<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Auspex Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
AUSPEX SYSTEMS, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 20, 1997
TO THE STOCKHOLDERS OF AUSPEX SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of AUSPEX SYSTEMS, INC., a Delaware corporation (the "Company"), will
be held at 9:00 a.m., local time, on Thursday, November 20, 1997, at the Santa
Clara Convention Center, 5001 Great America Parkway, Conference Room 207, Santa
Clara, California 95054, for the following purposes:
1. To elect one (1) Class II director of the Company to serve for a
two-year term.
2. To approve the adoption of the Company's 1997 Stock Plan and the
reservation of 2,000,000 shares of Common Stock for issuance thereunder.
3. To approve a 500,000 share increase in the Common Stock issuable
under the Company's 1993 Employee Stock Purchase Plan.
4. To approve amendments to the Company's 1993 Directors' Stock
Option Plan to (i) amend the vesting of initial and annual option grants
automatically awarded to the Company's directors thereunder and (ii)
provide for the acceleration of vesting of such options upon the occurrence
of certain events.
5. To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending June 30, 1998.
6. To transact such other business as may come properly before the
meeting or any postponements or adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on October 2, 1997 are
entitled to notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person; however, to ensure your representation at the meeting you are urged to
mark, sign, date and return the enclosed proxy card as promptly as possible in
the postage prepaid envelope enclosed for that purpose. YOU MAY REVOKE YOUR
PROXY IN THE MANNER DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT AT ANY TIME
BEFORE IT HAS BEEN VOTED AT THE ANNUAL MEETING. ANY STOCKHOLDER ATTENDING THE
ANNUAL MEETING MAY VOTE IN PERSON EVEN IF HE OR SHE HAS RETURNED A PROXY.
By Order of the Board of Directors,
/s/ Henry P. Massey, Jr.
Henry P. Massey, Jr.
Secretary
Santa Clara, California
October 14, 1997
<PAGE> 3
AUSPEX SYSTEMS, INC.
PROXY STATEMENT FOR THE
1997 ANNUAL MEETING OF STOCKHOLDERS
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of AUSPEX SYSTEMS, INC., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Thursday, November 20, 1997 at
9:00 a.m., local time, or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Stockholders. The Annual Meeting will be held at the Santa Clara Convention
Center, 5001 Great America Parkway, Conference Room 207, Santa Clara, California
95054. The telephone number at that location is (408) 748-7000. When proxies are
properly dated, executed and returned, the shares they represent will be voted
at the Annual Meeting in accordance with the instructions of the stockholder. If
no specific instructions are given, the shares will be voted "FOR" (i) the
election of the one (1) Class II nominee for director set forth herein, (ii) the
adoption of the Company's 1997 Stock Plan and the reservation of 2,000,000
shares of Common Stock for issuance thereunder, (iii) the approval of a 500,000
share increase in the Common Stock issuable under the Company's 1993 Employee
Stock Purchase Plan, (iv) the amendments to the 1993 Directors' Stock Option
Plan changing the vesting of initial and annual option grants automatically
awarded to the Company's directors thereunder and providing for the acceleration
of vesting of such options upon the occurrence of certain events, (v) the
ratification of the appointment of Arthur Andersen LLP as independent auditors
and, (vi) at the discretion of the proxy holders, upon such other business as
may properly come before the Annual Meeting or any adjournment or postponement
thereof.
These proxy solicitation materials and the Annual Report to Stockholders
for the fiscal year ended June 30, 1997, including financial statements, were
first mailed on or about October 14, 1997, to all stockholders entitled to vote
at the meeting.
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on October 2, 1997 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. At
the Record Date, 25,093,239 shares of the Company's Common Stock, $.001 par
value, were issued and outstanding. No shares of the Company's Preferred Stock
were outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to the solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company at or before the taking of the vote at the
Annual Meeting a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later dated proxy relating to the same shares and
delivering it to the Secretary of the Company at or before the taking of the
vote at the Annual Meeting or (iii) attending the Annual Meeting and voting in
person (although attendance at the Annual Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be delivered to the principal executive offices of the
Company at Auspex Systems, Inc., 5200 Great America Parkway, Santa Clara,
California 95054, Attention: Secretary, or hand-delivered to the Secretary of
the Company at or before the taking of the vote at the Annual Meeting.
<PAGE> 4
VOTING AND SOLICITATION
On all matters, each share has one vote.
The cost of soliciting proxies will be borne by the Company. The Company
has retained Skinner & Company, Inc., a proxy solicitation firm, to assist in
its solicitation of proxies from brokers, nominees, institutions and individuals
and estimates that such service will cost approximately $5,000. Arrangements
will also be made with custodians, nominees and fiduciaries for forwarding of
proxy solicitation materials to beneficial owners of shares held of record by
such custodians, nominees and fiduciaries. The Company will reimburse such
custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith. In addition, proxies may be solicited by directors,
officers and employees of the Company in person or by telephone, telegram or
other means of communication. No additional compensation will be paid for such
services.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR",
"AGAINST", or "WITHHELD FROM" on a matter are treated as being present at the
meeting for purposes of establishing a quorum and are also treated as shares
entitled to vote at the Annual Meeting (the "Votes Cast") with respect to such
matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
In a 1989 Delaware case, Berlin v. Emerald Partners, the Delaware Supreme
Court held that, while broker non-votes should be counted for the purpose of
determining the presence or absence of a quorum for the transaction of business,
broker non-votes should not be counted for the purpose of determining the number
of Votes Cast with respect to the particular proposal on which the broker has
expressly not voted. Accordingly, the Company intends to treat broker non-votes
in this manner. Thus, a broker non-vote will not affect the outcome of the
voting on a proposal.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
The Company currently intends to hold its 1998 Annual Meeting of
Stockholders in November 1998 and to mail proxy statements relating to such
meeting in October 1998. The date by which stockholder proposals must be
received by the Company for inclusion in the proxy statement and form of proxy
for its 1998 Annual Meeting of Stockholders is June 16, 1998. Such stockholder
proposals should be submitted to Auspex Systems, Inc. at 5200 Great America
Parkway, Santa Clara, California 95054, Attention: Secretary.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEE
Pursuant to the Company's Restated Certificate of Incorporation, the Board
of Directors is divided into two classes. The directors are elected to serve
staggered two-year terms, such that the term of one class of directors expires
each year. The Company currently has four directors divided among the two
classes as follows: Class I -- W. Frank King, David F. Marquardt and Bruce N.
Moore; and Class II -- R. Stephen Cheheyl. The one (1) Class II director has
been nominated for election at the Annual Meeting for a two-year term ending at
the 1999 Annual Meeting of Stockholders or when such director's successor is
elected.
2
<PAGE> 5
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Class II nominee named below. In the event that such
nominee is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for a nominee who shall be designated by the
present Board of Directors to fill the vacancy. In the event that additional
persons are nominated for election as director, the proxy holders intend to vote
all proxies received by them in such a manner as will assure the election of as
many of the nominees listed below as possible, and, in such event, the specific
nominees to be voted for will be determined by the proxy holders. The Company is
not aware that the nominee will be unable or will decline to serve as a
director. The director elected at this Annual Meeting will serve until the term
of that director's class expires or until such director's successor has been
duly elected and qualified.
VOTE REQUIRED
The one (1) nominee in Class II receiving the highest number of affirmative
votes of the shares entitled to be voted shall be elected to the Board of
Directors. An abstention will have the same effect as a vote withheld for the
election of directors and, pursuant to Delaware law, a broker non-vote will not
be treated as voting in person or by proxy on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOMINEE
LISTED BELOW.
The names of the directors, certain information about them and their ages
as of September 30, 1997 are set forth below:
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME OF DIRECTOR AGE POSITION(S) WITH THE COMPANY SINCE EXPIRES CLASS
- -------------------------------- --- --------------------------------------- -------- ------- -----
<S> <C> <C> <C> <C> <C>
NOMINEE FOR CLASS II DIRECTOR
R. Stephen Cheheyl.............. 51 Director 1995 1999 II
DIRECTORS WHOSE TERMS CONTINUE
W. Frank King................... 57 Director 1994 1998 I
David F. Marquardt.............. 48 Director 1989 1998 I
Bruce N. Moore.................. 46 Chief Executive Officer, President and 1995 1998 I
Director
</TABLE>
Nominee for Class II Director:
Mr. R. Stephen Cheheyl has served as a director of the Company since April
1995. From October 1994 until he retired in December 1995, Mr. Cheheyl served as
an Executive Vice President of Bay Networks, Inc., which was formed through the
merger of Wellfleet Communications, Inc. ("Wellfleet") and Synoptics
Communications Inc. From December 1990 to October 1994, Mr. Cheheyl served as
Senior Vice President, Finance and Administration at Wellfleet. He also serves
on the boards of directors of ON Technology Corporation, Infinium Software, Inc.
and Sapient Corporation.
Directors Whose Terms Continue:
Dr. W. Frank King has served as a director of the Company since October
1994. Dr. King has served as President, Chief Executive Officer and a Director
of PSW Technologies, Inc., a software services firm that provides high value
solutions to technology vendors and business end-users by mastering and applying
critical emerging technologies, since October 1996. From 1992 to October 1996,
Dr. King served as President of Pencom Software, a division of Pencom Systems,
Inc. From 1988 to 1992, Dr. King was Senior Vice President of the Software
Business group of Lotus, a software publishing company. Prior to joining Lotus,
Dr. King was with IBM, a technology company, for 19 years, where his last
position was Vice President of Development for the Personal Computing Division.
Dr. King also serves on the boards of directors of State of the Art, Inc.,
Excalibur Technologies Corporation, SystemSoft and Natural Microsystems, Inc.
3
<PAGE> 6
Mr. David F. Marquardt has served as a director of the Company since April
1989. Since August 1995, Mr. Marquardt has been a general partner at August
Capital, which is a private venture capital partnership. Since August 1980, Mr.
Marquardt has been a general partner of various Technology Venture Investors
entities, which are private venture capital limited partnerships. Mr. Marquardt
also serves on the boards of directors of Microsoft Corporation, Farallon
Communication, Inc., Visioneer, Inc. and several privately held companies.
Mr. Bruce N. Moore joined the Company in June 1995 as President, Chief
Operating Officer and a member of the Board of Directors. In January 1996, Mr.
Moore assumed the additional role of Chief Executive Officer and relinquished
the role of Chief Operating Officer. Mr. Moore joined the Company from Diasonics
Ultrasound, Inc., a provider of diagnostic ultrasound equipment, where he held
the positions of President and Chief Executive Officer. His eleven-year career
at Diasonics included various senior management positions in marketing and
business development. Mr. Moore started his career as a sales representative in
IBM's Data Processing Division in 1976.
BOARD OF DIRECTOR MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of seven (7) meetings
during the fiscal year ended June 30, 1997 and acted once by unanimous written
consent. No director attended fewer than 75% of the total number of meetings of
the Board of Directors, or committees of the Board of Directors on which he
served, held during the fiscal year or such shorter period as he may have served
as a director. The Board of Directors has an Audit Committee, a Compensation
Committee and a Stock Option Committee. The Board of Directors does not have a
nominating committee or any committee performing similar functions.
The Audit Committee, which consists of Dr. W. Frank King and Mr. R. Stephen
Cheheyl, held two (2) meetings during the fiscal year. This committee is
primarily responsible for approving the services performed by the Company's
independent auditors and for reviewing and evaluating the Company's accounting
principles and its system of internal accounting controls.
The Compensation Committee, which consists of Dr. W. Frank King and Mr.
David F. Marquardt, held a total of six (6) meetings during the fiscal year and
acted once by unanimous written consent. This committee reviews and approves the
Company's executive compensation policies and approves all stock option grants
to executive officers, stock option grants over 10,000 shares to new employees
and all subsequent stock option grants to existing employees.
The Stock Option Committee, which consisted of Messrs. Laurence B. Boucher
and Bruce N. Moore in fiscal year 1997, until Mr. Boucher's resignation from the
Board of Directors in January 1997, after which the Stock Option Committee
consisted of only Mr. Moore, held no meetings during the fiscal year. This
committee is primarily responsible for approving all stock option grants to
newly-hired employees (other than executive officers) of 10,000 shares or fewer.
