s/ David B. Pratt Director March 27, 2000
- --------------------------------------------
(David B. Pratt)
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
5.1 Opinion of Cooley Godward LLP
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Cooley Godward LLP is contained in Exhibit
5.1 to this Registration Statement
24.1 Power of Attorney is contained on the signature page
99.1 Integrated Systems, Inc. 1988 Stock Option Plan
99.2 Dr. Design, Inc. 1991 Stock Option Plan
99.3 Integrated Systems, Inc. 1994 Directors Stock Option Plan
99.4 Epilogue Technology Corporation 1994 Stock Option Plan
99.5 Integrated Systems, Inc. 1998 Equity Incentive Plan
99.6 Wind River Systems, Inc. 1998 Equity Incentive Plan
<PAGE>
[LOGO]
[LETTERHEAD]
March 27, 2000
Wind River Systems, Inc.
500 Wind River Way
Alameda, CA 94501
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Wind River Systems, Inc. (the "Company") of a Registration
Statement on Form S-8 (the "Registration Statement") with the Securities and
Exchange Commission covering the offering of up to (i) 1,738,345 shares of
the Company's Common Stock, $.001 par value, pursuant to the Integrated
Systems, Inc. 1988 Stock Option Plan (the "1988 ISI Plan"), (ii) 27,824
shares of the Company's Common Stock, $.001 par value, pursuant to the Dr.
Design, Inc. 1991 Stock Option Plan (the "1991 Dr. Design Plan"), (iii)
211,600 shares of the Company's Common Stock, $.001 par value, pursuant to
the Integrated Systems, Inc. 1994 Directors Stock Option Plan (the "ISI
Directors Plan"), (iv) 27,317 shares of the Company's Common Stock, $.001 par
value, pursuant to the Epilogue Technology Corporation 1994 Stock Option Plan
(the "1994 Epilogue Plan"), (v) 2,061,812 shares of the Company's Common
Stock, $.001 par value, pursuant to the Integrated Systems, Inc. 1998 Equity
Incentive Plan (the "ISI 1998 Plan") and (vi) 2,600,000 additional shares
pursuant to the Company's 1998 Equity Incentive Plan (together with the 1988
ISI Plan, the 1991 Dr. Design Plan, the ISI Directors Plan, the 1994 Epilogue
Plan and the ISI 1998 Plan referred to as the "Plans").
In connection with this opinion, we have examined the Registration Statement,
your Certificate of Incorporation and Bylaws, as amended, and such other
documents, records, certificates, memoranda and other instruments as we deem
necessary as a basis for this opinion. We have assumed the genuineness and
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as copies thereof, and the due
execution and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Plans and the
Registration Statement, will be validly issued, fully paid, and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /s/ Andrea Vachss
------------------------------
Andrea Vachss, Esq.
<PAGE>
CONSENT OF PRICEWATERHOUSECOOPERS LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated February 24, 1999 relating to the
financial statements and financial statement schedules of Wind River Systems,
Inc., which appears in Wind River Systems, Inc.'s Annual Report on Form 10-K for
the year ended January 31, 1999.
PricewaterhouseCoopers LLP
San Jose, California
March 27, 2000
<PAGE>
INTEGRATED SYSTEMS, INC.
1988 Stock Option Plan
As Adopted September 26, 1988
As Amended through March 28, 1997
1. PURPOSE. This Stock Option Plan ("Plan") is established to provide
incentive for selected persons to promote the financial success and progress of
Integrated Systems, Inc. (the "Company") by granting such persons options to
purchase shares of common stock of the Company.
2. ADOPTION AND SHAREHOLDER APPROVAL. This Plan shall be approved by
the shareholders of the Company, in any manner permitted by applicable corporate
law, within twelve (12) months before or after the date this Plan is adopted by
the Board of Directors of the Company (the "Board") and after the date of
certain amendments to the Plan. In addition, no later than twelve (12) months
after the Company becomes subject to Section 16(b) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") the Company will comply with the
requirements of Rule 16b-3 with respect to shareholder approval.
3. TYPES OF OPTIONS AND SHARES. Options granted under this Plan (the
"Options") may be either (a) incentive stock options ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986 (the "Code"), or (b)
nonqualified stock options ("NQSOs"), as designated at the time of grant. The
shares of stock that may be purchased upon exercise of Options granted under
this Plan (the "Shares") are shares of the common stock of the Company.
4. NUMBER OF SHARES. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan is Seven Million (7,000,000) Shares,
subject to adjustment as provided in this Plan. If any Option is terminated for
any reason without being exercised in whole or in part, the Shares thereby
released from such Option shall be available for purchase under other Options
subsequently granted under this Plan. At all times during the term of this Plan,
the Company shall reserve and keep available such number of Shares as shall be
required to satisfy the requirements of outstanding Options under this Plan.
5. ADMINISTRATION. This Plan may be administered by the Board or a
Committee appointed by the Board (the "Committee"). If, at the time the Company
registers under the Exchange Act, a majority of the Board is not comprised of
Disinterested Persons, the Board shall appoint a Committee consisting of not
less than three persons (who need not be members of the Board), each of whom is
a "Disinterested Person" (as defined in Section 6(b)(iv) of the Plan) and an
"Outside Director" (as defined in Section 6(b)(vi) of the Plan) or qualifies
under transition rules as an Outside Director. As used in this Plan, references
to the "Committee" shall mean either such Committee or the Board if no Committee
has been established. After registration of the Company under the Exchange Act,
Board members who are not Disinterested Persons may not vote on any matters
affecting the administration of this Plan or on the grant of any Options
pursuant to this Plan to any officer or director of the Company or other person
(in each case, an "Insider") whose transactions in the Company's common stock
are subject to Section 16(b) of the Exchange Act, but any such member may be
counted for determining the existence of a quorum at any meeting of the Board
during which action is taken with respect to Options or administration of this
Plan and may vote on the grant of any Options pursuant to this Plan other than
to Insiders. The interpretation by the Committee of any of the provisions of
this Plan or any Option granted under this Plan shall be final and binding upon
the Company and all persons having an interest in any Option or any Shares
purchased pursuant to an Option. The Committee may delegate the authority to
officers of the Company to grant Options under this Plan to Optionees who are
not Insiders of the Company. No Optionee shall be eligible to receive more than
500,000 Shares at any time during the term of this Plan pursuant to the grant of
Options hereunder.
<PAGE>
6. ELIGIBILITY. Options may be granted only to such employees,
officers, directors and consultants of the Company or any Parent, Subsidiary or
Affiliate of the Company (as defined below) as the Committee shall select from
time to time in its sole discretion ("Optionees"), provided that only employees
of the Company or a Parent or Subsidiary of the Company shall be eligible to
receive ISOs. An Optionee may be granted more than one Option under this Plan.
(a) Assumption of Options. The Company may, from time to time,
assume outstanding options granted by another company, whether in connection
with an acquisition of such other company or otherwise, by either (i) granting
an option under this Plan in replacement of the option assumed by the Company,
or (ii) treating the assumed option as if it had been granted under this Plan if
the terms of such assumed option could be applied to an option granted under
this Plan. Such assumption shall be permissible if the holder of the assumed
option would have been eligible to be granted an option hereunder if the other
Company had applied the rules of this Plan to such grant.
(b) Definitions. As used in the Plan, the following terms
shall have the following meanings:
(i) "Parent" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at the
time of the granting of the Option, each of such corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
(ii) "Subsidiary" means any corporation (other than
the Company) in an unbroken chain of corporations beginning with the Company if,
at the time of granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
(iii) "Affiliate" means any corporation that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with another corporation, where
"control" (including the terms "controlled by" and "under common control with")
means the possession, direct or indirect, of the power to cause the direction of
the management and policies of the corporation, whether through the ownership of
voting securities, by contract or otherwise.
(iv) "Disinterested Person" shall have the meaning
set forth in Rule 16b-3(d)(3) as promulgated by the Securities and Exchange
Commission ("SEC") under Section 16(b) of the Exchange Act, as such rule is
amended from time to time and as interpreted by the SEC.
(v) "Fair Market Value" shall mean the fair market
value of the Shares as determined by the Committee from time to time in good
faith. If a public market exists for the Shares, the Fair Market Value shall be
the average of the last reported bid and asked prices for Common Stock of the
Company on the last trading day prior to the date of determination or, in the
event the Common Stock of the Company is listed on a stock exchange or the
Nasdaq National Market, the Fair Market Value shall be the closing price on such
exchange or quotation system on the last trading day prior to the date of
determination.
(vi) "Outside Director" shall mean any director who
is not (i) a current employee of the Company or any Parent, Subsidiary or
Affiliate of the Company, (ii) a former employee of the Company or any Parent,
Subsidiary or Affiliate of the Company who is receiving compensation for prior
services (other than benefits under a tax-qualified pension plan), (iii) a
current or former officer of the Company or any Parent, Subsidiary or Affiliate
of the Company or (iv) currently receiving compensation for personal services in
any capacity, other than as a director, from the Company or any Parent,
Subsidiary or Affiliate of the Company; provided, however, that at such time as
the term "Outside Director", as used in Section 162(m) of the Code, is
<PAGE>
defined in the regulations promulgated under Section 162(m), "Outside Director"
shall have the meaning set forth in such regulations, as amended from time to
time and as interpreted by the Internal Revenue Service.
7. TERMS AND CONDITIONS OF OPTIONS. The Committee shall determine
whether each Option is to be an ISO or an NQSO, the number of Shares for which
the Option shall be granted, the exercise price of the Option, the periods
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following terms and conditions:
(a) Form of Option Grant. Each Option granted under this Plan
shall be evidenced by a written Stock Option Grant ("Grant") in such form (which
need not be the same for each Optionee) as the Committee shall from time to time
approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
(b) Exercise Price. The exercise price of an Option shall be
not less than the Fair Market Value of the Shares, at the time that the Option
is granted. The exercise price of any Option granted to a person owning 10% or
more of the total combined voting power of all classes of stock of the Company
or any Parent or Subsidiary of the Company ("Ten Percent Shareholder") shall not
be less than 110% of the Fair Market Value of the Shares at the time of the
grant, as determined by the Committee in good faith.
(c) Exercise Period. Options shall be exercisable within the
times or upon the events determined by the Committee as set forth in the option
grant; provided, however, that no Option shall be exercisable after the
expiration of ten years from the date the option is granted, and provided
further that no Option granted to a Ten Percent Shareholder shall be exercisable
after the expiration of five years from the date the Option is granted.
(d) Limitations on ISOs. The aggregate Fair Market Value
(determined as of the time an Option is granted) of stock with respect to which
ISOs are exercisable for the first time by an Optionee during the calendar year
(under this Plan or under any other incentive stock option plan of the Company
or any Parent or Subsidiary of the Company) shall not exceed $100,000. If the
Fair Market Value of stock with respect to which ISOs are first exercised
exceeds $100,000, the Options for the first $100,000 worth of stock shall be
ISOs and options for the amount in excess of $100,000 shall be NQSOs.
(e) Date of Grant. The date of grant of an Option shall be the
date on which the Committee makes the determination to grant such Option unless
otherwise specified by the Committee. The Grant representing the Option shall be
delivered to the Optionee within a reasonable time after the granting of the
Option.
(f) Assumed Options. In the event the Company assumes an
option granted by another company, the terms and conditions of such option shall
remain unchanged (except the exercise price and the number and nature of shares
issuable upon exercise, which will be adjusted appropriately pursuant to Section
425(c) of the Code). In the event the Company elects to grant a new option
rather than assuming an existing option (as specified in Section 6(a), such new
option need not be granted at Fair Market Value on the date of grant and may
instead be granted with a similarly adjusted exercise price.
8. EXERCISE OF OPTIONS.
(a) Notice. Options may be exercised only by delivery to the
Company of a written notice and exercise agreement in a form approved by the
Committee, stating the number of Shares being purchased, the restrictions
imposed on the Shares and such representations and agreements regarding the
Optionee's investment intent and access to information as may be required by the
Company to comply with applicable securities laws together with payment in full
of the exercise price for the number of Shares being purchased.
<PAGE>
(b) Payment. Payment for the Shares may be made (i) in cash
(by check); (ii) by surrender of shares of common stock of the Company that have
been owned by Optionee for more than six (6) months (and which have been paid
for within the meaning of SEC Rule 144 and, if such shares were purchased from
the Company by use of a promissory note, such note has been fully paid with
respect to such shares) or were obtained by the Optionee in the open public
market, having a Fair Market Value equal to the exercise price of the Option;
(iii) where permitted by applicable law and approved by the Committee in its
sole discretion, by tender of a full recourse promissory note having such terms
as may be approved by the Committee; (iv) provided that a public market for the
Company's stock exists, through a "same day sale" commitment from the Optionee
and a broker-dealer that is a member of the National Association of Securities
Dealers (a "NASD Dealer") whereby the Optionee irrevocably elects to exercise
the Option and to sell a portion of the Shares so purchased to pay for the
exercise price and whereby the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the exercise price directly to the Company; or (v) by any
combination of the foregoing where approved by the Committee in its sole
discretion. Optionees who are not employees or directors of the Company shall
not be entitled to purchase Shares with a promissory note unless the note is
adequately secured by collateral other than the Shares.
(c) Withholding Taxes. Prior to issuance of the Shares upon
exercise of an Option, the Optionee shall pay or make adequate provision for any
federal or state withholding obligations of the Company, if applicable.
(d) Limitations on Exercise. Notwithstanding the exercise
periods set forth in the Grant, exercise of an Option shall always be subject to
the following limitations:
(i) If an Optionee ceases to be employed by the
Company or any Parent, Subsidiary or Affiliate of the Company for any reason
except death or disability, the Optionee may exercise such Optionee's Options to
the extent (and only to the extent) that it would have been exercisable upon the
date of termination, within three (3) months after the date of termination (or
such shorter time period as may be specified in the Grant), provided that, if
Optionee is an Insider and the Company is subject to Section 16(b) of the
Exchange Act, the Optionee's Option will be exercisable for a period of time
sufficient to allow such Optionee from having a matching purchase and sale under
Section 16(b), with any extension beyond three (3) months from termination of
employment in the case of an Option constituting an ISO being deemed to be as an
NQSO, and provided further that in no event may an Option be exercisable later
than the expiration date of the Option.
(ii) If an Optionee's employment with the Company or
any Parent, Subsidiary or Affiliate of the Company is terminated because of the
death of the Optionee or disability of Optionee within the meaning of Section
22(e)(3) of the Code, such Optionee's Options may be exercised to the extent
(and only to the extent) that it would have been exercisable by the Optionee on
the date of termination, by the Optionee (or the Optionee's legal
representative) within twelve (12) months after the date of termination (or such
shorter time period as may be specified in the Grant), but in any event no later
than the expiration date of the Options.
(iii) The Committee shall have discretion to
determine whether the Optionee has ceased to be employed by the Company or any
Parent, Subsidiary or Affiliate of the Company and the effective date on which
such employment terminated.
(iv) In the case of an Optionee who is a director,
independent consultant, contractor or advisor, the Committee will have the
discretion to determine whether the Optionee is "employed by the Company or any
Parent, Subsidiary or Affiliate of the Company" pursuant to the foregoing
Sections.
(v) An Option shall not be exercisable unless such
exercise is in compliance with the Securities Act of 1933, as amended, and all
<PAGE>
applicable state securities laws, as they are in effect on the date of exercise.
(vi) The Committee may specify a reasonable minimum
number of Shares that may be purchased on any exercise of an Option, provided
that such minimum number will not prevent the Optionee from exercising the full
number of Shares as to which the Option is then exercisable.
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee. No Option may be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent and distribution.
10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the
rights of a shareholder with respect to any Shares subject to an Option until
the Option has been validly exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
of exercise, except as provided in this Plan. The Company shall provide to each
Optionee a copy of the annual financial statements of the Company, at such time
after the close of each fiscal year of the Company as they are released by the
Company to its shareholders.
