CATALYTICA INC
S-8, 1998-06-26
COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH
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<PAGE>
 
As filed with the Securities and Exchange Commission on June 26, 1998
                                                    Registration No. 333-
================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                                ---------------

                                   FORM S-8
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                               --------------- 

                               CATALYTICA, INC.
            (Exact name of Registrant as specified in its charter)
 
 
        DELAWARE                                       94-2262240
        --------                                       ---------- 
(State of incorporation)                   (I.R.S. Employer Identification No.)
 
                              430 FERGUSON DRIVE
                        MOUNTAIN VIEW, CALIFORNIA 94043
             (Address of principal executive offices and Zip code)
 
                               --------------- 

                      1992 STOCK OPTION PLAN, AS AMENDED
                 1992 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
                           (Full title of the plan)
 
                                ---------------
 
                              LAWRENCE W. BRISCOE
                            CHIEF FINANCIAL OFFICER
                               CATALYTICA, INC.
                              430 FERGUSON DRIVE
                        MOUNTAIN VIEW, CALIFORNIA 94043
                                (650) 960-3000
(Name, address, and telephone number, including area code, of agent for service)

                               --------------- 
 
                                  Copies to:
                             BARRY E. TAYLOR, ESQ.
                       WILSON SONSINI GOODRICH & ROSATI
                           PROFESSIONAL CORPORATION
                              650 PAGE MILL ROAD
                           PALO ALTO, CA 94304-1050
                                (650) 493-9300

<TABLE>
<CAPTION>
 =============================================================================================================
                                         CALCULATION OF REGISTRATION FEE
 =============================================================================================================
 
                                                                PROPOSED           PROPOSED                    
                                                                 MAXIMUM            MAXIMUM        AMOUNT OF   
TITLE OF SECURITIES                         AMOUNT TO BE     OFFERING PRICE        AGGREGATE      REGISTRATION 
TO BE REGISTERED                             REGISTERED         PER SHARE       OFFERING PRICE        FEE      
- --------------------------------------------------------------------------------------------------------------- 
<S>                                       <C>               <C>                <C>                <C> 
Common Stock, $0.001 par value

   - 1992 Stock Option Plan               2,000,000 shares         $17.00(1)     $34,000,000(1)       $10,030

   - 1992 Employee Stock Purchase Plan    1,500,000 shares         $14.45(2)     $21,675,000(2)       $ 6,395

      TOTAL                               3,500,000 SHARES                       $55,675,000          $16,425
==============================================================================================================
</TABLE>
(1) Estimated in accordance with Rules 457(h) and 457(c) under the Securities
    Act solely for the purpose of calculating the registration fee. The
    estimated exercise price of $17.00 per share as to the 2,000,000
    unregistered shares subject to future issuance under the 1992 Stock Option
    plan is based on the closing price of a share of Catalytica, Inc.'s Common
    Stock as reported in the Nasdaq National Market on June 23, 1998 (the
    "MARKET PRICE").
(2) The exercise price of $14.45 per share represents the estimated exercise
    price of the 1,500,000 unregistered shares subject to future issuance under
    the 1992 Employee Stock Purchase Plan, which is 85% of the Market Price.
    Pursuant to Section 2(m) of the 1992 Employee Stock Purchase Plan (Exhibit
    4.6), shares are sold at 85% of the lesser of the fair market value of such
    shares on the Enrollment Date or on the Exercise Date.
<PAGE>
 
                                CATALYTICA, INC.
                       REGISTRATION STATEMENT ON FORM S-8

                                    PART II

                 INFORMATION REQUIRED IN REGISTRATION STATEMENT

Item 3.   Incorporation of Documents by Reference
          ---------------------------------------

     The following documents and information previously filed with the
Securities and Exchange Commission (the "COMMISSION") by Catalytica, Inc. (the
"COMPANY") are hereby incorporated by reference in this Registration Statement:

     (a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 filed pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT").

     (b) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998 filed pursuant to Section 13(a) or 15(d) of the Exchange Act.

     (c) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed pursuant to Section 12(g) of
the Exchange Act, which became effective on February 8, 1993 and was
subsequently amended on November 19, 1996 and on July 29, 1997.

     All 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 that indicates that all securities registered have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference in this Registration Statement and to be part hereof
from the date of filing of such documents.

Item 4.   Description of Securities.
          ------------------------- 

          Not applicable.

Item 5.   Interests of Named Experts and Counsel.
          -------------------------------------- 

          Not applicable.

Item 6.   Indemnification of Directors and Officers.
          ----------------------------------------- 

          Section 145 of the Delaware General Corporation Law authorizes a court
to award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933
(the "SECURITIES ACT"), as amended. The Company has included in its Certificate
of Incorporation a provision that to the fullest extent permitted by Delaware
law, the Company's directors will not be liable for monetary damages for breach
of the directors' fiduciary duty of care to the Company and its stockholders. In
addition, the Company's Bylaws provide that the Company is required to indemnify
its officers and directors to the fullest extent permitted by Delaware law,
including those circumstances in which indemnification would otherwise be
discretionary, and that the Company is required to advance expenses to its
officers and directors as incurred. Further, the Company intends to enter into
indemnification agreements with its officers and directors, providing such
individuals indemnification to the maximum extent permitted by the Delaware
General Corporation Law.

                                      II-1
<PAGE>
 
     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the Delaware General Corporation Law, the foregoing Bylaw provision
or any Indemnification Agreement, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.

Item 7.  Exemption from Registration Claimed.
         ----------------------------------- 

     Not applicable.

Item 8.  Exhibits.
         -------- 

        Exhibit                              
        Number                          Description
        --------        --------------------------------------------------------
        4.1(A)+         Agreement of Shareholders Amending Registration Rights
                        and Right of First Refusal.
        4.1(B)+         Amended and Restated Registration Rights Agreement dated
                        September 27, 1988.
        4.1(C)+         Amendment No. 1 to Amended and Restated Registration
                        Rights Agreement.
        4.1(D)+         Form of Amended and Restated Rights Agreement.
        4.2+            Specimen of Common Stock Certificate.
        4.3++           Preferred Shares Rights Agreement dated as of October
                        23, 1996, between Catalytica, Inc. and ChaseMellon
                        Shareholder Services, L.L.P., including the form of
                        Rights Certificate and the Certificate of Designation,
                        the Summary of Rights Attached thereto as Exhibits A, B
                        and C, respectively.
        4.3(B)+++       Amendment No. 1, dated as of June 28, 1997, to Preferred
                        Shares Rights Agreement between Catalytica, Inc. and
                        ChaseMellon Shareholder Services, L.L.C.
        4.4++++         Stock Purchase Warrant for 2,000,000 Shares of the
                        Company's Common Stock dated July 31, 1997.
        4.5             1992 Stock Option Plan, as amended.
        4.6             1992 Employee Stock Purchase Plan, as amended.
        5.1             Opinion of Wilson Sonsini Goodrich & Rosati, P.C. as to
                        legality of securities being registered.
       23.1             Consent of Wilson Sonsini Goodrich & Rosati, P.C.
                        (contained in Exhibit 5.1).
       23.2             Consent of Ernst & Young LLP, Independent Auditors.
       24.1             Power of Attorney (see page II-4).
- ----------------
+       Incorporated by reference to the exhibits filed with the Company's
        Registration Statement on Form S-1 (Registration Statement No. 33-
        55696).
 
++      Incorporated by reference to the exhibits filed with the Company's
        Registration Statement on Form 8-A as filed with the Commission on
        November 29, 1996. 

+++     Incorporated by reference to the exhibits filed with the Company's
        Registration Statement on Form 8-A/A as filed with the Commission on
        July 29, 1997. 

++++    Incorporated by reference to the exhibits filed with the Company's Form
        10-Q for the quarter ended June 30, 1997.

                                      II-2
<PAGE>
 
+++++   Incorporated by reference to the exhibits filed with the Company's
        Form 10-K for the year ended December 31, 1996.

Item 9.  Undertakings.
         ------------ 

     (a) The undersigned Registrant hereby undertakes:

          (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement 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.

          (2) That, for the purpose of determining liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

          (3) To remove from registration by means of a post-effective amendment
any of the securities being registered, which remain unsold at the termination
of the offering.

     (b) 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 therein, and the
offering of such securities at that time shall be deemed to be an initial bona
fide offering thereof.

     (c) 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.

                                      II-3
<PAGE>
 
                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Mountain View, State of California, on this 26th day
of June, 1998.

                                    CATALYTICA, INC.


                                    By:    /s/ LAWRENCE A. BRISCOE
                                         ---------------------------------
                                           Lawrence W. Briscoe
                                           Chief Financial Officer
 

                               POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, Lawrence W. Briscoe and Ricardo B. Levy,
and each of them acting individually, his or her attorney-in-fact, each with
full power of substitution, for him in any and all capacities, to sign any and
all amendments to this Registration Statement on Form S-8, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant in the capacities and on the date indicated.