BOARD OF DIRECTOR COMPENSATION
Directors who are not employees of the Company receive compensation for
their services as directors at the rate of $2,000 per quarter and $1,000 per
Board of Director or committee meeting attended. Generally, Compensation
Committee meetings are held just prior to or just after regularly scheduled
Board of Director meetings and directors are not separately compensated for
attending such committee meetings. Non-employee directors are automatically
granted an initial option to purchase 16,000 shares of the Company's Common
Stock and thereafter annual options to purchase 4,000 shares of the Company's
Common Stock pursuant to the terms of the Company's 1993 Directors' Stock Option
Plan. Pursuant to this plan, on July 1, 1997, Mr. Cheheyl, Dr. King and Mr.
Marquardt were each granted an annual option to purchase 4,000 shares of Common
Stock at an exercise price of $9.00 per share, which options vest fully on the
fourth anniversary of the date of grant. For information regarding certain
proposed amendments to the 1993 Directors' Stock Option Plan, see Proposal No.
4.
4
<PAGE> 7
PROPOSAL NO. 2
APPROVAL OF THE ADOPTION OF THE 1997 STOCK PLAN
At the Annual Meeting, the stockholders are being requested to consider and
approve the adoption of the Company's 1997 Stock Plan (the "1997 Plan") and the
reservation of 2,000,000 shares of the Company's Common Stock for issuance
thereunder.
In September 1997, the Board of Directors adopted the 1997 Plan and
reserved 2,000,000 shares of Common Stock for issuance thereunder, subject to
stockholder approval. The 1997 Plan is intended to replace the Company's 1988
Stock Option Plan, as amended (the "1988 Plan"), which will terminate with
respect to the grant of any new options upon stockholder approval of the 1997
Plan. Pursuant to the terms of the 1997 Plan, all unissued and available shares
under the 1988 Plan will be added to the shares issuable under the 1997 Plan,
including any shares which are returned to the 1988 Plan as a result of the
termination or forfeiture of any options granted under the 1988 Plan. The
Company cannot estimate the number of shares which will be returned to the 1988
Plan as a result of such terminations or forfeitures; however, as of September
30, 1997, there were 1,416,162 and, subject to stockholder approval, 2,000,000
shares of Common Stock available for issuance under the 1988 Plan and 1997 Plan,
respectively.
Section 162(m) of the Internal Revenue Code of 1986, as amended ("Section
162(m)"), limits the Company's deduction in any one fiscal year for federal
income tax purposes to $1,000,000 per person with respect to the Company's Chief
Executive Officer and its four other highest paid executive officers who are
employed on the last day of the fiscal year unless the compensation was not
otherwise subject to the deduction limit. Option grants under the 1997 Plan will
not be subject to the deduction limitation if the stockholders approve the
material provisions of the 1997 Plan (see Appendix A). The 1997 Plan allows for
the grant of incentive stock options to all employees of the Company and the
grant of nonstatutory stock options and restricted stock to employees, directors
and consultants of the Company. Incentive stock options must be granted with an
exercise price not less than the fair market value of the Company's Common Stock
on the date of grant. The exercise price for nonstatutory stock options and the
purchase price for restricted stock is determined by the administrator of the
1997 Plan. The 1997 Plan provides that no employee of the Company may be
granted, in any fiscal year, options to purchase more than 1,000,000 shares of
Common Stock. However, notwithstanding this limit, in connection with such
individual's initial employment with the Company, the individual may be granted
options to purchase up to an additional 500,000 shares.
PURPOSE
The Board of Directors believes that it is in the best interests of the
Company and its stockholders to have a stock plan in place for several reasons.
First, the 1988 Plan expires by its terms in April 1988, and the Board of
Directors believes that having a stock plan in place is vital to retaining,
motivating and rewarding employees, executives and consultants by providing them
with long-term equity participation in the Company relating directly to the
financial performance and long-term growth of the Company. Second, the Board of
Directors believes that granting stock options to employees is an important
contributor to aligning the incentives of the Company's employees with the
interests of the Company's stockholders. Third, the number of shares reserved
for issuance under the 1997 Plan will provide the Company with an adequate pool
of options to compete effectively with other companies for existing and new
employees. Competition for qualified employees in the technology market is
extremely intense, and, due to the rapid growth of many successful companies in
this sector, such competition is increasing. The Board of Directors believes
that in order to remain competitive with other technology companies with regard
to its long-term incentive plans, the Company must continue to provide employees
with the opportunity to obtain equity in the Company. Finally, an adequate pool
of options will enhance the Company's ability to structure attractive offers to
potential acquisition targets. A summary of the principal terms of the 1997 Plan
is located in Appendix A to this Proxy Statement.
5
<PAGE> 8
NEW 1997 PLAN BENEFITS
The Company cannot now determine the number of stock options to be granted
in the future to the Named Executive Officers (as defined in "Executive
Compensation -- Summary Compensation Table"), all current executive officers as
a group, all current directors who are not executive officers as a group or all
employees (including current officers who are not executive officers) as a
group. However, the following table sets forth information with respect to stock
option grants under the 1988 Plan during the fiscal year ended June 30, 1997 to
such persons:
NEW 1997 PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
NUMBER OF SHARES
DOLLAR SUBJECT TO OPTIONS
NAME OF INDIVIDUAL OR IDENTITY OF GROUP VALUE($) GRANTED(#)
---------------------------------------------- -------- ------------------
<S> <C> <C>
Bruce N. Moore................................ -- --
Joseph G. Brown............................... -- (1) 75,000
Paul R. Gifford............................... -- (1) 100,000
Russell M. Lait............................... -- (1) 50,000
Kent L. Robertson............................. -- (1) 25,000
Michael B. Stevens............................ -- --
All current executive officers as a group (6
total)...................................... -- (1) 250,000
Non-Executive Director Group (3 total)........ -- --
All other employees as a group................ $454,351(2) 1,378,750
</TABLE>
- ---------------
(1) The exercise prices of these options exceeded $9.625, the closing price of
the Company's Common Stock on June 30, 1997 as listed on The Nasdaq Stock
Market. None of such options were therefore in-the-money as of such date.
(2) This dollar value reflects the difference between $9.625 (the closing price
of the Company's Common Stock on June 30, 1997) and the exercise prices of
such options, multiplied by the number of shares subject to such options.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the adoption of the Company's 1997 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ADOPTION OF THE COMPANY'S 1997 PLAN AND THE RESERVATION OF 2,000,000 SHARES OF
COMMON STOCK FOR ISSUANCE THEREUNDER.
PROPOSAL NO. 3
APPROVAL OF A 500,000 SHARE INCREASE IN THE SHARES ISSUABLE
UNDER THE COMPANY'S 1993 EMPLOYEE STOCK PURCHASE PLAN
At the Annual Meeting, the stockholders are being requested to consider and
approve an amendment to the Company's 1993 Employee Stock Purchase Plan, as
amended (the "Purchase Plan"), to increase the number of shares of Common Stock
reserved for issuance thereunder by 500,000 shares.
The Company's Purchase Plan was adopted by the Board of Directors and by
the stockholders in March 1993. A total of 800,000 shares of Common Stock was
reserved for issuance under the Purchase Plan. In September 1997, the Board of
Directors approved a further increase of 500,000 shares issuable under the
Purchase Plan, which, if approved by the stockholders, would increase the total
shares reserved for issuance under the Purchase Plan since its inception to
1,300,000 shares. As of September 30, 1997, 652,003 shares of Common Stock had
been purchased under the Purchase Plan and 147,997 shares remained available for
6
<PAGE> 9
future purchases. A summary of the principal terms of the Purchase Plan (which
assumes the adoption of the proposed amendment) is located in Appendix B to this
Proxy Statement.
PURPOSE AND EFFECT OF AMENDMENT
The purpose of the proposed amendment to the Purchase Plan is to increase
the number of shares available for issuance under the Purchase Plan. The Board
of Directors believes that the proposed amendment is in the best interests of
the Company and its stockholders for a number of reasons. First, the Board of
Directors believes that the Company's Purchase Plan serves to incentivize
current employees and to align their interests with those of the Company's
stockholders. Second, the Board of Directors believes that the Purchase Plan is
an important element of the Company's strategy to attract and retain qualified
employees in an increasingly competitive market. Finally, without the proposed
share increase, the Company will deplete the shares available for issuance under
the Purchase Plan within the next year.
AMENDED PURCHASE PLAN BENEFITS
The Company cannot now determine the number of shares to be purchased in
the future by the Named Executive Officers (as defined in "Executive
Compensation -- Summary Compensation Table"), all current executive officers as
a group, all current directors who are not executive officers as a group or all
employees (including current officers who are not executive officers) as a
group. However, the following table sets forth information with respect to share
purchases under the Purchase Plan during the fiscal year ended June 30, 1997 by
such persons:
AMENDED PURCHASE PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
NUMBER OF
SHARES
DOLLAR SUBJECT TO
VALUE OPTIONS
NAME OF INDIVIDUALS OR IDENTITY OF GROUP ($)(1) GRANTED (#)
-------------------------------------------------- ----------- -----------
<S> <C> <C>
Bruce N. Moore.................................... $ 1,724 1,877
Joseph G. Brown................................... 200 268
Paul R. Gifford................................... -- --
Russell M. Lait................................... 583 970
Kent L. Robertson................................. -- --
Michael B. Stevens................................ 1,597 2,371
All current executive officers as a group (6
total).......................................... 4,104 5,486
Non-Executive Director Group (3 total)............ -- --
All other employees as a group.................... 131,893 213,198
</TABLE>
- ---------------
(1) Indicates the difference between the purchase prices of the shares and
$9.625, the closing price of the Company's Common Stock on June 30, 1997 as
listed on The Nasdaq Stock Market, multiplied by the number of shares
purchased.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
500,00 SHARE INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR
ISSUANCE UNDER THE COMPANY'S PURCHASE PLAN.
7
<PAGE> 10
PROPOSAL NO. 4
APPROVAL OF AMENDMENTS TO THE
1993 DIRECTORS' STOCK OPTION PLAN
At the Annual Meeting, the stockholders are being requested to consider and
approve amendments to the Company's 1993 Directors' Stock Option Plan (the
"Directors' Plan") to (i) change the vesting of initial and annual option grants
automatically awarded to the Company's directors thereunder and (ii) provide for
the acceleration of vesting of such options upon the occurrence of certain
events.
The Directors' Plan was approved by the Board of Directors and by the
stockholders in March 1993. A total of 175,000 shares of Common Stock was
reserved for issuance under the Directors' Plan. In September 1997, the Board of
Directors approved amendments to the Directors' Plan which (i) modify the
vesting of annual and subsequent automatic option grants and (ii) accelerate the
vesting of options under certain conditions. As of September 10, 1997, options
to purchase 100,000 shares of Common Stock (net of lapsed and terminated
options) had been granted under the Directors' Plan, 75,000 shares remained
available for future option grants and options for the purchase of 16,000 shares
had been exercised. A summary of the principal terms of the Directors' Plan
(which assumes adoption of the amendments) is located in Appendix C to this
Proxy Statement.
PURPOSE AND EFFECT OF AMENDMENTS
The purposes of the proposed amendments to the Directors' Plan are to (i)
amend the vesting of option grants to the Company's non-employee directors and
(ii) provide for the acceleration of options upon the occurrence of certain
events. The Directors' Plan provides that each new non-employee director will
automatically be granted an initial option to purchase sixteen thousand (16,000)
shares of the Company's Common Stock on the first business date of the fiscal
year following such director's election to the Board of Directors and thereafter
annual options to purchase four thousand (4,000) shares of the Company's Common
Stock. Currently, the initial option grants become exercisable as to twenty-five
percent (25%) of the total shares granted on the first, second, third and fourth
anniversaries of the date of grant; and the subsequent annual option grants
become exercisable as to one hundred percent (100%) of the total shares granted
on the fourth anniversary of the date of grant. The proposed amendments would
make all options granted under the Directors' Plan become exercisable as to
one-sixteenth ( 1/16th) of the shares subject to such options each quarter over
a period of four years. An additional amendment provides that in the event of a
merger, acquisition or sale of all or substantially all of the assets of the
Company (collectively, a "Change in Control"), to the extent unvested, an
additional 25% of the total number of shares subject to an option become
immediately vested. Additionally, in the event of a Change in Control where the
options are not assumed or substituted by the acquiror, all shares subject to
all outstanding options immediately become fully vested and exercisable.