11. ADJUSTMENT OF OPTIONS SHARES. In the event that the number of
outstanding shares of common stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration,
the number of Shares available under this Plan and the number of Shares subject
to outstanding Options and the exercise price per share of such Options shall be
proportionately adjusted, subject to any required action by the Board or
shareholders of the Company and compliance with applicable securities; provided,
however, that no certificate or scrip representing fractional shares shall be
issued upon exercise of any Option and any resulting fractions of a Share shall
be ignored.
12. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan shall confer on any Optionee any right to continue in the employ
of the Company or any Parent, Subsidiary or Affiliate of the Company or limit in
any way the right of the Company or any Parent, Subsidiary or Affiliate of the
Company to terminate the Optionee's employment at any time, with or without
cause.
13. COMPLIANCE WITH LAWS. The grant of Options and the issuance of
Shares upon exercise of any Options shall be subject to and conditioned upon
compliance with all applicable requirements of law, including without limitation
compliance with the Securities Act of 1933, as amended, any required approval by
the Commissioner of Corporations of the State of California, compliance with all
other applicable state securities laws and compliance with the requirements of
any stock exchange on which the Shares may be listed. The Company shall be under
no obligation to register the Shares with the SEC or to effect compliance with
the registration or qualification requirements of any state securities laws or
stock exchange.
14. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself or its assignee(s) in the Grant (a) a right of
first refusal to purchase any Shares that an Optionee (or a subsequent
transferee) may propose to transfer to a third party and (b) a right to
repurchase all Shares held by an Optionee upon the Optionee's termination of
employment or service with the Company or its Parent, Subsidiary or Affiliate of
the Company for any reason within a specified time as determined by the
Committee at the time of grant at (i) the Optionee's original purchase price
(provided that the right to repurchase at such price shall lapse at the rate of
at least 20% per year from the date of grant), (ii) the Fair Market Value of
such Shares as determined by the Committee in good faith or (iii) a price
determined by a formula or other provision set forth in the Grant.
15. ASSUMPTION OF OPTIONS BY SUCCESSORS. In the event of a dissolution
or liquidation of the Company, a merger in which the Company is not the
surviving corporation, or the sale of substantially all of the assets of the
<PAGE>
Company, any or all outstanding Options shall, notwithstanding any contrary
terms of the Grant, accelerate and become exercisable in full at least ten days
prior to (and shall expire on) the consummation of such dissolution,
liquidation, merger or sale of stock or sale of assets on such conditions as the
Committee shall determine unless the successor corporation assumes the
outstanding Options or substitutes substantially equivalent options. The
aggregate Fair Market Value (determined at the time an Option is granted) of
stock with respect to ISOs which first become exercisable in the year of such
dissolution, liquidation, merger, sale of stock or sale of assets cannot exceed
$100,000. Any remaining accelerated ISOs shall be NQSOs.
16. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time
terminate or amend this Plan in any respect (including, but not limited to, any
form of Grant, agreement or instrument to be executed pursuant to this Plan);
provided, however, that the Committee shall not, without the approval of the
holders of a majority of the outstanding voting shares of the Company, amend
this Plan in any manner that requires such shareholder approval pursuant to the
Code or the regulations promulgated thereunder as such provisions apply to
incentive stock option plans or pursuant to the Exchange Act or Rule 16b-3 (or
its successor) promulgated thereunder.
17. TERM OF PLAN. Options may be granted pursuant to this Plan from
time to time within a period of ten years from the date this Plan is adopted by
the Board.
<PAGE>
DR. DESIGN, INC.
1991 STOCK OPTION PLAN
1. DESCRIPTION OF PLAN. This is the 1991 Stock Option Plan, dated
August 10, 1991 (the "Plan"), of Dr. Design, Inc., a California corporation (the
"Company"). Under this Plan, certain key employees, non-employee directors and
consultants with important business relationships with the Company, or any
present or future subsidiary of the Company, may be granted options ("Options")
to purchase shares of the common stock of the Company ("Common Stock") . A
person who is granted an option is referred to as an "Optionee". For purposes of
this Plan, the term "subsidiary" shall have the same meaning as "subsidiary
corporation" as such term is defined in Section 425(f) of the Internal Revenue
Code of 1986, as amended (the "Code"), where the Company is the "employer
corporation". It is intended that the Options under this Plan will either
qualify for treatment as incentive stock options under Section 422A of the Code
and be designated "Qualified Stock Options" or not qualify for such treatment
and be designated "Non-Qualified Stock Options."
2. PURPOSE OF PLAN. The purpose of the Plan is to provide additional
incentives to certain key employees and other persons that will enable them to
purchase Common Stock of the Company and thereby share and directly benefit from
the Company's growth, development and financial success. In this way, the Plan
will allow the Company to attract and retain key employees and other persons and
encourage them to remain in the Company's service.
3. ADMINISTRATION. The Plan shall be administered by a committee (the
"Committee") to be composed of not less than 2 members of the Board of Directors
of the Company ("Board"), who are not eligible for selection as Optionees under
the Plan. Members of the Committee shall be appointed, both initially and as
vacancies occur, by the Board, to serve at the pleasure of the Board. The entire
Board may serve as the Committee, if by the terms of this Plan all Board members
are otherwise eligible to serve on the Committee. The Committee shall meet at
such times and places as it determines, but at least once a year after the
Company's fiscal year end. A majority of its members shall constitute a quorum,
and the decision of a majority of those present at any meeting at which a quorum
is present shall constitute the decision of the Committee. A memorandum signed
by all of its members shall constitute the decision of the Committee without the
necessity of holding an actual meeting.
The Committee is authorized and empowered to administer the Plan and,
subject to the Plan (i) to select the Optionees, to specify the number of shares
of Common Stock with respect to which Options are granted to each Optionee, to
specify the option Price (as defined in Section 8) and the terms of the Options
and in general to grant Options; (ii) to specify whether the Options granted
will be for Class A - Voting or Class B - Non-voting Stock; (iii) to determine
the dates upon which Options shall be granted and the terms and conditions
thereof in a manner consistent with this Plan, which terms and conditions need
not be identical as to the various Options granted; (iv) to determine which
Options are to be Qualified Stock Options and Non-Qualified Stock Options; (v)
to interpret the Plan; (vi) to prescribe, amend and rescind rules relating to
the Plan; (vii) to determine the rights and obligations of Optionees under the
Plan; and (viii) to accelerate the Vesting Schedule and/or the time during which
an Option may be exercised, notwithstanding the provisions in the Option
Agreement (as defined in Section 7) stating the time during which it may be
exercised.
<PAGE>
The above matters are not exclusive, and the Committee and/or the Board
shall have the authority to determine any other matters incident to the
administration of this Plan. The Board, and not the Committee, is authorized and
empowered to determine whether any shares of Common Stock subject to repurchase
by the Company or its nominees as provided in Section 16 will be actually
repurchased by the Company. The interpretation and construction by the Committee
of any provision of the Plan or of any option granted under it shall be final.
No member of the Committee or the Board shall be liable for any action or
determination made in good faith with respect to this Plan or any Option granted
under this Plan.
4. SHARES SUBJECT TO THE PLAN. The aggregate amount of Common Stock
which may be purchased pursuant to Options granted under this Plan shall be One
Million (1,000,000) shares of the Company's authorized but unissued or
reacquired Common Stock, subject to adjustment as provided in Section 18 to
reflect all stock splits, stock dividends or similar capital changes. If any
Option shall expire or terminate for any reason without having been exercised in
full, and/or if the Company repurchases any shares of Common Stock as provided
herein, such unexercised shares and reacquired shares shall be available for
granting additional Options under the Plan.
5. ELIGIBILITY. The persons who shall be eligible to receive grants of
Qualified Stock Options under this Plan shall be the key employees of the
Company or any of its subsidiaries, and those directors of the Company who are
also key employees, but who are not members of the Committee. The persons who
shall be eligible to receive grants of Non-Qualified Stock Options under this
Plan shall be the key employees of the Company or any of its subsidiaries, any
director of the Company, whether or not he or she is an employee of the Company
(provided that he or she is not a member of the Committee), and consultants or
advisers with important business relationships with the Company (provided that
substantial bona fide services shall have been rendered to the Company by such
advisers or consultants and such services shall not have been in connection with
the offer and sale of securities in a capital raising transaction).
The Committee shall have the right in its sole discretion to determine
who is a "key employee" of the Company. The selection of Optionees and the
criteria used to select Optionees shall also be within the sole discretion of
the Committee. An Optionee who is granted in writing a leave of absence by the
Board shall be deemed to have remained in the employ of the Company during such
leave of absence for purposes of this Plan.
Notwithstanding the foregoing, members of the Committee shall be
ineligible for selection as participants in the Plan during their service on the
Committee. More than one Option may be granted to any one Optionee. However,
pursuant to Section 422A(d) of the Code, for Qualified Stock Options, no more
than $100,000 of market value Common Stock (determined at time of granting the
option) plus a carryover amount, if applicable, can be granted to an Optionee in
any one calendar year. Any portion of an Option that exceeds such amount shall
be treated and deemed a Non-Qualified Stock Option.
6 . TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date when the Committee determines to grant an Option.
Notice of the determination shall be given to each Optionee to whom an Option is
granted within a reasonable time after the date of such grant.
7. OPTION AGREEMENT. Each Option granted under this Plan shall be
evidenced by a written stock option agreement ("Option Agreement") executed by
the Company and the Optionee. Each Option Agreement shall, among other things,
(a) specify the number of shares of Common Stock granted to an Optionee and the
purchase price per share, (b) designate whether the options will be for Class A
- - Voting or Class B - Non-voting Common Stock, (c) contain each of the
provisions and agreements of this Plan specifically required to be contained
therein,
<PAGE>
(d) indicate whether such option is to be a Qualified Stock Option or a
Non-Qualified Stock Option, and if a Qualified Stock Option shall contain terms
and conditions permitting such option to qualify for treatment as an incentive
stock option under Section 422A of the Code, (e) contain the agreement of the
Optionee to resell to the Company any Common Stock issued pursuant to the
exercise of options granted under this Plan pursuant to the Company's repurchase
rights and/or rights of first refusal as provided in Sections 16 and 17 below,
(f) specify the Vesting Schedule and Vesting Start Date (as described in Section
9 below), and (g) contain such other terms and conditions as the Committee deems
desirable and which are not inconsistent with this Plan. The granting of an
Option or the execution of an option Agreement shall not require the Optionee to
exercise such Option.
8. OPTION PRICE. Except as provided in Section 18 or Section 19, the
purchase price per share (the "Option Price") of Common Stock underlying each
Option shall be determined by the Committee, but shall not be less than 85% of
the fair market value of such shares on the date the Option is granted. With
respect to any Qualified Stock Option, the Option Price shall not be less than
100% of the fair market value of such shares on the date the Qualified Stock
Option is granted; provided, however, that if the Optionee is a 10-percent
shareholder of the Company (as defined in Section 422A(b) (6) of the Code) at
the time such Qualified Stock option is granted, the Option Price shall not be
less than 110% of the fair market value. The fair market value shall be
determined in good faith by the Committee or the Board in its sole discretion.
9. VESTING REQUIREMENTS. There shall be a vesting schedule ("Vesting
Schedule") for all Options granted under this Plan. The Committee shall
determine, in its sole discretion, the Vesting Schedule that shall apply to each
Option granted under this Plan. The Vesting Schedule shall be based on a
specified time period, certain performance or milestone goals, or such other
criteria or factors selected by the Committee in its sole discretion.
The Vesting Schedules may differ among the Options granted under this
Plan; in other words, the Committee shall have the right, in its sole
discretion, to designate different Vesting Schedules for different Optionees,
and different Vesting Schedules for various Options granted to the same
Optionee. In addition, the Committee has the right, in its sole discretion, to
specify Vesting Schedules for certain Optionees consistent with or to
accommodate vesting commitments that have been previously made and authorized by
the Board subject to the adoption of this Plan, as embodied in the corporate
minutes and records of the Company.
The Vesting Schedule applied to each Option shall be set forth in the
Option Agreement. Each Option Agreement shall specify a Vesting Start Date,
which shall be determined by the Committee in its sole discretion. The Vesting
Start Date is the beginning date from which the Vesting Schedule shall be
calculated.
The Vesting Schedule is basically a time period or other criteria
during which Options and shares of Common Stock issued to Optionees shall vest.
An Optionee shall have the right to exercise all or any portion of an Option at
any time after it is granted. However, the Vesting Schedule shall determine the
manner in which the unexercised portion of an Option and/or shares of Common
Stock issued to an Optionee upon exercise of an Option shall vest.
The basic purpose of the Vesting Schedule is to determine the rights of
an Optionee and the Company as to Options and/or issued shares of Common Stock
upon an Optionee's termination or cessation of work for the Company.
Specifically, upon an Optionee's termination or cessation of work for the
Company as described in Section 12 below and in the Option Agreement, the
Vesting Schedule shall apply as follows: any unexercised and unvested Options
shall lapse and be forfeited by the Optionee upon the termination date. As to
any vested Options, an Optionee shall have the right to exercise the remaining
unexercised portion of a vested option during the applicable Window Period
(defined in Section 12 below). With respect to any issued
<PAGE>
and vested shares held by an Optionee at the termination date, that Optionee
cannot sell or otherwise transfer the vested shares without first giving the
Company the opportunity to exercise its Right of First Refusal under Section 17
of this Plan. In addition, as to any issued but unvested shares held by an
Optionee at the termination date, the Company shall have the right to repurchase
the unvested shares from the Optionee pursuant to Section 16 below.
For example, assume that an Option for 1,000 shares is granted on
October 1, 1991. The Committee determines that the Vesting Schedule for this
Option shall be as follows: the Option or shares will fully vest in four (4)
years from the Vesting Start Date. The Vesting Start Date is January 1, 1990,
the date the Optionee was hired by the Company. According to this Vesting
Schedule, no portion of an Option or shares issued under an Option shall vest
before the one (1) year anniversary of the Vesting Start Date ("Holding Period).
Upon the one (1) year anniversary of the Vesting Start Date (or expiration of
the Holding Period), twenty-five percent (25%) of the Option or shares shall be
deemed vested. Thereafter, the Option or shares shall vest at twenty-five
percent (25%) for every subsequent year. In addition, after the first year, a
pro rata portion of the annual twenty-five percent (25%) vesting shall be deemed
to vest each month.
Under the above example, on October 1, 1991, the date the option was
granted, the Optionee may exercise all or any portion of the option since an
Optionee has the right to purchase any shares under an Option at any time. An
Optionee's ability to exercise an option is not conditioned on whether the
Option is vested or nonvested. Assume that Optionee purchases two hundred fifty
(250) shares under the Option in 1991, and is terminated by the Company on
December 31, 1992. On December 31, 1992, only fifty percent (50%) of the option
or shares shall be deemed vested, since twenty-five percent (25%) vested as of
January 1, 1991 (the expiration of the Holding Period), and twenty-five percent
(25%) vested for the year 1991.
As a result, upon such termination, the two hundred fifty (250) shares
previously purchased and issued to Optionee are vested shares, subject to the
Company's Right of First Refusal in the event Optionee proposes to transfer or
sell such shares. Since fifty percent (50%) or five hundred (500) shares of the
Option are deemed vested as of the termination date, and two hundred fifty (250)
shares have already been issued, Optionee has the right during the sixty (60)
day Window Period specified in Section 12(b) of this Plan to purchase the
remaining two hundred fifty (250) vested shares. If Optionee does not purchase
the vested portion of the Option (250 shares) within the Window Period, then the
Option shall automatically terminate upon the expiration of the Window Period.
Using the same example above, assume that Optionee had purchased seven
hundred fifty (750) shares under the option before he/she was terminated. Since
only fifty percent (50%) or five hundred (500) shares will be deemed vested as
of the termination date, five hundred (500) of the issued shares shall be vested
and two hundred fifty (250) of the issued shares shall be non-vested. In such
event, the Company has the right to repurchase the two hundred fifty (250)
unvested shares at the Option Price pursuant to Section 16 of this Plan, and the
other five hundred (500) vested shares may be transferred by the Optionee
subject to the Company's Right of First Refusal under Section 17 of this Plan.