<TABLE>
<CAPTION>
        Signature                          Title                              Date
        ---------                          -----                              ----    
<S>                        <C>                                           <C>
  /s/ RICARDO B. LEVY      President, Chief Executive Officer            June 26, 1998
- -------------------------  (Principal Executive Officer), and Director
RICARDO B. LEVY
 

 /s/ JAMES A. CUSUMANO     Chairman of the Board and Chief               June 26, 1998
- -------------------------  Technical Officer
JAMES A. CUSUMANO
 

/s/ LAWRENCE W. BRISCOE    Vice President, Finance and                   June 26, 1998
- -------------------------  Administration, and Chief Financial            
LAWRENCE W. BRISCOE        Officer (Principal Accounting and                       
                           Financial Officer)           
 

 /s/ UTZ FELCHT            Director                                       June 26, 1998
- -------------------------
UTZ FELCHT
 

/s/ RICHARD FLEMING        Director                                       June 26, 1998
- -------------------------
RICHARD FLEMING
</TABLE> 

                                      II-4
<PAGE>
 
<TABLE> 
<CAPTION> 

        Signature                          Title                              Date
        ---------                          -----                              ----    
<S>                        <C>                                           <C>
/s/ ALAN GOLDBERG           Director                                      June 26, 1998   
- -------------------------
ALAN GOLDBERG
 
/s/ HOWARD HOFFEN           Director                                      June 26, 1998
- -------------------------
HOWARD HOFFEN

 /s/ ERNEST MARIO           Director                                      June 26, 1998
- -------------------------
ERNEST MARIO                                 
 
 /s/ JOHN A. URQUHART       Director                                      June 26, 1998
- -------------------------
JOHN A. URQUHART
</TABLE> 

                                      II-5
<PAGE>
 
                               INDEX TO EXHIBITS

        Exhibit                              
        Number                          Description
        --------        --------------------------------------------------------
        4.1(A)+         Agreement of Shareholders Amending Registration Rights
                        and Right of First Refusal.
        4.1(B)+         Amended and Restated Registration Rights Agreement dated
                        September 27, 1988.
        4.1(C)+         Amendment No. 1 to Amended and Restated Registration
                        Rights Agreement.
        4.1(D)+         Form of Amended and Restated Rights Agreement.
        4.2+            Specimen of Common Stock Certificate.
        4.3++           Preferred Shares Rights Agreement dated as of October
                        23, 1996, between Catalytica, Inc. and ChaseMellon
                        Shareholder Services, L.L.P., including the form of
                        Rights Certificate and the Certificate of Designation,
                        the Summary of Rights Attached thereto as Exhibits A, B
                        and C, respectively.
        4.3(B)+++       Amendment No. 1, dated as of June 28, 1997, to Preferred
                        Shares Rights Agreement between Catalytica, Inc. and
                        ChaseMellon Shareholder Services, L.L.C.
        4.4++++         Stock Purchase Warrant for 2,000,000 Shares of the
                        Company's Common Stock dated July 31, 1997.
        4.5             1992 Stock Option Plan, as amended.
        4.6             1992 Employee Stock Purchase Plan, as amended.
        5.1             Opinion of Wilson Sonsini Goodrich & Rosati, P.C. as to
                        legality of securities being registered.
       23.1             Consent of Wilson Sonsini Goodrich & Rosati, P.C.
                        (contained in Exhibit 5.1).
       23.2             Consent of Ernst & Young LLP, Independent Auditors.
       24.1             Power of Attorney (see page II-4).
- ----------------
+       Incorporated by reference to the exhibits filed with the Company's
        Registration Statement on Form S-1 (Registration Statement No. 33-
        55696).
 
++      Incorporated by reference to the exhibits filed with the Company's
        Registration Statement on Form 8-A as filed with the Commission on
        November 29, 1996. 

+++     Incorporated by reference to the exhibits filed with the Company's
        Registration Statement on Form 8-A/A as filed with the Commission on
        July 29, 1997. 

++++    Incorporated by reference to the exhibits filed with the Company's Form
        10-Q for the quarter ended June 30, 1997.

+++++   Incorporated by reference to the exhibits filed with the Company's
        Form 10-K for the year ended December 31, 1996.

<PAGE>
 
                                                                     EXHIBIT 4.5



                              CATALYTICA, INC.

                           1992 STOCK OPTION PLAN

                       (AS AMENDED THROUGH APRIL 1998)



<PAGE>
 
                               CATALYTICA, INC.

                            1992 STOCK OPTION PLAN
                       (AS AMENDED THROUGH APRIL 1998)


     1.   Purposes of the Plan.  The purposes of this Stock Option Plan are:
          --------------------                                              

     .    to attract and retain the best available personnel for positions of
          substantial responsibility,

     .    to provide additional incentive to Employees and Consultants, and

     .    to promote the success of the Company's business.

Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant.  Stock
Purchase Rights may also be granted under the Plan.

     2.   Definitions.  As used herein, the following definitions shall apply:
          -----------                                                         

          (a) "Administrator" means the Board or any of its Committees as shall
               -------------                                                   
be administering the Plan, in accordance with Section 4 of the Plan.

          (b) "Applicable Laws" means the legal requirements relating to the
               ---------------                                              
administration of stock option plans under state corporate and securities laws
and the Code.

          (c) "Board" means the Board of Directors of the Company.
               -----                                              

          (d) "Code" means the Internal Revenue Code of 1986, as amended.
               ----                                                      

          (e) "Committee"  means a Committee appointed by the Board in
               ---------                                              
accordance with Section 4 of the Plan.

          (f) "Common Stock" means the Common Stock of the Company.
               ------------                                        

          (g) "Company" means Catalytica, Inc., a California corporation.
               -------                                                   

          (h) "Consultant" means any person, including an advisor, engaged by
               ----------                                                    
the Company or a Parent or Subsidiary to render services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.

          (i) "Continuous Status as an Employee or Consultant" means that the
               ----------------------------------------------                
employment or consulting relationship is not interrupted or terminated by the
Company, any Parent or Subsidiary.  Continuous Status as an Employee or
Consultant shall not be considered interrupted 
<PAGE>
 
in the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; provided, however, that for
purposes of Incentive Stock Options, any such leave may not exceed ninety (90)
days, unless reemployment upon the expiration of such leave is guaranteed by
contract (including certain Company policies) or statute; or (ii) transfers
between locations of the Company or between the Company, its Parent, its
Subsidiaries or its successor.

          (j) "Director" means a member of the Board.
               --------                              

          (k) "Disability" means total and permanent disability as defined in
               ----------                                                    
Section 22(e)(3) of the Code.

          (l) "Employee" means any person, including Officers and Directors,
               --------                                                     
employed by the Company or any Parent or Subsidiary of the Company.  Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.

          (m) "Exchange Act" means the Securities Exchange Act of 1934, as
               ------------                                               
amended.

          (n) "Fair Market Value" means, as of any date, the value of Common
               -----------------                                            
Stock determined as follows:

              (i)   If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, 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 system or exchange (or the exchange with the
greatest volume of trading in 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 Administrator deems reliable;

              (ii)  If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for 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 Administrator deems reliable;

              (iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.

          (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.

                                      -2-
<PAGE>
 
          (p) "Nonstatutory Stock Option" means an Option not intended to
               -------------------------                                 
qualify as an Incentive Stock Option.

          (q) "Notice of Grant" means a written notice evidencing certain terms
               ---------------                                                 
and conditions of an individual Option or Stock Purchase Right grant.  The
Notice of Grant is part of the Option Agreement.

          (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 a 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.  The Option Agreement is subject to the terms and conditions of the Plan.

          (u) "Option Exchange Program" means a program whereby outstanding
               -----------------------                                     
options are surrendered in exchange for options with a lower exercise price.

          (v) "Optioned Stock" means the Common Stock subject to an Option or
               --------------                                                
Stock Purchase Right.

          (w) "Optionee" means an Employee or Consultant who holds an
               --------                                              
outstanding Option or Stock Purchase Right.

          (x) "Parent" means a "parent corporation", whether now or hereafter
               ------                                                        
existing, as defined in Section 424(e) of the Code.

          (y) "Plan" means this 1992 Stock Option Plan.
               ----                                    

          (z) "Restricted Stock" means shares of Common Stock acquired pursuant
               ----------------                                                
to a grant of Stock Purchase Rights under Section 11 below.

          (aa) "Restricted Stock Purchase Agreement" means a written agreement
                -----------------------------------                           
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right.  The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.

          (bb) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
                ----------                                             
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.

          (cc) "Share" means a share of the Common Stock, as adjusted in
                -----                                                   
accordance with Section 13 of the Plan.

                                      -3-
<PAGE>
 
          (dd) "Stock Purchase Right" means the right to purchase Common Stock
                --------------------                                          
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.

          (ee) "Subsidiary" means a "subsidiary corporation", whether now or
                ----------                                                  
hereafter existing, as defined in Section 424(f) of the Code.

     3.   Stock Subject to the Plan.  Subject to the provisions of Section 13 of
          -------------------------                                             
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is Five Million Fifty Thousand (5,050,000) Shares.  The Shares
may be authorized, but unissued, or reacquired Common Stock.  However, should
the Company reacquire Shares which were issued pursuant to the exercise of an
Option or Stock Purchase Right, such Shares shall not become available for
future grant under the Plan.

          If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated).

     4.   Administration of the Plan.
          -------------------------- 

          (a)  Procedure.
               --------- 

              (i)   Multiple Administrative Bodies. The Plan may be administered
                    ------------------------------
by different Committees with respect to different groups of Optionees.

              (ii)  Section 162(m). To the extent that the Administrator
                    --------------                                      
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.

              (iii) Rule 16b-3.  To the extent desirable to qualify transactions
                    ----------                                                  
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.

              (iv)  Other Administration.  Other than as provided above, the
                    --------------------                                    
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.

          (b) Powers of the Administrator.  Subject to the provisions of the
              ---------------------------                                   
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:

                                      -4-
<PAGE>
 
              (i)   to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(n) of the Plan;

              (ii)  to select the Consultants and Employees to whom Options and
Stock Purchase Rights may be granted hereunder;

              (iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof, are granted hereunder;

              (iv)  to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;

              (v)   to approve forms of agreement for use under the Plan;

              (vi)  to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder.  Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options or Stock Purchase Rights may be exercised (which may be based
on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock
Purchase Right or the shares of Common Stock relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine;

              (vii) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have declined
since the date the Option or Stock Purchase Right was granted;

              (viii) to construe and interpret the terms of the Plan;

              (ix)   to prescribe, amend and rescind rules and regulations
relating to the Plan;

              (x)    to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan);

              (xi)   to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;

              (xii)  to institute an Option Exchange Program;

              (xiii) to determine the terms and restrictions applicable to
Options and Stock Purchase Rights and any Restricted Stock; and

                                      -5-
<PAGE>
 
              (xiv)  to make all other determinations deemed necessary or
advisable for administering the Plan.

