<PAGE> 1
As filed with the Securities and Exchange Commission on February 20, 1996
Registration No. 333-_______________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
CISCO SYSTEMS, INC.
(Exact name of issuer as specified in its charter)
CALIFORNIA 77-0059951
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
170 WEST TASMAN DRIVE, SAN JOSE, CALIFORNIA 95134-1706
(Address of principal executive offices) (Zip Code)
--------------------
CISCO SYSTEMS, INC. 1987 STOCK OPTION PLAN
COMBINET, INC. INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
(Full title of the plans)
--------------------
JOHN T. CHAMBERS
PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
CISCO SYSTEMS, INC.
170 WEST TASMAN DRIVE, SAN JOSE, CALIFORNIA 95134-1706
(Name and address of agent for service)
(408) 526-4000
(Telephone number, including area code, of agent for service)
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered per Share Price Fee
---------- ---------- --------- ----- ---
<S> <C> <C> <C>
Cisco Systems, Inc.
1987 Stock Option Plan:
Options to Purchase
Common Stock 19,000,000 N/A N/A N/A
Common Stock 19,000,000(1) shares $88.5625(2) $1,682,687,500(2) $580,237.70
Combinet, Inc.
Incentive and Nonqualified
Stock Option Plan:
Options to Purchase 400 N/A N/A N/A
Common Stock
Common Stock 400 shares $0.725(3) $169,249(3) $100.00
==============================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Registrant's 1987 Stock
Option Plan and/or the Combinet, Inc. Incentive and Nonqualified Stock
Option Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the
receipt of consideration which results in an increase in the number of
the Registrant's outstanding shares of Common Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of
the Securities Act of 1933, as amended, on the basis of the average of
the high and low selling prices per share of the Common Stock of Cisco
Systems, Inc. on February 14, 1996.
(3) Calculated solely for purposes of this offering under Rule 457(h) of
the Securities Act of 1933, as amended, on the basis of the weighted
average exercise price of the outstanding options.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference
Cisco Systems, Inc. (the "Registrant") hereby incorporates by reference
into this Registration Statement the following documents previously filed with
the Securities and Exchange Commission (the "SEC"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal
year ended July 30, 1995 filed with the SEC on October 26,
1995, pursuant to Section 13 of the Securities Exchange Act of
1934 as amended (the "1934 Act");
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended October 29, 1995 filed with the SEC on December
12, 1995; and
(c) The Registrant's Registration Statement No. 00-18225 on Form
8-A filed with the SEC on January 11, 1990, together with
Amendment No. 1 filed with the SEC on February 15, 1990, in
which there is described in which there is described the
terms, rights and provisions applicable to the Registrant's
outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
Item 4. Description of Securities
Not Applicable.
Item 5. Interests of Named Experts and Counsel
Not Applicable.
Item 6. Indemnification of Directors and Officers
Section 317 of the California Corporations Code authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit indemnification (including
reimbursement of expenses incurred) under certain circumstances for liabilities
arising under the Securities Act of 1933, as amended, (the "1933 Act"). The
Registrant's Restated Articles of Incorporation, as amended, and Amended By-laws
provide for indemnification of its directors, officers, employees and other
agents to the maximum extent permitted by the California Corporations Code. In
addition, the Registrant has entered into Indemnification Agreements with each
of its directors and officers.
II-1.
<PAGE> 3
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
4 Instruments Defining the Rights of Shareholders. Reference is made to the Registrant's
Registration Statement No. 00-18225 on Form 8-A which is incorporated herein by reference
pursuant to Item 3(c) of this Registration Statement.
5 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Accountants - Coopers & Lybrand L.L.P.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24. Power of Attorney. Reference is made to page II-4 of this Registration Statement.
99.1 1987 Stock Option Plan.
99.2* Form of Notice of Grant of Stock Option (Installment Options).
99.3* Form of Notice of Grant of Stock Option (Immediately Exercisable).
99.4* Form of Stock Option Agreement.
99.5* Form of Stock Option Exercise Form.
99.6** Combinet, Inc. Incentive and Nonqualified Stock Option Plan.
99.7** Form of Incentive Stock Option Agreement.
99.8** Form of Nonqualified Stock Option Agreement.
99.9** Form of Stock Option Assumption Agreement.
</TABLE>
* Incorporated by reference to Exhibits 99.6 through 99.9 to the
Registrant's Registration Statement No. 33-64283 on Form S-8 filed with the SEC
on November 15, 1995.
** Incorporated by reference to Exhibits 99.2 through 99.5 to the
Registrant's Registration Statement No. 33-63331 on Form S-8 filed with the SEC
on October 11, 1995.
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include any prospectus required
by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts
or events arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement, and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement; provided, however, that clauses (1)(i) and (1)(ii) shall not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference
into the Registration Statement; (2) that for the purpose of determining any
liability under the 1933 Act each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered therein
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and (3) to remove from registration by means
of a post-effective amendment any of the securities being registered which
remain unsold
II-2.
<PAGE> 4
at the termination of the Registrant's 1987 Stock Option Plan and/or the
Combinet, Inc. Incentive and Nonqualified Stock Option Plan.
B. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the 1933 Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act that is incorporated by reference into the Registration Statement shall
be deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
1933 Act may be permitted to directors, officers or controlling persons of the
Registrant pursuant to the indemnity provisions summarized in Item 6 or
otherwise, the Registrant has been informed that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
II-3.
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Jose, State of California, on this 16th day
of February, 1996.
CISCO SYSTEMS, INC.
By /s/ JOHN T. CHAMBERS
-----------------------------------------------
John T. Chambers
President, Chief Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Cisco Systems,
Inc., a California corporation, do hereby constitute and appoint John T. Chamber
and Larry R. Carter and each of them, the lawful attorneys-in-fact and agents
with full power and authority to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, and any one of them,
determine may be necessary or advisable or required to enable said corporation
to comply with the Securities Act of 1933, as amended, and any rules or
regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
that all said attorneys and agents, or any one of them, shall do or cause to be
done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this
Power of Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement as been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ JOHN T. CHAMBERS President, Chief Executive Officer and February 16, 1996
- ---------------------- Director (Principal Executive Officer)
John T. Chambers
/s/ LARRY R. CARTER Vice President, Finance and Administration, February 16, 1996
- ---------------------- Chief Financial Officer and Secretary
Larry R. Carter (Principal Financial and Accounting Officer)
</TABLE>
II-4.