However, if either of such accelerated vesting features would in and of itself
jeopardize the Company's ability to account for a merger as a pooling of
interest, then no such acceleration shall occur with respect to any options
issued under the Directors' Plan.
The Board of Directors believes that stock option grants are an essential
element in attracting and retaining qualified individuals to serve as directors
of the Company. The pool of individuals qualified to be directors of growing
technology companies is relatively small and the number of companies seeking
such expertise is increasing. In addition, many qualified individuals are
reluctant to serve on boards of directors unless appropriately compensated for
the responsibility and risk they assume. The Board of Directors believes that
most individuals it seeks as Board of Director members expect equity
compensation as an inducement for their services. Further, the Board of
Directors believes that equity compensation serves to better align the interests
of non-employee directors with those of the Company and its stockholders than
does cash compensation. The Board of Directors believes that the proposed
amendments are in the best interests of the Company and its stockholders for two
reasons. First, the Board of Directors believes that accelerating the vesting of
option grants to non-employee directors will make these options more valuable to
the grantees and thus will help to attract and retain qualified individuals to
serve as directors of the Company. Second, the Board of Directors believes that
providing non-employee directors with an early opportunity to acquire a
8
<PAGE> 11
significant ownership interest in the Company's Common Stock will help to
incentivize those directors to use their influence and talent to maximize
stockholder value for all stockholders.
AMENDED DIRECTORS' PLAN BENEFITS
The following table sets forth information with respect to stock option
grants to be made under the Directors' Plan to the Company's non-employee
directors for the fiscal year ending June 30, 1998:
AMENDED DIRECTORS' PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
NUMBER OF
SHARES SUBJECT
DOLLAR TO OPTIONS TO BE
VALUE GRANTED DURING
NAME OF INDIVIDUAL OR IDENTITY OF GROUP ($)(1) FISCAL 1998 (#)
---------------------------------------------------- ------- ----------------
<S> <C> <C>
R. Stephen Cheheyl.................................. -- 4,000
W. Frank King....................................... -- 4,000
David F. Marquardt.................................. -- 4,000
All current directors who are not executive officers
(3 persons)....................................... -- 12,000
</TABLE>
- ---------------
(1) Pursuant to the Directors' Plan, these stock options were automatically
granted on July 1, 1997 at an exercise price of $9.00 (the closing price of
the Company's Common Stock on July 1, 1997 as listed on The Nasdaq Stock
Market).
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendments to the Company's Directors' Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
AMENDMENTS TO THE COMPANY'S DIRECTORS' PLAN TO CHANGE THE VESTING OF THE INITIAL
AND ANNUAL OPTION GRANTS AUTOMATICALLY AWARDED TO THE COMPANY'S DIRECTORS
THEREUNDER AND TO PROVIDE FOR ACCELERATION OF VESTING UPON THE OCCURRENCE OF
CERTAIN EVENTS.
PROPOSAL NO. 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending June 30, 1998, and recommends that stockholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Arthur Andersen LLP has audited the Company's financial statements since
1991. Its representatives are expected to be present at the Annual Meeting with
the opportunity to make a statement if they desire to do so and are expected to
be available to respond to appropriate questions.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the ratification of the appointment of Arthur Andersen LLP as
independent auditors of the Company for the fiscal year ending June 30, 1998.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
9
<PAGE> 12
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for the three most recently
completed fiscal years concerning the compensation of the Chief Executive
Officer of the Company and the five other most highly compensated executive
officers of the Company (the "Named Executive Officers") in the fiscal year
ended June 30, 1997:
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------- SECURITIES ALL OTHER
FISCAL SALARY BONUS UNDERLYING OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) (#) ($)(2)
- ------------------------------- ------ -------- -------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Bruce N. Moore................. 1997 $350,000 $125,342 -- $ 1,285
Chief Executive Officer 1996 285,732 171,000 -- 1,833
and President 1995 13,154 -- 400,000 31
Joseph G. Brown................ 1997 205,960 73,431(3) 100,000(4) 1,285
Vice President of World Wide 1996 186,383 30,000 -- 1,598
Field Operations 1995 177,113 35,000 -- 1,857
Paul R. Gifford(5)............. 1997 145,385 88,852(6) 100,000 53,213(7)
Vice President of Product
Development
Russell M. Lait(8)............. 1997 156,533 39,470 107,500(9) 345
Vice President of Operations
Kent L. Robertson.............. 1997 226,595 45,000 150,000(10) 3,320
Vice President of Finance 1996 37,231 16,500 100,000 692
and Chief Financial Officer
Michael B. Stevens............. 1997 165,000 80,180(11) 107,000(12) 9,052(13)
Vice President of 1996 120,000 140,963(14) 107,000 8,597(15)
North American Sales
</TABLE>
- ---------------
(1) Includes (in each fiscal year) bonuses earned during the fiscal year and
paid in the subsequent fiscal year.
(2) Group term life insurance premiums except as otherwise indicated.
(3) Includes $39,536 in sales commissions.
(4) Includes 25,000 options granted in exchange for cancellation of a like
number of previously granted options that were repriced on November 1,
1996.
(5) Mr. Gifford was appointed an executive officer of the Company on October
21, 1996.
(6) Includes $50,000 signing bonus.
(7) Also includes $52,394 of relocation expenses.
(8) Mr. Lait was appointed an executive officer of the Company on August 1,
1996.
(9) Includes 57,500 options granted in exchange for cancellation of a like
number of previously granted options that were repriced on November 1,
1996.
(10) Includes 125,000 options granted in exchange for cancellation of a like
number of previously granted options that were repriced on November 1,
1996.
(11) Includes $19,420 in sales commissions.
(12) Reflects 107,000 options granted in exchange for cancellation of a like
number of previously granted options that were repriced on November 1,
1996.
(13) Also includes $6,600 car allowance and $325 health club reimbursement.
(14) Includes $66,611 in sales commissions.
(15) Also includes $6,600 auto allowance and $650 health club reimbursement.
10
<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended June 30, 1997 to the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(4)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SHARE)(3) DATE 5%($) 10%($)
- ----------------------- ------------- -------------- ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bruce N. Moore......... -- -- -- -- -- --
Joseph G. Brown........ 25,000 0.70% $15.50 09/02/06 $243,697 $ 617,575
25,000(5) 0.70 10.25 11/01/06 161,154 408,397
50,000 1.40 12.75 12/06/06 400,921 1,016,011
Paul R. Gifford........ 100,000(6) 2.80 10.25 11/01/06 644,617 1,633,586
Russell M. Lait........ 50,000 1.40 15.50 09/03/06 487,394 1,235,150
57,500(5) 1.61 10.25 11/01/06 370,655 939,312
Kent L. Robertson...... 25,000 0.70 15.50 09/03/06 243,697 617,575
125,000(5) 3.51 10.25 11/01/06 805,772 2,041,983
Michael B. Stevens..... 107,000(5) 3.00 10.25 11/01/06 689,741 1,747,937
</TABLE>
- ---------------
(1) Under the terms of the Company's 1988 Plan, the Board of Directors retains
discretion, subject to plan limits, to modify the terms of outstanding
options and to reprice the options.
(2) An aggregate of 3,562,342 options to purchase shares of Common Stock of the
Company was granted to employees and consultants during the fiscal year
ended June 30, 1997. This number includes 1,933,592 options granted in
exchange for cancellation of a like number of previously granted options
that were repriced in November 1996.
(3) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of shares that are already owned or by offset of the
underlying shares, subject to certain conditions.
(4) These columns show the hypothetical gains or "option spreads" of the options
granted based on assumed annual compound stock appreciation rates of 5% and
10% over the full ten-year term of the options. The 5% and 10% assumed rates
of appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
future Common Stock prices.
(5) Reflects options granted in exchange for cancellation of a like number of
previously granted options. These options vest monthly over 5 years
beginning one month following the date of grant.
(6) Includes 20,000 options that vest on October 21, 1998; the remaining options
vest equally over a period of 48 months.
11
<PAGE> 14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides certain information concerning option
exercises by the Named Executive Officers during the fiscal year ended June 30,
1997 and fiscal year-end option values:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
NUMBER OF UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT JUNE
SHARES VALUE OPTIONS AT JUNE 30, 1997 30, 1997($)(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- -------------- ------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bruce N. Moore............. -- -- 160,000 240,000 -- --
Joseph G. Brown............ -- -- 76,248 118,753 $ 222,287 $ 175,217
Paul R. Gifford............ -- -- -- 100,000 -- --
Russell M. Lait............ 7,488 $68,962 17,708 52,692 77,906 12,206
Kent L. Robertson.......... -- -- 2,916 122,084 -- --
Michael B. Stevens(3)...... 500 3,250 29,566 92,434 23,406 15,219
</TABLE>
- ---------------
(1) Calculated by determining the difference between the closing price of the
Company's Common Stock on The Nasdaq National Market on the date of exercise
and the exercise price of the options, and multiplying such difference by
the number of shares.
(2) Calculated by determining the difference between the fair market value of
the Company's Common Stock underlying the options at June 30, 1997 (the
closing price of the Common Stock of the Company was listed on The Nasdaq
National Market at $9.625 per share on June 30, 1997) and the exercise price
of the options, and multiplying such difference by the number of shares
subject to outstanding options.
(3) Under the Company's 1988 Plan, certain of the options listed are immediately
exercisable for all shares subject to the option, including shares that have
not yet vested. However, unvested shares purchased upon early exercise of
options are subject to repurchase by the Company, at its option, upon the
optionee's termination of employment. This repurchase right lapses over
time. Certain of the shares listed above were subject to repurchase by the
Company on June 30, 1997.
SEVERANCE AND CHANGE IN CONTROL ARRANGEMENTS
On June 7, 1995, the Company entered into an agreement with Bruce N. Moore,
Chief Executive Officer, President and director, which provides, among other
things, that in the case of (i) the termination of Mr. Moore for any reason
other than for cause or (ii) an acquisition of the Company following which Mr.
Moore elects not to continue his employment with the Company or the acquiror,
Mr. Moore will be entitled to receive his salary and continue his participation
in the Company's executive bonus program for a period of 12 months following
such termination or acquisition. Mr. Moore's current annual base salary is equal
to $375,000 and he is eligible for a bonus of up to 55% of his annual salary
pursuant to the Company's annual cash incentive program.
REPORT OF THE COMPENSATION COMMITTEE
The following is the Report of the Compensation Committee of the Company's
Board of Directors, describing the compensation policies and rationale with
respect to the compensation paid to the Company's executive officers for the
fiscal year ended June 30, 1997. The information contained in the report shall
not be deemed to be "soliciting material" or to be "filed" with the Securities
and Exchange Commission (the "SEC") nor shall such information be incorporated
by reference into any future filing under the Securities Act of 1933, as amended
(the "Securities Act") or the Exchange Act of 1934, as amended (the "Exchange
Act"), except to the extent that the Company specifically incorporates it by
reference into such filing.
INTRODUCTION
The Compensation Committee administers the Company's executive compensation
programs. The Compensation Committee is comprised of two non-employee directors
of the Company, Dr. W. Frank King
12
<PAGE> 15
and Mr. David F. Marquardt. The Company's programs and policies are designed to
enhance stockholder values by closely linking executive rewards with the
Company's success.