          (c) Effect of Administrator's Decision.  The Administrator's
              ----------------------------------                      
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.

     5.   Eligibility.  Nonstatutory Stock Options and Stock Purchase Rights may
          -----------                                                           
be granted to Employees and Consultants.  Incentive Stock Options may be granted
only to Employees.  If otherwise eligible, an Employee or Consultant who has
been granted an Option or Stock Purchase Right may be granted additional Options
or Stock Purchase Rights.

     6.   Limitations.
          ----------- 

          (a) Each Option shall be designated in the Notice of Grant as either
an Incentive Stock Option or a Nonstatutory Stock Option.  However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of Shares subject to an Optionee's incentive stock options granted by the
Company, any Parent or Subsidiary, which become exercisable for the first time
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.  For purposes of this Section 6(a), incentive stock
options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares shall be determined as of the time of grant.

          (b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
employment or consulting relationship with the Company, nor shall they interfere
in any way with the Optionee's right or the Company's right to terminate such
employment or consulting relationship at any time, with or without cause.

          (c) The following limitations shall apply to grants of Options:

              (i)   No Optionee shall be granted, in any fiscal year of the
Company, Options to purchase more than 500,000 Shares.

              (ii)  In connection with his or her initial service, an Optionee
may be granted Options to purchase up to an additional 500,000 Shares
which shall not count against the limit set forth in subsection (i) above.

              (iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.

              (iv)  If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above.  For 

                                      -6-
<PAGE>
 
this purpose, if the exercise price of an Option is reduced, the transaction
will be treated as a cancellation of the Option and the grant of a new Option.

     7.   Term of Plan.  Subject to Section 19 of the Plan, the Plan shall
          ------------                                                    
become effective upon the earlier to occur of its adoption by the Board or its
approval by the shareholders of the Company as described in Section 19 of the
Plan.  It shall continue in effect for a term of ten (10) years unless
terminated earlier under Section 15 of the Plan.

     8.   Term of Option.  The term of each Option shall be stated in the Notice
          --------------                                                        
of Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant.  Moreover, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant or
such shorter term as may be provided in the Notice of Grant.

     9.   Option Exercise Price and Consideration.
          --------------------------------------- 

          (a) Exercise Price.  The per share exercise price for the Shares to be
              --------------                                                    
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

              (i)   In the case of an Incentive Stock Option

                    (A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.

                    (B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.

              (ii)  In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be no less than 50% of the Fair Market Value per Share on
the date of grant.  In the case of a Nonstatutory Stock Option intended to
qualify as "performance-based compensation" within the meaning of Section 162(m)
of the Code, the per Share exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant.

          (b) Waiting Period and Exercise Dates.  At the time an Option is
              ---------------------------------                           
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.  In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.

                                      -7-
<PAGE>
 
          (c) Form of Consideration.  The Administrator shall determine the
              ---------------------                                        
acceptable form of consideration for exercising an Option, including the method
of payment.  In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant.  Such
consideration may consist entirely of:

              (i)   cash;

              (ii)  check;

              (iii) promissory note;

              (iv)  other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;

              (v)   delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;

              (vi)  any combination of the foregoing methods of payment; or

              (vii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.

     10.  Exercise of Option.
          ------------------ 

          (a) Procedure for Exercise; Rights as a Shareholder. Any Option
              -----------------------------------------------            
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.

              An Option may not be exercised for a fraction of a Share.

              An Option shall be deemed exercised when the Company receives: (i)
written notice of exercise (in accordance with the Option Agreement) from the
person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised.  Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan.  Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse.  Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option.  The Company shall issue 

                                      -8-
<PAGE>
 
(or cause to be issued) such stock certificate promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in Section 13 of the Plan.

              Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.

          (b) Termination of Employment or Consulting Relationship.  In the
              ----------------------------------------------------         
event that an Optionee's Continuous Status as an Employee or Consultant
terminates (other than upon the Optionee's death or Disability), the Optionee
may exercise his or her Option, but only within such period of time as is
determined by the Administrator, and only to the extent that the Optionee was
entitled to exercise it at the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Notice of Grant).
In the case of an Incentive Stock Option, the Administrator shall determine such
period of time (in no event to exceed ninety (90) days from the date of
termination) when the Option is granted.  If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

          (c) Disability of Optionee.  In the event that an Optionee's
              ----------------------                                  
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option at any time
within twelve (12) months from the date of such termination, but only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.

          (d) Death of Optionee.  In the event of the death of an Optionee, the
              -----------------                                                
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death.  If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan.  If, after death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.

                                      -9-
<PAGE>
 
     11.  Stock Purchase Rights.
          --------------------- 

          (a) Rights to Purchase.  Stock Purchase Rights may be issued either
              ------------------                                             
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan.  After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing, by means of a Notice of Grant, of the terms, conditions and
restrictions related to the offer, including the number of Shares that the
offeree shall be entitled to purchase, the price to be paid (which price shall
not be less than 50% of the Fair Market Value of the Shares as of the date of
the offer), and the time within which the offeree must accept such offer, which
shall in no event exceed six (6) months from the date upon which the
Administrator made the determination to grant the Stock Purchase Right.  The
offer shall be accepted by execution of a Restricted Stock Purchase Agreement in
the form determined by the Administrator.

          (b) Repurchase Option.  Unless the Administrator determines otherwise,
              -----------------                                                 
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
Disability).  The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company.  The repurchase option shall lapse at a rate determined by the
Administrator.

          (c) Other Provisions.  The Restricted Stock Purchase Agreement shall
              ----------------                                                
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.  In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.

          (d) Rights as a Shareholder.  Once the Stock Purchase Right is
              -----------------------                                   
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.

     12.  Non-Transferability of Options and Stock Purchase Rights.  An Option
          --------------------------------------------------------            
or Stock Purchase Right may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.

     13. Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset
         ----------------------------------------------------------------------
     Sale or Change of Control.
     ------------------------- 

          (a) Changes in Capitalization.  Subject to any required action by the
              -------------------------                                        
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted 

                                      -10-
<PAGE>
 
or which have been returned to the Plan upon cancellation or expiration of an
Option or Stock Purchase Right, as well as the price per share of Common Stock
covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option or Stock Purchase Right.

          (b) Dissolution or Liquidation.  In the event of the proposed
              --------------------------                               
dissolution or liquidation of the Company, to the extent that an Option or Stock
Purchase Right has not been previously exercised, it will terminate immediately
prior to the consummation of such proposed action.  The Board may, in the
exercise of its sole discretion in such instances, declare that any Option or
Stock Purchase Right shall terminate as of a date fixed by the Board and give
each Optionee the right to exercise his or her Option or Stock Purchase Right as
to all or any part of the Optioned Stock, including Shares as to which the
Option or Stock Purchase Right would not otherwise be exercisable.

          (c) Merger or Asset Sale.  Subject to the provisions of paragraph (d)
              --------------------                                             
hereof, in the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, each
outstanding Option and Stock Purchase Right shall be assumed or an equivalent
option or right shall be substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation.  In the event that the successor
corporation does not agree to assume the Option or Stock Purchase Right or to
substitute an equivalent option or right, the Administrator shall, in lieu of
such assumption or substitution, provide for the Optionee to have the right to
exercise the Option or Stock Purchase Right as to all or a portion of the
Optioned Stock, including Shares as to which it would not otherwise be
exercisable.  If the Administrator makes an Option or Stock Purchase Right
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee that the Option or
Stock Purchase Right shall be fully exercisable for a period of fifteen (15)
days from the date of such notice, and the Option or Stock Purchase Right will
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or Stock Purchase Right shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets was not solely common stock of the 

                                      -11-
<PAGE>
 
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation and the participant, provide for the consideration to
be received upon the exercise of the Option or Stock Purchase Right, for each
Share of Optioned Stock subject to the Option or Stock Purchase Right, to be
solely common stock of the successor corporation or its Parent equal in fair
market value to the per share consideration received by holders of Common Stock
in the merger or sale of assets.

          (d) Change in Control.  In the event of a "Change in Control" of the
              -----------------                                               
Company, as defined in paragraph (e) below, then the following acceleration and
valuation provisions shall apply:

              (i)   Except as otherwise determined by the Board, in its
     discretion, prior to the occurrence of a Change in Control, any Options and
     Stock Purchase Rights outstanding on the date such Change in Control is
     determined to have occurred that are not yet exercisable and vested on such
     date shall become fully exercisable and vested;

              (ii)   Except as otherwise determined by the Board, in its
     discretion, prior to the occurrence of a Change in Control, all outstanding
     Options and Stock Purchase Rights, to the extent they are exercisable and
     vested (including Options and Stock Purchase Rights that shall become
     exercisable and vested pursuant to subparagraph (i) above), shall be
     terminated in exchange for a cash payment equal to the Change in Control
     Price, (reduced by the exercise price applicable to such Options or Stock
     Purchase Rights).  These cash proceeds shall be paid to the Optionee or, in
     the event of death of an Optionee prior to payment, to the estate of the
     Optionee or to a person who acquired the right to exercise the Option or
     Stock Purchase Right by bequest or inheritance.