<PAGE> 6
<TABLE>
<S> <C> <C>
/s/ JOHN P. MORGRIDGE Chairman of the Board February 16, 1996
- -----------------------
John P. Morgridge
/s/ DONALD T. VALENTINE Vice Chairman of the Board February 16, 1996
- -----------------------
Donald T. Valentine
/s/ MICHAEL S. FRANKEL Director February 16, 1996
- -----------------------
Michael S. Frankel
/s/ JAMES F. GIBBONS Director February 16, 1996
- -----------------------
James F. Gibbons
/s/ ROBERT L. PUETTE Director February 16, 1996
- -----------------------
Robert L. Puette
/s/ MASAYOSHI SON Director February 16, 1996
- -----------------------
Masayoshi Son
</TABLE>
II-5.
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
4 Instruments Defining the Rights of Shareholders. Reference is made to the Registrant's
Registration Statement No. 00-18225 on Form 8-A which is incorporated herein by reference
pursuant to Item 3(c) of this Registration Statement.
5 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Accountants - Coopers & Lybrand L.L.P.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this Registration Statement.
99.1 1987 Stock Option Plan.
99.2* Form of Notice of Grant of Stock Option (Installment Options).
99.3* Form of Notice of Grant of Stock Option (Immediately Exercisable).
99.4* Form of Stock Option Agreement.
99.5* Form of Stock Option Exercise Form.
99.6** Combinet, Inc. Incentive and Nonqualified Stock Option Plan.
99.7** Form of Incentive Stock Option Agreement.
99.8** Form of Nonqualified Stock Option Agreement.
99.9** Form of Stock Option Assumption Agreement.
</TABLE>
* Incorporated by reference to Exhibits 99.2 through 99.5 to the Registrant's
Registration Statement No. 33-63331 on Form S-8 filed with the SEC on October
11, 1995.
** Incorporated by reference to Exhibits 99.6 through 99.9 to the Registrant's
Registration Statement No. 33-64283 on Form S-8 filed with the SEC on November
15, 1995.
<PAGE> 1
EXHIBIT 5
Opinion of Brobeck, Phleger & Harrison LLP
February 14, 1996
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134-1706
Re: Cisco Systems, Inc. Registration Statement for
Offering of an aggregate of 19,000,400 Shares of Common Stock
Ladies and Gentlemen:
We refer to your registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of (i) 19,000,000
shares of the common stock ("Common Stock") of Cisco Systems, Inc. (the
"Company") issuable under the Company's 1987 Stock Option Plan and (ii) 400
shares of Common Stock issuable under the Combinet, Inc. Incentive and
Nonqualified Stock Option Plan (the "Combinet Plan") as assumed by the Company
on September 29, 1995. We advise you that, in our opinion, when such shares have
been issued and sold pursuant to the applicable provisions of the 1987 Stock
Option Plan and the Combinet Plan and in accordance with the Registration
Statement, such shares will be validly issued, fully paid and nonassessable
shares of Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference of our reports dated August 15,
1995, with respect to the financial statements and schedule of Cisco Systems,
Inc. for the years ended July 30, 1995, included in the Annual Report (Form
10-K) for 1995, filed with the Securities and Exchange Commission, in the
Registration Statement of Form S-8 of Cisco Systems, Inc. of 19,000,400 shares
of its common stock and the registration of 19,000,400 options to purchase
shares of its common stock.
COOPERS & LYBRAND L.L.P.
San Jose, California
February 14, 1996
<PAGE> 1
EXHIBIT 99.1
1987 Stock Option Plan
CISCO SYSTEMS, INC.
1987 STOCK OPTION PLAN
(AS AMENDED THROUGH OCTOBER 17, 1995)
ARTICLE ONE
GENERAL
I. PURPOSES OF THE PLAN
(a) This Stock Option Plan (the "Plan") is intended to promote the
interests of Cisco Systems, Inc. (the "Company") by providing a method whereby
(i) key employees (including officers and directors) of the Company (or its
parent or subsidiary corporations) responsible for the management, growth and
financial success of the Company (or its parent or subsidiary corporations),
(ii) non-employee members of the Company's Board of Directors (or of the board
of directors of any parent or subsidiary corporations) and (iii) consultants and
independent contractors who provide valuable services to the Company (or its
parent or subsidiary corporations) may be offered incentives and rewards which
will encourage them to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Company and continue to render services to
the Company (or its parent or subsidiary corporations).
(b) For purposes of the Plan, the following provisions shall be
applicable in determining the parent and subsidiary corporations of the Company:
(i) Any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company shall be considered to be a parent
corporation of the Company, provided each such corporation in the unbroken chain
(other than the Company) owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(ii) Each corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company shall be considered to be a
subsidiary of the Company, provided each such corporation (other than the last
corporation) in the unbroken chain owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
<PAGE> 2
II. PLAN STRUCTURE
(a) The Plan shall be divided into two separate components:
- The Discretionary Option Grant Program, under which eligible
individuals may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock in accordance with the provisions
of Article Two.
- The Automatic Option Grant Program, under which non-employee Board
members shall automatically receive special option grants at periodic
intervals to purchase shares of Common Stock in accordance with the
provisions of Article Three.
(b) Unless the context clearly indicates otherwise, the provisions of
Articles One and Four shall apply to both the Discretionary Option Grant and
Automatic Option Grant Programs and shall accordingly govern the interests of
all individuals under the Plan.
III. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by a committee ("Committee") of two
(2) or more non-employee Board members appointed by the Board. No Board member
shall be eligible to serve on the Committee if such individual has, within the
twelve (12)- month period immediately preceding the date he or she is to be
appointed to the Committee, received an option grant or stock issuance under
this Plan or any other stock plan of the Company (or any parent or subsidiary
corporation), other than pursuant to the Automatic Option Program. Members of
the Committee shall serve for such period of time as the Board may determine and
shall be subject to removal by the Board at any time.
(b) The Committee as Plan Administrator shall have full power and
authority (subject to the express provisions of the Plan) to establish such
rules and regulations as it may deem appropriate for the proper administration
of the Discretionary Option Grant Program and to make such determinations under,
and to issue such interpretations of, such program and any outstanding option
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties with an interest in the
Discretionary Option Grant Program or any outstanding option thereunder.
(c) The Plan Administrator shall have full authority to determine
which eligible individuals are to receive option grants under the Discretionary
Option Grant Program, the number of shares to be covered by each such grant, the
status of the granted option as either an incentive stock option ("Incentive
Option") which satisfies the requirements of Section 422 of the Internal Revenue
Code or a non-statutory option not
2.