The Company's executive compensation program has three elements:
- Base Salary
- Annual Cash Incentive Plan
- Stock Option Program
BASE SALARY
The base salaries for the Company's executive officers for the fiscal year
ended June 30, 1997 set forth in the Summary Compensation Table were determined
by the Compensation Committee. See "Executive Compensation -- Summary
Compensation Table." The Compensation Committee considers the recommendations
made by the Chief Executive Officer for the Company's officers other than the
Chief Executive Officer. In addition, the Compensation Committee retained the
services of an outside compensation consulting firm. In its deliberations, the
Compensation Committee took into consideration:
- Salaries of officers in similar positions in similar sized and comparable
high technology companies. This peer group of companies may be different
than those of the companies incorporated in the stock performance graph
inasmuch as they represent competitors for executive talent, rather than
commercial competitors;
- Company performance as measured by achievement of goals and objectives
established at the start of the previous fiscal year; and
- Evaluations of each individual's contributions as made by the Chief
Executive Officer (the Chief Executive Officer's performance was
evaluated independently by the Committee).
ANNUAL CASH INCENTIVE PROGRAM
The annual cash incentive plan is designed to reward participants for
achievement of predetermined Company goals and objectives. These predetermined
goals and objectives are designed to drive Company performance towards enhanced
stockholder returns. During the fiscal year ended June 30, 1997, awards were
earned under this plan by the Company's officers, including the Chief Executive
Officer, as set forth in the bonus column of the Summary Compensation Table. See
"Executive Compensation -- Summary Compensation Table."
STOCK OPTION PROGRAM
During the fiscal year ended June 30, 1997, the Compensation Committee
approved all stock option grants made to executive officers and employees under
the stockholder approved 1988 Plan, except for stock option grants to
newly-hired employees who are non-executive officers receiving 10,000 or fewer
shares (which are handled by the Stock Option Committee). The stock option
program is designed to attract, retain and motivate the Company's officers and
other participants by providing them with a meaningful stake in the Company's
long-term success.
In making its determinations, the Compensation Committee takes into
consideration:
- Grants made to individuals in similar positions in comparable high
technology companies;
- Participants' contributions to the Company's performance, both short and
long-term;
- Prior stock option grants, especially as they relate to the number of
options vested and unvested; and
- Impact that total option grants made to all participants have on dilution
of current stockholder ownership and the Company's earnings.
13
<PAGE> 16
Stock option grants made to the Named Executive Officers are set forth in
the table of option grants in the last fiscal year set forth in this Proxy
Statement. See "Executive Compensation -- Option Grants in Last Fiscal Year."
TEN-YEAR OPTION REPRICINGS FROM JULY 1, 1988 TO JUNE 30, 1997
On November 1, 1996, the Board of Directors offered all employees the
opportunity to exchange any outstanding stock options with exercise prices in
excess of $10.25, the closing price per share of the Company's Common Stock on
October 31, 1996 (as listed on The Nasdaq Stock Market), for new options with an
exercise price of $10.25 per share. The new options were identical to the old
options that were surrendered in exchange for the new options, except that the
new options imposed a three month vesting delay. In approving the option
repricing, the Board of Directors considered such factors as the competitive
environment for retaining qualified employees and officers and the overall
benefit to the stockholders from a highly motivated group of employees and
officers. In particular, the Board of Directors recognized the extremely intense
competition for qualified employees in the San Francisco Bay area employment
market. Given the variety of alternative employment opportunities from both
established high-technology companies and high-technology startup companies, the
Board of Directors concluded that repricing out-of-the-money options would
greatly assist the Company in retaining its employees and the members of the
Company's management team. Finally, the Board of Directors recognized the
important role which stock options serve in aligning the incentives of the
Company's employees with the interests of the Company's stockholders.
TEN-YEAR OPTION REPRICINGS TABLE
The following table provides certain information regarding the repricing of
options held by the Company's executive officers during the last 10 completed
fiscal years:
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES MARKET PRICE EXERCISE OPTION TERM
UNDERLYING OF STOCK PRICE NEW REMAINING AT
OPTIONS AT TIME OF AT TIME OF EXERCISE DATE
NAME DATE REPRICED(#) REPRICING($) REPRICING($) PRICE($) OF REPRICING
- ----------------------------- -------- ----------- ------------ ------------ -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Bruce N. Moore............... -- -- -- -- -- --
Chief Executive Officer
and President
Joseph G. Brown.............. 11/01/96 25,000 $10.25 $ 15.50 $10.25 9 yrs. 305 days
Vice President of World 02/28/94 100,000 6.50 9.75 6.50 9 yrs. 324 days
Wide Field Operations
Paul R. Gifford.............. -- -- -- -- -- --
Vice President of Product
Development
Russell M. Lait.............. 11/01/96 7,500 10.25 15.50 10.25 8 yrs. 357 days
Vice President of 11/01/96 50,000 10.25 15.50 10.25 9 yrs. 306 days
Operations
Kent L. Robertson............ 11/01/96 100,000 10.25 18.875 10.25 9 yrs. 180 days
Vice President of Finance 11/01/96 25,000 10.25 15.50 10.25 9 yrs. 306 days
and Chief Financial Officer
Michael B. Stevens........... 11/01/96 7,000 10.25 15.50 10.25 8 yrs. 357 days
Vice President of 11/01/96 100,000 10.25 18.312 10.25 9 yrs. 173 days
North American Sales 02/28/94 9,000 6.50 10.25 6.50 9 yrs. 196 days
</TABLE>
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Bruce N. Moore serves as the Company's Chief Executive Officer and
President. The Compensation Committee has independently reviewed the
compensation of the Chief Executive Officer. The Compensation Committee's
recommendation to the full Board of Directors regarding Mr. Moore's compensation
was based upon the same criteria used to evaluate the Company's other officers,
i.e., independent outside sources of compensation data, the Company's
performance, the individual's performance and the overall contribution to the
Company's short and long-term objectives.
14
<PAGE> 17
Utilizing this criteria, the Compensation Committee increased Mr. Moore's
base salary by $65,000 for the fiscal year ended June 30, 1997 in order to
recognize his contribution to the Company and recognize his level of
responsibility versus that of other corporate officers of the Company. In
addition, Mr. Moore earned a bonus of $125,342 for the fiscal year ended June
30, 1997 under the Company's annual cash incentive program. No stock options
were granted to Mr. Moore during the fiscal year ended June 30, 1997.
All evaluation and consideration of adjustments in Mr. Moore's compensation
were made independently by the Compensation Committee during Mr. Moore's absence
from the proceedings.
The foregoing report has been furnished by the Compensation Committee of
the Board of Directors of the Company.
Compensation Committee
W. Frank King
David F. Marquardt
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1997, the Compensation Committee
consisted of Dr. W. Frank King and Mr. David F. Marquardt. The Company is not
aware of any interlocks or insider participation required to be disclosed under
applicable rules of the SEC.
15
<PAGE> 18
COMPANY PERFORMANCE
The following performance graph compares the cumulative total return to
stockholders of the Company's Common Stock since May 11, 1993 (the date the
Company first became subject to the reporting requirements of the Exchange Act)
to the cumulative total return over such period of (i) The Nasdaq Stock Market
(U.S. Companies) and (ii) the Hambrecht & Quist Technology Index. The
information contained in the performance graph below shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall such information
be incorporated by reference into any future filing under the Securities Act or
the Exchange Act, except to the extent that the Company specifically
incorporates it by reference into such filing.
The performance graph assumes that $100 was invested on May 11, 1993 in the
Company's Common Stock at the initial public offering price of $12.00 per share
in each index, and that all dividends were reinvested. No dividends have been
declared or paid on the Company's Common Stock. Stockholder returns over the
period indicated should not be considered indicative of future stockholder
returns.
HAMBRECHT & QUIST INDEX PRODUCTS AND SERVICES:
1997 PROXY PERFORMANCE GRAPH DATA
<TABLE>
<CAPTION>
MEASUREMENT PERIOD AUSPEX SYSTEMS, NASDAQ STOCK
(FISCAL YEAR COVERED) INC. H&Q TECHNOLOGY MARKET - U.S.
<S> <C> <C> <C>
5/11/93 100.00 100.00 100.00
DEC-93 79.17 110.27 113.97
JUN-94 41.67 104.60 104.08
DEC-94 56.25 132.46 111.41
JUN-95 104.17 185.04 138.93
DEC-95 152.08 198.06 157.56
JUN-96 125.00 216.25 178.37
DEC-96 96.88 246.16 193.78
JUN-97 80.21 270.13 216.91
</TABLE>
16
<PAGE> 19
CERTAIN TRANSACTIONS WITH MANAGEMENT
The Company has entered into indemnification agreements with its directors
and executive officers. Such agreements require the Company to indemnify such
individuals to the fullest extent permitted by Delaware law if certain claims
are brought against them in their capacities with the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 2, 1997 (except as set forth
in the footnotes) certain information with respect to the beneficial ownership
of the Company's Common Stock by (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) each
of the Named Executive Officers of the Company listed in the Summary
Compensation Table above, (iii) each director of the Company, and (iv) all
directors and executive officers as a group. The Company knows of no agreements
among its stockholders which relate to voting or investment power of its shares
of Common Stock.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
-----------------------
PERCENTAGE
FIVE PERCENT STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS NUMBER OWNERSHIP
- ---------------------------------------------------------------------- ---------- ---------
<S> <C> <C>
Neuberger & Berman, LLC(2)............................................ 2,625,300 10.5%
605 Third Avenue
New York, NY 10158-3698
State of Wisconsin Investment Board(3)................................ 2,307,200 9.2
P.O. Box 7842
Madison, WI 53702-0000
Nevis Capital Management, Inc.(4)..................................... 1,377,800 5.5
1119 St. Paul Street
Baltimore, MD 21202
Bruce N. Moore(5)..................................................... 188,498 *
Joseph G. Brown(5).................................................... 88,496 *
Paul R. Gifford(5).................................................... 21,000 *
Russell M. Lait(5).................................................... 46,845 *
Kent L. Robertson(5).................................................. 29,999 *
Michael B. Stevens(5)................................................. 51,119 *
R. Stephen Cheheyl(5)................................................. 13,000 *
W. Frank King(5)...................................................... 12,000 *
David F. Marquardt(5)................................................. 84,283 *
All current executive officers and directors as a group (9)
persons(6).......................................................... 535,240 2.1
</TABLE>
- ---------------
* Less than one percent.
(1) Applicable percentage of ownership is based on 25,058,104 shares of the
Company's Common Stock outstanding as of September 2, 1997 together with any
applicable stock options held by such stockholder. Beneficial ownership is
determined in accordance with the rules of the SEC, and includes voting and
investment power with respect to shares. Shares of Common Stock subject to
options currently exercisable or exercisable within 60 days of September 2,
1997 are deemed outstanding for computing the percentage ownership of the
person holding such options, but are not deemed outstanding for computing
the percentage of any other person. Options granted by the Company prior to
its initial public offering in May 1993 are immediately exercisable for all
shares subject to the option, including shares that have not yet vested.
Therefore, such options held by certain parties named in the table have been
treated as currently exercisable. However, the Company has a right to
repurchase, upon the optionee's termination of employment, any unvested
shares acquired by the optionee through the early exercise of options. This
repurchase right lapses over time.
17
<PAGE> 20
(2) Neuberger & Berman, LLC claims shared dispositive power as to the 2,625,300
shares, shared voting power as to 924,100 shares and sole voting power as to
1,175,300 shares. Information provided herein is based solely upon a
Schedule 13G filed with the SEC in September 1997.
(3) State of Wisconsin Investment Board claims sole voting and dispositive power
as to the 2,307,200 shares. Information provided herein is based solely upon
a Schedule 13F-E filed with the SEC in July 1997.
(4) Nevis Capital Management, Inc. claims sole voting and dispositive power as
to the 1,377,800 shares. Information provided herein is based solely upon a
Schedule 13F filed with the SEC in June 1997.
(5) Includes shares of Common Stock issuable upon exercise of options
exercisable within 60 days of September 2, 1997 as follows: Bruce N. Moore,
186,666 shares; Joseph G. Brown, 87,499 shares; Paul R. Gifford, 20,000
shares; Russell M. Lait, 22,975 shares; Kent L. Robertson, 29,999 shares;
Michael B. Stevens, 39,865 shares; R. Stephen Cheheyl, 8,000 shares; W.