          (e) Definition of "Change in Control".  For purposes of this Section
              ---------------------------------                               
13, a "Change in Control" means the happening of any of the following:

              (i)   When any "person," as such term is used in Sections 13(d)
     and 14(d) of the Exchange Act (other than the Company, a Subsidiary or a
     Company employee benefit plan, including any trustee of such plan acting as
     trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3
     under the Exchange Act), directly or indirectly, of securities of the
     Company representing fifty percent (50%) or more of the combined voting
     power of the Company's then outstanding securities entitled to vote
     generally in the election of directors: or

              (ii)  The stockholders of the Company approve a merger or
     consolidation of the Company with any other corporation, other than a
     merger or consolidation which would result in the voting securities of the
     Company outstanding immediately prior thereto continuing to represent
     (either by remaining outstanding or by being converted into voting
     securities of the surviving entity) at least fifty percent (50%) of the
     total voting power represented by the voting securities of the Company or
     such surviving entity outstanding immediately after such merger or
     consolidation, or the stockholders of the Company approve 

                                      -12-
<PAGE>
 
     an agreement for the sale or disposition by the Company of all or
     substantially all the Company's assets; or

               (iii)  A change in the composition of the Board of Directors of
     the Company, as a result of which fewer than a majority of the directors
     are Incumbent Directors. "Incumbent Directors" shall mean directors who
     either (A) are directors of the Company as of the date the Plan is approved
     by the stockholders, or (B) are elected, or nominated for election, to the
     Board of Directors of the Company with the affirmative votes of at least a
     majority of the Incumbent Directors at the time of such election or
     nomination (but shall not include an individual whose election or
     nomination is in connection with an actual or threatened proxy contest
     relating to the election of directors to the Company).

          (f) Change in Control Price.  For purposes of this Section 13, "Change
              -----------------------                                           
in Control Price" shall be, as determined by the Board, (i) the highest Fair
Market Value of a Share within the 60 day period immediately preceding the date
of determination of the Change in Control Price by the Board (the "60-Day
Period"), or (ii) the highest price paid or offered per Share, as determined by
the Board, in any bona fide transaction or bona fide offer related to the Change
in Control of the Company, at any time within the 60-Day Period, or (iii) some
lower price as the Board, in its discretion, determines to be a reasonable
estimate of the fair market value of a Share.

     14.  Date of Grant.  The date of grant of an Option or Stock Purchase Right
          -------------                                                         
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator.  Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.

     15.  Amendment and Termination of the Plan.
          ------------------------------------- 

          (a) Amendment and Termination.  The Board may at any time amend,
              -------------------------                                   
alter, suspend or terminate the Plan.

          (b) Shareholder Approval.  The Company shall obtain shareholder
              --------------------                                       
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.

          (c) Effect of Amendment or Termination.  No amendment, alteration,
              ----------------------------------                            
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.

     16.  Conditions Upon Issuance of Shares.
          ---------------------------------- 

          (a) Legal Compliance.  Shares shall not be issued pursuant to the
              ----------------                                             
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with all relevant provisions of law, including, 

                                      -13-
<PAGE>
 
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regula tions promulgated thereunder, Applicable Laws, and the
requirements of any stock exchange or quotation system upon which the Shares may
then be listed or quoted, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

          (b) Investment Representations.  As a condition to the exercise of an
              --------------------------                                       
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.

     17.  Liability of Company.
          -------------------- 

          (a) Inability to Obtain Authority.  The 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.

          (b) Grants Exceeding Allotted Shares.  If the Optioned Stock covered
              --------------------------------                                
by an Option or Stock Purchase Right exceeds, as of the date of grant, the
number of Shares which may be issued under the Plan without additional
shareholder approval, such Option or Stock Purchase Right shall be void with
respect to such excess Optioned Stock, unless shareholder approval of an
amendment sufficiently increasing the number of Shares subject to the Plan is
timely obtained in accordance with Section 15(b) of the Plan.

     18.  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.

     19.  Shareholder Approval.  Continuance of the Plan shall be subject
          --------------------                                           
to approval by the shareholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such shareholder approval shall be
obtained in the manner and to the degree required under applicable federal and
state law.

                                      -14-
<PAGE>
 
                    CATALYTICA, INC. 1992 STOCK OPTION PLAN

                            STOCK OPTION AGREEMENT

     Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.

I.  NOTICE OF STOCK OPTION GRANT
    ----------------------------

     Name: _______________________________

     Address: ____________________________

              ____________________________


     You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:

     Grant Number                       __________________

     Date of Grant                      __________________

     Vesting Commencement Date          __________________

     Exercise Price per Share           $_________________

     Total Number of Shares Granted     __________________

     Total Exercise Price               $_________________

     Type of Option:                    ______ Incentive Stock Option

                                        ______ Nonstatutory Stock Option

     Term/Expiration Date:              _________________________

     Vesting Schedule:
     ---------------- 

     This Option may be exercised, in whole or in part, in accordance with the
following schedule:

     20% of the Shares subject to the Option shall vest on the Vesting
Commencement Date, and an additional 20% shall vest upon each succeeding
anniversary of the Vesting Commencement Date until the Option becomes 100%
exercisable.


                                      -1-
<PAGE>
 
     Termination Period:
     ------------------ 

     This Option may be exercised for [90 days maximum for ISOs] _____ days
after termination of employment or consulting relationship, or such longer
period as may be applicable upon death or Disability of Optionee as provided in
the Plan, but in no event later than the Term/Expiration Date as provided above.

II.  AGREEMENT
     ---------

     1.   Grant of Option.  The Plan Administrator of the Company hereby grants
          ---------------                                                      
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee"), an option (the "Option") to purchase a number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference.  Subject to
Section 15(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.

          If designated in the Notice of Grant as an Incentive Stock Option,
this Option is intended to qualify as an Incentive Stock Option under Section
422 of the Code.

     2.   Exercise of Option.
          ------------------ 

          (a) Right to Exercise.  This Option is exercisable during its term in
              -----------------                                                
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.  In the event of
Optionee's death, Disability or other termination of Optionee's employment or
consulting relationship, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.

          (b) Method of Exercise.  This Option is exercisable by delivery of an
              ------------------                                               
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan.  The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company.  The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares.  This Option shall
be deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.

          No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed.  Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the
Option is exercised with respect to such Exercised Shares.


                                      -2-
<PAGE>
 
     3.   Method of Payment.  Payment of the aggregate Exercise Price shall be
          -----------------                                                   
by any of the following, or a combination thereof, at the election of the
Optionee:

     (a)  cash; or

     (b)  check; or

     (c) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price; or

     (d) surrender of other Shares which (i) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six (6)
months on the date of surrender, AND (ii) have a Fair Market Value on the date
of surrender equal to the aggregate Exercise Price of the Exercised Shares; or

     (e) delivery of Optionee's promissory note (the "Note") in the form
attached hereto as Exhibit C, in the amount of the aggregate Exercise Price of
the Exercised Shares together with the execution and delivery by the Optionee of
the Security Agreement attached hereto as Exhibit B.  The Note shall bear
interest at a rate no less than the "applicable federal rate" prescribed under
the Code and its regulations at time of purchase, and shall be secured by a
pledge of the Shares purchased by the Note pursuant to the Security Agreement.

     4.   Non-Transferability of Option.  This Option may not be transferred in
          -----------------------------                                        
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee.  The
terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

     5.   Term of Option.  This Option may be exercised only within the term set
          --------------                                                        
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.

     6.   Tax Consequences.  Some of the federal tax consequences relating to
          ----------------                                                   
this Option, as of the date of this Option, are set forth below.  THIS SUMMARY
IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.


                                      -3-
<PAGE>
 
         (a)  Exercising the Option.
              --------------------- 

              (i) Nonqualified Stock Option ("NSO").  If this Option does not
                  ---------------------------------                          
qualify as an ISO, the Optionee may incur regular federal income tax liability
upon exercise.  The Optionee will be treated as having received compensation
income (taxable at ordinary income tax rates) equal to the excess, if any, of
the fair market value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price.  If the Optionee is an employee, the Company will be
required to withhold from his or her compensation or collect from Optionee and
pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.

              (ii) Incentive Stock Option ("ISO").  If this Option qualifies as
                   ------------------------------                              
an ISO, the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the fair market value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to alternative minimum tax in the year of exercise.

         (b)  Disposition of Shares.
              --------------------- 

              (i) NSO.  If the Optionee holds NSO Shares for at least one year,
                  ---
any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.

              (ii) ISO.  If the Optionee holds ISO Shares for at least one year
                   ---                                                         
after exercise AND two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes.  If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the LESSER OF (A) the difference
between the FAIR MARKET VALUE OF THE SHARES ACQUIRED ON THE DATE OF EXERCISE and
the aggregate Exercise Price, or (B) the difference between the SALE PRICE of
such Shares and the aggregate Exercise Price.

         (c) Notice of Disqualifying Disposition of ISO Shares.  If the
             -------------------------------------------------         
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition.  The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.


                                      -4-
<PAGE>
 
     By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement.  Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement.


OPTIONEE:                         CATALYTICA, INC.


_____________________________                By:_______________________________
Signature

_____________________________                Title:____________________________
Print Name



                               CONSENT OF SPOUSE
                               -----------------

     The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement.  In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound.  The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.



                                        ______________________________
                                        Spouse of Optionee



                                      -5-
<PAGE>
 
                                   EXHIBIT A
                                   ---------

                    CATALYTICA, INC. 1992 STOCK OPTION PLAN

                                EXERCISE NOTICE


Catalytica, Inc.
430 Ferguson Drive
Mountain View, CA 94043-5272

Attention:  Secretary

     1.   Exercise of Option.  Effective as of today, ___________, 199__, the
          ------------------                                                 
undersigned ("Purchaser") hereby elects to purchase _________ shares (the
"Shares") of the Common Stock of Catalytica, Inc. (the "Company") under and
pursuant to the Catalytica, Inc. 1992 Stock Option Plan (the "Plan") and the
Stock Option Agreement dated _____________ (the "Option Agreement"). The
purchase price for the Shares shall be $_____________, as required by the Option
Agreement.

     2.   Delivery of Payment.  Purchaser herewith delivers to the Company the
          -------------------                                                 
full purchase price for the Shares.

     3.   Representations of Purchaser.  Purchaser acknowledges that Purchaser
          ----------------------------                                        
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.

     4.   Rights as Shareholder.  Subject to the terms and conditions of this
          ---------------------                                              
Agreement, Purchaser shall have all of the rights of a shareholder of the
Company with respect to the Shares from and after the date that Purchaser
delivers full payment of the Exercise Price until such time as Purchaser
disposes of the Shares.