<PAGE> 3
intended to meet such requirements, the time or times at which each such option
is to become exercisable, and the maximum term for which the option is to be
outstanding.
(d) Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the express terms and conditions of Article
Three, and the Plan Administrator shall not exercise any discretionary functions
with respect to the option grants made pursuant to that program.
III. ELIGIBILITY FOR OPTION GRANTS
(a) The persons eligible to receive option grants under the Plan are
as follows:
(i) key employees (including officers and directors) of the
Company (or its parent or subsidiary corporations) who render services which
contribute to the success and growth of the Company (or its parent or
subsidiary corporations) or which may reasonably be anticipated to
contribute to the future success and growth of the Company (or its parent or
subsidiary corporations);
(ii) the non-employee members of the Board;
(iii) the non-employee members of the board of directors of any
parent or subsidiary corporation; and
(iv) those consultants or independent contractors who provide
valuable services to the Company (or its parent or subsidiary corporations).
(b) Members of the Committee while serving as the Plan Administrator
shall not be eligible to receive any stock options, stock appreciation rights,
direct stock issuances or other stock awards under this Plan or any other stock
plan of the Company or its parent or subsidiary corporations, other than
pursuant to the Automatic Option Grant Program.
IV. STOCK SUBJECT TO THE PLAN
(a) The stock issuable under the Plan shall be shares of the Company's
authorized but unissued or reacquired Common Stock. The aggregate number of
shares which may be issued over the term of the Plan as adjusted for the four
2-for-1 stock splits effected in March 1991, March 1992, March 1993 and March
1994 respectively, shall not
3.
<PAGE> 4
exceed 110,640,112 shares.(*) The total number of shares issuable under the Plan
shall be subject to further adjustment from time to time in accordance with
Section IV(d) of this Article One.
(b) In no event may which any one individual participating in the Plan
be granted stock options or separately exercisable stock appreciation rights for
more than 2,000,000 shares of Common Stock in the aggregate over the remaining
term of the Plan, subject to periodic adjustment in accordance with the
provisions of Section IV (d) of this Article One. For purposes of such
limitation, any stock options or stock appreciation rights granted prior to
August 1, 1994 shall not be taken into account.
(c) Should an option terminate or expire for any reason prior to
exercise in full, the shares subject to the portion of the option not so
exercised shall be available for subsequent option grants under the Plan. Shares
subject to any option surrendered or cancelled in accordance with Section IV of
Article Two or Section III of Article Three and all share issuances under the
Plan, whether or not the shares are subsequently repurchased by the Company
pursuant to its repurchase rights under the Plan, shall reduce on a
share-for-share basis the number of shares of Common Stock available for
subsequent option grants under the Plan. If the exercise price of an outstanding
option under the Plan is paid with shares of Common Stock, the number of shares
available for subsequent option grant shall be reduced by the gross number of
shares for which the option is exercised, and not by the net number of shares
actually issued.
(d) In the event any change is made to the Common Stock issuable under
the Plan by reason of any stock split, stock dividend, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without receipt of consideration, then appropriate adjustments will be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the maximum number and/or class of securities for which any one
individual may be granted stock options and separately
- --------
(*) Reflects (i) the two-for-one stock splits effected March 1991, March 1992,
March 1993 and March 1994, (ii) the 500,000-share increase authorized by the
Board on October 8, 1991 and approved by the shareholders at the 1991 Annual
Meeting, (iii) the 1,000,000-share increase authorized by the Board on October
5, 1992 and approved by the shareholders at the 1992 Annual Meeting on November
10, 1992, (iv) the 2,000,000-share increase authorized by the Board on August
10, 1993 and approved by the shareholders at the 1993 Annual Meeting on November
12, 1993, (v) the 4,000,000-share increase authorized by the Board on August 9,
1994 and approved by the shareholders at the 1994 Annual Meeting on November 15,
1994, and (vi) the 19,000,000-share increase authorized by the Board on August
22, 1995, subject to shareholder approval at the 1995 Annual Meeting on November
14, 1995. Assuming approval of the proposed 19,000,000 share increase by the
Company's shareholders, not more than 41,672,653 shares may be issued under the
Plan from and after July 30, 1995, subject, however, to adjustment under Section
IV(d) of Article One.
4.
<PAGE> 5
exercisable stock appreciation rights under the Option Plan after July 31, 1994,
(iii) the number and/or class of securities for which option grants are to be
subsequently made to each newly elected or continuing non-employee Board member
under the Automatic Option Grant Program and (iv) the number and/or class of
securities and price per share in effect under each outstanding option.
5.
<PAGE> 6
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF DISCRETIONARY GRANTS
Options granted pursuant to the Discretionary Option Grant Program
shall be authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or non-statutory
options. Individuals who are not employees of the Company or its parent or
subsidiary corporations may only be granted non-statutory options. Each option
granted under the Discretionary Option Grant Program shall be evidenced by one
or more instruments in the form approved by the Plan Administrator; provided,
however, that each such instrument shall comply with the terms and conditions
specified below. Each instrument evidencing an Incentive Option shall, in
addition, be subject to the applicable provisions of Section II of this Article
Two.
A. Option Price.
1. The option price per share shall be fixed by the Plan
Administrator, provided the option price per share for any option granted prior
to October 1, 1995 shall not be less than eighty-five percent (100%) of the fair
market value of a share of Common Stock on the date of the option grant and the
option price per share for any option granted on or after October 1, 1995 shall
not be less than one hundred percent (100%) of the fair market value of a share
of Common Stock on the date of the option grant.
2. The option price shall, subject to the provisions of Section I of
Article Four and the instrument evidencing the grant, be payable in one of the
alternative forms specified below:
(i) full payment in cash or cash equivalents;
(ii) full payment in shares of Common Stock held by the optionee
for at least six (6) months and valued at fair market value on the Exercise
Date (as such term is defined below);
(iii) full payment through a combination of shares of Common
Stock held by the optionee for at least six (6) months and valued at fair
market value on the Exercise Date (as such term is defined below) and cash
or cash equivalents; or
(iv) to the extent the option is exercised for fully-vested
shares of Common Stock, full payment effected through a broker-dealer sale
and remittance procedure pursuant to which the optionee (I) shall provide
6.
<PAGE> 7
irrevocable written instructions to a Corporation-designated brokerage firm
to effect the immediate sale of the purchased shares and remit to the
Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate option price payable for the
purchased shares plus all applicable Federal and State income and employment
taxes required to be withheld by the Company by reason of such purchase and
(II) shall provide written directives to the Company to deliver the
certificates for the purchased shares directly to such brokerage firm in
order to complete the sale transaction.