Frank King, 12,000 shares; and David F. Marquardt, 16,000 shares.
(6) Includes 423,004 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days of September 2, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act and regulations of the SEC thereunder
require the Company's executive officers and directors, and persons who own more
than 10% of a registered class of the Company's equity securities, to file
reports of initial ownership and changes in ownership with the SEC. Based solely
on its review of copies of such forms received by the Company, or on written
representations from certain reporting persons that no other reports were
required for such persons, the Company believes that, during or with respect to
the fiscal year ending June 30, 1997, all of the Section 16(a) filing
requirements applicable to its executive officers, directors and 10%
stockholders were complied with.
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the accompanying proxy to vote the shares
represented as the Board of Directors may recommend.
THE BOARD OF DIRECTORS
/s/ Henry P. Massey, Jr.
Henry P. Massey, Jr.
Secretary
Dated: October 14, 1997
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APPENDIX A
SUMMARY OF 1997 STOCK PLAN
General. The purposes of the 1997 Stock Plan (the "1997 Plan") are to
attract and retain the best available personnel for positions of substantial
responsibility with the Company, to provide additional incentive to the
employees, directors and consultants of the Company and to promote the success
of the Company's business. Options and stock purchase rights may be granted
under the 1997 Plan. Options granted under the Plan may be either "incentive
stock options," as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), or nonstatutory stock options.
Administration. The 1997 Plan may generally be administered by the Board
of Directors or the Committee appointed by the Board of Directors (as
applicable, the "Administrator").
Eligibility; Limitations. Nonstatutory stock options and stock purchase
rights may be granted under the 1997 Plan to employees, directors and
consultants of the Company and any parent or subsidiary of the Company.
Incentive stock options may be granted only to employees. The Administrator, in
its discretion, selects the employees, directors and consultants to whom options
and stock purchase rights may be granted, the time or times at which such
options and stock purchase rights shall be granted, and the number of shares
subject to each such grant.
Section 162(m) of the Code places limits on the deductibility for federal
income tax purposes of compensation paid to certain executive officers of the
Company. In order to preserve the Company's ability to deduct the compensation
income associated with options granted to such persons, the 1997 Plan provides
that no employee, director or consultant may be granted, in any fiscal year of
the Company, options to purchase more than 1,000,000 shares of Common Stock.
Notwithstanding this limit, however, in connection with such individual's
initial employment with the Company, he or she may be granted options to
purchase up to an additional 500,000 shares of Common Stock.
Terms and Conditions of Options. Each option is evidenced by a stock
option agreement between the Company and the optionee, and is subject to the
following additional terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price
of options at the time the options are granted. The exercise price of an
incentive stock option may not be less than 100% of the fair market value
of the Common Stock on the date such option is granted; provided, however,
the exercise price of an incentive stock option granted to a greater than
10% stockholder may not be less than 110% of the fair market value of the
Common Stock on the date such option is granted. The fair market value of
the Common Stock is generally determined with reference to the closing sale
price for the Common Stock (or the closing bid if no sales were reported)
on the last market trading day prior to the date the option is granted.
(b) Exercise of Option; Form of Consideration. The Administrator
determines when options become exercisable and may, in its discretion,
accelerate the vesting of any outstanding option. Stock options granted
under the 1997 Plan generally vest and become exercisable over five years.
The means of payment for shares issued upon exercise of an option is
specified in each option agreement. The 1997 Plan permits payment to be
made by cash, check, promissory note, other shares of Common Stock of the
Company (with some restrictions), cashless exercises, a reduction in the
amount of any Company liability to the optionee, any other form of
consideration permitted by applicable law, or any combination thereof.
(c) Term of Option. The term of an incentive stock option may be no
more than ten (10) years from the date of grant; provided that in the case
of an incentive stock option granted to a greater than 10% stockholder, the
term of the option may be no more than five (5) years from the date of
grant. No option may be exercised after the expiration of its term.
(d) Termination of Employment. If an optionee's employment or
consulting relationship terminates for any reason (other than death or
disability), the optionee may exercise his or her option within such period
of time as is specified in the option agreement to the extent that the
option is vested on the
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date of termination (but in no event later than the expiration of the term
of such option as set forth in the option agreement). In the absence of a
specified time in the option agreement, the option shall remain exercisable
for three (3) months following the optionee's termination in the case of an
incentive stock option, and six (6) months following the optionee's
termination in the case of a non-statutory stock option.
(e) Death or Disability. If an optionee's employment or consulting
relationship terminates as a result of disability, the optionee may
exercise his or her option within such period of time as is specified in
the option agreement (but in no event later than the expiration of the term
of such option as set forth in the option agreement) to the extent that the
option is vested on the date of termination. In the absence of a specified
time in the option agreement, the option shall remain exercisable for six
(6) months following the optionee's termination. If an optionee's
employment or consulting relationship terminates as a result of death while
the optionee is an employee or consultant, the option may be exercised by
the optionee's estate or a person who acquired the right to exercise the
option by bequest or inheritance within such period of time as is specified
in the option agreement (but in no event later than the expiration of the
term of such option as set forth in the option agreement) to the extent
that the option would have vested had the optionee continued living and
working for the Company for an additional six (6) months. In the absence of
a specified time in the option agreement, the option shall remain
exercisable for twelve (12) months following the optionee's death. If an
optionee's employment or consulting relationship terminates as a result of
death occurring within 30 days of the optionee's termination of employment
or consultancy with the Company, the option may be exercised by the
optionee's estate or a person who acquired the right to exercise the option
by bequest or inheritance within such period of time as is specified in the
option agreement not to exceed three (3) months from the date of
termination (but in no event later than the expiration of the term of such
option as set forth in the option agreement) to the extent that the option
had vested on the date of termination.
(f) Nontransferability of Options and Stock Purchase Rights: Options
and stock purchase rights granted under the 1997 Plan are not transferable
other than by will or the laws of descent and distribution, and may be
exercised during the optionee's lifetime only by the optionee.
(g) Other Provisions: The stock option agreement may contain other
terms, provisions and conditions not inconsistent with the 1997 Plan as may
be determined by the Administrator.
Stock Purchase Rights. In the case of stock purchase rights, unless the
Administrator determines otherwise, the standard form of 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.
Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
Sale. In the event that the stock of the Company changes by reason of any stock
split, reverse stock split, stock dividend, combination, reclassification or
other similar change in the capital structure of the Company effected without
the receipt of consideration, appropriate adjustments shall be made in the
number and class of shares of stock subject to the 1997 Plan, the number and
class of shares of stock subject to any option or stock purchase right
outstanding under the 1997 Plan, and the exercise price of any such outstanding
option or stock purchase right.
In the event of a liquidation or dissolution, any unexercised options or
stock purchase rights will terminate. The Administrator may, in its discretion,
provide that each optionee shall have the right to exercise all of the
optionee's options and stock purchase rights, including those not otherwise
exercisable, until the date ten (10) days prior to the consummation of the
liquidation or dissolution.
In connection with any merger, consolidation, acquisition of assets or like
occurrence involving the Company, each outstanding option or stock purchase
right, to the extent unvested, shall become vested and exercisable as to an
additional 1/16th of the shares subject to the option or stock purchase right
for each full year
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that such option or stock purchase right has been outstanding and any restricted
stock will vest and the Company's repurchase right will lapse as to 1/16th of
the shares subject to such repurchase right for each full year from the date of
purchase. In addition, each outstanding option or stock purchase right may be
assumed or an equivalent option or right substituted by the successor
corporation. If the successor corporation refuses to assume the options and
stock purchase rights or to substitute substantially equivalent options and
stock purchase rights, the optionee shall have the right to exercise the option
or stock purchase right as to all the optioned stock, including shares not
otherwise exercisable, and any restricted stock will vest and the Company's
repurchase right will fully lapse. In such event, the Administrator shall notify
the optionee that the option or stock purchase right is fully exercisable for
thirty (30) days from the date of such notice and that the option or stock
purchase right terminates upon expiration of such period. In the event that the
Company's independent public accountants determine that the acceleration of
vesting of outstanding options (described above) upon a merger would preclude
accounting for such merger as a pooling of interests, and the Board of Directors
desires to approve such transaction which requires as a condition to the closing
of such transaction that it be accounted for as a pooling of interests, then any
such option acceleration shall be null and void, but only if the absence of such
option acceleration would preserve the pooling treatment.
Amendment and Termination of the Plan. The Board of Directors may amend,
alter, suspend or terminate the 1997 Plan, or any part thereof, at any time and
for any reason. However, the Company shall obtain stockholder approval for any
amendment to the 1997 Plan to the extent necessary to comply with Section 162(m)
and Section 422 of the Code, or any similar rule or statute. No such action by
the Board of Directors or stockholders may alter or impair any option or stock
purchase right previously granted under the 1997 Plan without the written
consent of the optionee. Unless terminated earlier, the 1997 Plan shall
terminate 10 years from the date of its approval by the stockholders or the
Board of Directors of the Company, whichever is earlier.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is also an officer, director, or
greater than 10% stockholder of the Company. The Company is entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Nonstatutory Stock Options. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. The Company is
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Upon a disposition of such shares by the optionee, any difference
between the sale price and the optionee's exercise price, to the extent not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period.
Stock Purchase Rights. Stock purchase rights will generally be taxed in
the same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. At the time of
purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code. As a result, the purchaser will
not recognize ordinary income at the time of purchase. Instead, the purchaser
will recognize ordinary income on the dates when a stock ceases to be subject to
a substantial risk of forfeiture. The stock will generally cease to be subject
to a substantial risk of forfeiture when
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it is no longer subject to the Company's right to repurchase the stock upon the
purchaser's termination of employment with the Company. At such times, the
purchaser will recognize ordinary income measured as the difference between the
purchase price and the fair market value of the stock on the date the stock is
no longer subject to a substantial risk of forfeiture.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and the beginning of any capital gain holding period
by timely filing an election pursuant to Section 83(b) of the Code. In such
event, the ordinary income recognized, if any, is measured as the difference
between the purchase price and the fair market value of the stock on the date of
purchase, and the capital gain holding period commences on such date. The
ordinary income recognized by a purchaser who is an employee will be subject to
tax withholding by the Company. Different rules may apply if the purchaser is
also an officer, director, or greater than 10% stockholder of the Company.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES, HOLDERS OF STOCK PURCHASE RIGHTS AND THE COMPANY WITH RESPECT TO
THE GRANT AND EXERCISE OF OPTIONS AND STOCK PURCHASE RIGHTS UNDER THE 1997 PLAN.
IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF
THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF
ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE EMPLOYEE OR CONSULTANT
MAY RESIDE.
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APPENDIX B
SUMMARY OF 1993 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1993 Employee Stock Purchase Plan, as amended (the "Purchase
Plan") was adopted by the Board of Directors and by the stockholders in March
1993. Including the 500,000 shares reserved for issuance by the Board of
Directors in September 1997, a total of 1,300,000 shares of Common Stock
currently is reserved for issuance under the Purchase Plan (pending stockholder
approval of a 500,000 share increase). The Purchase Plan is intended to qualify
under Section 423 of the Code.
Purpose. The purpose of the Purchase Plan is to provide employees of the
Company with an opportunity to purchase Common Stock of the Company through
accumulated payroll deductions, which serves to incentivize current employees
and to align their interests with those of the Company's stockholders and
supports the Company's strategy to attract and retain qualified employees.
Administration. The Purchase Plan shall be administered by the Board of
Directors or a committee appointed by the Board of Directors. All questions of
interpretation of the Purchase Plan are determined by the Board of Directors or
its committee, whose decisions are final and binding upon all participants.
Eligibility. Any person who is an employee of the Company as of the
offering date of a given offering period shall be eligible to participate in
such offering period under the Purchase Plan, provided that such person was not
eligible to participate in such Offering Period as of any prior offering date,
and further, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code.
Participation. Eligible employees become participants in the Purchase Plan
by delivering to the Company a subscription agreement authorizing payroll
deductions prior to the applicable offering date, unless a later time for filing
the subscription agreement has been set by the Board of Directors for all
eligible employees with respect to a given offering period.