     5.   Tax Consultation.  Purchaser understands that Purchaser may suffer
          ----------------                                                  
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares.  Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.

     6.   Entire Agreement; Governing Law.  The Plan and Option Agreement are
          -------------------------------                                    
incorporated herein by reference.  This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the 


                                      -1-
<PAGE>
 
Company and Purchaser with respect to the subject matter hereof, and such
agreement is governed by California law except for that body of law pertaining
to conflict of laws.


Submitted by:                   Accepted by:

PURCHASER:                         CATALYTICA, INC.


___________________________        By: __________________________
Signature

___________________________        Its: _________________________
Print Name


Address:                           Address:
- -------                            ------- 

___________________________        430 Ferguson Drive

___________________________        Mountain View, CA 94043-5272


                                      -2-
<PAGE>
 
                                   EXHIBIT B
                                   ---------

                              SECURITY AGREEMENT



     This Security Agreement is made as of __________, 19___ between Catalytica,
Inc., a California corporation ("Pledgee"), and _________________________
("Pledgor").


                                   Recitals
                                   --------

     Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated ________ (the "Option"), between Pledgor and Pledgee under
Pledgee's 1992 Stock Option Plan and Pledgor's election under the terms of the
Option to pay for such shares with his promissory note (the "Note"), Pledgor has
purchased _________ shares of Pledgee's Common Stock (the "Shares") at a price
of $________ per share, for a total purchase price of $__________.  The Note and
the obliga  tions thereunder are as set forth in Exhibit C to the Option.

     NOW, THEREFORE, it is agreed as follows:

     1.   Creation and Description of Security Interest.  In consideration of
          ---------------------------------------------                      
the transfer of the Shares to Pledgor under the Option Agreement, Pledgor,
pursuant to the California Commercial Code, hereby pledges all of such Shares
(herein sometimes referred to as the "Collateral") represented by certificate
number ______, duly endorsed in blank or with executed stock powers, and
herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"),
who shall hold said certificate subject to the terms and conditions of this
Security Agreement.

     The pledged stock (together with an executed blank stock assignment for use
in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Option, and the
Pledgeholder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.

     2.   Pledgor's Representations and Covenants.  To induce Pledgee to enter
          ---------------------------------------                             
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:

          (a) Payment of Indebtedness.  Pledgor will pay the principal sum of
              -----------------------                                        
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.

          (b) Encumbrances.  The Shares are free of all other encumbrances,
              ------------                                                 
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.

                                      -1-
<PAGE>
 
          (c) Margin Regulations.  In the event that Pledgee's Common Stock is
              ------------------                                              
now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.

     3.   Voting Rights.  During the term of this pledge and so long as all
          -------------                                                    
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.

     4.   Stock Adjustments.  In the event that during the term of the pledge
          -----------------                                                  
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder.  In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.

     5.   Options and Rights.  In the event that, during the term of this
          ------------------                                             
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.

     6.   Default.  Pledgor shall be deemed to be in default of the Note and of
          -------                                                              
this Security Agreement in the event:

          (a) Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or

          (b) Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.

     In the case of an event of Default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the California
Commercial Code.

     7.   Release of Collateral.  Subject to any applicable contrary rules under
          ---------------------                                                 
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder here  under upon payments of the principal of the
Note.  The number of the pledged Shares which shall be 


                                      -2-
<PAGE>
 
released shall be that number of full Shares which bears the same proportion to
the initial number of Shares pledged hereunder as the payment of principal bears
to the initial full principal amount of the Note.

     8.   Withdrawal or Substitution of Collateral.  Pledgor shall not sell,
          ----------------------------------------                          
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.

     9.   Term.  The within pledge of Shares shall continue until the payment of
          ----                                                                  
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.

     10.  Insolvency.  Pledgor agrees that if a bankruptcy or insolvency
          ----------                                                    
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.

     11.  Pledgeholder Liability.  In the absence of willful or gross
          ----------------------                                     
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.

     12.  Invalidity of Particular Provisions.  Pledgor and Pledgee agree that
          -----------------------------------                                 
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.

     13.  Successors or Assigns.  Pledgor and Pledgee agree that all of the
          ---------------------                                            
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.

     14.  Governing Law.  This Security Agreement shall be interpreted and
          -------------                                                   
governed under the laws of the State of California.


     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.



     "PLEDGOR"              By:  _________________________________

                                 _________________________________
                                 Print Name



                                      -3-
<PAGE>
 
                            Address: _________________________________

                                     _________________________________


     "PLEDGEE"                       Catalytica, Inc.
                                     a California corporation


                            By:  _________________________________

                            Title:  ________________________________


     "PLEDGEHOLDER"               ________________________________
                                Secretary of Catalytica, Inc.



                                      -4-
<PAGE>
 
                                   EXHIBIT C
                                   ---------

                               INSTALLMENT NOTE


 $_______________                                      Mountain View, California

                                                           ______________, 19___

     FOR VALUE RECEIVED, _______________ promises to pay to Catalytica, Inc., a
California corporation (the "Company"), or order, the principal sum of
_______________________ ($_____________), together with interest on the unpaid
principal hereof from the date hereof at the rate of _______________ percent
(____%) per annum, compounded semiannually.

     Principal and interest shall be due and payable on __________, 19___.
Should the undersigned fail to make full payment of any installment of principal
or interest for a period of 10 days or more after the due date thereof, the
whole unpaid balance on this Note of principal and interest shall become
immediately due at the option of the holder of this Note.  Payments of principal
and interest shall be made in lawful money of the United States of America.

     The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.

     This Note is subject to the terms of the Option, dated as of
________________.  This Note is secured by a pledge of the Company's Common
Stock under the terms of a Security Agreement of even date herewith and is
subject to all the provisions thereof.

     The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.

     In the event the undersigned shall cease to be an employee or consultant of
the Company for any reason, this Note shall, at the option of the Company, be
accelerated, and the whole unpaid balance on this Note of principal and accrued
interest shall be immediately due and payable.

     Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.

                                _____________________________

                                _____________________________


                                      -5-
<PAGE>
 
                    CATALYTICA, INC. 1992 STOCK OPTION PLAN

                    NOTICE OF GRANT OF STOCK PURCHASE RIGHT

     Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Notice of Grant.

Name: ___________________________________

Address: ________________________________

         ________________________________

     You have been granted the right to purchase Common Stock of the Company,
subject to the Company's repurchase option and your ongoing Continuous Status as
an Employee or Consultant (as described in the Plan and the attached Restricted
Stock Purchase Agreement), as follows:

     Grant Number                       __________________

     Date of Grant                      __________________

     Price Per Share                    $_________________

     Total Number of Shares Subject

      to This Stock Purchase Right      __________________

     Expiration Date:            _______________________________


     YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR
IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES.  By
your signature and the signature of the Company's representative below, you and
the Company agree that this Stock Purchase Right is granted under and governed
by the terms and conditions of the Catalytica, Inc. 1992 Stock Option Plan and
the Restricted Stock Purchase Agreement, all of which are attached and made a
part of this document.  You further agree to execute the attached Restricted
Stock Purchase Agreement as a condition to purchasing any shares under this
Stock Purchase Right.

GRANTEE:                                CATALYTICA, INC.


_____________________________           By:_____________________
Signature



_____________________________           Title:__________________   Print Name



                                      -1-
<PAGE>
 
                                  EXHIBIT A-1
                                  -----------

                    CATALYTICA, INC. 1992 STOCK OPTION PLAN

                      RESTRICTED STOCK PURCHASE AGREEMENT

     Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Restricted Stock Purchase Agreement.

     WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an
employee or consultant of the Company, and the Purchaser's continued
participation is considered by the Company to be important for the Company's
continued growth; and

     WHEREAS in order to give the Purchaser an opportunity to acquire an equity
interest in the Company as an incentive for the Purchaser to participate in the
affairs of the Company, the Admin  istrator has granted to the Purchaser stock
purchase rights subject to the terms and conditions of the Plan and the Notice
of Grant, which are incorporated herein by reference, and pursuant to this
restricted stock purchase agreement (the "Agreement").

     THEREFORE, the parties agree as follows:

     1.   Sale of Stock.  The Company hereby agrees to sell to the Purchaser and
          -------------                                                         
the Purchaser hereby agrees to purchase shares of the Company's Common Stock
(the "Shares"), at the per share purchase price and as otherwise described in
the Notice of Grant.

     2.   Payment of Purchase Price.  The purchase price for the Shares may be
          -------------------------                                           
paid by delivery to the Company at the time of execution of this Agreement of
cash, a check, or some combination thereof.

     3.   Repurchase Option.
          ----------------- 

          (a) In the event the Purchaser's Continuous Status as an Employee or
Consultant terminates for any or no reason (including death or disability)
before all of the Shares are released from the Company's repurchase option (see
Section 4), the Company shall, upon the date of such termination (as reasonably
fixed and determined by the Company) have an irrevocable, exclusive option for a
period of sixty (60) days from such date to repurchase up to that number of
shares which constitute the Unreleased Shares (as defined in Section 4) at the
original purchase price per share (the "Repurchase Price").  Said option shall
be exercised by the Company by delivering written notice to the Purchaser or the
Purchaser's executor (with a copy to the Escrow Holder) AND, at the Company's
option, (i) by delivering to the Purchaser or the Purchaser's executor a check
in the amount of the aggregate Repurchase Price, or (ii) by the Company
cancelling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals such aggregate
Repurchase Price.  Upon delivery of such notice and the payment of the aggregate
Repurchase Price 


                                      -1-
<PAGE>
 
in any of the ways described above, the Company shall become the legal and
beneficial owner of the Shares being repurchased and all rights and interests
therein or relating thereto, and the Company shall have the right to retain and
transfer to its own name the number of Shares being repurchased by the Company.

          (b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares; provided that if the Fair Market Value of
the Shares to be repurchased on the date of such designation or assignment (the
"Repurchase FMV") exceeds the aggregate Repurchase Price of such Shares, then
each such designee or assignee shall pay the Company cash equal to the
difference between the Repurchase FMV and the aggregate Repurchase Price of such
Shares.