For purposes of this subparagraph 2, the Exercise Date shall be the
first date on which the Company shall have received written notice of the
exercise of the option. Except to the extent the sale and remittance procedure
under clause (iv) above is utilized by the optionee, payment of the option price
for the purchased shares shall accompany the notice.
3. The fair market value of a share of Common Stock on any relevant
date under subparagraph 1 or 2 above (and for all other valuation purposes under
the Plan) shall be determined in accordance with the following provisions:
(i) If the Common Stock is not at the time listed or admitted
to trading on any stock exchange but is traded on the National Market, the
fair market value shall be the closing selling price per share of Common
Stock on the date in question, as such prices are reported by the National
Association of Securities Dealers on the Nasdaq National Market or any
successor system. If there is no reported closing selling price for the
Common Stock on the date in question, then the closing selling price on the
last preceding date for which such quotation exists shall be determinative
of fair market value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any national securities exchange, then the fair market value
shall be the closing selling price of one share of Common Stock on the date
in question on the securities exchange determined by the Plan Administrator
to be the primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If there is
no reported sale of Common Stock on such exchange on the date in question,
then the fair market value shall be the closing selling price on the
exchange on the last preceding date for which such quotation exists.
B. Term and Exercise of Options. Each option granted under this
Article Two shall be exercisable at such time or times, during such period, and
for such number of shares as shall be determined by the Plan Administrator and
set forth in the instrument evidencing such option; provided, however, that no
such option granted prior to October 1,
7.
<PAGE> 8
1995 shall have a term in excess of ten (10) years measured from the grant date
and no such option granted on or after October 1, 1995 shall have a term in
excess of nine (9) years measured from the grant date. During the lifetime of
the optionee, the option shall be exercisable only by the optionee and shall not
be assignable or transferable by the optionee otherwise than by will or by the
laws of descent and distribution following the optionee's death.
C. Effect of Termination of Service.
1. Should an optionee cease to remain in Employee status for any
reason (including death or permanent disability as defined in Section 22(e)(3)
of the Internal Revenue Code) while the holder of one or more outstanding
options under this Article Two, then such option or options shall not (except to
the extent otherwise provided pursuant to subparagraph C.4 below) remain
exercisable for more than a twelve (12)-month period (or such shorter period
determined by the Plan Administrator and specified in the instrument evidencing
the grant) following the date of such cessation of Employee status; provided,
however, that under no circumstances shall such options be exercisable after the
specified expiration date of the option term. Each such option shall, during
such twelve (12)-month or shorter period, be exercisable only to the extent of
the number of shares (if any) for which the option is exercisable on the date of
such cessation of Employee status. Upon the expiration of such twelve (12)-month
or shorter period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be exercisable. However, each such option
shall, immediately upon optionee's cessation of Employee status, terminate and
cease to remain outstanding with respect to any option shares for which the
option is not otherwise at that time exercisable.
2. Any outstanding option under this Article Two held by an optionee
at the time of his or her death may be subsequently exercised, but only to the
extent of the number of shares (if any) for which the option is exercisable on
the date of the optionee's cessation of Employee status (less any shares
subsequently purchased by optionee prior to death), by the personal
representative of the optionee's estate or by the person or persons to whom the
option is transferred pursuant to the optionee's will or in accordance with the
laws of descent and distribution, provided and only if such exercise occurs
prior to the earlier of (i) the first anniversary of the date of the optionee's
death or (ii) the specified expiration date of the option term. Upon the
occurrence of the earlier event, the option shall terminate and cease to be
exercisable for any and all of the option shares for which the option is
exercisable at the time of optionee's cessation of Employee status but for which
the option is not subsequently exercised.
3. If (i) the optionee's Employee status is terminated for misconduct
(including, but not limited to, any act of dishonesty, willful misconduct, fraud
or embezzlement or any unauthorized disclosure or use of confidential
information or trade secrets) or (ii) the optionee makes or attempts to make any
unauthorized use or disclosure
8.
<PAGE> 9
of confidential information or trade secrets of the Company or its parent or
subsidiary corporations, then in any such event all outstanding options held by
the optionee under this Article Two shall immediately terminate and cease to be
exercisable.
4. Notwithstanding subparagraphs C.1 and C.2 above, the Plan
Administrator shall have complete discretion, exercisable either at the time the
option is granted or at any time while the option remains outstanding,
- to extend the period of time for which the option is to remain
exercisable following the optionee's cessation of Employee status from the
twelve (12) month or shorter period set forth in the option agreement to
such greater period of time as the Plan Administrator shall deem
appropriate. Such extension may in the Plan Administrator's sole discretion
be conditioned upon the optionee's performance of services as a consultant
to the Company during all or any portion of the extension period. In no
event, however, shall such option be exercisable after the specified
expiration date of the option term.
- to permit one or more options held by the optionee under the Plan
to be exercised during the limited period of exercisability following his or
cessation of Employee status, not only with respect to the number of shares
for which it is exercisable at the time of such cessation of Employee status
but also with respect to one or more subsequent installments of purchasable
shares for which the option would otherwise become exercisable were such
cessation of Employee status not to occur. Such additional vesting may in
the Plan Administrator's sole discretion be conditioned upon the optionee's
performance of services as a consultant to the Company following such
cessation of Employee status.
5. For purposes of the foregoing provisions of this Section C (and
all other purposes of the Plan), the optionee shall be deemed to remain in
EMPLOYEE status for so long as the optionee renders services while in the employ
of the Company or one or more of its parent or subsidiary corporations, subject
to the control and direction of the employer entity not only as to the work to
be performed but also as to the manner and method of performance. The Plan
Administrator shall have complete discretion to determine the extent to which an
optionee may be deemed to be an Employee while on a leave of absence.
6. If the option is to be granted to an individual who is not an
Employee of the Company, then the option agreement evidencing the granted option
shall include provisions comparable to subparagraphs C.1, C.2 and C.3 above, and
may include provisions comparable to subparagraph C.4 above, with respect to the
optionee's termination of service with the Company or its parent or subsidiary
corporations.
9.
<PAGE> 10
D. Shareholder Rights. An optionee shall have none of the rights of
a shareholder with respect to any shares covered by the option until such
individual shall have exercised the option and paid the option price.