Offering Periods. The offering period for the Purchase Plan commenced on
April 1, 1994 and ended on June 30, 1994. After such initial offering period,
the Purchase Plan is implemented by consecutive six-month offering periods
commencing on or about January 1 and July 1 of each year or on such date as the
Board of Directors shall determine. The Board of Directors may change the
duration of the offering periods without stockholder approval upon fifteen days
prior notice.
Payroll Deductions. The purchase price for the shares is accumulated by
payroll deductions during the offering period. The deductions may not be less
than 1% nor more than 10% of a participant's eligible aggregate compensation
during the offering period. Eligible aggregate compensation is defined to
include all regular straight time gross earnings and sales commissions,
including payments for overtime, shift premiums, bonuses and other compensation
earned during a given offering period. A participant may discontinue his or her
participation in the Purchase Plan at any time during the offering period and
may decrease or increase the rate of payroll deductions one time during any
offering period. Payroll deductions shall commence on the first payroll
following the first day of the offering period, and shall end on the last day of
the offering period (the "exercise date") unless sooner terminated as provided
in the Purchase Plan.
Grant and Exercise of Option. The maximum number of shares placed under
option to a participant in an offering is that number determined by dividing the
amount of the participant's total payroll deductions to be accumulated prior to
an exercise date (not to exceed $12,500) by the lower of 85% of the fair market
value of the Common Stock at the beginning of the offering period or 85% of the
fair market value of the Common Stock on the exercise date. The fair market
value of the Common Stock on a given date shall be the closing sale price of the
Common Stock for such date as reported by The Nasdaq National Market or, if such
price is not reported, the means of the bid and asked prices per share of the
Common Stock as reported by The Nasdaq National Market or, if listed on a stock
exchange, the closing price on such exchange as of such date or, if not traded
on such date, on the immediately preceding trading date as reported in The Wall
Street Journal. Unless a participant withdraws from the Purchase Plan, such
participant's option for the purchase of shares will be exercised automatically
on each exercise date for the maximum number of whole shares at the applicable
price.
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Notwithstanding the foregoing, no employee will be permitted to subscribe
for shares under the Purchase Plan if, immediately after the grant of the
option, the employee would own 5% or more of the voting power or value of all
classes of stock of the Company or of any of its subsidiaries (including stock
which may be purchased under the Purchase Plan or pursuant to any other
options), nor shall any employee be granted an option that would permit the
employee to buy pursuant to the Purchase Plan more than $25,000 worth of stock
(determined at the fair market value of the shares at the time the option is
granted) in any calendar year.
Withdrawal; Termination of Employment. A participant's interest in a given
offering may be terminated in whole, but not in part, at any time by signing and
delivering to the Company a notice of withdrawal from the Purchase Plan. Any
withdrawal by the participant of accumulated payroll deductions for a given
offering automatically terminates the participant's interest in that offering.
Transferability. Neither accumulated payroll deductions nor any rights with
regard to the exercise of an option or to receive shares under the Purchase 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 the
Purchase Plan) 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 from the Purchase Plan.
Adjustments Upon Changes in Capitalization. In the event any change is made
in the Company's capitalization, such as a stock split or stock dividend, which
results in an increase or decrease in the number of outstanding shares of Common
Stock without receipt of consideration by the Company, appropriate adjustments
will be made by the Board of Directors to the shares subject to purchase under
the Purchase Plan and in the purchase price per share.
In the event of the proposed dissolution or liquidation of the Company, the
offering will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board of Directors. 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
Purchase Plan shall be assumed or an equivalent option shall be substituted by
such successor corporation, unless the Board of Directors decides to accelerate
vesting of such options. If the Board of Directors accelerates vesting of such
options, participants shall have 10 days to withdraw from the offering period or
such options will be exercised automatically.
Amendment or Termination. The Board of Directors may at any time terminate
or amend the Purchase Plan, except that termination shall not affect options
previously granted and no amendment may make any change in any option previously
granted that adversely affects the rights of any participant. In addition, the
Company shall obtain stockholder approval in such a manner and to such a degree
as required to comply with Section 423 of the Code (or any successor rule or
provision or any other applicable law or regulation).
TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
at the time of grant of the option or purchase of shares. Upon disposition of
the shares, the participant will generally recognize taxable income, and the
amount of the tax will depend upon the length of time the shares have been held
by the participant. If the shares have been held by the participant for more
than two years after the date of option grant, the lesser of (a) the excess of
the fair market value of the shares at the time of such disposition over the
option price or (b) 15% of the fair market value of the shares at the time the
option was granted will be treated as ordinary income. All additional gain upon
the disposition will be treated as long-term capital gain. If the shares are
sold and the sale price is less than the purchase price, there is no ordinary
income, and the participant will have a long-term capital loss. If the shares
are disposed of within two years of the date of grant, the excess of the fair
market value of the shares on the exercise date over the option price will be
treated as ordinary income. Any further gain or loss on such disposition will be
capital gain or loss, and will be long-term if the shares are held for more than
one year. Under current law, the maximum federal tax rate on net capital gain is
28% (for shares held at least 18 months, the maximum rate is 20%). Net capital
gain is net long-term capital gain less net short-term capital loss, if any.
Capital losses are allowed in full against capital gains plus $3,000 of other
income.
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Different rules may apply with respect to optionees subject to Section
16(b) of the Exchange Act. The Company is not entitled to a deduction for
amounts taxed as ordinary income or capital gain to a participant except to the
extent of ordinary income reported by participants upon disposition of shares
within two years from date of grant.
THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE SUMMARY OF THE EFFECT OF
FEDERAL INCOME TAXATION UPON THE PARTICIPANT AND THE COMPANY WITH RESPECT TO THE
PURCHASE OF SHARES UNDER THE PURCHASE PLAN AND REFERENCE SHOULD BE MADE TO THE
APPLICABLE PROVISIONS OF THE CODE. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS
THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN
COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
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APPENDIX C
SUMMARY OF THE 1993 DIRECTORS' STOCK OPTION PLAN
The Company's 1993 Directors' Stock Option Plan (the "Directors' Plan") was
approved by the Board of Directors and by the stockholders in March 1993. A
total of 175,000 shares of Common Stock has been reserved for issuance under the
Directors' Plan.
Purpose. The purposes of the Directors' Plan are to attract and retain the
best available personnel for service as directors of the Company, to provide
additional incentive to the outside directors of the Company to serve as
directors and to encourage their continued service on the Board of Directors.
Administration. Except as may otherwise be required pursuant to the terms
of the Directors' Plan or applicable law, the Directors' Plan is administered by
the Board of Directors. However, all options granted under the Directors' Plan
are automatic and nondiscretionary. All decisions, determinations and
interpretations of the Board of Directors shall be final and binding on all
participants.
Eligibility. Options may be granted only to the Company's outside
directors. An outside director who has been granted an option may, if he or she
is otherwise eligible, be granted an additional option or options in accordance
with such provisions. The Directors' Plan defines the term "outside director" as
a director of the Company's Board of Directors who is not otherwise an employee
or a consultant of the Company.
Terms of Options. Each current outside director was automatically granted
an option to purchase sixteen thousand (16,000) shares on June 28, 1993. New
outside directors will automatically be granted an option to purchase sixteen
thousand (16,000) shares on the first business date of the fiscal year following
such new outside director's election to the Board of Directors. On the first
business date of each fiscal year, after June 28, 1993, during the term of the
Directors' Plan, each outside director will automatically receive a nonstatutory
stock option to purchase four thousand (4,000) shares of Common Stock.
The term of each option is ten (10) years from the date of grant.
Each option granted under the Directors' Plan shall be evidenced by a
written stock option agreement between the optionee and the Company and is
subject to the following terms and conditions:
Exercise Price. The exercise price of options granted under the Directors'
Plan shall be 100% of the fair market value per share on the date of grant. For
so long as the Company's Common Stock is listed on The Nasdaq National Market or
a stock exchange, the fair market value per share shall be the closing price on
such system or exchange on the date of the grant of the option.
Exercise of Option. Except as described below, options granted under the
Directors' Plan are exercisable only while the optionee remains a director of
the Company. If the proposed amendment to the Directors' Plan is approved, all
options granted under the Directors' Plan will become exercisable as to 1/16th
of the shares subject to such option on the last day of each calendar quarter
beginning with the first full calendar quarter after the date of grant.
An option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
option by the person entitled to exercise the option and full payment for the
shares with respect to which the option is exercised has been received by the
Company. The consideration to be paid for the shares shall consist entirely of
cash, check, other shares of Common Stock which (i) either have been owned by
the optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company and (ii) have a fair market value on the date of
surrender equal to the aggregate exercise price of the shares as to which the
option granted under this Directors' Plan shall be exercised, delivery of a
properly executed exercise notice together with instructions to a broker to
deliver to the Company the amount of sale proceeds required to pay the exercise
price, or any combination of such methods of payment.
Termination, Disability or Death. If an optionee ceases to serve as a
director, other than due to death or permanent disability, such optionee may,
but only within 30 days after the date he or she ceases to be a director of the
Company, exercise his or her option to the extent that he or she was entitled to
exercise it at the
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date of such termination. To the extent that the optionee was not entitled to
exercise an option at the date of such termination, or if the optionee does not
exercise such option (which he or she was entitled to exercise) within the time
specified, the option shall terminate.
In the event an optionee is unable to continue service as a director as a
result of total and permanent disability (as defined in Section 22(e)(3) of the
Code), such optionee may, but only within six (6) months (or such other time not
to exceed 12 months as is determined by the Board of Directors) from the date of
termination (but in no event later than the expiration of the term of such
option as set forth in the option agreement), exercise his or her option to the
extent he or she was entitled to exercise it at the date of such termination. To
the extent that the optionee was not entitled to exercise an option at the date
of termination, or if the optionee does not exercise such option (which he or
she was entitled to exercise) within the time specified, the option shall
terminate.
In the event of the death of an optionee while serving as a director for
the Company, the option may be exercised at any time within six (6) months (or
such lesser period of time as is determined by the Board of Directors) following
the date of death, 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
of the right to exercise that would have accrued had the optionee continued
living and remained a director for six (6) months after the date of death. If
the optionee dies within three (3) months (or such shorter period as is
determined by the Board of Directors) of termination of status as a director,
the option may be exercised at any time within six (6) months following the date
of death 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 of the
right to exercise that had accrued at the date of termination.
Nontransferability of Options. An option 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.
Adjustments Upon Changes in Capitalization or Merger. In the event any
change is made in the Company's capitalization, such as a stock split or stock
dividend, which results in an increase or decrease in the number of outstanding
shares of Common Stock without receipt of consideration by the Company,
appropriate adjustments will be made by the Board of Directors to the shares
subject to purchase under the Directors' Plan and in the purchase price per
share.
In the event of the proposed dissolution or liquidation of the Company, the
option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board of Directors. 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, then, to the extent
unvested, each option shall become vested and exercisable as to an additional
25% of the shares subject to such option. If the successor corporation does not
assume an outstanding option or substitute an equivalent option, the option will
become fully vested and exercisable, including shares as to which the option
would not otherwise be vested or exercisable. If an option becomes exercisable
in lieu of assumption or substitution in the event of a merger or sale of
assets, the participant shall have fifteen (15) days to exercise such option. In
the event that the Company's independent public accountants determine that the
acceleration of vesting of outstanding options (described above) upon a merger
would preclude accounting for such merger as a pooling of interests, and the
Board of Directors desires to approve such transaction which requires as a
condition to the closing of such transaction that it be accounted for as a
pooling of interests, then any such option acceleration shall be null and void,
but only if the absence of such option acceleration would preserve the pooling
treatment.
Amendment and Termination. The Board of Directors may amend or terminate
the Directors' Plan from time to time. Any such amendment or termination shall
not impair the rights of any optionee unless mutually agreed otherwise between
the optionee and the Company as evidenced in writing. The Company shall obtain
stockholder approval for any Directors' Plan amendment to the extent necessary
and desirable to comply with any applicable law, rule or regulation.