Since there is no remaining unexercised portion of the Option that is deemed
vested as of the termination date, Optionee may not purchase any additional
shares during a Window Period or after termination.
The above examples are only for informational purposes. The application
of each option will depend upon the specific provisions of the Vesting Schedule
for each Option.
10. EXERCISE OF OPTIONS. Subject to all other provisions of this Plan,
each Option shall be exercisable for the full number of shares of Common Stock
specified in the grant and in the Option Agreement, or any part thereof, at any
time after the Option is granted. However, an Optionee shall not exercise any
option, or part thereof, more frequently than once per calendar
<PAGE>
quarter; the preceding limitation shall not apply if the Common Stock becomes
publicly traded upon an initial public offering of its securities pursuant to a
registration statement filed by the Company under the Securities Act of 1933, as
amended.
No Option can be exercised after its termination date or after it is
terminated pursuant to Section 12. Each Option shall terminate and expire, and
shall no longer be subject to exercise, as the Committee may determine in
granting such Option, but in no event later than ten (10) calendar years from
the date the Option is granted. An Option can be exercised only by the Optionee
to whom it is granted during his/her lifetime. After the death of an Optionee,
the vested portion of the Option may be exercised, prior to its termination as
provided in Section 12 below, only by his/her legal representative, legatee or
heir who acquired the right to exercise the Option.
11. METHOD OF EXERCISING OPTIONS. An Option shall be exercised by the
Optionee by delivering to the Company before the Option expires or terminates a
written notice specifying the number of shares to be purchased. The Optionee's
written notice must be accompanied by (a) payment of the full Option Price for
the number of shares to be purchased in cash, by check or such other lawful
consideration (including promissory notes or the assignment and transfer by the
Optionee to the Company of outstanding shares of Common Stock previously held by
the Optionee in a manner intended to comply with the provisions of Rule 16b-3
under the Securities and Exchange Act of 1934) as the Committee may approve in
its sole discretion, (b) upon the Company's request, a letter or written
statement from the Optionee in form and substance acceptable to the Company
setting forth the investment intent and other representations of the Optionee,
and (c) upon the Company's request, payment in cash or check of any taxes that
the Company is required to withhold or collect as further discussed in Section
21.
12. TERMINATION OF OPTIONS. Any portion of an Option that has vested
pursuant to the terms of an Option Agreement shall immediately terminate upon
the first to occur of any of the following events:
(a) the expiration or termination date specified in the Option
Agreement;
(b) the expiration of sixty (60) days from the date of an Optionee's
termination or resignation of employment or voluntary leaving the employ of the
Company ("Window Period") (other than by reason of death or disability), except
if the Optionee is terminated for "Cause', as defined in Section 16 of this
Plan, then the Option terminates upon the termination date;
(c) the expiration of six (6) months from the date of an Optionee's
termination or other cessation of employment ("Window Period") due to that
Optionee having become disabled within the meaning of Section 22(e)(3) of the
Code;
(d) the expiration of twelve (12) months from the date of an Optionee's
death ("Window Period") if his/her death occurs while being employed with the
Company;
(e) for options granted to consultants or other non-employees who
become members of the Board, if the Optionee is no longer a member of the Board;
(f) for options granted to consultants or third parties who perform
substantial bona fide services to the Company, if the Optionee has not provided
services to the Company as an independent contractor, consultant or advisor for
a period of time determined by the Committee or the Board in their sole
discretion, at the time of granting the Option; and/or
(g) the termination of an Option pursuant to Section 18.
<PAGE>
In addition to the above events, all Qualified Stock Options shall
terminate no later than ten (10) years from the date the Option is granted, or
no later than five (5) years from the date the Option is granted for Options
granted to Optionees who own more than ten percent (10%) of the total combined
voting power of all classes of the Company's stock at the time the Option is
granted (as defined in Section 422A(b)(6) of the Code).
Upon the termination of an Optionee for any reason or upon the
happening of any of the events in subparagraphs (e), (f) or (g) above, all
unexercised and unvested portions of an option shall automatically lapse and
shall not be entitled to be exercised at any further time. All unexercised and
vested Options, or parts thereof, that are not exercised during a Window Period
or prior to termination as provided above shall be forfeited by an Optionee and
shall not be exercised after the Window Period or termination date, as the case
may be. Upon such termination, all issued but unvested shares of Common Stock
owned by an Optionee shall be subject to being repurchased by the Company at the
Option Price pursuant to Section 16 of this Plan. In addition, upon such
termination, all issued and vested shares of Common Stock owned by an Optionee
shall only be subject to the Company's Right of First Refusal set forth in
Section 17 of this Plan.
13. ADDITIONAL REQUIREMENTS FOR QUALIFIED STOCK OPTIONS. Subject to the
other provisions of this Plan, all Optionees who are granted Qualified Stock
Options must satisfy all the following requirements in order to receive the tax
benefits of an incentive stock option under the Code:
(a) the Optionee must be continuously employed by the Company from the
time the Option is granted until at least three (3) months before it is
exercised (twelve (12) months if the Optionee is disabled within the meaning of
Section 22(e)(3) of the Code);
(b) the Optionee must hold the Common Stock until at least two (2)
years after the option is granted and one (1) year after it is exercised; and
(c) the Optionee cannot exercise a current Qualified Stock Option while
there is outstanding another Qualified Stock Option that was previously granted
to the Optionee that has not been fully exercised.
A Qualified Stock Option issued to an Optionee who fails to meet all of
the three (3) requirements above is subject to being treated and taxed as a
Non-Qualified Stock Option.
14. ISSUANCE OF COMMON STOCK. Notwithstanding anything to the contrary
contained herein, the Company shall not be obligated to grant any Option under
this Plan or to sell or issue any Common Stock pursuant to any Option or Option
Agreement, unless the grant or sale is effectively registered or qualified, or
exempt from registration or qualification under all applicable state and/or
federal laws or rulings and regulations of any governmental regulatory body.
Prior to the execution of an Option Agreement and/or issuance of the Common
Stock, the Company shall have the right to require an Optionee to deliver to the
Company written investment representations or other warranties deemed necessary
or advisable by the Company to comply with the requirements of any exemption
from such registration or other qualification of such shares.
The required representations and warranties may include without limitation
representations and agreements that each Optionee (a) is purchasing such shares
for investment and for his/her own account, and not with any present intention
of selling or otherwise disposing of such shares; (b) has a pre-existing
personal or business relationship with the Company or its officers or directors,
or has sufficient business or financial experience to evaluate the risks
involved in purchasing the Common Stock; (c) agrees to have a legend placed upon
the face or reverse of any certificates
<PAGE>
evidencing such shares that restrict the transfer of such shares; and/or (d)
agrees to such other matters as the Company requires or deems advisable.
15. NONTRANSFERABILITY. Unless otherwise provided in the Option
Agreement, an Optionee shall not sell, assign, encumber, transfer or permit a
levy or attachment on all or any part of his/her Qualified Stock Options or
Non-Qualified Stock Options and/or any shares of Common Stock purchased
thereunder to any person or entity at any time. The Option Agreement may, in
some instances, provide that certain Options granted hereunder and/or shares of
Common Stock previously issued to Optionee may be transferable by will or by the
laws of descent and distribution upon the death of an Optionee/shareholder,
and/or any Non-Qualified Stock Options may be transferable or assignable subject
to the Company's Right of First Refusal to purchase the Common Stock prior to
such transfer or assignment as provided in Section 17 below.
The Option Agreement may also provide that an Optionee or shareholder
holding Non-Qualified Stock Options or shares of Common Stock purchased under
Non-Qualified Stock Options may have the right, with prior written notice to the
Company, to transfer or assign such options or shares of Common Stock to his/her
spouse, children or a living trust for the benefit of their family, provided the
Optionee/shareholder or his or her spouse is the sole trustee of the trust and
the sole beneficiaries of the trust shall be the Optionee/shareholder, his or
her spouse and/or their children, and further provided that any such transferee
shall agree in writing to be bound by all the provisions of this Plan and the
Option Agreement as a condition precedent to the transfer and receipt of the
shares of Common Stock. In addition, in the event the Company's Common Stock is
publicly traded, there will be additional restrictions imposed on the sale or
transfer of Common Stock pursuant to Rule 144 of the Securities and Exchange
Commission and other applicable laws, rules or regulations.
16. REPURCHASE OF STOCK. Upon the termination of an Optionee as an
employee, independent contractor or consultant of the Company for "Cause" (as
defined below), the Company and its assignees shall have the right, in their
sole discretion, to repurchase ("Repurchase Right") some or all of any vested
and/or unvested shares of Common Stock previously issued to an Optionee upon
exercise of any Option ("Repurchase Shares"). Pursuant to Section 12 of this
Plan, all unexercised portions of an Option, vested or non-vested, shall
automatically lapse upon termination of an Optionee for "Cause". The Company
shall exercise its Repurchase Right within sixty (60) days after the date the
Optionee is terminated for "Cause" by paying to the Optionee in cash an amount
per share equal to the Option Price.
In addition to the above the Repurchase Right upon termination for
"Cause", the Company shall also have a repurchase right as to all or any portion
of issued shares that are unvested as of the termination date. In other words,
if an Optionee is terminated or ceases to work for the Company for any reason,
and has previously purchased shares of Common Stock that have not vested as of
the termination date, then the Company shall have the right to repurchase
("Repurchase Right") some or all of the issued and unvested shares of Common
Stock ("Unvested Shares") at the Option Price. The Company shall exercise its
Repurchase Right for the Unvested Shares within sixty (60) days after the
termination date by paying to the Optionee in cash an amount per share equal to
the Option Price.
Upon termination for "Cause", or other termination whereby Optionee has
Unvested Shares, the Optionee shall surrender and deliver to the Company the
stock certificates for the Repurchase Shares and the Unvested Shares. Any new,
substituted or additional securities or other property distributed with respect
to the Repurchase Shares or Unvested Shares as a result of any stock split,
recapitalization or adjustment under Section 18 below shall also be held by the
Company until it decides whether to exercise its Repurchase Right. Any regular
cash dividends on the Repurchase Shares or Unvested Shares shall be paid
directly to the Optionee and shall not
<PAGE>
be held by the Company. The Repurchase Shares or Unvested Shares and any other
assets or securities associated therewith shall be released to and retained by
the Company and its assignees upon exercise of the Repurchase Right, or shall be
released to the Optionee upon expiration of the sixty (60) day period if the
Company has not exercised its Repurchase Right as to all of the Repurchase
Shares or Unvested Shares.
The Company shall exercise its Repurchase Right by delivering to the
Optionee a written notice and paying the Option Price for the Repurchase Shares
or Unvested Shares within the sixty (60) day period. In the event the Company
does not exercise its Repurchase Right as provided herein, or exercises its
Repurchase Right as to some but not all of the Repurchase Shares or Unvested
Shares, the remaining Repurchase Shares and/or Unvested Shares shall still be
subject to the Company's Right of First Refusal pursuant to Section 17 of this
Plan.
The term "Cause" shall mean (a) willful misconduct, gross negligence,
theft, fraud or embezzlement; (b) alcoholism or illegal drug addiction, that the
Board or Committee has reasonably determined causes the Optionee to be unable to
perform his/her duties and responsibilities for the Company; and/or (c) the
unauthorized use, disclosure or misappropriation, or attempt thereof, of any
confidential information or trade secrets of the Company or any subsidiary
thereof.
17. RIGHT OF FIRST REFUSAL. The Company shall have a right of first
refusal over all Options and all Common Stock issued upon the exercise of
Options ("Right of First Refusal"). If an Optionee desires at any time to sell
or otherwise transfer all or any part of vested Options, vested shares of Common
Stock previously issued to Optionee, and/or Unvested Shares that the Company
does not elect to repurchase under Section 16, as the case may be, then prior to
any such sale or transfer, the Optionee shall give the Company the right to
purchase the vested Options, the vested shares of Common Stock and/or the
Unvested Shares that have not been repurchased pursuant to the same terms and
conditions specified in a bona fide written offer from a third party or entity
that wishes to purchase the same from Optionee. The Company shall exercise its
Right of First Refusal pursuant to the terms contained in the Option Agreement.
The Company's Right of First Refusal shall terminate upon the consummation of
the sale of securities pursuant to a registration statement filed by the Company
under the Securities Act of 1933, as amended, in connection with an initial
underwritten offering of its securities to the general public.
18. RECAPITALIZATION, REORGANIZATION, MERGER OR CONSOLIDATION. Subject
to any required shareholder action or approval, if the outstanding shares of
Common Stock of the Company are increased, decreased or exchanged for different
securities through a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, stock dividend or like capital adjustment, a
proportionate adjustment shall be made (a) in the aggregate number of shares of
Common Stock which may be purchased pursuant to the exercise of Options as
provided in Section 4 hereof, and (b) in the number, price, and kind of shares
subject to any outstanding Option granted under this Plan. Subject to any
required shareholder action or approval, if the Company is the surviving
corporation in any merger or consolidation, each outstanding Option shall
survive and is exercisable pursuant to the terms of this Plan.
Upon the dissolution or liquidation of the Company or upon any
reorganization, merger or consolidation in which the Company does not survive,
this Plan and each outstanding option shall terminate subject to the following
provisions. In such event: (a) each Optionee who is not tendered an Option by
the surviving corporation in accordance with all of the terms of provision (b)
immediately below or who does not accept any such substituted Option which is so
tendered, shall have the right until 30 days before the effective date of such
dissolution, liquidation, reorganization, merger or consolidation in which the
Company is not the surviving corporation, to exercise, in whole or in part, any
unexpired and vested Option or options issued to him/her
<PAGE>
which the Optionee is then capable of exercising pursuant to the provisions of
the Option and of Sections 10 and 11 above; provided, however, that should the
Board so elect in its sole and absolute discretion all Optionees may be given
upon at least 30 days notice (x) the option to exercise, in whole or in part,
any unexpired Option, without regard to the Vesting Schedule requirements if the
Board accelerates the vesting period, or (y) the option to surrender such option
or Options to the Company for a price (which may be payable, in the sole
discretion of the Committee, in cash or in securities of the Company or in a
combination of both, and at times or in installments determined by the Company
in its sole discretion), equal to the difference between the aggregate Option
Price of the Option or Options without regard to the installment provisions and
the aggregate fair market value (as determined in the manner provided in Section
8 above) of the shares subject to such option or options on the date one day
before the effective date of such dissolution, liquidation, reorganization,
merger or consolidation; or (b) upon at least 30 days notice in its sole and
absolute discretion, the surviving corporation may, but shall not be so
obligated, tender to any Optionee an option or options to purchase shares of the
surviving corporation, and such new option or options shall contain such terms
and provisions as shall be required to substantially preserve the rights and
benefits of any Option then outstanding under the Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. There
shall be no pre-emptive rights regarding the Common Stock and/or any other
privileges granting to Optionees/shareholders the right to maintain their
percentage ownership in the Company upon the issuance of additional shares of
Common Stock or any other change in capital structure. In other words, except as
expressly provided above in this Section 18, an Optionee shall have no rights by
reason of any subdivision or consolidation of shares of stock of any class or
the payment of any stock dividend or any other increase or decrease in the
number of shares of stock of any class, and the number or price of shares of
Common Stock subject to any Option shall not be affected by, and no adjustment
shall be made by reason of, any dissolution, liquidation, reorganization, merger
or consolidation, or any issuance by the Company of shares of stock of any
class, or rights to purchase or subscribe for stock of any class, or securities
convertible into shares of stock of any class.
The grant of an Option under this Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications or changes
in its capital or business structures or to merge, consolidate, dissolve,
liquidate, sell or transfer all or any part of its business or assets.
19. SUBSTITUTE OPTIONS. If the Company at any time should succeed to
the business of another corporation through a merger or consolidation, or
through the acquisition or stock or assets of such corporation, Options may be
granted under this Plan to option holders of such corporation or its
subsidiaries, in substitution for options to purchase stock of such corporation
held by them at the time of succession. The Board, in its sole and absolute
discretion, shall determine the extent to which such substitute Options shall be
granted (if at all), the person or persons to receive such substitute Options
(who need not be all option holders of such corporation), the number of Options
to be received by each such person, the Option Price of such Option (which may
be determined without regard to Section 8 hereof) and the terms and conditions
of such substitute Options.