E. Repurchase Rights. The shares of Common Stock acquired upon the
exercise of options granted under this Article Two may be subject to repurchase
by the Company in accordance with the following provisions:
1. The Plan Administrator may in its discretion determine that it
shall be a term and condition of one or more options exercised under this
Article Two that the Company (or its assignees) shall have the right,
exercisable upon the optionee's cessation of Employee or other service status,
to repurchase at the option price any or all of the shares of Common Stock
previously acquired by the optionee upon the exercise of such option. Any such
repurchase right shall be exercisable by the Company (or its assignees) upon
such terms and conditions (including the establishment of the appropriate
vesting schedule and other provision for the expiration of such right in one or
more installments over the optionee's period of Employee or service status) as
the Plan Administrator may specify in the instrument evidencing such right.
2. All of the Corporation's outstanding repurchase rights shall
automatically terminate, and all shares subject to such terminated repurchase
rights shall immediately vest in full, upon the occurrence of any Corporate
Transaction under Section IV of this Article Two, except to the extent such
repurchase rights are expressly assigned to the successor corporation (or parent
thereof) in connection with the Corporate Transaction.
3. The Plan Administrator shall have the discretionary authority,
exercisable either before or after the optionee's cessation of Employee status,
to cancel the Company's outstanding repurchase rights with respect to one or
more shares purchased or purchasable by the optionee under the granted option
and thereby accelerate the vesting of such shares in connection with the
optionee's cessation of Employee status.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Article Two. Incentive Options may only be
granted to individuals who are Employees of the Company. Options which are
specifically designated as "non-statutory" options when issued under this
Article Two shall not be subject to such terms and conditions.
(a) Option Price. The option price per share of the Common Stock
subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the fair market value of a share of Common Stock on the date
of grant.
10.
<PAGE> 11
(b) Dollar Limitation. The aggregate fair market value (determined as
of the respective date or dates of grant) of the Common Stock for which one or
more options granted to any Employee after December 31, 1986 under this Plan (or
any other option plan of the Company or its parent or subsidiary corporations)
may for the first time become exercisable as incentive stock options under the
federal tax laws during any one calendar year shall not exceed the sum of One
Hundred Thousand Dollars ($100,000). To the extent the Employee holds two or
more such options which become exercisable for the first time in the same
calendar year, the foregoing limitation on the exercisability thereof as
incentive stock options under the federal tax laws shall be applied on the basis
of the order in which such options are granted.
(c) 10% Shareholder. If any individual to whom the Incentive Option is
granted is the owner of stock (as determined under Section 424(d) of the
Internal Revenue Code) possessing 10% or more of the total combined voting power
of all classes of stock of the Company or any one of its parent or subsidiary
corporations, then the option price per share shall not be less than one hundred
and ten percent (110%) of the fair market value per share of Common Stock on the
grant date, and the option term shall not exceed five (5) years, measured from
such grant date.
Except as modified by this Section II, all the provisions of the Plan
shall be applicable to the Incentive Options granted hereunder.
III. CORPORATE TRANSACTIONS
(a) In the event of any of the following transactions (a "Corporate
Transaction"):
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is
to change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(iii) any reverse merger in which the Company is the surviving
entity but in which fifty percent (50%) or more of the Company's outstanding
voting stock is transferred to holders different from those who held the
stock immediately prior to such merger,
the exercisability of each option outstanding under this Article Two
shall automatically accelerate so that each such option shall, immediately prior
to the specified effective date for the Corporate Transaction, become fully
exercisable with respect to the total number of shares of Common Stock at the
time subject to such option and may be
11.
<PAGE> 12
exercised for all or any portion of such shares. However, an outstanding option
under this Article Two shall not so accelerate if and to the extent: (i) such
option is, in connection with the Corporate Transaction, either to be assumed by
the successor corporation or parent thereof or be replaced with a comparable
option to purchase shares of the capital stock of the successor corporation or
parent thereof or (ii) the acceleration of such option is subject to other
applicable limitations imposed by the Plan Administrator at the time of grant.
The determination of such comparability shall be made by the Plan Administrator,
and its determination shall be final, binding and conclusive.
(b) The portion of any Incentive Option accelerated under this Section
III in connection with a Corporate Transaction shall remain exercisable as an
incentive stock option under the federal tax laws only to the extent the dollar
limitation of Section II of Article Two is not exceeded. To the extent such
dollar limitation is exceeded, the accelerated portion of such option shall be
exercisable as a non-statutory option under the federal tax laws.
(c) Immediately following the consummation of the Corporate
Transaction, all outstanding options under this Article Two shall, to the extent
not previously exercised or assumed by the successor corporation or its parent
company, terminate and cease to be outstanding.
(d) Each outstanding option under this Article Two which is to be
assumed in connection with the Corporate Transaction or is otherwise to continue
in effect shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issuable, in consummation of such Corporate Transaction, to an
actual holder of the same number of shares of Common Stock as are subject to
such option immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the option price payable per share, provided
the aggregate option price payable for such option shall remain the same. In
addition, appropriate adjustments shall also be made to the class and number of
securities available for issuance under the Plan on both an aggregate and
individual basis following the consummation of such Corporate Transaction.
(e) The grant of options under this Plan shall in no way affect the
right of the Company to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
IV. SURRENDER OF OPTIONS FOR CASH OR STOCK
(a) Provided and only if the Plan Administrator determines in its
discretion to implement the stock appreciation right provisions of this Section
V, one or more optionees may be granted the right, exercisable upon such terms
and conditions as the Plan Administrator may establish, to surrender all or part
of an unexercised option under this
12.
<PAGE> 13
Article Two in exchange for a distribution from the Company equal in amount to
the excess of (i) the fair market value (at date of surrender) of the number of
shares in which the optionee is at the time vested under the surrendered option
or portion thereof over (ii) the aggregate option price payable for such vested
shares.
(b) No surrender of an option shall be effective hereunder unless it
is approved by the Plan Administrator. If the surrender is so approved, then the
distribution to which the optionee shall accordingly become entitled under this
Section V may be made in shares of Common Stock valued at fair market value at
date of surrender, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.
(c) If the surrender of an option is rejected by the Plan
Administrator, then the optionee shall retain whatever rights the optionee had
under the surrendered option (or surrendered portion thereof) on the date of
surrender and may exercise such rights at any time prior to the later of (i) the
end of the five (5) business day period following receipt of the rejection
notice or (ii) the last day on which the option is otherwise exercisable in
accordance with the terms of the instrument evidencing such option, but in no
event may such rights be exercised at any time after ten (10) years after the
date of the option grant.