The Directors' Plan shall continue in effect until 2003 unless terminated
earlier by the Board of Directors.
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TAX INFORMATION
An optionee does not recognize any taxable income at the time he or she is
granted a nonstatutory stock option. Upon exercise, the optionee recognizes
taxable income generally measured by the excess of the then fair market value of
the shares over the exercise price. The Company is entitled to a deduction in
the same amount as the ordinary income recognized by the optionee. Upon a
disposition of such shares by the optionee, any difference between the sale
price and the optionee's exercise price, to the extent not recognized as taxable
income as provided above, is treated as long-term or short-term capital gain or
loss, depending on the holding period.
THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE SUMMARY OF THE EFFECT OF
FEDERAL INCOME TAXATION UPON THE OPTIONEE AND THE COMPANY WITH RESPECT TO THE
GRANT OF OPTIONS AND PURCHASE OF SHARES UNDER THE DIRECTORS' PLAN, AND REFERENCE
SHOULD BE MADE TO THE APPLICABLE PROVISIONS OF THE CODE. IN ADDITION, THIS
SUMMARY DOES NOT DISCUSS THE PROVISIONS OF THE INCOME TAX LAWS OF ANY
MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE OPTIONEE MAY RESIDE.
C-3
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AUSPEX SYSTEMS, INC.
5200 Great America Parkway, Santa Clara, CA 95054
---------------------------------------------------------
1997 ANNUAL MEETING OF STOCKHOLDERS
November 20, 1997
The undersigned stockholder of Auspex Systems, Inc., a Delaware
corporation (the "Company"), hereby acknowledges receipt of the Notice of
Annual Meeting of Stockholders and Proxy Statement, each dated October 14,
1997, and hereby appoints Bruce N. Moore and Kent L. Robertson, or either of
them, proxies and attorneys-in-fact, with full power to each of substitution,
on behalf and in the name of the undersigned, to represent the undersigned at
the 1997 Annual Meeting of Stockholders of the Company to be held on November
20, 1997 at 9:00 a.m. local time, at the Santa Clara Convention Center,
Conference Room 207, located at 5001 Great America Parkway, Santa Clara,
California, and at any adjournment(s) thereof, and to vote all shares of Common
Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below.
This proxy, when properly executed, will be voted as directed below, or, if
no direction is indicated, will be voted FOR proposals 1, 2, 3, 4 and 5, and as
said proxies deem advisable on such other matters as may properly come before
the meeting.
Please mark votes as in this example: [X]
1. To elect one (1) Class II director of the Company to serve for a
two-year term.
[ ] FOR the nominee listed below
[ ] WITHHOLD authority to vote for the nominee listed below
Nominee: R. Stephen Cheheyl
2. To approve the adoption of the Company's 1997 FOR AGAINST ABSTAIN
Stock Plan and the reservation of 2,000,000 [ ] [ ] [ ]
shares of Common Stock for issuance thereunder.
<PAGE> 32
3. To approve a 500,000 share increase in the FOR AGAINST ABSTAIN
Common Stock issuable under the Company's [ ] [ ] [ ]
1993 Employee Stock Purchase Plan.
4. To approve amendments to the Company's 1993 FOR AGAINST ABSTAIN
Directors' Stock Option Plan that (i) amend the [ ] [ ] [ ]
vesting of initial and annual stock option grants
automatically awarded to the Company's directors
thereunder and (ii) provide for the acceleration of
vesting of such options upon the occurrence of
certain events.
5. To ratify the appointment of Arthur Andersen LLP as FOR AGAINST ABSTAIN
the independent auditors of the Company for the [ ] [ ] [ ]
year ending June 30, 1998.
6. To transact such other business as Dated __________________________, 1997
may properly come before the meeting
or any postponements or adjournments Signature: ___________________________
thereof.
Signature: ___________________________
Mark here for address change and
note at left: [ ]
(This Proxy should be marked, dated, signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by president
or other authorized officer. If a partnership, please sign in partnership name
by authorized person.)
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN AND DATE
THIS PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE.
<PAGE> 33
APPENDIX 1
AUSPEX SYSTEMS, INC.
1997 STOCK PLAN
1. Purposes of the Plan. The purposes of this Plan are:
- to attract and retain the best available personnel for
positions of substantial responsibility,
- to provide additional incentive to Employees, Directors 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 requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(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 of Directors 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 Auspex Systems, Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
<PAGE> 34
(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "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 Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock 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; or
(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.
(n) "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.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
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<PAGE> 35
(p) "Notice of Grant" means a written or electronic 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.
(q) "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.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means an 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.
(t) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
(u) "Optioned Stock" means the Common Stock subject to an Option or
Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1997 Stock Plan.
(y) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "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.
(aa) "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.
(bb) "Section 16(b)" means Section 16(b) of the Exchange Act.
(cc) "Service Provider" means an Employee, Director or Consultant.
(dd) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
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<PAGE> 36
(ee) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "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 2,000,000 Shares plus (i) the number of Shares reserved but
unissued under the Company's 1988 Stock Option Plan (as amended) (the "1988
Plan") as of the date of stockholder approval of this Plan and (ii) any Shares
returned to the 1988 Plan as a result of termination of options issued under the
1988 Plan. The Shares may be authorized, but unissued, or reacquired Common
Stock.
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); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, such Shares shall become available for
future grant under the Plan.
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 Service
Providers.
(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.
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<PAGE> 37
(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:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and
Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to
be covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Purchase Right
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;
(vi) 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;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount
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<PAGE> 38
of tax to be withheld is to be determined. All elections by an Optionee to have
Shares withheld for this purpose shall be made in such form and under such
conditions as the Administrator may deem necessary or advisable;
(xii) 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;
(xiii)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 Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
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. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(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
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year
of the Company, Options to purchase more than 1,000,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider 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.
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<PAGE> 39
(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 canceled 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 canceled Option will be counted against the limits
set forth in subsections (i) and (ii) above. For 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 its adoption by the Board. 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 Option
Agreement. 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
Option Agreement. 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 total combined 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 Option Agreement.
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 other than an Employee
described in paragraph (A) immediately above, 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 determined by the Administrator. 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.
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<PAGE> 40
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price of less than 100% of the Fair Market Value per
Share on the date of grant pursuant to a merger or other corporate transaction.
(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.
(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) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of payment;
or
(viii) 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 Stockholder. 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. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
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<PAGE> 41
An Option shall be deemed exercised when the Company
receives: (i) written or electronic 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 Shares are 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 stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares 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 Shares are 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 Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination in the case of an
Incentive Stock Option and six (6) months following the Optionee's termination
in the case of a Nonstatutory Stock Option. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested 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. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for six (6) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested 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:
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<PAGE> 42
(i) during the term of the Option who is at the time of his
or her death a Service Provider, the Option may be exercised within such period
of time as is specified in the Option Agreement (in the absence of a specified
time in the Option Agreement, the Option shall remain exercisable for twelve
(12) months following Optionee's death, but in no event shall such period of
time extend beyond the date of 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
acquires the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that would have accrued had the Optionee
continued living and remained a Service Provider for six (6) months after the
date of his or her death, subject to the limitation set forth in Section 6(a);
or
(ii) within thirty (30) days (or such other period of time
not exceeding three (3) months as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) after the termination of the Optionee's status as a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the date of 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 acquires the right to exercise the Option by bequest
or inheritance, but only to the extent that the Option is vested at the date of
termination.
If, at the time of death, the Optionee is not vested as to
his or her entire Option, then subject to the additional vesting of Shares which
may occur pursuant to Section 10(d)(i) hereof, the Shares covered by the
unvested portion of the Option shall immediately revert to the Plan. The Option
may be exercised by the executor or administrator of the Optionee's estate or,
if none, by the person(s) entitled to exercise the Option under the Optionee's
will or the laws of descent or distribution. If the Option is not so exercised
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
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 or electronically, 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, and
the time within which the offeree must accept such offer. 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
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<PAGE> 43
the voluntary or involuntary termination of the purchaser's service 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.
(d) Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder 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. Unless
determined otherwise by the Administrator, 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. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the stockholders 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 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.
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<PAGE> 44
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of all or substantially all of the
assets of the Company, then, to the extent unvested, each outstanding Option
shall become vested and exercisable as to an additional 1/16th of the Shares
subject to the Option for each full year that such Option has been outstanding
and the repurchase option for any Restricted Stock shall lapse as to an
additional 1/16th of the Shares subject to the repurchase option for each full
year since the purchase of the Restricted Stock. (In no event shall an Optionee
obtain the right pursuant to this provision to exercise an Option or a Stock
Purchase Right for more than 100% of the Optioned Stock originally granted in
connection with such Option or Stock Purchase Right.) In addition, each
outstanding Option and Stock Purchase Right may be assumed or an equivalent
option or right substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option or Stock Purchase
Right, (i) the Optionee shall fully vest in and have the right to exercise the
Option or Stock Purchase Right as to all of the Optioned Stock, including Shares
as to which it would not otherwise be vested or exercisable and (ii) any
repurchase rights for Restricted Stock shall lapse so that all Shares of
Restricted Stock shall be vested. If an Option or Stock Purchase Right becomes
fully vested and exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Administrator shall notify the Optionee in
writing or electronically that the Option or Stock Purchase Right shall be fully
vested and exercisable for a period of thirty (30) days from the date of such
notice, and the Option or Stock Purchase Right shall terminate upon the
expiration of such period. If the repurchase option on Restricted Stock lapses
and the Restricted Stock becomes fully vested pursuant to this Section, then the
Administrator shall notify the owner of the Restricted Stock in writing or
electronically that the repurchase option has lapsed. 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 or receive, 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 is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise
-12-
<PAGE> 45
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) Certain Business Combinations. In the event it is determined by
the Company's independent public accountants that the acceleration of vesting of
outstanding Options upon a merger in accordance with this Section would preclude
accounting for such merger as a pooling of interests, and the Board otherwise
desires to approve such transaction which requires as a condition to the closing
of such transaction that it be accounted for as a pooling of interests, then any
such option acceleration shall be null and void, but only if the absence of such
option acceleration would preserve the pooling treatment.
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) Stockholder Approval. The Company shall obtain stockholder
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.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
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 Applicable Laws 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
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<PAGE> 46
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. 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.
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. Stockholder Approval. The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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<PAGE> 47
AUSPEX SYSTEMS, INC.
1997 STOCK 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
[Optionee's Name and 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:
[________% of the Shares subject to the Option shall vest _________ after
the Vesting Commencement Date, and ______ of the Shares subject to the Option
shall vest each month thereafter, subject to the Optionee continuing to be a
Service Provider on such dates.]
<PAGE> 48
Termination Period:
This Option may be exercised for thirty (30) days after Optionee ceases
to be a Service Provider. Upon the death or Disability of the Optionee, this
Option may be exercised for six (6) months after Optionee ceases to be a Service
Provider. In no event shall this Option be exercised 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 the 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
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
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.
(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 completed
by the Optionee and delivered to the Stock Administrator 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 Applicable Laws. 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.
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<PAGE> 49
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) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; 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.
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.
(a) Exercising the Option.
(i) Nonstatutory Stock Option. The Optionee may incur regular
federal income tax liability upon exercise of a NSO. 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 or a former 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 in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
(ii) Incentive Stock Option. 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
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<PAGE> 50
Market Value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price will be treated as an adjustment to alternative minimum
taxable income for federal tax purposes and may subject the Optionee to
alternative minimum tax in the year of exercise. In the event that the Optionee
ceases to be an Employee but remains a Service Provider, any Incentive Stock
Option of the Optionee that remains unexercised shall cease to qualify as an
Incentive Stock Option and will be treated for tax purposes as a Nonstatutory
Stock Option on the date three (3) months and one (1) day following such change
of status.
(b) Disposition of Shares.
(i) NSO. Generally, if the Optionee holds NSO Shares for at
least one year, any gain realized on disposition of the NSO Shares will be
treated as capital gain, short-term or long-term depending on the period that
the NSO Shares were held.