Provided, however, that the Option Price of each such substituted
Option which is a Qualified Stock Option shall be an amount such that, in the
sole and absolute judgment of the Board (and in compliance with Section 425(a)
of the Code), the economic benefit provided by such option is not greater than
the economic benefit represented by the option in the acquired corporation as of
the date of the Company's acquisition of such corporation. Notwithstanding
anything to the contrary herein, no Option shall be granted, nor any action
taken, permitted or
<PAGE>
omitted, which would cause this Plan, or any Options granted hereunder as to
which Rule 16b-3 under the Securities Exchange Act of 1934, as amended, may
apply, not to comply with such Rule.
20. RIGHTS AS A SHAREHOLDER. An Optionee shall have no rights as a
shareholder of the Company with respect to any shares covered by an Option until
the Option Price is fully paid for the shares that are exercised under an
Option. Within thirty (30) days of receipt of the Option Price, the Company
shall issue and deliver to the Optionee the stock certificate for the shares
purchased. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date the Option Price is received by
the Company, except as expressly provided in Section 18.
21. WITHHOLDING OF TAXES. The Company or any applicable subsidiary or
parent may deduct and withhold from the wages, salary, bonus or other income
paid by the Company or such subsidiary or parent to the Optionee the requisite
tax upon the amount of taxable income, if any, recognized by the Optionee due to
the exercise of any part of an Option or the permitted sale of Common Stock
issued to an Optionee under this Plan, all as may be required from time to time
under any federal or state tax laws and regulations. This withholding of tax
shall be made from the Company's (or such subsidiary's or parent's) concurrent
or next payment of wages, salary, bonus or other income to the Optionee or by
payment to the Company (or such subsidiary or parent) by the Optionee of the
required withholding tax, as determined by the Committee.
22. EFFECTIVENESS AND TERMINATION OF PLAN. This Plan shall be effective
on the date set forth on Page 1 above ("Effective Date") since that is the date
when this Plan was adopted by the Board and approved by the shareholders of the
Company. No Option shall be granted under this Plan on or after that date which
is ten (10) years from the Effective Date. This Plan shall terminate when all
shares of Common Stock which may be issued hereunder have been so issued or ten
(10) years from the Effective Date, whichever is earlier. The Board, however,
may in its sole discretion terminate this Plan at any time. No such termination,
other than as provided for in Section 18, shall in any way affect any
outstanding Option.
23. AMENDMENT OF PLAN. The Board shall have the right to amend this
Plan in its sole discretion, subject to approval of the shareholders. With the
consent of each Optionee affected, the Board may also make such changes in the
terms and conditions of granted Options as it deems advisable. Such amendments
and changes shall include without limitation acceleration of the time at which
an Option may be vested.
The Board, however, may not, without the approval of the
shareholders (a) increase the maximum number of shares subject to Qualified
Stock Options, except pursuant to Section 18, (b) decrease the Option Price
requirement contained in Section 8 (except as contemplated by Section 19),
(c) change the designation of the class of employees eligible to receive
Qualified Stock options, (d) modify the limits set forth in Section 5
regarding the value of Common Stock for which any Optionee may be granted
Qualified Stock Options, unless the provisions of Section 422A(d) of the Code
are likewise modified, or (e) in any manner materially increase the benefits
accruing to participants under this Plan, or otherwise modify this Plan such
that it fails to meet the requirements of Rule 16b-3 of the Securities and
Exchange Commission for the exemption of the acquisition, cancellation,
expiration or surrender of Options from the operation of Section 16(b) of the
Securities Exchange Act of 1934.
24. NOT AN EMPLOYMENT AGREEMENT. Nothing contained in this Plan or in
any Option Agreement shall confer on any Optionee any guaranty, right or vested
interest to be continued in the employ of the Company or one of its subsidiaries
or limit the ability of the Company or any
<PAGE>
of its subsidiaries to terminate, with or without cause, in its sole discretion,
the employment of any Optionee.
25. GOVERNING LAW. This Plan and any Option granted pursuant to this
Plan shall be construed and enforced under the laws of the State of California.
26. ARBITRATION. All Optionees, shareholders and the Company shall
attempt to resolve any dispute regarding this Plan in an amicable fashion. Any
unresolved disputes regarding this Plan or the administration thereof shall be
submitted to binding arbitration in San Diego, California, to be conducted in
accordance with the rules of the American Arbitration Association ("AAA").
Any dispute shall be submitted to an arbitration panel consisting of
three (3) members, one of whom shall be selected by the Company, one of whom
shall be selected by the Optionee/shareholder, and one of whom shall be selected
by the other two arbitrators. All arbitrators must have at least five (5) years
experience in the computer electronic industry and/or the legal aspects
pertaining to such industry. The parties shall be entitled to all rights and
privileges to conduct discovery (i.e. interrogatories, production of documents,
depositions, exchange of witnesses, and subpoenas), the right to have oral
testimony at the arbitration hearing, and other rights as provided in the
California Code of Civil Procedure. After discovery is concluded, the
arbitrators shall hold a hearing in accordance with the AAA rules. The
arbitration shall be governed under California law. The decision of a majority
of the arbitrators shall control. The order or award of the arbitrators shall be
final and shall be enforced in any court of competent jurisdiction. The
prevailing party in the arbitration shall be entitled to recover from the other
party its attorney's fees and costs incurred.
27. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Stock pursuant to options may be used for any corporate purpose.
The Board shall determine, in its sole discretion, how to use or apply such
funds or proceeds.
28. ENTIRE PLAN. This is the entire Stock Option Plan of the Company
and supersedes all prior or contemporaneous discussions, representations or
agreements, whether oral or written. This Plan cannot be modified or amended
except by the Board and/or the shareholders as provided above.
29. VALIDITY. If any provision of this Plan is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions shall remain in full force and effect, and the invalid provisions
shall be revised to reflect the intent of the Company regarding the subject
matter thereof.
<PAGE>
Integrated Systems, Inc.
1994 Directors Stock Option Plan
As Adopted March 23, 1994
1. Purpose. This Stock Option Plan (this "Plan") is established to
provide equity incentives for nonemployee members of the Board of Directors of
Integrated Systems, Inc. (the "Company") who are described in Section 6.1 below,
by granting such persons options to purchase shares of stock of the Company.
2. Adoption and Shareholder Approval. This Plan shall become effective
on the date (the "Effective Date") that it is adopted by the Board of Directors
(the "Board") of the Company. This Plan shall be approved by the shareholders of
the Company, consistent with applicable laws, within twelve months after the
date that it is adopted by the Board. After adoption of this Plan by the Board,
options ("Options") may be granted under this Plan provided that, in the event
that shareholder approval is not obtained within the time period provided
herein, this Plan, and all Options granted hereunder, shall terminate. No Option
that is issued as a result of any increase in the number of shares authorized to
be issued under this Plan shall be exercised prior to the time such increase has
been approved by the shareholders of the Company and all such Options granted
pursuant to such increase shall similarly terminate if such shareholder approval
is not obtained. So long as the Company is subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") the Company
will comply with the requirements of Rule 16b-3 with respect to shareholder
approval.
3. Types of Options and Shares. Options granted under this Plan shall
be nonqualified stock options ("NQSOs"). The shares of stock that may be
purchased upon exercise of Options granted under this Plan (the "Shares") are
shares of the Common Stock of the Company.
4. Number of Shares. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan is 200,000 Shares, subject to
adjustment as provided in this Plan. If any Option is terminated for any reason
without being exercised in whole or in part, the Shares thereby released from
such Option shall be available for purchase under other Options subsequently
granted under this Plan. At all times during the term of this Plan, the Company
shall reserve and keep available such number of Shares as shall be required to
satisfy the requirements of outstanding Options under this Plan.
5. Administration. This Plan shall be administered by the Board or by a
committee of not less than two members of the Board appointed to administer this
Plan (the "Committee"). As used in this Plan, references to the Committee shall
mean either such Committee or the Board if no committee has been established.
The interpretation by the Committee of any of the provisions of this Plan or any
Option granted under this Plan shall be final and binding upon the Company and
all persons having an interest in any Option or any Shares purchased pursuant to
an Option.
6. Eligibility and Award Formula.
6.1 Eligibility. Options may be granted only to directors of the
Company who are not employees of the Company or any Parent, Subsidiary or
Affiliate of the Company, as those terms are defined in Section 18 below (each
an "Optionee").
6.2 Initial Grant. Each Optionee who is a member of the Board on
the Effective Date or becomes a member of the Board for the first time after the
Effective Date and who has previously not been granted a stock option as a
director, will automatically be granted an Option for 15,000 shares (the
"Initial Grant") on the latter of the Effective Date or the date such Optionee
first joins the Board. No other member of the Board will receive an Initial
Grant.
6.3 Succeeding Grants. If, after the Effective Date, on each
anniversary date of joining the Board, the Optionee is still a member of the
Board, the Optionee will again automatically be granted an Option for 5,000
Shares.
7. Terms and Conditions of Options. Subject to the following and to
Section 6 above:
<PAGE>
7.1 Form of Option Grant. Each Option granted under this Plan
shall be evidenced by a written Stock Option Grant ("Grant") in such form (which
need not be the same for each Optionee) as the Committee shall from time to time
approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
7.2 Vesting. The date of automatic grant of an Option is
referred to in this Plan as the respective "Start Date" for each such Option.
Each Option granted under the Plan will vest as to 2.0833% of the Shares each
calendar month, so long as the Optionee continuously remains a director of the
Company.
7.3 Exercise Price. The exercise price of an Option shall be the
Fair Market Value (as defined in Section 18.4) of the Shares, at the time that
the Option is granted.
7.4 Termination of Option. Except as provided below in this
Section, each Option shall expire ten years after the Start Date (the
"Expiration Date"). The Option shall cease to vest if Optionee ceases to be a
member of the Board. The date on which Optionee ceases to be a member of the
Board shall be referred to as the "Termination Date." An Option may be exercised
after the Termination Date only as set forth below:
(a) Termination Generally. If Optionee ceases to be a
member of the Board for any reason except death or disability, each Option, to
the extent (and only to the extent) that it would have been exercisable by
Optionee on the Termination Date, may be exercised by Optionee within six (6)
months after the Termination Date, but in no event later than the Expiration
Date.
(b) Death or Disability. If Optionee ceases to be a member
of the Board because of the death of Optionee or the disability of Optionee
within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended, each Option, to the extent (and only to the extent) that it would have
been exercisable by Optionee on the Termination Date, may be exercised by
Optionee (or Optionee's legal representative) within twelve (12) months after
the Termination Date, but in no event later than the Expiration Date.
8. Exercise of Options.
8.1 Notice. Options may be exercised only by delivery to the
Company of an exercise agreement in a form approved by the Committee, stating
the number of Shares being purchased, the restrictions imposed on the Shares and
such representations and agreements regarding the Optionee's investment intent
and access to information as may be required by the Company to comply with
applicable securities laws, together with payment in full of the exercise price
for the number of Shares being purchased.
8.2 Payment. Payment for the Shares may be made (a) in cash or
by check; (b) by surrender of shares of Common Stock of the Company that have
been owned by Optionee for more than six (6) months (and which have been paid
for within the meaning of SEC Rule 144 and, if such shares were purchased from
the Company by use of a promissory note, such note has been fully paid with
respect to such shares) or were obtained by the Optionee in the open public
market, having a Fair Market Value equal to the exercise price of the Option;
(c) by waiver of compensation due or accrued to Optionee for services rendered;
(d) provided that a public market for the Company's stock exists, through a
"same day sale" commitment from the Optionee and a broker-dealer that is a
member of the National Association of Securities Dealers (a "NASD Dealer")
whereby the Optionee irrevocably elects to exercise the Option and to sell a
portion of the Shares so purchased to pay for the exercise price and whereby the
NASD Dealer irrevocably commits upon receipt of such Shares to forward the
exercise price directly to the Company; (e) provided that a public market for
the Company's stock exists, through a "margin" commitment from the Optionee and
a NASD Dealer whereby the Optionee irrevocably elects to exercise the Option and
to pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the exercise price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; or (f) by any combination of
the foregoing.
<PAGE>
8.3 Withholding Taxes. Prior to issuance of the Shares upon
exercise of an Option, the Optionee shall pay or make adequate provision for any
federal or state withholding obligations of the Company, if applicable.
8.4 Limitations on Exercise. Notwithstanding the exercise
periods set forth in the Grant, exercise of an Option shall always be subject to
the following limitations:
(a) An Option shall not be exercisable until such time as
the Plan or, in the case of Options granted pursuant to an amendment to the
number of shares that may be issued pursuant to the Plan, the amendment has been
approved by the shareholders of the Company in accordance with Section 16
hereof.
(b) An Option shall not be exercisable unless such
exercise is in compliance with the 1933 Securities Act, as amended, and all
applicable state securities laws, as they are in effect on the date of exercise.
(c) The Committee may specify a reasonable minimum number
of Shares that may be purchased on any exercise of an Option, provided that such
minimum number will not prevent the Optionee from exercising the full number of
Shares as to which the Option is then exercisable.
9. Nontransferability of Options. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or by the Optionee's
guardian or legal representative, unless otherwise permitted by the Committee.
No Option may be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent and distribution.
10. Privileges of Stock Ownership. No Optionee shall have any of the
rights of a shareholder with respect to any Shares subject to an Option until
the Option has been validly exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
of exercise, except as provided in this Plan. The Company shall provide to each
Optionee a copy of the annual financial statements of the Company, at such time
after the close of each fiscal year of the Company as they are released by the
Company to its shareholders.
11. Adjustment of Option Shares. In the event that the number of
outstanding shares of Common Stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration,
the number of Shares available under this Plan and the number of Shares subject
to outstanding Options and the exercise price per share of such Options shall be
proportionately adjusted, subject to any required action by the Board or
shareholders of the Company and compliance with applicable securities laws;
provided, however, that no certificate or scrip representing fractional shares
shall be issued upon exercise of any Option and any resulting fractions of a
Share shall be ignored.
12. No Obligation to Employ. Nothing in this Plan or any Option granted
under this Plan shall confer on any Optionee any right to continue as a director
of the Company.
13. Compliance With Laws. The grant of Options and the issuance of
Shares upon exercise of any Options shall be subject to and conditioned upon
compliance with all applicable requirements of law, including without limitation
compliance with the 1933 Securities Act, any required approval by the
Commissioner of Corporations of the State of California, compliance with all
other applicable state securities laws and compliance with the requirements of
any stock exchange or national market system on which the Shares may be listed.
The Company shall be under no obligation to register the Shares with the
Securities and Exchange Commission or to effect compliance with the registration
or qualification requirement of any state securities laws, stock exchange or
national market system.
l4. Restrictions on Shares. The Company may reserve to itself or its
assignee(s) in the Grant, a right to repurchase any or all unvested shares held
by an Optionee upon the Optionee's termination of service with the Company for
any reason at the Optionee's original exercise price.
<PAGE>
15. Assumption of Options by Successors. In the event of a dissolution
or liquidation of the Company, a merger in which the Company is not the
surviving corporation, the sale of substantially all of the assets of the
Company, or any other transaction which qualifies as a "corporate transaction"
under Section 424 of the Revenue Code wherein the Shareholders of the Company
give up all of their equity interest in the Company, the vesting of all options
granted pursuant to the Plan will accelerate and the options will become
exercisable in full prior to the consummation of such event at such times and on
such conditions as the Committee determines.
16. Amendment or Termination of Plan. The Committee may at any time
terminate or amend this Plan but not the terms of any outstanding option;
provided, however, that the Committee shall not, without the approval of the
shareholders of the Company, increase the total number of Shares available under
this Plan (except by operation of the provisions of Sections 4 and 11 above) or
change the class of persons eligible to receive Options. Further, the provisions
in Sections 6 and 7 of this Plan shall not be amended more than once every six
(6) months, other than to comport with changes in the Internal Revenue Code of
1986, as amended, the Employee Retirement Income Security Act or the rules
thereunder. In any case, no amendment of this Plan may adversely affect any then
outstanding Options or any unexercised portions thereof without the written
consent of the Optionee.