(d) One or more directors or officers of the Company subject to the
short-swing profit restrictions of the federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights in
tandem with their outstanding options under this Article Two. Upon the
occurrence of a Hostile Take-Over at a time when one or more classes of the
Company's equity securities are registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), each outstanding option with
such a limited stock appreciation right in effect for at least six (6) months
shall automatically be cancelled, to the extent such option is at the time
exercisable for vested shares of Common Stock, and the optionee shall in return
be entitled to a cash distribution from the Company in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock which are at the
time vested under the cancelled option over (ii) the aggregate exercise price
payable for such vested shares. The cash distribution payable upon such
cancellation shall be made within five (5) days following the consummation of
the Hostile Take-Over. Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option
cancellation and cash distribution. Any uncancelled portion of the option shall
continue to remain outstanding and become exercisable in accordance with the
terms of the agreement evidencing the grant.
(e) For purposes of this Section V and Section III of Article Three,
the following definitions shall be in effect:
A Hostile Take-Over shall be deemed to occur in the event
(i) any person or related group of persons (other than the Company or a
person that directly or indirectly controls, is controlled by, or is under
13.
<PAGE> 14
common control with, the Company) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting power
of the Company's outstanding securities pursuant to a tender or exchange
offer made directly to the Company's shareholders which the Board does not
recommend such shareholders to accept and (ii) more than fifty percent (50%)
of the securities so acquired in such tender or exchange offer are accepted
from holders other than officers and directors of the Company.
The Take-Over Price per share shall be deemed to be equal
to the greater of (a) the fair market value per share of Common Stock on the
date of the option cancellation, as determined pursuant to the valuation
provisions of Section I.A.3 of Article Two, or (b) the highest reported
price per share paid in effecting such Hostile Take-Over. However, if the
cancelled option is an Incentive Option, the Take-Over Price shall not
exceed the clause (a) price per share.
(f) The shares of Common Stock subject to any option surrendered or
cancelled for an appreciation distribution pursuant to this Section VI shall NOT
be available for subsequent option grant under the Plan.
14.
<PAGE> 15
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
A. Eligible Board Members. The individuals eligible to receive
automatic option grants pursuant to the provisions of this Article Three shall
be limited to (i) those individuals who are serving as non-employee Board
members on the August 9, 1994 effective date of this Automatic Option Grant
Program and who have otherwise completed at least four (4) years of service in
such capacity, (ii) those individuals who are first elected or appointed as
non-employee Board members after such effective date, whether through
appointment by the Board or election by the Company's shareholders, and (iii)
those individuals who are re-elected to serve as non-employee Board members at
one or more Annual Stockholder Meetings beginning with the 1994 Annual Meeting.
A non-employee Board member shall not be eligible to receive any automatic
option grants under this Article Three if such individual renders (or has
rendered) services as an Employee at any time on or after October 1, 1988. Each
non-employee Board member eligible to participate in the Automatic Option Grant
Program pursuant to the foregoing criteria shall be designated an Eligible
Director for purposes of this Article Three.
B. Limitation. The non-employee Board members serving as Plan
Administrator shall not, during such period of service, be eligible to receive
any stock options, stock appreciation rights, direct stock issuances or other
stock award under this Plan or any other stock plan of the Company (or any
parent or subsidiary), other than pursuant to the provisions of this Automatic
Option Grant Program.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants shall be made under this Article Three
on the dates specified below:
1. Each individual who is serving as an Eligible Director on the
August 9, 1994 effective date of the Automatic Option Grant Program and who has
otherwise completed at least four (4) years of service in such capacity shall
automatically be granted on such effective date a non-statutory option to
purchase 20,000 shares of Common Stock upon the terms and conditions of this
Article Three.
2. Each individual who first becomes an Eligible Director after the
August 9, 1994 effective date, whether through election by the Company's
shareholders or appointment by the Board, shall automatically be granted, at the
time of such initial election or appointment, a non-statutory option to purchase
20,000 shares of Common Stock upon
15.
<PAGE> 16
the terms and conditions of this Article Three.
3. On the date of each Annual Shareholders Meeting, beginning with
the 1994 Annual Meeting, each individual who is at that time re-elected as an
Eligible Director shall automatically be granted a non-statutory option to
purchase an additional 10,000 shares of Common Stock upon the terms and
conditions of this Article Three, provided such individual has served as a Board
member for at least five (5) months.
B. No Limitation. There shall be no limit on the number of such
10,000- share annual option grants any one Eligible Director may receive over
his or her period of Board service. The number of shares for which the automatic
option grants are to be made to newly elected or continuing Eligible Directors
shall be subject to periodic adjustment pursuant to the applicable provisions of
Section IV of Article One.
C. Option Price. The option price per share of Common Stock of each
automatic option grant made under this Article Three shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
automatic grant date.
D. Option Term. Each automatic grant under this Article Three shall
have a maximum term of five (5) years measured from the automatic grant date.
E. Exercisability/Vesting. Each automatic grant shall be immediately
exercisable for any or all of the option shares; provided, however, that no such
grant shall become exercisable in whole or in part unless the shareholders
approve this Automatic Option Grant Program at the 1994 Annual Meeting. Any
shares purchased under the option shall be subject to repurchase by the Company,
at the option price paid per share, upon the optionee's cessation of Board
service prior to vesting in those shares in accordance with the applicable
schedule below.
- The initial automatic grant for 20,000 shares shall vest, and the
Company's repurchase right shall lapse, in a series of four (4) equal and
successive annual installments over the optionee's period of continued
service as a Board member, measured from the automatic grant date.
- Each annual 10,000-share automatic grant shall vest, and the
Company's repurchase right shall lapse, in two (2) equal and successive
annual installments over the optionee's period of continued service as a
Board member, measured from the automatic grant date.
Vesting of the option shares shall be subject to acceleration as
provided in Section II.H.3 and Section III of this Article Three. In no event
shall any additional option shares vest after the optionee's cessation of Board
service, except as otherwise provided in Section II.H.3 of this Article Three.
16.
<PAGE> 17
F. Payment. The option price shall be payable in any of the
alternative forms authorized under Section I.A.2 of Article Two. To the extent
the option is exercised for any unvested shares, the optionee must execute and
deliver to the Company a stock purchase agreement for those unvested shares
which provides the Company with the right to repurchase, at the option price
paid per share, any unvested shares held by the optionee at the time of
cessation of Board service and which precludes the sale, transfer or other
disposition of the purchased shares at any time while those shares remain
subject to the Company's repurchase right.