     4.   Release of Shares From Repurchase Option.
          ---------------------------------------- 

          (a) ___________________ (_______) of the Shares shall be released from
the Company's repurchase option ___________________
_________________________________________________________________, provided in
each case that the Purchaser's Continuous Status as an Employee or Consultant
has not terminated prior to the date of any such release.

          (b) Any of the Shares which have not yet been released from the
Company's repurchase option are referred to herein as "Unreleased Shares."

          (c) The Shares which have been released from the Company's repurchase
option shall be delivered to the Purchaser at the Purchaser's request (see
Section 6).

     5.   Restriction on Transfer.  Except for the escrow described in Section 6
          -----------------------                                               
or transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's repurchase option in accordance with the provi
sions of this Agreement, other than by will or the laws of descent and
distribution.

     6.   Escrow of Shares.
          ---------------- 

          (a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Company's
repurchase option under Section 3 above, the Purchaser shall, upon execution of
this Agreement, deliver and deposit with an escrow holder designated by the
Company (the "Escrow Holder") the share certificates representing the Unreleased
Shares, together with the stock assignment duly endorsed in blank, attached
hereto as Exhibit A-2.  The Unreleased Shares and stock assignment shall be held
by the Escrow Holder, pursuant to the Joint Escrow Instructions of the Company
and Purchaser attached as Exhibit A-3 hereto, until such time as the Company's
repurchase option expires.  As a further condition to the 


                                      -2-
<PAGE>
 
Company's obligations under this Agreement, the spouse of Purchaser, if any,
shall execute and deliver to the Company the Consent of Spouse attached hereto
as Exhibit A-4.

          (b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise of its judgment.

          (c) If the Company or any assignee exercises its repurchase option
hereunder, the Escrow Holder, upon receipt of written notice of such option
exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.

          (d) When the repurchase option has been exercised or expires
unexercised or a portion of the Shares has been released from such repurchase
option, upon Purchaser's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Purchaser, as the case may be.

          (e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon.  If, from time to time during the term of
the Company's repurchase option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Company's repurchase option.

     7.   Legends.  The share certificate evidencing the Shares issued hereunder
          -------                                                               
shall be endorsed with the following legend (in addition to any legend required
under applicable state securities laws):

     THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.

     8.   Adjustment for Stock Split.  All references to the number of Shares
          --------------------------                                         
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.

     9.   Tax Consequences.  The Purchaser has reviewed with the Purchaser's own
          ----------------                                                      
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement.  The Purchaser
is relying solely on such advisors and not on any statements or representations
of the Company or any of its agents.  The Purchaser understands that 


                                      -3-
<PAGE>
 
the Purchaser (and not the Company) shall be responsible for the Purchaser's own
tax liability that may arise as a result of this investment or the transactions
contemplated by this Agreement. The Purchaser understands that Section 83 of the
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
the difference between the purchase price for the Shares and the Fair Market
Value of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" includes the right of the Company to buy back the Shares
pursuant to its repurchase option. The Purchaser understands that the Purchaser
may elect to be taxed at the time the Shares are purchased rather than when and
as the Company's repurchase option expires by filing an election under Section
83(b) of the Code with the I.R.S. within 30 days from the date of purchase. The
form for making this election is attached as Exhibit A-5 hereto.

          THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.

     10.  General Provisions.
          ------------------ 

          (a) This Agreement shall be governed by the laws of the State of
California.  This Agreement, subject to the terms and conditions of the Plan and
the Notice of Grant, represents the entire agreement between the parties with
respect to the purchase of Common Stock by the Purchaser.  Subject to Section
15(c) of the Plan, in the event of a conflict between the terms and conditions
of the Plan and the terms and conditions of this Agreement, the terms and
conditions of the Plan shall prevail.  Unless otherwise defined herein, the
terms defined in the Plan shall have the same defined meanings in this
Agreement.

          (b) Any notice, demand or request required or permitted to be given by
either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties at the addresses of the parties set forth at the end of this
Agreement or such other address as a party may request by notifying the other in
writing.

          Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party not sending the notice.

          (c) The rights and benefits of the Company under this Agreement shall
be transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns.  The rights and obligations of the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.

          (d) Either party's failure to enforce any provision or provisions of
this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party from thereafter enforcing each
and every other provision of this Agreement.  The rights granted 

                                      -4-
<PAGE>
 
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.

          (e) The Purchaser agrees upon request to execute any further documents
or instruments necessary or desirable to carry out the purposes or intent of
this Agreement.

          (f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE
OR CONSULTANT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR
PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE
SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD,
OR AT ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT
TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH
OR WITHOUT CAUSE.

     By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof.  Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement.  Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.


PURCHASER:                        CATALYTICA, INC.


_____________________________     By:_______________________________
Signature

_____________________________     Title:____________________________
Print Name



                                      -5-
<PAGE>
 
                                  EXHIBIT A-2
                                  -----------

                     ASSIGNMENT SEPARATE FROM CERTIFICATE



     FOR VALUE RECEIVED I, __________________________, hereby sell, assign and
transfer unto________________________________________ (__________) shares of the
Common Stock of Catalytica, Inc. standing in my name of the books of said
corporation represented by Certificate No. _____ herewith and do hereby
irrevocably constitute and appoint ____________________________________________
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.

     This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between_______________________ and the undersigned
dated ______________, 19__.


Dated: _______________, 19__


                    Signature:______________________________



                                      -6-
<PAGE>
 
INSTRUCTIONS:  Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"repurchase option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.



                                      -7-
<PAGE>
 
                                  EXHIBIT A-3
                                  -----------

                           JOINT ESCROW INSTRUCTIONS
                           -------------------------


                                                             _____________, 19__

Corporate Secretary
Catalytica, Inc.
430 Ferguson Drive
Mountain View, CA 94043-5272


Dear _________________:

     As Escrow Agent for both Catalytica, Inc., a California corporation (the
"Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:

     1.   In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company.  Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.

     2.   At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's repurchase option.

     3.   Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. 


                                      -1-
<PAGE>
 
Subject to the provisions of this paragraph 3, Purchaser shall exercise all
rights and privileges of a shareholder of the Company while the stock is held by
you.

     4.   Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within 90 days after cessation of Purchaser's continuous employment by or
services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's repurchase
option.

     5.   If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.

     6.   Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.

     7.   You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.

     8.   You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree, you shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.

     9.   You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.

     10.  You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.


                                      -2-
<PAGE>
 
     11.  You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.

     12.  Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall resign by
written notice to each party.  In the event of any such termination, the Company
shall appoint a successor Escrow Agent.

     13.  If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.

     14.  It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.

     15.  Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.


          COMPANY:       Catalytica, Inc.
                         430 Ferguson Drive
                         Mountain View, CA 94043-5272

          PURCHASER:     ________________________________

                         ________________________________

                         ________________________________

          ESCROW AGENT:  Corporate Secretary
                         Catalytica, Inc.

     16.  By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.


                                      -3-
<PAGE>
 
     17.  This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.

     18.  These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.

                              Very truly yours,

                              CATALYTICA, INC.


                              By:   __________________________________
 
                              Title:  ________________________________


                              PURCHASER:


                              _________________________________________
                                    (Signature)

                              _________________________________________
                                    (Typed or Printed Name)


                              ESCROW AGENT:


                              _________________________________________
                              Corporate Secretary



                                      -4-
<PAGE>
 
                                  EXHIBIT A-4
                                  -----------

                               CONSENT OF SPOUSE
                               -----------------


     I, ____________________, spouse of ___________________, have read and
approve the foregoing Agreement.  In consideration of granting of the right to
my spouse to purchase shares of Catalytica, Inc. as set forth in the Agreement,
I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of
any rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws or similar laws
relating to marital property in effect in the state of our residence as of the
date of the signing of the foregoing Agreement.

Dated: _______________, 19____


                                    ______________________________




                                      -5-
<PAGE>
 
                                  EXHIBIT A-5
                                  -----------
                         ELECTION UNDER SECTION 83(b)
                         ----------------------------
                     OF THE INTERNAL REVENUE CODE OF 1986
                     ------------------------------------

The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:

1.  The name, address, taxpayer identification number and taxable year of the
    undersigned are as follows:

    NAME        :           TAXPAYER:         SPOUSE:

    ADDRESS:    :

    IDENTIFICATION NO.:    TAXPAYER:          SPOUSE:

    TAXABLE YEAR:

2.  The property with respect to which the election is made is described as
    follows: __________ shares (the "Shares") of the Common Stock of Catalytica,
    Inc. (the "Company").

3.  The date on which the property was transferred is: ______________, 19__.

4.  The property is subject to the following restrictions:

    The Shares may be repurchased by the Company, or its assignee, on certain
    events. This right lapses with regard to a portion of the Shares based on
    the continued performance of services by the taxpayer over time.

5.  The fair market value at the time of transfer, determined without regard to
    any restriction other than a restriction which by its terms will never
    lapse, of such property is:

    $_______________.

6.  The amount (if any) paid for such property is:

    $_______________.

The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property.  The transferee of such property is the person per
forming the services in connection with the transfer of said property.

The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- ------------------------------------------- 

Dated:  _______________, 19__         ___________________________________
                                      _________________________, Taxpayer

The undersigned spouse of taxpayer joins in this election.

Dated:  _______________, 19__         ___________________________________
                                      Spouse of Taxpayer



                                      -6-

<PAGE>
 
                                                                     EXHIBIT 4.6


                               CATALYTICA, INC.

                       1992 EMPLOYEE STOCK PURCHASE PLAN

                       (AS AMENDED THROUGH APRIL 1998)
<PAGE>
 
                               CATALYTICA, INC.

                       1992 EMPLOYEE STOCK PURCHASE PLAN

                        (AS AMENDED THROUGH APRIL 1998)


     The following constitute the provisions of the 1992 Employee Stock Purchase
Plan of Catalytica, Inc.