17. Term of Plan. Options may be granted pursuant to this Plan from
time to time within a period of ten (10) years from the Effective Date.
18. Certain Definitions. As used in this Plan, the following terms
shall have the following meanings:
18.1 "Parent" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company if, at the time of the
granting of the Option, each of such corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
18.2 "Subsidiary" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company if, at the time
of granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
18.3 "Affiliate" means any corporation that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, another corporation, where "control" (including
the terms "controlled by" and "under common control with") means the possession,
direct or indirect, of the power to cause the direction of the management and
policies of the corporation, whether through the ownership of voting securities,
by contract or otherwise.
18.4 "Fair Market Value" shall be the closing price for the
common stock of the Company on the last trading day prior to the date of
determination as quoted on the Nasdaq National Market and reported in The Wall
Street Journal.
<PAGE>
EPILOGUE TECHNOLOGY CORPORATION,
A DELAWARE CORPORATION
1994 STOCK OPTION PLAN
As Adopted October 6, 1994
1. PURPOSE. The purpose of the Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent,
Subsidiaries and Affiliates, by offering them an opportunity to participate in
the Company's future performance through awards of Options. Capitalized terms
not defined in the text are defined in Section 20.
2. SHARES SUBJECT TO THE PLAN.
2.1 NUMBER OF SHARES AVAILABLE. Subject to
Sections 2.2 and 15, the total number of Shares reserved and available for grant
and issuance pursuant to the Plan shall be 30,000 Shares. Subject to Sections
2.2 and 15, Shares shall again be available for grant and issuance in connection
with future Option grants under the Plan that: (a) are subject to issuance upon
exercise of an Option but cease to be subject to such Option for any reason
other than exercise of such Option, (b) are subject to an Option granted
hereunder but are forfeited or are repurchased by the Company at the original
issue price, or (c) are subject to an Option that otherwise terminates without
Shares being issued.
2.2 ADJUSTMENT OF SHARES. In the event that the
number of outstanding Shares is changed by a stock dividend, recapitalization,
stock split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under the Plan, and (b) the
Exercise Prices of and number of Shares subject to outstanding Options shall be
proportionately adjusted, subject to any required action by the Board or the
shareholders of the Company and compliance with applicable securities laws;
PROVIDED, HOWEVER, that fractions of a Share shall not be issued but shall
either be paid in cash at Fair Market Value or shall be rounded up to the
nearest Share, as determined by the Committee; and PROVIDED, FURTHER, that the
Exercise Price of any Option may not be decreased to below the par value of the
Shares.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be
granted only to employees (including officers and directors who are also
employees) of the Company or of a Parent or Subsidiary of the Company. NQSOs may
be granted to employees, officers, directors, consultants, independent
contractors and advisors of the Company or any Parent, Subsidiary or Affiliate
of the Company; PROVIDED such consultants, contractors and advisors render bona
fide services not in connection with the offer and sale of securities in a
capital-raising transaction. A person may be granted more than one Option under
the Plan.
<PAGE>
4. ADMINISTRATION.
4.1 COMMITTEE AUTHORITY. The Plan shall be
administered by the Committee or the Board acting as the Committee. Subject to
the general purposes, terms and conditions of the Plan, and to the direction of
the Board, the Committee shall have full power to implement and carry out the
Plan. The Committee shall have the authority to:
(a) construe and interpret the Plan, any
Option Agreement and any other agreement or document
executed pursuant to the Plan;
(b) prescribe, amend and rescind rules
and regulations relating to the Plan;
(c) select persons to receive Options;
(d) determine the form and terms of
Options;
(e) determine the number of Shares
subject to Options;
(f) grant waivers of Plan or Option
conditions;
(g) determine the vesting, exercisability
and payment of Options;
(h) correct any defect, supply any
omission, or reconcile any inconsistency in
the Plan, any Option or any Option Agreement;
and
(i) make all other determinations
necessary or advisable for the administration
of the Plan.
4.2 COMMITTEE DISCRETION. Any determination
made by the Committee with respect to any Option shall be made in its sole
discretion at the time of grant of the Option or, unless in contravention of any
express term of the Plan or Option, at any later time, and such determination
shall be final and binding on the Company and all persons having an interest in
any Option under the Plan.
4.3 EXCHANGE ACT REQUIREMENTS. If the Company is
subject to the Exchange Act, the Company will take appropriate steps to comply
with the disinterested director requirements of Section 16(b) of the Exchange
Act, including but not limited to, the appointment by the Board of a Committee
consisting of not less than two persons (who are members of the Board), each of
whom is a Disinterested Person.
5. OPTIONS. The Committee may grant Options to eligible persons
and shall determine whether such Options shall be Incentive Stock Options within
the meaning of the Code ("ISOS") or Nonqualified Stock Options ("NQSOS"), the
number of Shares subject to the Option, the Exercise Price of the Option, the
period during which the Option may be exercised, and all other terms and
conditions of the Option, subject to the following:
5.1 FORM OF OPTION GRANT. Each Option granted under the
Plan shall be evidenced by an Option Agreement which shall expressly identify
the Option as an ISO or NQSO ("STOCK OPTION AGREEMENT"), and be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee shall from time to time approve, and which shall comply with and be
subject to the terms and conditions of the Plan.
<PAGE>
5.2 DATE OF GRANT. The date of grant of an
Option shall be the date on which the Committee makes the determination to grant
such Option, unless otherwise specified by the Committee. The Stock Option
Agreement and a copy of the Plan will be delivered to the Participant within a
reasonable time after the granting of the Option.
5.3 EXERCISE PERIOD. Options shall be
exercisable within the times or upon the events determined by the Committee as
set forth in the Stock Option Agreement; PROVIDED, HOWEVER, that no Option shall
be exercisable after the expiration of ten (10) years from the date the Option
is granted, and provided further that no Option granted to a person who directly
or by attribution owns more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary of the
Company ("TEN PERCENT SHAREHOLDER") shall be exercisable after the expiration of
five (5) years from the date the Option is granted. The Committee also may
provide for the exercise of Options to become exercisable at one time or from
time to time, periodically or otherwise, in such number or percentage as the
Committee determines.
5.4 EXERCISE PRICE. The Exercise Price shall be
determined by the Committee when the Option is granted and may be not less than
85% of the Fair Market Value of the Shares on the date of grant; provided that
(i) the Exercise Price of an ISO shall be not less than 100% of the Fair Market
Value of the Shares on the date of grant and (ii) the Exercise Price of any
Option granted to a Ten Percent Shareholder shall not be less than 110% of the
Fair Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of the Plan.
5.5 METHOD OF EXERCISE. Options may be
exercised only by delivery to the Company of a written stock option exercise
agreement (the "EXERCISE AGREEMENT") in a form approved by the Committee (which
need not be the same for each Participant), stating the number of Shares being
purchased, the restrictions imposed on the Shares, if any, and such
representations and agreements regarding Participant's investment intent and
access to information and other matters, if any, as may be required or desirable
by the Company to comply with applicable securities laws, together with payment
in full of the Exercise Price for the number of Shares being purchased.
5.6 TERMINATION. Notwithstanding the exercise
periods set forth in the Stock Option Agreement, exercise of an Option shall
always be subject to the following:
(a) If the Participant is Terminated for any
reason except death or Disability, then
Participant may exercise such Participant's
Options only to the extent that such Options
would have been exercisable upon the
Termination Date no later than thirty (30)
days after the Termination Date, but in any
event, no later than the expiration date of
the Options.
(b) If the Participant is terminated because
of death or Disability (or the Participant
dies within 30 days of such termination),
then Participant's Options may be exercised
only to the extent that such Options would
have been exercisable by Participant on the
Termination Date and must be exercised by
Participant (or Participant's legal
representative or authorized assignee) no
later than twelve (12) months after the
Termination Date (or such shorter time
period as may be specified in the Stock
Option Agreement), but in any event no later
than the expiration date of the Options.
<PAGE>
5.7 LIMITATIONS ON EXERCISE. The Committee may
specify a reasonable minimum number of Shares that may be purchased on any
exercise of an Option, provided that such minimum number will not prevent
Participant from exercising the Option for the full number of Shares for which
it is then exercisable.
5.8 LIMITATIONS ON ISOS. The aggregate Fair
Market Value (determined as of the date of grant) of Shares with respect to
which ISOs are exercisable for the first time by a Participant during any
calendar year (under the Plan or under any other incentive stock option plan of
the Company or any Affiliate, Parent or Subsidiary of the Company) shall not
exceed $100,000. If the Fair Market Value of Shares on the date of grant with
respect to which ISOs are exercisable for the first time by a Participant during
any calendar year exceeds $100,000, the Options for the first $100,000 worth of
Shares to become exercisable in such calendar year shall be ISOs and the Options
for the amount in excess of $100,000 that become exercisable in that calendar
year shall be NQSOs. In the event that the Code or the regulations promulgated
thereunder are amended after the Effective Date of the Plan to provide for a
different limit on the Fair Market Value of Shares permitted to be subject to
ISOs, such different limit shall be automatically incorporated herein and shall
apply to any Options granted after the effective date of such amendment.
5.9 MODIFICATION, EXTENSION OR RENEWAL. The
Committee may modify, extend or renew outstanding Options and authorize the
grant of new Options in substitution therefor, provided that any such action may
not, without the written consent of Participant, impair any of Participant's
rights under any Option previously granted. Any outstanding ISO that is
modified, extended, renewed or otherwise altered shall be treated in accordance
with Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; PROVIDED, HOWEVER, that the Exercise Price may not be reduced
below the minimum Exercise Price that would be permitted under Section 5.4 of
the Plan for Options granted on the date the action is taken to reduce the
Exercise Price; PROVIDED, FURTHER, that the Exercise Price shall not be reduced
below the par value of the Shares.
5.10 NO DISQUALIFICATION. Notwithstanding any other
provision in the Plan, no term of the Plan relating to ISOs shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be exercised, so as to disqualify the Plan under Section 422 of
the Code or, without the consent of the Participant affected, to disqualify any
ISO under Section 422 of the Code.
6. PAYMENT FOR SHARE PURCHASES.
6.1 PAYMENT. Payment for Shares purchased pursuant to the
Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:
(a) by cancellation of indebtedness of
the Company to the Participant;
(b) by waiver of compensation due or
accrued to Participant for services rendered;
(c) with respect only to purchases upon
exercise of an Option, and provided that a
public market for the Company's stock exists:
<PAGE>
(1) through a "same day sale"
commitment from Participant and a
broker-dealer that is a member of the
National Association of Securities
Dealers (an "NASD DEALER") whereby the
Participant irrevocably elects to
exercise the Option and to sell a
portion of the Shares so purchased to
pay for the Exercise Price, and
whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to
forward the Exercise Price directly to
the Company; or
(2) through a "margin" commitment from
Participant and an NASD Dealer whereby
Participant irrevocably elects to
exercise the Option and to pledge the
Shares so purchased to the NASD Dealer
in a margin account as security for a
loan from the NASD Dealer in the
amount of the Exercise Price, and
whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to
forward the exercise price directly to
the Company;
or
(d) by any combination of the foregoing.
6.2 WITHHOLDING. Whenever Shares are to be
issued in satisfaction of Options granted under the Plan, the Company may
require the Participant to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for such Shares. Whenever, under the Plan,
payments in satisfaction of Options are to be made in cash, such payment shall
be net of an amount sufficient to satisfy federal, state, and local withholding
tax requirements.
7. PRIVILEGES OF STOCK OWNERSHIP.
7.1 VOTING AND DIVIDENDS. No Participant
shall have any of the rights of a shareholder with respect to any Shares until
the Shares are issued to the Participant. After Shares are issued to the
Participant, the Participant shall be a shareholder and have all the rights of a
shareholder with respect to such Shares, including the right to vote and receive
all dividends or other distributions made or paid with respect to such Shares;
PROVIDED, HOWEVER, that the Participant shall have no right to retain such stock
dividends or stock distributions with respect to Shares that are repurchased at
the Participant's original Purchase Price pursuant to Section 9.
7.2 FINANCIAL STATEMENTS. The Company shall
provide financial statements to each Participant prior to such Participant's
purchase of Shares under the Plan, and to each Participant annually during the
period such Participant has Options outstanding; PROVIDED, HOWEVER, the Company
shall not be required to provide such financial statements to Participants whose
services in connection with the Company assure them access to equivalent
information.
8. TRANSFERABILITY. Options granted under the Plan, and any
interest therein, shall not be transferable or assignable by Participant, and
may not be made subject to execution, attachment or similar process, otherwise
than by will or by the laws of descent and distribution or as consistent with
the specific Plan and Option Agreement provisions relating thereto. During the
lifetime of the Participant an Option shall be exercisable only by the
Participant, and any elections with respect to an Option, may be made only by
the Participant.
<PAGE>
9. RESTRICTIONS ON SHARES. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Option Agreement
(a) a right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, and/or (b) a
right to repurchase a portion of or all Shares held by a Participant following
such Participant's Termination at any time within ninety (90) days after the
later of Participant's Termination Date and the date Participant purchases
Shares under the Plan, for cash, at: (A) with respect to Shares that are
"Vested" (as defined in the Option Agreement), the higher of: (l) Participant's
original Purchase Price, or (2) the Fair Market Value of such Shares on
Participant's Termination Date, PROVIDED, such right of repurchase terminates
when the Company's securities become publicly traded; or (B) with respect to
Shares that are not "Vested" (as defined in the Option Agreement), at the
Participant's original Purchase Price, PROVIDED, that the right to repurchase at
the original Purchase Price lapses at the rate of at least 20% per year over 5
years from the date the Shares were purchased, and if the right to repurchase is
assignable, the assignee must pay the Company, upon assignment of the right to
repurchase, cash equal to the excess of the Fair Market Value of the Shares over
the original Purchase Price.
10. CERTIFICATES. All certificates for Shares or other
securities delivered under the Plan shall be subject to such stock transfer
orders, legends and other restrictions as the Committee may deem necessary or
advisable, including restrictions under any applicable federal, state or foreign
securities law, or any rules, regulations and other requirements of the SEC or
any stock exchange or automated quotation system upon which the Shares may be
listed.
11. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates.
12. EXCHANGE AND BUYOUT OF OPTIONS. The Committee may, at any
time or from time to time, authorize the Company, with the consent of the
respective Participants, to issue new Options in exchange for the surrender and
cancellation of any or all outstanding Options. The Committee may at any time
buy from a Participant an Option previously granted with payment in cash, Shares
or other consideration, based on such terms and conditions as the Committee and
the Participant shall agree.
13. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Option
shall not be effective unless such Option is in compliance with all applicable
federal and state securities laws, rules and regulations of any governmental
body, and the requirements of any stock exchange or automated quotation system
upon which the Shares may then be listed, as they are in effect on the date of
grant of the Option and also on the date of exercise or other issuance.
Notwithstanding any other provision in the Plan, the Company shall have no
obligation to issue or deliver certificates for Shares under the Plan prior to
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable, and/or (b) completion of any registration
or other qualification of such shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable. The Company shall be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation
system, and the Company shall have no liability for any inability or failure to
do so.
<PAGE>
14. NO OBLIGATION TO EMPLOY. Nothing in the Plan or any Option
granted under the Plan shall confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent, Subsidiary or Affiliate of the Company or limit
in any way the right of the Company or any Parent, Subsidiary or Affiliate of
the Company to terminate Participant's employment or other relationship at any
time, with or without cause.