G. Non-Transferability. During the optionee's lifetime the automatic
option grant, together with the limited stock appreciation right pertaining to
such option, shall be exercisable only by the optionee and shall not be
assignable or transferable except for a transfer of the option effected by will
or by the laws of descent and distribution following the optionee's death.
H. Termination of Board Service.
1. Should the optionee cease to serve as a Board member for any
reason (other than death or permanent disability, as defined in Section I.C.1 of
Article Two) while holding one or more automatic option grants under this
Article Three, then such individual shall have a six (6)-month period following
the date of such cessation of Board service in which to exercise each such
option for any or all of the option shares in which the optionee is vested at
the time of such cessation of Board service. However, each such option shall
immediately terminate and cease to remain outstanding, at the time of such
cessation of Board service, with respect to any option shares in which the
optionee is not otherwise at that time vested under such option.
2. Should the optionee die within six (6) months after cessation of
Board service, then any automatic option grant held by the optionee at the time
of death may subsequently be exercised, for any or all of the option shares in
which the optionee is vested at the time of his or her cessation of Board
service (less any option shares subsequently purchased by the optionee prior to
death), by the personal representative of the optionee's estate or by the person
or persons to whom the option is transferred pursuant to the optionee's will or
in accordance with the laws of descent and distribution. The right to exercise
each such option shall lapse upon the expiration of the twelve (12)-month period
measured from the date of the optionee's death.
3. Should the optionee die or become permanently disabled while
serving as a Board member, then the shares of Common Stock at the time subject
to each automatic option grant held by the optionee shall immediately vest in
full (and the Company's repurchase right with respect to such shares shall
terminate), and the optionee (or the representative of the optionee's estate or
the person or persons to whom the option is transferred upon the optionee's
death) shall have a twelve (12)-month period following the date of the
optionee's cessation of Board service in which to exercise such option for any
17.
<PAGE> 18
or all of those vested shares of Common Stock.
4. In no event shall any automatic grant under this Article Three
remain exercisable after the expiration date of the five (5)-year option term.
Upon the expiration of the applicable post-service exercise period under
subparagraphs 1 through 3 above or (if earlier) upon the expiration of the five
(5)-year option term, the automatic grant shall terminate and cease to be
outstanding for any option shares in which the optionee was vested at the time
of his or her cessation of Board service but for which such option was not
subsequently exercised.
I. Shareholder Rights. The holder of an automatic option grant under
this Article Three shall have none of the rights of a shareholder with respect
to any shares subject to that option until such individual shall have exercised
the option and paid the option price for the purchased shares.
J. Remaining Terms. The remaining terms and conditions of each
automatic option grant shall be as set forth in the form Automatic Stock Option
Agreement attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction (as defined in Section
III of Article Two), the shares of Common Stock at the time subject to each
outstanding option under this Article Three but not otherwise vested shall
automatically vest in full and the Company's repurchase right with respect to
those shares shall terminate, so that each such option shall, immediately prior
to the specified effective date for the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time subject to that
option and may be exercised for all or any portion of such shares as fully
vested shares of Common Stock. Immediately following the consummation of the
Corporate Transaction, all option grants under this Article Three shall
terminate and cease to remain outstanding, except to the extent one or more such
grants are assumed by the successor entity or its parent corporation.
B. In connection with any Change in Control (as defined below) or
Hostile Take-Over (as defined in Section V of Article Two), the shares of Common
Stock at the time subject to each outstanding option under this Article Three
but not otherwise vested shall automatically vest in full and the Company's
repurchase right with respect to those shares shall terminate, so that each such
option shall, immediately prior to the specified effective date for the Change
in Control or Hostile Take-Over, become fully exercisable for all of the shares
of Common Stock at the time subject to that option and may be exercised for all
or any portion of such shares as fully vested shares of Common Stock. Each
option shall remain so exercisable for all the option shares following the
Change in Control or Hostile Take-Over until the expiration or sooner
termination of the option term.
18.
<PAGE> 19
C. Upon the occurrence of a Hostile Take-Over, the optionee shall
also have a thirty (30)-day period in which to surrender to the Corporation each
option held by him or her under this Article Three for a period of at least six
(6) months. The optionee shall in return be entitled to a cash distribution from
the Company in an amount equal to the excess of (i) the Take-Over Price (as
defined in Section V of Article Two) of the shares of Common Stock at the time
subject to the surrendered option over (ii) the aggregate option price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Company. Neither the approval of
the Plan Administrator nor the consent of the Board shall be required in
connection with such option surrender and cash distribution. The shares of
Common Stock subject to each option surrendered in connection with the Hostile
Take-Over shall NOT be available for subsequent issuance under the Plan.
D. The automatic option grants outstanding under this Article Three
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
E. For purposes of this Article Three, a Change in Control shall be
deemed to occur upon a change in ownership or control of the Company effected
through either of the following transactions:
(i) the direct or indirect acquisition by any person or related
group of persons (other than the Company or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities pursuant
to a tender or exchange offer made directly to the Company's shareholders
which the Board does not recommend such shareholders to accept; or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the Board
members (rounded up to the next whole number) ceases, by reason of one or
more contested elections for Board membership, to be comprised of
individuals who either (i) have been Board members continuously since the
beginning of such period or (ii) have been elected or nominated for election
as Board members during such period by at least a majority of the Board
members described in clause (i) who were still in office at the time such
election or nomination was approved by the Board.
19.
<PAGE> 20
IV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
The provisions of this Automatic Option Grant Program, together with
the automatic option grants outstanding under this Article Three, may not be
amended at intervals more frequently than once every six (6) months, other than
to the extent necessary to comply with applicable federal income tax laws and
regulations.
20.
<PAGE> 21
ARTICLE FOUR
MISCELLANEOUS
I. LOANS OR GUARANTEE OF LOANS
The Plan Administrator may assist any optionee (including any officer
or director) in the exercise of one or more options held by such optionee under
the Discretionary Option Grant Program by (a) authorizing the extension of a
loan to such optionee from the Company, (b) permitting the optionee to pay the
option price for the purchased Common Stock in installments over a period of
years or (c) authorizing a guarantee by the Company of a third party loan to the
optionee. The terms of any loan, installment method of payment or guarantee
(including the interest rate and terms of repayment) will be established by the
Plan Administrator in its sole discretion. Loans, installment payments and
guarantees may be granted without security or collateral (other than to
optionees who are consultants or independent contractors, in which event the
loan must be adequately secured by collateral other than the purchased shares),
but the maximum credit available to the optionee shall not exceed the sum of (i)
the aggregate option price payable for the purchased shares plus (ii) any
federal and state income and employment tax liability incurred by the optionee
in connection with the exercise of the option.
II. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects whatsoever. However, (i) no such
amendment or modification shall, without the consent of the holders, adversely
affect rights and obligations with respect to options at the time outstanding
under the Plan and (ii) any amendment made to the Automatic Option Grant Program
(or any options outstanding thereunder) shall be in compliance with the
limitation of Section IV of Article Three. In addition, the Board shall not,
without the approval of the shareholders of the Company (i) materially increase
the maximum number of shares issuable under the Plan or the number of shares for
which options may be granted to newly elected or continuing non-employee Board
members under Article Three of the Plan or the maximum number of shares for
which any one individual participating in the Plan may be granted stock options
and separately exercisable stock appreciation rights in the aggregate after July
31, 1994, except for permissible adjustments under Section IV(d) of Article One,
(ii) materially modify the eligibility requirements for the grant of options
under the Plan or (iii) otherwise materially increase the benefits accruing to
participants under the Plan.
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III. EFFECTIVE DATE AND TERM OF PLAN
(a) The Plan was initially adopted by the Board in September 1987 and
approved by the Company's shareholders in October 1987. The Plan was
subsequently amended by the Board in August 1988, July 1989, August 1990,
October 1991 and October 1992 to increase the number of shares of Common Stock
issuable thereunder. The shareholders approved such amendments in December 1988,
December 1989, December 1990, November 1991, and November 1992 respectively. The
Plan was restated by the Board, effective April 10, 1992, to bring the Plan into
compliance with applicable requirements of SEC Rule 16b-3, as amended May 1,
1991, under the 1934 Act. The Plan was subsequently amended on August 10, 1993
to increase the number of shares issuable over the term of the Plan by 2,000,000
shares, and such increase was approved by the shareholders at the 1993 Annual
Meeting. The Plan was amended on August 9, 1994 to (i) increase the number of
shares issuable over the term of the Plan by 4,000,000 shares, (ii) impose a
limitation of 2,000,000 shares on the total number of shares of Common Stock for
which any one individual may be granted stock options and separately exercisable
stock appreciation rights after July 31, 1994 and (iii) establish the Automatic
Option Grant for non-employee Board members. The Plan was further amended on
August 22, 1995 to increase the number of shares issuable over the term of the
Plan from 91,640,112 to 110,640,112 shares, subject to shareholder approval of
the 19,000,000-share increase at the 1995 Annual Shareholders Meeting. The Plan
was most recently amended on October 17, 1995 to (i) eliminate the authority of
the Plan Administrator to grant options with an exercise price per share less
than the fair market value per share of Common Stock on the grant date and (ii)
reduce the maximum term for which an option granted on or after October 1, 1995
may remain outstanding to nine (9) years.
(b) The provisions of the August 9, 1994 amendment shall apply only to
options granted under the Plan from and after the August 9, 1994 effective date.
Each option issued and outstanding under the Plan immediately prior to such
effective date shall continue to be governed by the terms and conditions of the
Plan as in effect on the grant date, and nothing in the August 9, 1994 amendment
shall be deemed to affect or otherwise modify the rights or obligations of the
holders of such options with respect to the acquisition of shares of Common
Stock thereunder. The provisions of the October 17, 1995 amendment are effective
October 1, 1995 and shall apply only to options granted under the Plan on or
after such effective date. Each option issued and outstanding under the Plan
immediately prior to such effective date shall continue to be governed by the
terms and conditions of the Plan as in effect on the grant date, and nothing in
the October 17, 1995 amendment shall be deemed to affect or otherwise modify the
rights or obligations of the holders of such options with respect to the
acquisition of shares of Common Stock thereunder.
(c) The sale and remittance procedure authorized for the exercise of
outstanding options shall be available for (i) all options granted under the
Plan on or after October 8, 1991, including options granted to officers and
directors, and (ii) all non-statutory options outstanding on such date,
including non-statutory options held by officers and
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directors. The Plan Administrator may also allow such procedure to be utilized
in connection with the exercise of designated incentive stock options
outstanding on such date, including those held by officers and directors.
(d) No option granted on the basis of the 19,000,000-share increase
authorized by the Board on August 22, 1995 shall become exercisable in whole or
in part at any time prior to shareholder approval of such 19,000,000-share
increase. If such shareholder approval is not obtained at the 1995 Annual
Meeting, then all options granted on the basis of such increase shall
immediately terminate and cease to be outstanding without ever becoming
exercisable for any of the option shares, and no further options shall be
granted on the basis of such share increase. Subject to such limitations, the
Plan Administrator may grant options under the Plan at any time after the date
of adoption and prior to the date of termination under paragraph (e) below.
(e) Unless sooner terminated in accordance with Section VII, the Plan
shall terminate upon the earlier of (i) the expiration of the ten (10) year
period measured from the date of the Board's initial adoption of the Plan or
(ii) the date on which all shares available for issuance under the Plan shall
have been issued or cancelled pursuant to the exercise, surrender or cash-out of
the options granted hereunder. If the date of termination is determined under
clause (i) above, then options outstanding on such date shall thereafter
continue to have force and effect in accordance with the provisions of the
instruments evidencing such options.
(f) Options may be granted under this Plan to purchase shares of
Common Stock in excess of the number of shares then available for issuance under
the Plan, provided (i) an amendment to increase the maximum number of shares
issuable under the Plan is adopted by the Board prior to the initial grant of
any such option and within one year thereafter such amendment is approved by the
shareholders of the Company and (ii) each option granted is not to become
exercisable, in whole or in part, at any time prior to the obtaining of such
shareholder approval.
IV. USE OF PROCEEDS
Any cash proceeds received by the Company from the sale of shares
pursuant to options granted under the Plan shall be used for general corporate
purposes.
V. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option hereunder,
and the issuance of stock upon the exercise or surrender of any such option
shall be subject to the procurement by the Company of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
options granted under it and the stock issued pursuant to it.
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V. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Company in establishing the Plan, nor any
action taken by the Plan Administrator hereunder, nor any provision of the Plan
shall be construed so as to grant any individual the right to remain in the
employ or service of the Company (or any parent or subsidiary) for any period of
specific duration, and the Company (or any parent or subsidiary corporation
retaining the services of such individual) may terminate such individual's
employment or service at any time and for any reason, with or without cause.
24.