     1.   Purpose.  The purpose of the Plan is to provide employees of the
          -------                                                         
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions.  It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended.  The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.

     2.   Definitions.
          ----------- 

          (a)  "Board" shall mean the Board of Directors of the Company.
                -----                                                   

          (b)  "Code" shall mean the Internal Revenue Code of 1986, as amended.
                ----                                                           

          (c)  "Common Stock" shall mean the Common Stock of the Company.
                ------------                                             

          (d)  "Company" shall mean Catalytica, Inc., a Delaware corporation.
                -------                                                        

          (e)  "Compensation" shall mean all base straight time gross earnings,
                ------------                                                   
exclusive of payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses, commissions and other compensation.

          (f)  "Designated Subsidiaries" shall mean the Subsidiaries which 
                -----------------------         
have been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.

          (g)  "Employee" shall mean any individual who is an Employee of the 
                --------          
Company for purposes of tax withholding under the Code whose customary
employment with the Company or any Designated Subsidiary is at least twenty (20)
hours per week and more than five (5) months in any calendar year. For purposes
of the Plan, the employment relationship shall be treated as continuing intact
while the individual is on sick leave or other leave of absence
<PAGE>
 
approved by the Company.  Where the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship will be deemed to have terminated on the
91st day of such leave.

          (h)  "Enrollment Date" shall mean the first day of each Offering 
                ---------------        
Period.
          (i)  "Exercise Date" shall mean the last day of each Purchase Period.
                -------------                                                  

          (j)  "Fair Market Value" shall mean, as of any date, the value of
                -----------------  
Common Stock determined as follows:

               (1)  If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sale
price for the Common Stock (or the mean of the closing bid and asked prices, if
no sales were reported), as quoted on such exchange (or the exchange with the
greatest volume of trading in Common Stock) or system on the date of such
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable, or;

               (2)  If the Common Stock is quoted on the NASDAQ system (but not
on the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;

               (3)  In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.

               (4)  For purposes of the Enrollment Date under the first Offering
Period under the Plan, the Fair Market Value of the Common Stock shall be the
Price to Public as set forth in the final prospectus filed with the Securities
and Exchange Commission pursuant to Rule 424 under the Securities Act of 1933,
as amended.

          (k)  "Offering Period" shall mean the period of approximately 
                ---------------        
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading

                                      -2-
<PAGE>
 
Day on or after July 1 and January 1 of each year and terminating on the last
Trading Day in the periods ending twenty-four months later, except that the
first Offering Period shall be a shorter Offering Period of approximately
twenty-two and one-half months, commencing with the date on which the Company's
registration statement on Form S-1 (or any successor form thereof) is declared
effective by the Securities and Exchange Commission.  The second Offering Period
under the Plan shall commence with the first Trading Day on or after July 1,
1993.  The duration of Offering Periods may be changed pursuant to Section 4 of
this Plan.

          (l)  "Plan" shall mean this Employee Stock Purchase Plan.
                ----                                               

          (m)  "Purchase Price" shall mean an amount equal to 85% of the Fair 
                --------------   
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.

          (n)  "Purchase Period" shall mean the approximately six month period
                ---------------                                               
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date; provided, however, that
the first Purchase Period of the first Offering Period under the Plan shall be
approximately four and one-half months in duration.

          (o)  "Reserves" shall mean the number of shares of Common Stock 
                --------       
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.

          (p)  "Subsidiary" shall mean a corporation, domestic or foreign, of
                ----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.

          (q)  "Trading Day" shall mean a day on which national stock 
                -----------
exchanges and the National Association of Securities Dealers Automated Quotation
(NASDAQ) System are open for trading.

     3.   Eligibility.
          ----------- 

          (a)  Any Employee (as defined in Section 2(g)), who shall be employed
by the Company on a given Enrollment Date shall be eligible to participate in
the Plan.

                                      -3-
<PAGE>
 
          (b)  Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own capital stock of
the Company and/or hold outstanding options to purchase such stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of the capital stock of the Company or of any Subsidiary, or (ii) which
permits his or her rights to purchase stock under all employee stock purchase
plans of the Company and its subsidiaries to accrue at a rate which exceeds
twenty-five thousand dollars ($25,000) worth of stock (determined at the fair
market value of the shares at the time such option is granted) for each calendar
year in which such option is outstanding at any time.

     4.   Offering Periods.  The Plan shall be implemented by consecutive,
          ----------------                                                
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after July 1 and January 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 19 hereof; provided, however, that the first Offering
Period under the Plan shall be shorter Offering Period of approximately twenty-
two and one-half months, commencing with the first Trading Day on or after the
date on which the Company's registration statement on Form S-1 (or any
successor form thereof) is declared effective by the Securities and Exchange
Commission and ending on the last Trading Day in the period ending December 31,
1994.  The second Offering Period under the Plan shall commence with the first
Trading Day on or after July 1, 1993.  The Board shall have the power to change
the duration of Offering Periods (including the commencement dates thereof) with
respect to future offerings without shareholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected thereafter.

     5.   Participation.
          ------------- 

          (a)  An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office at
least five (5) business days prior to the applicable Enrollment Date, unless a
later time for filing the subscription agreement is set by the Board for all
eligible Employees with respect to a given Offering Period.

          (b)  Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on

                                      -4-
<PAGE>
 
the last payroll in the Offering Period to which such authorization is
applicable, unless sooner terminated by the participant as provided in Section
10 hereof.

          (c)  Employees may only participate in one Offering Period at any
time.

     6.   Payroll Deductions.
          ------------------ 

          (a)  At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period, and the aggregate of such payroll deductions during the Offering Period
shall not exceed ten percent (10%) of the participant's Compensation during
said Offering Period.

          (b)  All payroll deductions made for a participant shall be credited
to his or her account under the Plan and will be withheld in whole percentages
only. A participant may not make any additional payments into such account.

          (c)  A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.

          (d)  Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to 0% at such time during any Purchase
Period which is scheduled to end during the current calendar year (the "Current
Purchase Period") that the aggregate of all payroll deductions which were
previously used to purchase stock under the Plan in a prior Purchase Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Purchase Period

                                      -5-
<PAGE>
 
equal $21,250.  Payroll deductions shall recommence at the rate provided in such
participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.

          (e)  At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.

     7.   Grant of Option.  On the Enrollment Date of each Offering Period, each
          ---------------                                                       
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than a
number of Shares determined by dividing $12,500 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to Section 10 hereof, and
shall expire on the last day of the Offering Period.

     8.  Exercise of Option.  Unless a participant withdraws from the Plan as
         ------------------                                                  
provided in Section 10 hereof, his or her option for the purchase of shares will
be exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account.  No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offer- 

                                      -6-
<PAGE>
 
ing Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.

     9.   Delivery.  As promptly as practicable after each Exercise Date on 
          --------          
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.

     10.  Withdrawal; Termination of Employment.
          ------------------------------------- 

          (a)  A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account will be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period will be automatically terminated, and no further payroll deductions for
the purchase of shares will be made during the Offering Period. If a participant
withdraws from an Offering Period, payroll deductions will not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.

          (b)  Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof), for any reason, including by virtue of him or her having
failed to remain an Employee of the Company for at least twenty (20) hours per
week during an Offering Period in which the Employee is a participant, he or she
will be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option will be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 14 hereof, and such participant's option will be automatically
terminated.

     11.  Interest.  No interest shall accrue on the payroll deductions of a
          --------                                                          
participant in the Plan.


                                      -7-
<PAGE>
 
     12.  Stock.
          ----- 

          (a)  The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be three million five 
hundred thousand (3,500,000) shares, subject to adjustment upon changes in
capitalization of the Company as provided in Section 18 hereof. If on a given
Exercise Date the number of shares with respect to which options are to be
exercised exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.

          (b)  The participant will have no interest or voting right in shares
covered by his option until such option has been exercised.

          (c)  Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.

     13.  Administration.
          -------------- 

          (a)  Administrative Body.  The Plan shall be administered by the 
               -------------------       
Board or a committee of members of the Board appointed by the Board. The Board
or its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the full
extent permitted by law, be final and binding upon all parties. Members of the
Board who are eligible Employees are permitted to participate in the Plan,
provided that:

               (1)  Members of the Board who are eligible to participate in the
Plan may not vote on any matter affecting the administration of the Plan or the
grant of any option pursuant to the Plan.

               (2)  If a Committee is established to administer the Plan, no
member of the Board who is eligible to participate in the Plan may be a member
of the Committee.

          (b)  Rule 16b-3 Limitations.  Notwithstanding the provisions of 
               ----------------------  
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision ("Rule

                                      -8-
<PAGE>
 
16b-3") provides specific requirements for the administrators of plans of this
type, the Plan shall be only administered by such a body and in such a manner as
shall comply with the applicable requirements of Rule 16b-3.  Unless permitted
by Rule 16b-3, no discretion concerning decisions regarding the Plan shall be
afforded to any committee or person that is not "disinterested" as that term is
used in Rule 16b-3.

     14.  Designation of Beneficiary.
          -------------------------- 

          (a)  A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise
Date on which the option is exercised but prior to delivery to such participant
of such shares and cash. In addition, a participant may file a written
designation of a beneficiary who is to receive any cash from the participant's
account under the Plan in the event of such participant's death prior to
exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.

          (b)  Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.

     15.  Transferability.  Neither payroll deductions credited to a
          ---------------                                           
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant.  Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.

                                      -9-

<PAGE>
 
     16.  Use of Funds.  All payroll deductions received or held by the Company
          ------------                                                         
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.

     17.  Reports.  Individual accounts will be maintained for each participant
          -------                                                              
in the Plan.  Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.

     18.  Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
          ---------------------------------------------------------------------
Merger or Asset Sale.
- -------------------- 

          (a) Changes in Capitalization.  Subject to any required action by the
              -------------------------
shareholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration".  Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive.  Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.