15. CORPORATE TRANSACTIONS.
15.1 ASSUMPTION OR REPLACEMENT OF OPTIONS BY
SUCCESSOR. In the event of (a) a merger or consolidation in which the Company is
not the surviving corporation (other than a merger or consolidation with a
wholly-owned subsidiary, a reincorporation of the Company in a different
jurisdiction, or other transaction in which there is no substantial change in
the shareholders of the Company and the Options granted under the Plan are
assumed or replaced by the successor corporation, which assumption shall be
binding on all Participants), (b) a dissolution or liquidation of the Company,
(c) the sale of substantially all of the assets of the Company, or (d) any other
transaction which qualifies as a "corporate transaction" under Section 424(a) of
the Code wherein the shareholders of the Company give up all of their equity
interest in the Company (EXCEPT for the acquisition, sale or transfer of all or
substantially all of the outstanding shares of the Company), any or all
outstanding Options may be assumed or replaced by the successor corporation (if
any), which assumption or replacement shall be binding on all Participants. In
the alternative, the successor corporation may substitute equivalent Options or
provide substantially similar consideration to Participants as was provided to
shareholders (after taking into account the existing provisions of the Options).
The successor corporation may also issue, in place of outstanding Shares of the
Company held by the Participant, substantially similar shares or other property
subject to repurchase restrictions no less favorable to the Participant.
In the event such successor corporation (if any) refuses to
assume or substitute Options, as provided above, pursuant to a transaction
described in this Subsection 15.1, such Options shall expire on such transaction
at such time and on such conditions as the Board shall determine.
15.2 OTHER TREATMENT OF OPTIONS. Subject to
any greater rights granted to Participants under the foregoing provisions of
this Section 15, in the event of the occurrence of any transaction described in
Section 15.1, any outstanding Options shall be treated as provided in the
applicable agreement or plan of merger, consolidation, dissolution, liquidation,
sale of assets or other "corporate transaction."
15.3 ASSUMPTION OF OPTIONS BY THE COMPANY. The
Company, from time to time, also may substitute or assume outstanding Options
granted by another company, whether in connection with an acquisition of such
other company or otherwise, by either (a) granting an Option under the Plan in
substitution of such other company's Option, or (b) assuming such Option as if
it had been granted under the Plan if the terms of such assumed Option could be
applied to an Option granted under the Plan. Such substitution or assumption
shall be permissible if the holder of the substituted or assumed Option would
have been eligible to be granted an Option under the Plan if the other company
had applied the rules of the Plan to such grant. In the event the Company
assumes an Option granted by another company, the terms and conditions of such
Option shall remain unchanged (EXCEPT that the exercise price and the number and
nature of Shares issuable upon exercise of any such option will be adjusted
appropriately pursuant to Section 424(a) of the Code). In the event the Company
elects to grant a new Option rather than assuming an existing option, such new
Option may be granted with a similarly adjusted Exercise Price.
<PAGE>
16. ADOPTION AND SHAREHOLDER APPROVAL. The Plan shall become
effective on the date that it is adopted by the Board (the "EFFECTIVE DATE").
The Plan shall be approved by the shareholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with applicable laws, within twelve
months before or after the Effective Date. Upon the Effective Date, the Board
may grant Options pursuant to the Plan; PROVIDED, HOWEVER, that: (a) no Option
may be exercised prior to initial shareholder approval of the Plan; (b) no
Option granted pursuant to an increase in the number of Shares approved by the
Board shall be exercised prior to the time such increase has been approved by
the shareholders of the Company; and (c) in the event that shareholder approval
is not obtained within the time period provided herein, all Options granted
hereunder shall be cancelled, any Shares issued pursuant to any Option shall be
cancelled and any purchase of Shares hereunder shall be rescinded. After the
Company becomes subject to Section 16(b) of the Exchange Act, the Company will
comply with the requirements of Rule 16b-3 (or its successor), as amended, with
respect to shareholder approval.
17. TERM OF PLAN. The Plan will terminate ten (10) years from
the Effective Date or, if earlier, the date of shareholder approval.
18. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend the Plan in any respect, including without limitation
amendment of any form of Option Agreement or instrument to be executed pursuant
to the Plan; PROVIDED, HOWEVER, that the Board shall not, without the approval
of the shareholders of the Company, amend the Plan in any manner that requires
such shareholder approval pursuant to the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans or pursuant to the Exchange Act
or Rule 16b-3 (or its successor), as amended, thereunder.
19. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan
by the Board, the submission of the Plan to the shareholders of the Company for
approval, nor any provision of the Plan shall be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
20. DEFINITIONS. As used in the Plan, the following terms shall
have the following meanings:
"AFFILIATE" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
"OPTION" means any Option under the Plan, including any ISO or
NQSO.
"OPTION AGREEMENT" means, with respect to each Option, the
signed written agreement between the Company and the Participant setting forth
the terms and conditions of the Option.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to
administer the Plan, or if no committee is appointed, the Board.
<PAGE>
"COMPANY" means Epilogue Technology Corporation, a corporation
organized under the laws of the State of Delaware, or any successor corporation.
"DISABILITY" means a disability, whether temporary or permanent,
partial or total, within the meaning of Section 22(e)(3) of the Code, as
determined by the Committee.
"DISINTERESTED PERSON" means a director who has not, during the
period that person is a member of the Committee and for one year prior to
service as a member of the Committee, been granted an Option pursuant to the
Plan or any other plan of the Company or any Parent, Subsidiary or Affiliate of
the Company, except in accordance with the requirements set forth in Rule
16b-3(c)(2)(i) (and any successor regulation thereto) as promulgated by the SEC
under Section 16(b) of the Exchange Act, as such rule is amended from time to
time and as interpreted by the SEC.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" means the price at which a holder of an Option
may purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share
of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on
the Nasdaq National Market, its last
reported sale price on the Nasdaq National
Market or, if no such reported sale takes
place on such date, the average of the
closing bid and asked prices;
(b) if such Common Stock is publicly traded
and is then listed on a national securities
exchange, the last reported sale price or,
if no such reported sale takes place on such
date, the average of the closing bid and
asked prices on the principal national
securities exchange on which the Common
Stock is listed or admitted to trading;
(c) if such Common Stock is publicly traded
but is not quoted on the Nasdaq National
Market nor listed or admitted to trading on
a national securities exchange, the average
of the closing bid and asked prices on such
date, as reported by The Wall Street
Journal, for the over-the-counter market; or
(d) if none of the foregoing is applicable,
by the Board of Directors of the Company in
good faith.
"INSIDER" means an officer or director of the Company or any
other person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if at the time of the
granting of an Option under the Plan, each of such corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
"PARTICIPANT" means a person who receives an Option under the
Plan.
<PAGE>
"PLAN" means this Epilogue Technology Corporation 1994 Stock
Option Plan, as amended from time to time.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock, $0.001 par
value per share, reserved for issuance under the Plan, as adjusted pursuant to
Sections 2 and 15, and any successor security.
"SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
granting of the Option, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
"TERMINATION" or "TERMINATED" means, for purposes of the Plan
with respect to a Participant, that the Participant has ceased to provide
services as an employee, director, consultant, independent contractor or
adviser, to the Company or a Parent, Subsidiary or Affiliate of the Company,
except in the case of sick leave, military leave, or any other leave of absence
approved by the Committee, PROVIDED, that such leave is for a period of not more
than ninety (90) days, or reinstatement upon the expiration of such leave is
guaranteed by contract or statute. The Committee shall have sole discretion to
determine whether a Participant has ceased to provide services and the effective
date on which the Participant ceased to provide services (the "TERMINATION
DATE").
<PAGE>
INTEGRATED SYSTEMS, INC.
1998 EQUITY INCENTIVE PLAN
As Adopted March 30, 1998
As Amended March 24, 1999
1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and
18, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 2,000,000 Shares plus (a) any authorized shares
not issued or subject to outstanding grants under the Company's 1988 Stock
Option Plan the ("Prior Plan") on the Effective Date (as defined in Section 19
below); (b) shares that are subject to issuance upon exercise of an option
granted under the Prior Plan but cease to be subject to such option for any
reason other than exercise of such option; and (c) shares that were issued under
the Prior Plan which are repurchased by the Company at the original issue price
or forfeited. Subject to Sections 2.2 and 18, Shares that are subject to: (x)
issuance upon exercise of an Option but cease to be subject to such Option for
any reason other than exercise of such Option; (y) an Award granted hereunder
but are forfeited or are repurchased by the Company at the original issue price;
and (z) an Award that otherwise terminates without Shares being issued, will
again be available for grant and issuance in connection with future Awards under
this Plan. At all times the Company shall reserve and keep available a
sufficient number of Shares as shall be required to satisfy the requirements of
all outstanding Options granted under this Plan and all other outstanding but
unvested Awards granted under this Plan.
2.2 Adjustment of Shares. In the event that the number of
outstanding shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities laws; provided, however, that
fractions of a Share will not be issued but will either be replaced by a cash
payment equal to the Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be
granted only to employees (including officers and directors who are also
employees) of the Company or of a Parent or Subsidiary of the Company. All other
Awards may be granted to employees, officers, directors, consultants,
independent contractors and advisors of the Company or any Parent or Subsidiary
of the Company; provided such consultants, contractors and advisors render bona
fide services not in connection with the offer and sale of securities in a
capital-raising transaction. No person will be eligible to receive more than
200,000 Shares in any calendar year under this Plan pursuant to the grant of
Awards hereunder, other than new employees of the Company or of a Parent or
Subsidiary of the Company (including new employees who are also officers and
directors of the Company or any Parent or Subsidiary of the Company), who are
eligible to receive up to a maximum of 1,000,000 Shares in the calendar year in
which they commence their employment. A person may be granted more than one
Award under this Plan.
4. ADMINISTRATION.
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4.1 Committee Authority. This Plan will be administered by the
Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and any
other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to
this Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject
to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or as
alternatives to, other Awards under this Plan or any other
incentive or compensation plan of the Company or any Parent or
Subsidiary of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 Committee Discretion. Any determination made by the
Committee with respect to any Award will be made in its sole discretion at the
time of grant of the Award or, unless in contravention of any express term of
this Plan or Award, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Award under
this Plan. The Committee may delegate to one or more officers of the Company the
authority to grant an Award under this Plan to Participants who are not Insiders
of the Company.
5. OPTIONS. The Committee may grant Options to eligible persons
and will determine whether such Options will be Incentive Stock Options within
the meaning of the Code ("ISO") or Nonqualified Stock Options ("NQSOs"), the
number of Shares subject to the Option, the Exercise Price of the Option, the
period during which the Option may be exercised, and all other terms and
conditions of the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan
will be evidenced by an Award Agreement which will expressly identify the Option
as an ISO or an NQSO ("Stock Option Agreement"), and will be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
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5.3 Exercise Period. Options may be exercisable within the
times or upon the events determined by the Committee as set forth in the Stock
Option Agreement governing such Option; provided, however, that no Option will
be exercisable after the expiration of ten (10) years from the date the Option
is granted; and provided further that no ISO granted to a person who directly or
by attribution owns more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of any Parent or Subsidiary of
the Company ("Ten Percent Stockholder") will be exercisable after the expiration
of five (5) years from the date the ISO is granted. The Committee also may
provide for Options to become exercisable at one time or from time to time,
periodically or otherwise, in such number of Shares or percentage of Shares as
the Committee determines.
5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may be not less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will be not less than 100% of the Fair Market
Value of the Shares on the date of grant; and (ii) the Exercise Price of any ISO
granted to a Ten Percent Stockholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of this Plan.
5.5 Method of Exercise. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"Exercise Agreement") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.
5.6 Termination. Notwithstanding the exercise periods set
forth in the Stock Option Agreement, exercise of an Option will always be
subject to the following:
(a) If the Participant is Terminated for any reason except death
or Disability, then the Participant may exercise such
Participant's Options only to the extent that such Options
would have been exercisable upon the Termination Date no later
than three (3) months after the Termination Date (or such
shorter or longer time period not exceeding five (5) years as
may be determined by the Committee, with any exercise beyond
three (3) months after the Termination Date deemed to be an
NQSO), but in any event, no later than the expiration date of
the Options.
(b) If the Participant is Terminated because of Participant's
death or Disability (or the Participant dies within three (3)
months after a Termination other than for Cause or because of
Participant's Disability), then Participant's Options may be
exercised only to the extent that such Options would have been
exercisable by Participant on the Termination Date and must be
exercised by Participant (or Participant's legal
representative or authorized assignee) no later than twelve
(12) months after the Termination Date (or such shorter or
longer time period not exceeding five (5) years as may be
determined by the Committee, with any such exercise beyond (a)
three (3) months after the Termination Date when the
Termination is for any reason other than the Participant's
death or Disability, or (b) twelve (12) months after the
Termination Date when the Termination is for Participant's
death or Disability, deemed to be an NQSO), but in any event
no later than the expiration date of the Options.
(c) Notwithstanding the provisions in paragraph 5.6(a) above, if a
<PAGE>
Participant is terminated for Cause, neither the Participant,
the Participant's estate nor such other person who may then
hold the Option shall be entitled to exercise any Option with
respect to any Shares whatsoever, after termination of
service, whether or not after termination of service the
Participant may receive payment from the Company or Subsidiary
for vacation pay, for services rendered prior to termination,
for services rendered for the day on which termination
occurs, for salary in lieu of notice, or for any other
benefits. In making such determination, the Board shall give
the Participant an opportunity to present to the Board
evidence on his behalf. For the purpose of this paragraph,
termination of service shall be deemed to occur on the date
when the Company dispatches notice or advice to the
Participant that his service is terminated.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISO. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISO are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company, Parent
or Subsidiary of the Company) will not exceed $100,000. If the Fair Market Value
of Shares on the date of grant with respect to which ISO are exercisable for the
first time by a Participant during any calendar year exceeds $100,000, then the
Options for the first $100,000 worth of Shares to become exercisable in such
calendar year will be ISO and the Options for the amount in excess of $100,000
that become exercisable in that calendar year will be NQSOs. In the event that
the Code or the regulations promulgated thereunder are amended after the
Effective Date of this Plan to provide for a different limit on the Fair Market
Value of Shares permitted to be subject to ISO, such different limit will be
automatically incorporated herein and will apply to any Options granted after
the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; provided, however, that the Exercise Price may not be reduced
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision
in this Plan, no term of this Plan relating to ISO will be interpreted, amended
or altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
<PAGE>
Agreement ("Restricted Stock Purchase Agreement") that will be in such form
(which need not be the same for each Participant) as the Committee will from
time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The offer of Restricted Stock will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30) days,
then the offer will terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant
to a Restricted Stock Award will be determined by the Committee on the date the
Restricted Stock Award is granted, except in the case of a sale to a Ten Percent
Stockholder, in which case the Purchase Price will be 100% of the Fair Market
Value. Payment of the Purchase Price may be made in accordance with Section 8 of
this Plan.
6.3 Terms of Restricted Stock Awards. Restricted Stock Awards
shall be subject to such restrictions as the Committee may impose. These
restrictions may be based upon completion of a specified number of years of
service with the Company or upon completion of the performance goals as set out
in advance in the Participant's individual Restricted Stock Purchase Agreement.
Restricted Stock Awards may vary from Participant to Participant and between
groups of Participants. Prior to the grant of a Restricted Stock Award, the
Committee shall: (a) determine the nature, length and starting date of any
Performance Period for the Restricted Stock Award; (b) select from among the
Performance Factors to be used to measure performance goals, if any; and (c)
determine the number of Shares that may be awarded to the Participant. Prior to
the payment of any Restricted Stock Award, the Committee shall determine the
extent to which such Restricted Stock Award has been earned. Performance Periods
may overlap and Participants may participate simultaneously with respect to
Restricted Stock Awards that are subject to different Performance Periods and
having different performance goals and other criteria.
6.4 Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Restricted Stock Award only to the extent earned as of the date of
Termination in accordance with the Restricted Stock Purchase Agreement, unless
the Committee will determine otherwise.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of
Shares (which may consist of Restricted Stock) for services rendered to the
Company or any Parent or Subsidiary of the Company. A Stock Bonus may be awarded
for past services already rendered to the Company, or any Parent or Subsidiary
of the Company pursuant to an Award Agreement (the "Stock Bonus Agreement") that
will be in such form (which need not be the same for each Participant) as the
Committee will from time to time approve, and will comply with and be subject to
the terms and conditions of this Plan. A Stock Bonus may be awarded upon
satisfaction of such performance goals as are set out in advance in the
Participant's individual Award Agreement (the "Performance Stock Bonus
Agreement") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent or Subsidiary and/or
individual performance factors or upon such other criteria as the Committee may
determine.
7.2 Terms of Stock Bonuses. The Committee will determine the
number of Shares to be awarded to the Participant. If the Stock Bonus is being
earned upon the satisfaction of performance goals pursuant to a Performance
Stock Bonus Agreement, then the Committee will: (a) determine the nature, length
and starting date of any Performance Period for each Stock Bonus; (b) select
<PAGE>
from among the Performance Factors to be used to measure the performance, if
any; and (c) determine the number of Shares that may be awarded to the
Participant. Prior to the payment of any Stock Bonus, the Committee shall
determine the extent to which such Stock Bonuses have been earned. Performance
Periods may overlap and Participants may participate simultaneously with respect
to Stock Bonuses that are subject to different Performance Periods and different
performance goals and other criteria. The number of Shares may be fixed or may
vary in accordance with such performance goals and criteria as may be determined
by the Committee. The Committee may adjust the performance goals applicable to
the Stock Bonuses to take into account changes in law and accounting or tax
rules and to make such adjustments as the Committee deems necessary or
appropriate to reflect the impact of extraordinary or unusual items, events or
circumstances to avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may
be paid currently or on a deferred basis with such interest or dividend
equivalent, if any, as the Committee may determine. Payment may be made in the
form of cash or whole Shares or a combination thereof, either in a lump sum
payment or in installments, all as the Committee will determine.
8. PAYMENT FOR SHARE PURCHASES.
8.1 Payment. Payment for Shares purchased pursuant to this
Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid
for within the meaning of SEC Rule 144 (and, if such shares
were purchased from the Company by use of a promissory note,
such note has been fully paid with respect to such shares); or
(2) were obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such terms
as may be approved by the Committee and bearing interest at a
rate sufficient to avoid imputation of income under Sections
483 and 1274 of the Code; provided, however, that Participants
who are not employees or directors of the Company will not be
entitled to purchase Shares with a promissory note unless the
note is adequately secured by collateral other than the
Shares;
(d) by waiver of compensation due or accrued to the Participant
for services rendered;
(e) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from the
Participant and a broker-dealer that is a member of
the National Association of Securities Dealers (an
"NASD Dealer") whereby the Participant irrevocably
elects to exercise the Option and to sell a portion
of the Shares so purchased to pay for the Exercise
Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or
(2) through a "margin" commitment from the Participant
and a NASD Dealer whereby the Participant irrevocably
elects to exercise the Option and to pledge the
Shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer
in the amount of the Exercise Price, and whereby the
<PAGE>
NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the
Company; or
(f) by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the Participant
pay for Shares purchased under this Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant.
9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.
9.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee
10. PRIVILEGES OF STOCK OWNERSHIP.
10.1 Voting and Dividends. No Participant will have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a stockholder and have all the rights of a stockholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's Purchase Price or Exercise Price pursuant
to Section 12.
10.2 Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
11. TRANSFERABILITY. Awards granted under this Plan, and any
interest therein, will not be transferable or assignable by Participant, and may
not be made subject to execution, attachment or similar process, otherwise than
by will or by the laws of descent and distribution or as determined by the
Committee and set forth in the Award Agreement with respect to Awards that are
not ISOs. During the lifetime of the Participant an Award will be exercisable
only by the Participant, and any elections with respect to an Award may be made
only by the Participant unless otherwise determined by the Committee and set
forth in the Award Agreement with respect to Awards that are not ISOs.
<PAGE>
12. RESTRICTIONS ON SHARES. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Award Agreement
a right to repurchase a portion of or all Unvested Shares held by a Participant
following such Participant's Termination at any time within ninety (90) days
after the later of Participant's Termination Date and the date Participant
purchases Shares under this Plan, for cash and/or cancellation of purchase money
indebtedness, at the Participant's Exercise Price or Purchase Price, as the case
may be.
13. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time
or from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will
not be effective unless such Award is in compliance with all applicable federal
and state securities laws, rules and regulations of any governmental body, and
the requirements of any stock exchange or automated quotation system upon which
the Shares may then be listed or quoted, as they are in effect on the date of
grant of the Award and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to:
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and/or (b) completion of any registration
or other qualification of such Shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable. The Company will be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation
system, and the Company will have no liability for any inability or failure to
do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award
granted under this Plan will confer or be deemed to confer on any Participant
<PAGE>
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent or Subsidiary of the Company or limit in any way
the right of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
18.1 Assumption or Replacement of Awards by Successor. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale, or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction, any or all outstanding Awards may be assumed, converted or
replaced by the successor corporation (if any), which assumption, conversion or
replacement will be binding on all Participants. In the alternative, the
successor corporation may substitute equivalent Awards or provide substantially
similar consideration to Participants as was provided to stockholders (after
taking into account the existing provisions of the Awards). In the event such
successor or acquiring corporation (if any) does not assume, convert, replace or
substitute Awards, as provided above, pursuant to a transaction described in
this Section 18.1, then notwithstanding any other provision in this Plan to the
contrary, the vesting of such Awards will accelerate and the Options will become
exercisable in full prior to the consummation of such event at such times and on
such conditions as the Committee determines, and if such Options are not
exercised prior to the consummation of the corporate transaction, they shall
terminate in accordance with the provisions of this Plan. The successor
corporation may also issue, in place of outstanding Shares of the Company held
by the Participant, substantially similar shares or other property subject to
repurchase restrictions no less favorable to the Participant.
The Committee may, in its sole discretion, provide that the
vesting of any or all Awards granted pursuant to this Plan will accelerate even
if Options would otherwise be assumed, converted, replaced or substituted for.
If the Committee exercises such discretion with respect to Options, such Options
will become exercisable in full prior to the consummation of such event at such
time and on such conditions as the Committee determines, and if such Options are
not exercised prior to the consummation of the corporate transaction, they shall
terminate at such time as determined by the Committee.
18.2 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, or sale of assets.
18.3 Assumption of Awards by the Company. The Company, from
time to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either; (a) granting an Award under this Plan in substitution
of such other company's award; or (b) assuming such award as if it had been
granted under this Plan if the terms of such assumed award could be applied to
an Award granted under this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed award would have been
eligible to be granted an Award under this Plan if the other company had applied
the rules of this Plan to such grant. In the event the Company assumes an award
<PAGE>
granted by another company, the terms and conditions of such award will remain
unchanged (except that the exercise price and the number and nature of Shares
issuable upon exercise of any such option will be adjusted appropriately
pursuant to Section 424(a) of the Code). In the event the Company elects to
grant a new Option rather than assuming an existing option, such new Option may
be granted with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become
effective upon the expiration date of the Prior Plan (the "Effective Date").
This Plan shall be approved by the stockholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with applicable laws, within twelve
(12) months before or after the date this Plan is adopted by the Board. Upon the
Effective Date, the Committee may grant Awards pursuant to this Plan; provided,
however, that: (a) no Option may be exercised prior to initial stockholder
approval of this Plan; (b) no Option granted pursuant to an increase in the
number of Shares subject to this Plan approved by the Board will be exercised
prior to the time such increase has been approved by the stockholders of the
Company; and (c) in the event that stockholder approval of such increase is not
obtained within the time period provided herein, all Awards granted pursuant to
such increase will be canceled, any Shares issued pursuant to any Award granted
pursuant to such increase will be canceled, and any purchase of Shares pursuant
to such increase will be rescinded.
20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as
provided herein, this Plan will terminate ten (10) years from the date this Plan
is adopted by the Board or, if earlier, the date of stockholder approval. This
Plan and all agreements thereunder shall be governed by and construed in
accordance with the laws of the State of California.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; provided, however, that the Board will not, without the approval
of the stockholders of the Company, amend this Plan in any manner that requires
such stockholder approval.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan
by the Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. DEFINITIONS. As used in this Plan, the following terms will
have the following meanings:
"Award" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.
"Award Agreement" means, with respect to each Award, the
signed written agreement between the Company and the Participant setting forth
the terms and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Cause" means the commission of an act of theft, embezzlement,
fraud, dishonesty or a breach of fiduciary duty to the Company or a Parent or
Subsidiary of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board.
"Company" means Integrated Systems, Inc. or any successor
corporation.
<PAGE>
"Disability" means a disability, whether temporary or
permanent, partial or total, as determined by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Price" means the price at which a holder of an
Option may purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a
share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the
date of determination as reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then listed on
a national securities exchange, its closing price on the date
of determination on the principal national securities exchange
on which the Common Stock is listed or admitted to trading as
reported in The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not quoted on
the Nasdaq National Market nor listed or admitted to trading
on a national securities exchange, the average of the closing
bid and asked prices on the date of determination as
reported in The Wall Street Journal;
(d) in the case of an Award made on the Effective Date, the price
per share at which shares of the Company's Common Stock are
initially offered for sale to the public by the Company's
underwriters in the initial public offering of the Company's
Common Stock pursuant to a registration statement filed with
the SEC under the Securities Act; or
(d) if none of the foregoing is applicable, by the Committee in
good faith.
"Insider" means an officer or director of the Company or any
other person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act.
"Option" means an award of an option to purchase Shares
pursuant to Section 5.
"Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"Participant" means a person who receives an Award under this
Plan.
"Performance Factors" means the factors selected by the
Committee from among the following measures to determine whether the performance
goals established by the Committee and applicable to Awards have been satisfied:
(a) Net revenue and/or net revenue growth;
(b) Earnings before income taxes and amortization and/or
earnings before income taxes and amortization growth;
(c) Operating income and/or operating income growth;
(d) Net income and/or net income growth;
<PAGE>
(e) Earnings per share and/or earnings per share growth;
(f) Total shareholder return and/or total shareholder return
growth;
(g) Return on equity;
(h) Operating cash flow return on income;
(i) Adjusted operating cash flow return on income;
(j) Economic value added; and
(k) Individual confidential business objectives.
"Performance Period" means the period of service determined by
the Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Awards or Stock Bonuses.
"Plan" means this Integrated Systems, Inc. 1998 Equity
Incentive Plan, as amended from time to time.
"Restricted Stock Award" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved
for issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.
"Stock Bonus" means an award of Shares, or cash in lieu of
Shares, pursuant to Section 7.
"Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
"Termination" or "Terminated" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the Company.
An employee will not be deemed to have ceased to provide services in the case of
(i) sick leave, (ii) military leave, or (iii) any other leave of absence
approved by the Committee, provided, that such leave is for a period of not more
than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Option agreement.
The Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "Termination Date").
"Unvested Shares" means "Unvested Shares" as defined in the
Award Agreement.
"Vested Shares" means "Vested Shares" as defined in the Award
Agreement.
<PAGE>
WIND RIVER SYSTEMS, INC.
1998 EQUITY INCENTIVE PLAN
ADOPTED APRIL 23, 1998
APPROVED BY STOCKHOLDERS JUNE 25, 1998
ADJUSTED FOR STOCK SPLIT FEBRUARY 4, 1999
AMENDED FEBRUARY, 1999
AMENDED OCTOBER, 1999
APPROVED BY STOCKHOLDERS FEBRUARY 16, 2000
TERMINATION DATE: APRIL 22, 2008
1. PURPOSES.
(a) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to
receive Stock Awards are the Employees, Directors and Consultants of the Company
and its Affiliates.
(b) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide
a means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock appreciation rights, (iv) stock bonuses and (v) rights to
acquire restricted stock.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to
retain the services of the group of persons eligible to receive Stock Awards, to
secure and retain the services of new members of this group and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c).
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means Wind River Systems, Inc., a Delaware
corporation.
<PAGE>
(g) "CONSULTANT" means any person, including an advisor, (1)
engaged by the Company or an Affiliate to render consulting or advisory services
and who is compensated for such services or (2) who is a member of the Board of
Directors of an Affiliate. However, the term "Consultant" shall not include
either Directors of the Company who are not compensated by the Company for their
services as Directors or Directors of the Company who are merely paid a
director's fee by the Company for their services as Directors.
(h) "CONTINUOUS SERVICE" means that the Participant's service with
the Company or an Affiliate, whether as an Employee, Director or Consultant, is
not interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.
(i) "COVERED EMPLOYEE" means the chief executive officer and the
four (4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board of Directors of the
Company.
(k) "DISABILITY" means the permanent and total disability of a
person within the meaning of Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap
Market, the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in the Common Stock) on the last market trading day prior to
the day of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable.
<PAGE>
(ii) In the absence of such markets for the Common Stock,
the Fair Market Value shall be determined in good faith by the Board.
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(p) "NON-EMPLOYEE DIRECTOR" means a Director of the Company who
either (i) is not a current Employee or Officer of the Company or its parent or
a subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K of the
Securities and Exchange Commission ("Regulation S-K")), does not possess an
interest in any other transaction as to which disclosure would be required under
Item 404(a) of Regulation S-K and is not engaged in a business relationship as
to which disclosure would be required under Item 404(b) of Regulation S-K; or
(ii) is otherwise considered a "non-employee director" for purposes of Rule
16b-3.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(r) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "OPTION" means an Incentive Stock Option or a Nonstatutory
Stock Option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.
(u) "OPTIONEE" means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.
(v) "OUTSIDE DIRECTOR" means a Director of the Company who either
(i) is not a current employee of the Company or an "affiliated corporation"
(within the meaning of Treasury Regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an "affiliated
corporation" receiving compensation for prior services (other than benefits
under a tax qualified pension plan), was not an officer of the Company or an
"affiliated corporation" at any time and is not currently receiving direct or
indirect remuneration from the Company or an "affiliated corporation" for
services in any capacity other than as a Director or (ii) is otherwise
considered an "outside director" for purposes of Section 162(m) of the Code.
(w) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
<PAGE>
(x) "PLAN" means this Wind River Systems, Inc. 1998 Equity
Incentive Plan.
(y) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange
Act or any successor to Rule 16b-3, as in effect from time to time.
(z) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(aa) "STOCK AWARD" means any right granted under the Plan,
including an Option, a stock appreciation right, a stock bonus and a right to
acquire restricted stock.
(bb) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(cc) "TEN PERCENT STOCKHOLDER" means a person who owns (or is
deemed to own pursuant to Section 424(d) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board will administer the Plan
unless and until the Board delegates administration to a Committee, as provided
in subsection 3(c).
(b) POWERS OF BOARD. The board shall have the power, subject to,
and within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; what type or combination of types of Stock Award shall
be granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; and the number of shares with respect
to which a Stock Award shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in
Section 12.
(iv) Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient to promote the best
interests of the Company which are not in conflict with the provisions of the
Plan.
<PAGE>
(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the Plan to
a Committee or Committees of one or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(ii) COMMITTEE COMPOSITION. As long as the Common Stock is publicly
traded, in the discretion of the Board, a Committee may consist solely of two or
more Outside Directors, in accordance with Section 162(m) of the Code, and/or
solely of two or more Non-Employee Directors, in accordance with Rule 16b-3.
Within the scope of such authority, the Board or the Committee may (i) delegate
to a committee of one or more members of the Board who are not Outside
Directors, the authority to grant Stock Awards to eligible persons who are
either (a) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Stock Award
or (b) not persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code and/or (ii) delegate to a committee of one or more
members of the Board who are not Non-Employee Directors the authority to grant
Stock Awards to eligible persons who are not then subject to Section 16 of the
Exchange Act.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, the stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate one million five
hundred thousand (1,500,000) shares of Common Stock (the "Initial Reserve").
Effective on the date of stockholder approval, an additional two million six
hundred thousand (2,600,000) shares of Common Stock shall be added to the Plan's
share reserve (the "Supplemental Reserve"). Stock Awards from the Supplemental
Reserve shall be subject to the following conditions:
(i) The provisions of Section 4(b) shall apply separately to the
Initial Reserve and the Supplemental Reserve.
(ii) Stock Awards from the Supplemental Reserve shall be subject to
the provisions of Section 11 relating to adjustments upon changes in stock.