          (b) Dissolution or Liquidation. In the event of the proposed
              --------------------------
dissolution or liquidation of the Company, the Offering Periods will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.

          (c) Merger or Asset Sale.  In the event of a proposed sale of all or
              --------------------                                            
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board 
determines, in the exercise of its sole discretion and in lieu of such

                                     -10-
<PAGE>
 
assumption or substitution, to shorten the Offering Periods then in progress by
setting a new Exercise Date (the "New Exercise Date"). If the Board shortens the
Offering Periods then in progress in lieu of assumption or substitution in the
event of a merger or sale of assets, the Board shall notify each participant in
writing, at least ten (10) business days prior to the New Exercise Date, that
the Exercise Date for his option has been changed to the New Exercise Date and
that his option will be exercised automatically on the New Exercise Date, unless
prior to such date he has withdrawn from the Offering Period as provided in
Section 10 hereof. For purposes of this paragraph, an option granted under the
Plan shall be deemed to be assumed if, following the sale of assets or merger,
the option confers the right to purchase, for each share of option stock subject
to the option immediately prior to the sale of assets or merger, the
consideration (whether stock, cash or other securities or property) received in
the sale of assets or merger by holders of Common Stock for each share of Common
Stock held on the effective date of the transaction (and if such holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); provided,
however, that if such consideration received in the sale of assets or merger was
not solely common stock of the successor corporation or its parent (as defined
in Section 424(e) of the Code), the Board may, with the consent of the successor
corporation and the participant, provide for the consideration to be received
upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock and the sale of assets or
merger.

     19.  Amendment or Termination.
          ------------------------ 

          (a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan.  Except as provided in Section 18 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its shareholders.  Except as provided in Section 18
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant.  To the extent necessary to
comply with Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.

                                     -11-
<PAGE>
 
          (b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods,
limit the frequency and/or number of changes in the amount withheld during an
Offering Period, establish the exchange ratio applicable to amounts withheld in
a currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.

     20.  Notices.  All notices or other communications by a participant to the
          -------                                                              
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.

     21.  Conditions Upon Issuance of Shares.  Shares shall not be issued with
          ----------------------------------                                  
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

          As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.

     22.  Term of Plan.  The Plan shall become effective upon the earlier to
          ------------                                                      
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company.  It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.

                                     -12-
<PAGE>
 
     23.  Additional Restrictions of Rule 16b-3.  The terms and conditions of
          -------------------------------------                              
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3.  This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.

     24.   Automatic Transfer to Low Price Offering Period.  To the extent
           -----------------------------------------------                
permitted by Rule 16b-3 of the Exchange Act, if the Fair Market Value of the
Common Stock on any Exercise Date in an Offering Period is lower than the Fair
Market Value of the Common Stock on the Enrollment Date of such Offering Period,
then all participants in such Offering Period shall be automatically withdrawn
from such Offering Period immediately after the exercise of their option on such
Exercise Date and automatically re-enrolled in the immediately following
Offering Period as of the first day thereof.

                                     -13-
<PAGE>
 
                                   EXHIBIT A
                                   ---------


                                CATALYTICA, INC.

                       1992 EMPLOYEE STOCK PURCHASE PLAN

                             SUBSCRIPTION AGREEMENT



      Original Application              Enrollment Date: 
- -----                                                    -----------
      Change in Payroll Deduction Rate
- -----
      Change of Beneficiary(ies)
- -----

1.   ________________________________________ hereby elects to participate in
     the Catalytica, Inc. 1992 Employee Stock Purchase Plan (the "Employee
     Stock Purchase Plan") and subscribes to purchase shares of the Company's
     Common Stock in accordance with this Subscription Agreement and the
     Employee Stock Purchase Plan.

2.   I hereby authorize payroll deductions from each paycheck in the amount of
     ____% of my Compensation on each payday (not to exceed 10%) during the
     Offering Period in accordance with the Employee Stock Purchase Plan.
     (Please note that no fractional percentages are permitted.)

3.   I understand that said payroll deductions shall be accumulated for the
     purchase of shares of Common Stock at the applicable Purchase Price
     determined in accordance with the Employee Stock Purchase Plan. I
     understand that if I do not withdraw from an Offering Period, any
     accumulated payroll deductions will be used to automatically exercise my
     option.

4.   I have received a copy of the complete "Catalytica, Inc. 1992 Employee
     Stock Purchase Plan." I understand that my participation in the Employee
     Stock Purchase Plan is in all respects subject to the terms of the Plan. I
     understand that the grant of the option by the Company under this
     Subscription Agreement is subject to obtaining shareholder approval of the
     Employee Stock Purchase Plan.

5.   Shares purchased for me under the Employee Stock Purchase Plan should be
     issued in the name(s) of (Employee or Employee and spouse only):___________
     _____________________________________________________________________.
<PAGE>
 
6.   I understand that if I dispose of any shares received by me pursuant to the
     Plan within 2 years after the Enrollment Date (the first day of the
     Offering Period during which I purchased such shares) or one year after the
     Exercise Date, I will be treated for federal income tax purposes as having
     received ordinary income at the time of such disposition in an amount equal
     to the excess of the fair market value of the shares at the time such
     shares were purchased over the price which I paid for the shares. I hereby
                                                                       --------
     agree to notify the Company in writing within 30 days after the date of any
     ---------------------------------------------------------------------------
     disposition of my shares and I will make adequate provision for Federal,
     ------------------------------------------------------------------------
     state or other tax withholding obligations, if any, which arise upon the
     ------------------------------------------------------------------------
     disposition of the Common Stock. The Company may, but will not be obligated
     -------------------------------
     to, withhold from my compensation the amount necessary to meet any
     applicable withholding obligation including any withholding necessary to
     make available to the Company any tax deductions or benefits attributable
     to sale or early disposition of Common Stock by me. If I dispose of such
     shares at any time after the expiration of the 2-year and 1-year holding
     periods, I understand that I will be treated for federal income tax
     purposes as having received income only at the time of such disposition,
     and that such income will be taxed as ordinary income only to the extent of
     an amount equal to the lesser of (1) the excess of the fair market value of
     the shares at the time of such disposition over the purchase price which I
     paid for the shares, or (2) 15% of the fair market value of the shares on
     the first day of the Offering Period. The remainder of the gain, if any,
     recognized on such disposition will be taxed as capital gain.

7.   I hereby agree to be bound by the terms of the Employee Stock Purchase
     Plan. The effectiveness of this Subscription Agreement is dependent upon
     my eligibility to participate in the Employee Stock Purchase Plan.

8.   In the event of my death, I hereby designate the following as my
     beneficiary(ies) to receive all payments and shares due me under the
     Employee Stock Purchase Plan:


NAME:  (Please print)
                     -----------------------------------------------------------
                       (First)            (Middle)               (Last)


- ------------------------------------       -------------------------------------
Relationship
                                           -------------------------------------
                                           (Address)

                                      -2-
<PAGE>
 
Employee's Social
Security Number:     
                      ------------------------------------


Employee's Address:   
                      ------------------------------------

                      ------------------------------------

                      ------------------------------------


I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.



Dated:
      --------------------      --------------------------------------------
                                Signature of Employee


                                --------------------------------------------
                                Spouse's Signature (If beneficiary 
                                other than spouse)

                                      -3-
<PAGE>
 
                                   EXHIBIT B
                                   ---------


                                CATALYTICA, INC.

                       1992 EMPLOYEE STOCK PURCHASE PLAN

                              NOTICE OF WITHDRAWAL



     The undersigned participant in the Offering Period of the Catalytica, Inc.
1992 Employee Stock Purchase Plan which began on ____________, 19____ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated.  The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.

                                                Name and Address of Participant:

                                                --------------------------------

                                                --------------------------------

                                                --------------------------------
                                                                                

                                                Signature:
                                                                                

                                                --------------------------------
                                                                                

                                                Date:
                                                     ---------------------------


                                      -4-

<PAGE>
 
                                                           EXHIBIT 5.1


               [LETTERHEAD OF WILSON SONSINI GOODRICH & ROSATI]


                                 June 26, 1998


Catalytica, Inc.
430 Ferguson Drive
Mountain View, California  94043

  RE:  REGISTRATION STATEMENT ON FORM S-8
       ----------------------------------

Gentlemen:

  We have examined the Registration Statement on Form S-8 to be filed by you
with the Securities and Exchange Commission on June 26, 1998 (the "Registration
Statement"), in connection with the registration under the Securities Act of
1933, as amended, of up to 2,000,000 shares of your Common Stock which are to be
issued pursuant to the 1992 Stock Option Plan, as amended, and up to 1,500,000
shares of Common Stock which are to be issued pursuant to the 1992 Employee
Stock Purchase Plan, as amended, (collectively, the "Plans"). As your legal
counsel, we have examined the proceedings taken and are familiar with the
proceedings proposed to be taken by you in connection with the sale and issuance
of such Common Stock under the Plans.

  It is our opinion that, when issued and sold in the manner referred to in the
Plans and pursuant to the agreements which accompany the Plans, the Common Stock
issued and sold thereby will be legally and validly issued, fully paid and non-
assessable.

  We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including any Prospectus constituting a part thereof,
and any amendments thereto.

                                 Very truly yours,

                                 WILSON SONSINI GOODRICH & ROSATI
                                 Professional Corporation

                                 /s/ WILSON SONSINI GOODRICH & ROSATI

<PAGE>
 
                                                                  EXHIBIT 23.2
 
              CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


  We consent to the incorporation by reference in this Registration Statement on
Form S-8 pertaining to the 1992 Stock Option Plan, as amended, and the 1992
Employee Stock Purchase Plan, as amended, of Catalytica, Inc. of our report
dated January 27, 1998, with respect to the consolidated financial statements
and schedule of Catalytica, Inc. included in its Annual Report (Form 10-K) for
the year ended December 31, 1997, filed with the Securities and Exchange
Commission.



San Jose, California                     ERNST & YOUNG LLP
June 26, 1998


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