(iii) Options are the only form of Stock Award that may be granted
with respect to shares of Common Stock in the Supplemental Reserve.
<PAGE>
(iv) Section 6(c) shall apply to Options granted from the
Supplemental Reserve by replacing "eighty-five percent (85%)" with "one hundred
percent (100%)."
(v) Notwithstanding any other provision of the Plan to the
contrary, the Board shall not reduce the exercise price of ("reprice") any
outstanding Options granted from the Supplemental Reserve without stockholder
approval; PROVIDED, HOWEVER, that such restriction shall not apply to
adjustments pursuant to Section 11.
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award
shall for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full (or vested in the case of Restricted Stock), the
stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan. Shares subject to stock appreciation
rights exercised in accordance with the Plan shall not be available for
subsequent issuance under the Plan. If any Common Stock acquired pursuant to the
exercise of an Option shall for any reason be repurchased by the Company under
an unvested share repurchase option provided under the Plan, the stock
repurchased by the Company under such repurchase option shall not revert to and
again become available for issuance under the Plan.
(c) SOURCE OF SHARES. The stock subject to the Plan may be
unissued shares or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options
may be granted only to Employees. Stock Awards other than Incentive Stock
Options may be granted to Employees, Directors and Consultants.
(b) TEN PERCENT STOCKHOLDERS. No Ten Percent Stockholder shall be
eligible for the grant of an Incentive Stock Option unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair Market Value
of the Common Stock at the date of grant and the Option is not exercisable after
the expiration of five (5) years from the date of grant.
(c) SECTION 162(m) LIMITATION. Subject to the provisions of
Section 11 relating to adjustments upon changes in stock, no employee shall be
eligible to be granted Options covering more than seven hundred fifty thousand
(750,000) shares of the Common Stock during any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option. The provisions of separate Options
need not be identical, but each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each
of the following provisions:
<PAGE>
(a) TERM. Subject to the provisions of subsection 5(b) regarding
Ten Percent Stockholders, no Incentive Stock Option shall be exercisable after
the expiration of ten (10) years from the date it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option
may be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. The exercise
price of each Nonstatutory Stock Option shall be not less than eighty-five
percent (85%) of the Fair Market Value of the stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(d) CONSIDERATION. The purchase price of stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) by delivery to the
Company of other Common Stock, according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Participant or in any other
form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive
Stock Option shall not be transferable except by will or by the laws of descent
and distribution and shall be exercisable during the lifetime of the Optionee
only by the Optionee. Notwithstanding the foregoing provisions of this
subsection 6(e), the Optionee may, by delivering written notice to the Company,
in a form satisfactory to the Company, designate a third party who, in the event
of the death of the Optionee, shall thereafter be entitled to exercise the
Option.
(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory
Stock Option shall be transferable to the extent provided in the Option
Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be
<PAGE>
transferable except by will or by the laws of descent and distribution and shall
be exercisable during the lifetime of the Optionee only by the Optionee.
Notwithstanding the foregoing provisions of this subsection 6(f), the Optionee
may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionee,
shall thereafter be entitled to exercise the Option.
(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
(h) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionee's
Continuous Service terminates (other than upon the Optionee's death or
Disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionee's Continuous Service (or such
longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate.
(i) EXTENSION OF TERMINATION DATE. An Optionee's Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionee's Continuous Service (other than upon the Optionee's death or
Disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in subsection 6(a) or (ii) the expiration of a period of
three (3) months after the termination of the Optionee's Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements.
(j) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Service terminates as a result of the Optionee's Disability, the Optionee may
exercise his or her Option (to the extent that the Optionee was entitled to
exercise it as of the date of termination), but only within such period of time
ending on the earlier of (i) the date twelve (12) months following such
termination (or such longer or shorter period specified in the Option Agreement)
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate.
(k) DEATH OF OPTIONEE. In the event (i) an Optionee's Continuous
Service terminates as a result of the Optionee's death or (ii) the Optionee dies
within the period (if any) specified in the Option Agreement after the
termination of the Optionee's Continuous Service for a reason other than death,
then the Option may be exercised (to the extent the Optionee was entitled to
exercise the Option as of the date of death) by the Optionee's estate, by a
person who acquired
<PAGE>
the right to exercise the Option by bequest or inheritance or by a person
designated to exercise the option upon the Optionee's death pursuant to
subsection 6(e) or 6(f), but only within the period ending on the earlier of (1)
the date eighteen (18) months following the date of death (or such longer or
shorter period specified in the Option Agreement) or (2) the expiration of the
term of such Option as set forth in the Option Agreement. If, after death, the
Option is not exercised within the time specified herein, the Option shall
terminate.
(l) EARLY EXERCISE. The Option may, but need not, include a
provision whereby the Optionee may elect at any time before the Optionee's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option. Any
unvested shares so purchased may be subject to an unvested share repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in
such form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may change from
time to time, and the terms and conditions of separate stock bonus agreements
need not be identical, but each stock bonus agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:
(i) CONSIDERATION. A stock bonus shall be awarded in
consideration for past services actually rendered to the Company or for its
benefit.
(ii) VESTING. Shares of Common Stock awarded under the
stock bonus agreement may, but need not, be subject to a share repurchase option
in favor of the Company in accordance with a vesting schedule to be determined
by the Board.
(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In
the event a Participant's Continuous Service terminates, the Company may
reacquire any or all of the shares of Common Stock held by the Participant which
have not vested as of the date of termination under the terms of the stock bonus
agreement.
(iv) TRANSFERABILITY. Rights to acquire shares under the
stock bonus agreement shall be transferable by the Participant only upon such
terms and conditions as are set forth in the stock bonus agreement, as the Board
shall determine in its discretion, so long as stock awarded under the stock
bonus agreement remains subject to the terms of the stock bonus agreement.
(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase
agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. The terms and conditions of the restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall include (through
incorporation of
<PAGE>
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) PURCHASE PRICE. The purchase price under each
restricted stock purchase agreement shall be such amount as the Board shall
determine and designate in such restricted stock purchase agreement. The
purchase price shall not be less than eighty-five percent (85%) of the stock's
Fair Market Value on the date such award is made or at the time the purchase is
consummated.
(ii) CONSIDERATION. The purchase price of stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other arrangement with the Participant; or (iii) in any
other form of legal consideration that may be acceptable to the Board in its
discretion; provided, however, that at any time that the Company is incorporated
in Delaware, payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.
(iii) VESTING. Shares of Common Stock acquired under the
restricted stock purchase agreement may, but need not, be subject to a share
repurchase option in favor of the Company in accordance with a vesting schedule
to be determined by the Board.
(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In
the event a Participant's Continuous Service terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of Common Stock held
by the Participant which have not vested as of the date of termination under the
terms of the restricted stock purchase agreement.
(v) TRANSFERABILITY. Rights to acquire shares under the
restricted stock purchase agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the restricted stock
purchase agreement, as the Board shall determine in its discretion, so long as
stock awarded under the restricted stock purchase agreement remains subject to
the terms of the restricted stock purchase agreement.
(C) STOCK APPRECIATION RIGHTS.
(i) AUTHORIZED RIGHTS. The following three types of stock
appreciation rights shall be authorized for issuance under the Plan:
(1) TANDEM RIGHTS. A "Tandem Right" means a stock
appreciation right granted appurtenant to an Option which is subject to the same
terms and conditions applicable to the particular Option grant to which it
pertains with the following exceptions: The Tandem Right shall require the
holder to elect between the exercise of the underlying Option for shares of
Common Stock and the surrender, in whole or in part, of such Option for an
appreciation distribution. The appreciation distribution payable on the
exercised the Tandem Right shall be in cash (or, if so provided, in an
equivalent number of shares of Common Stock based on Fair Market Value on the
date of the Option surrender) in an amount up to the excess of (A) the Fair
Market Value (on the date of the Option surrender) of the number of shares of
Common Stock
<PAGE>
covered by that portion of the surrendered Option in which the Optionee is
vested over (B) the aggregate exercise price payable for such vested shares.
(2) CONCURRENT RIGHTS. A "Concurrent Right" means a stock
appreciation right granted appurtenant to an Option which applies to all or a
portion of the shares of Common Stock subject to the underlying Option and which
is subject to the same terms and conditions applicable to the particular Option
grant to which it pertains with the following exceptions: A Concurrent Right
shall be exercised automatically at the same time the underlying Option is
exercised with respect to the particular shares of Common Stock to which the
Concurrent Right pertains. The appreciation distribution payable on an exercised
Concurrent Right shall be in cash (or, if so provided, in an equivalent number
of shares of Common Stock based on Fair Market Value on the date of the exercise
of the Concurrent Right) in an amount equal to such portion as determined by the
Board at the time of the grant of the excess of (A) the aggregate Fair Market
Value (on the date of the exercise of the Concurrent Right) of the vested shares
of Common Stock purchased -under the underlying Option which have Concurrent
Rights appurtenant to them over (B) the aggregate exercise price paid for such
shares.
(3) INDEPENDENT RIGHTS. An "Independent Right" means a
stock appreciation right granted independently of any Option but which is
subject to the same terms and conditions applicable to a Nonstatutory Stock
Option with the following exceptions: An Independent Right shall be denominated
in share equivalents. The appreciation distribution payable on the exercised
Independent Right shall be not greater than an amount equal to the excess of (a)
the aggregate Fair Market Value (on the date of the exercise of the Independent
Right) of a number of shares of Company stock equal to the number of share
equivalents in which the holder is vested under such Independent Right, and with
respect to which the holder is exercising the Independent Right on such date,
over (b) the aggregate Fair Market Value (on the date of the grant of the
Independent Right) of such number of shares of Company stock. The appreciation
distribution payable on the exercised Independent Right shall be in cash or, if
so provided, in an equivalent number of shares of Common Stock based on Fair
Market Value on the date of the exercise of the Independent Right.
(ii) RELATIONSHIP TO OPTIONS. Stock appreciation rights appurtenant
to Incentive Stock Options may be granted only to Employees. The "Section 162(m)
Limitation" provided in subsection 5(c) and any authority to reprice Options
shall apply as well to the grant of stock appreciation rights.
(iii) EXERCISE. To exercise any outstanding stock appreciation
right, the holder shall provide written notice of exercise to the Company in
compliance with the provisions of the Stock Award Agreement evidencing such
right. Except as provided in subsection 5(c) regarding the "Section 162(m)
Limitation," no limitation shall exist on the aggregate amount of cash payments
that the Company may make under the Plan in connection with the exercise of a
stock appreciation right.
<PAGE>
8. COVENANTS OF THE COMPANY.
p
(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards,
the Company shall keep available at all times the number of shares of Common
Stock required to satisfy such Stock Awards.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain
from each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any stock issued or issuable pursuant to any such
Stock Award. If, after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Stock Awards unless and until such authority is
obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall
have the power to accelerate the time at which a Stock Award may first be
exercised or the time during which a Stock Award or any part thereof will vest
in accordance with the Plan, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.
(b) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or
any instrument executed or Stock Award granted pursuant thereto shall confer
upon any Participant or other holder of Stock Awards any right to continue to
serve the Company or an Affiliate in the capacity in effect at the time the
Stock Award was granted or shall affect the right of the Company or an Affiliate
to terminate (i) the employment of an Employee with or without notice and with
or without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.
<PAGE>
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that
the aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionee during any calendar year (under all plans of the Company and its
Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant,
as a condition of exercising or acquiring stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring the stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the stock. The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (iii) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act or
(iv) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms
of a Stock Award Agreement, the Participant may satisfy any federal, state or
local tax withholding obligation relating to the exercise or acquisition of
stock under a Stock Award by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares from the shares of the Common Stock
otherwise issuable to the participant as a result of the exercise or acquisition
of stock under the Stock Award; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or
subject to any Stock Award, without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan pursuant to
subsection 4(a) and the maximum number of securities
<PAGE>
subject to award to any person pursuant to subsection 5(c), and the outstanding
Stock Awards will be appropriately adjusted in the class(es) and number of
securities and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board, the determination of which
shall be final, binding and conclusive. (The conversion of convertible
securities, cashless exercise of options and net exercise of warrants shall not
be treated as transactions "without receipt of consideration" by the Company.)
(b) In the event of a dissolution or liquidation of the Company,
then all Stock Awards outstanding under the Plan shall be terminated if not
exercised (if applicable) prior to such event.
(c) Subject to subsection (d) of this Section 11, in the event of
(1) a sale of substantially all of the assets of the Company, (2) a merger or
consolidation in which the Company is not the surviving corporation or (3) a
reverse merger in which the Company is the surviving corporation but the shares
of Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then any surviving corporation or acquiring corporation shall
assume any Stock Awards outstanding under the Plan or shall substitute similar
stock awards (including an award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 11(c)) for those
outstanding under the Plan. In the event any surviving corporation or acquiring
corporation refuses to assume such Stock Awards or to substitute similar stock
awards for those outstanding under the Plan, then with respect to Stock Awards
held by Participants whose Continuous Service has not terminated, the vesting of
such Stock Awards (and, if applicable, the time during which such Stock Awards
may be exercised) shall be accelerated in full, and the Stock Awards shall
terminate if not exercised (if applicable) at or prior to such event. With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to such event.
(d) In the event of either (i) the acquisition by any person,
entity or group within the meaning of Section 13(d) or 14(d) of the Exchange Act
or any comparable successor provisions (excluding any employee benefit plan, or
related trust, sponsored or maintained by the Company or an Affiliate of the
Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of directors, which acquisition has not
been approved by resolution of the Company's Board of Directors, or (ii) a
change in a majority of the membership of the Company's Board of Directors
within a twenty-four (24) month period where the selection of such majority
either (A) was not approved by a majority of the members of the Board of
Directors at the beginning of such twenty-four (24) month period or (B) occurred
as the result of an actual or threatened "Election Contest" (as described in
Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of any person other than the
Board (a "Proxy Contest"), including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest, then to the extent not
prohibited by applicable law, the time during which Stock Awards outstanding
under the Plan may be exercised shall be accelerated prior to such event, but
only to the extent that such Stock Awards would have become exercisable within
thirty (30) months of the date of such event, and
<PAGE>
the Stock Awards terminated if not exercised after such acceleration and at or
prior to such event.
12. TIME OF GRANTING OPTIONS.
The date of grant of an Option shall, for all purposes, be the date on
which the Board makes the determination granting such Option. Notice of the
determination shall be given to each Employee or Consultant to whom an Option is
so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem advisable.
(b) EFFECT OF AMENDMENT OR TERMINATION. Options granted before
amendment of the Plan shall not be impaired any amendment unless mutually agreed
otherwise between the Optionee and the Company, which agreement must be in
writing and signed by the Optionee and the Company.
14. SECURITIES LAW COMPLIANCE.
Notwithstanding any provisions relating to vesting contained herein or
in an Option, no Option granted hereunder may be exercised unless the shares
issuable upon exercise of such option are then registered under the Securities
Act of 1933, as amended.
15. RESERVATION OF SHARES.
The Company, during the term of this Plan, will at all times reserve
and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
16. OPTION AGREEMENT.
Options shall be evidenced by written Option Agreements in such form or
forms as the Board or the Committee shall approve.
17. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to
time, may amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to
<PAGE>
the extent stockholder approval is necessary to satisfy the requirements of
Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing
requirements.
(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion,
submit any other amendment to the Plan for stockholder approval, including, but
not limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or advisable
to provide eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted
before amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the Participant and (ii) the
Participant consents in writing.
(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from
time to time, may amend the terms of any one or more Stock Awards; provided,
however, that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
18. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate on the day before the
tenth (10th) anniversary of the date the Plan is adopted by the Board or
approved by the stockholders of the Company, whichever is earlier. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) NO IMPAIRMENT OF RIGHTS. Rights and obligations under any
Stock Award granted while the Plan is in effect shall not be impaired by
suspension or termination of the Plan, except with the written consent of the
Participant.
19. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Stock Award shall be exercised (or, in the case of a stock bonus, shall be
granted) unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.