(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. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(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.
7. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS
-4-
<PAGE> 51
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE
PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
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 further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: AUSPEX SYSTEMS, INC.
- ----------------------------------- ------------------------------------
Signature By
- ------------------------------------ ------------------------------------
Print Name Title
- ------------------------------------
Residence Address
- ------------------------------------
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<PAGE> 52
EXHIBIT A
AUSPEX SYSTEMS, INC.
1997 STOCK PLAN
EXERCISE NOTICE
Auspex Systems, Inc.
5200 Great America Parkway
Santa Clara, CA 95054
Attention: Stock Administrator
1. Exercise of Option. Effective as of today, ________________, 199__,
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Auspex Systems, Inc. (the "Company") under
and pursuant to the 1997 Stock Plan (the "Plan") and the Stock Option Agreement
dated______, 19___ (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 Stockholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
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 with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
<PAGE> 53
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
Submitted by: Accepted by:
PURCHASER: AUSPEX SYSTEMS, INC.
- ---------------------------------- -------------------------------------
Signature By
- ---------------------------------- -------------------------------------
Print Name Its
Address: Address:
Auspex Systems, Inc.
- ---------------------------------- 5200 Great America Parkway
Santa Clara, CA 95054
- ----------------------------------
-------------------------------------
Date Received
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<PAGE> 54
AUSPEX SYSTEMS, INC.
1997 STOCK 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.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's Repurchase Option and your ongoing status as a Service
Provider (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 1997 Stock Plan and the
Restricted Stock Purchase Agreement, attached hereto as Exhibit A-1, both of
which are 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: AUSPEX SYSTEMS, INC.
- --------------------------- --------------------------------
Signature By
- --------------------------- --------------------------------
Print Name Title
<PAGE> 55
EXHIBIT A-1
AUSPEX SYSTEMS, INC.
1997 STOCK 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 Service Provider, 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 a
Stock Purchase Right 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").
NOW 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 ceases to be a Service Provider 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 (the "Repurchase 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"). The Repurchase
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
canceling 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 the aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price, the Company shall become the legal and beneficial owner of the
Shares being repurchased and all
<PAGE> 56
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 stockholders 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. 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) _______________________ percent (______%) of the Shares shall
be released from the Company's Repurchase Option after the Date of Grant and
__________________ percent (______%) of the Shares provided that the Purchaser
does not cease to be a Service Provider prior to the date of any such release.
(b) Any of the Shares that have not yet been released from the
Repurchase Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the 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 the 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 such Shares
are released 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 Repurchase
Option, 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
hereto as Exhibit A-3, until such time as the Company's Repurchase Option
expires. As a further condition to the Company's obligations under this
Agreement, the Company may require the spouse of Purchaser, if any, to execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-4.
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<PAGE> 57
(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 while acting
in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the Repurchase Option
hereunder, the Escrow Holder, upon receipt of written notice of such 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 the Repurchase
Option, upon request the Escrow Holder shall promptly cause a new certificate to
be issued for the released Shares and shall deliver the 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 stockholder with respect to the Shares while they are held in
escrow, including without limitation, the right to vote the Shares and to
receive any cash dividends declared thereon. If, from time to time during the
term of the 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 Repurchase Option.
7. Legends. The share certificate evidencing the Shares, if any, 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 STOCKHOLDER, 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 contem plated 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 the
Purchaser (and not the Company) shall be responsible for the Purchaser's own tax
liability that may arise as a result of 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
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<PAGE> 58
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 the 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 Repurchase Option expires by filing an election under Section
83(b) of the Code with the IRS 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 internal substantive
laws, but not the choice of law rules 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 the Shares
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 hereto.
(c) The rights 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 of this
Agreement shall not in any way be construed as a waiver of any such provision,
nor prevent that party from thereafter enforcing any other provision of this
Agreement. The rights granted both parties hereunder are cumulative and shall
not constitute a waiver of either party's right to assert any other legal remedy
available to it.
(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.
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<PAGE> 59
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (AND 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 A SERVICE PROVIDER 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 RELATIONSHIP AS A SERVICE PROVIDER 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.
DATED:
---------------------
PURCHASER: AUSPEX SYSTEMS, INC.
- ------------------------------ ----------------------------------
Signature By
- ------------------------------ ----------------------------------
Print Name Title
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<PAGE> 60
EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign
and transfer unto __________________________________ (__________) shares of the
Common Stock of Auspex Systems, 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 (the "Agreement")
between________________________ and the undersigned dated ______________, 19__.
Dated: _______________, 19
Signature:
------------------------------
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 the
Repurchase Option, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 61
EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
_________, 19_____
Corporate Secretary
Auspex Systems, Inc.
5200 Great America Parkway
Santa Clara, CA 95054
Dear :
-------------
As Escrow Agent for both Auspex Systems, 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 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. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a stockholder of the Company while the
stock is held by you.
<PAGE> 62
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
shall 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 Purchaser ceases to be a Service Provider, you shall
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.
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.
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<PAGE> 63
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: Auspex Systems, Inc.
5200 Great America Parkway
Santa Clara, CA 95054
PURCHASER:
-----------------------------
-----------------------------
-----------------------------
ESCROW AGENT: Corporate Secretary
Auspex Systems, Inc.
5200 Great America Parkway
Santa Clara, CA 95054
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.
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 internal substantive laws, but not the
choice of law rules, of California.
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<PAGE> 64
Very truly yours,
AUSPEX SYSTEMS, INC.
-------------------------------------
By
-------------------------------------
Title
PURCHASER:
-------------------------------------
Signature
-------------------------------------
Print Name
ESCROW AGENT:
- -------------------------------------
Corporate Secretary
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<PAGE> 65
EXHIBIT A-4
CONSENT OF SPOUSE
I, ____________________, spouse of ___________________, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of the Company's grant to my spouse of the right to purchase
shares of Auspex Systems, 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
------------------------------------------
Signature of Spouse
<PAGE> 66
EXHIBIT A-5
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
for the current taxable year the amount of any compensation taxable to taxpayer
in connection with his or her 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 Auspex Systems, 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, upon
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
performing 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
<PAGE> 67
APPENDIX 2
AUSPEX SYSTEMS, INC.
1993 EMPLOYEE STOCK PURCHASE PLAN
(As amended through September 1997)
The following constitute the provisions of the 1993 Employee Stock
Purchase Plan of Auspex Systems, 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. 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 shall, accordingly,
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, $0.001 par value,
of the Company.
(d) "Company" shall mean Auspex Systems, Inc., a Delaware
corporation.
(e) "Compensation" shall mean all regular straight time gross
earnings, sales commissions, payments for overtime, shift premium, bonuses and
other compensation, but excluding car allowances.
(f) "Continuous Status as an Employee" shall mean the absence of
any interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of a leave of
absence agreed to in writing by the Company, provided that such leave is for a
period of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statute.
(g) "Contributions" shall mean all amounts credited to the
account of a participant pursuant to the Plan.
(h) "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.
<PAGE> 68
(i) "Employee" shall mean any person, including an officer, who
is customarily employed for at least twenty (20) hours per week and more than
five (5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(j) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(k) "Exercise Date" shall mean the last day of each Offering
Period of the Plan.
(l) "Offering Date" shall mean the first business day of each
Offering Period of the Plan, except that in the case of an individual who
becomes an eligible Employee after the first business day of an Offering Period
but prior to the first business day of the last calendar quarter of such
Offering Period, the term "Offering Date" shall mean the first business day of
the calendar quarter coinciding with or next succeeding the day on which that
individual becomes an eligible Employee.
Options granted after the first business day of an Offering
Period will be subject to the same terms as the options granted on the first
business day of such Offering Period except that they will have a different
grant date (thus, potentially, a different exercise price) and, because they
expire at the same time as the options granted on the first business day of such
Offering Period, a shorter term.
(m) "Offering Period" shall mean a period of six (6) months.
(n) "Plan" shall mean this Employee Stock Purchase Plan.
(o) "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.
3. Eligibility.
(a) Any person who is an Employee as of the Offering Date of a
given Offering Period shall be eligible to participate in such Offering Period
under the Plan, provided that such person was not eligible to participate in
such Offering Period as of any prior Offering Date, and further, subject to the
requirements of Section 5(a) and the limitations imposed by Section 423(b) of
the Code.
(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 stock and/or
hold outstanding options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any subsidiary of the Company, or (ii) if such option would permit
his or her rights to purchase stock under all employee stock purchase plans
(described in Section 423 of the Code) of the Company and
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<PAGE> 69
its Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) of fair market value of such stock (determined 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 a series of
Offering Periods, with new Offering Periods commencing on or about January 1 and
July 1 of each year (or at such other time or times as may be determined by the
Board of Directors). The first Offering Period shall commence on April 1, 1994
and shall end on June 30, 1994 and the subsequent Offering Period will commence
on July 1, 1994 or on such other date the Board shall determine. The Plan shall
continue until terminated in accordance with Section 19 hereof. The Board of
Directors of the Company shall have the power to change the duration and/or the
frequency of Offering Periods with respect to future offerings without
stockholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period to be affected.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's Office of Human Resources 10 days prior to the
applicable Offering Date, except that with respect to the first Offering Period
only, an eligible Employee may become a participant in the Plan by completing a
Subscription Agreement and filing it with the office of Human Resources no later
than March 25, 1994. The subscription agreement shall set forth the percentage
of the participant's Compensation (which shall be not less than 1% and not more
than 10%) to be paid as Contributions pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll
following the Offering Date and shall end on the last payroll paid on or prior
to the Exercise Date of the Offering Period to which the subscription agreement
is applicable, unless sooner terminated by the participant as provided in
Section 10.
6. Method of Payment of Contributions.
(a) The participant shall elect to have payroll deductions made
on each payday during the Offering Period in an amount not less than one percent
(1%) and not more than ten percent (10%) of such participant's Compensation on
each such payday; provided that the aggregate of such payroll deductions during
the Offering Period shall not exceed ten percent (10%) of the participant's
aggregate Compensation during said Offering Period. All payroll deductions made
by a participant shall be credited to his or her account under the Plan. A
participant may not make any additional payments into such account.
(b) A participant may discontinue his or her participation in the
Plan as provided in Section 10, or, on one occasion only during the Offering
Period, may increase or decrease the rate of his or her Contributions during the
Offering Period by completing and filing with the Company a new subscription
agreement. The change in rate shall be effective as of the beginning of the
calendar
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<PAGE> 70
quarter following the date of filing of the new subscription agreement. A
participant's subscription agreement shall remain in effect for successive
Offering Periods unless terminated as provided in Section 10 hereof.
(c) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) herein, a
participant's payroll deductions may be decreased to 0% at such time during any
Offering Period which is scheduled to end during the current calendar year that
the aggregate of all payroll deductions accumulated with respect to such
Offering Period and any other Offering Period ending within the same calendar
year equal $21,250. Payroll deductions shall re-commence at the rate provided in
such participant's subscription Agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10.
7. Grant of Option.
(a) On the Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on the Exercise Date a number of shares of the Company's Common Stock
determined by dividing such Employee's Contributions accumulated prior to such
Exercise Date and retained in the participant's account as of the Exercise Date
by the lower of (i) eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Offering Date, or (ii) eighty-five
percent (85%) of the fair market value of a share of the Company's Common Stock
on the Exercise Date; provided however, that the maximum number of shares an
Employee may purchase during each Offering Period shall be determined at the
Offering Date by dividing $12,500 by the fair market value of a share of the
Company's Common Stock on the Offering Date, and provided further that such
purchase shall be subject to the limitations set forth in Sections 3(b) and 12.
The fair market value of a share of the Company's Common Stock shall be
determined as provided in Section 7(b).
(b) The option price per share of the shares offered in a given
Offering Period shall be the lower of: (i) 85% of the fair market value of a
share of the Common Stock of the Company on the Offering Date; or (ii) 85% of
the fair market value of a share of the Common Stock of the Company on the
Exercise Date. The fair market value of the Company's Common Stock on a given
date shall be determined by the Board in its discretion based on the closing
price of the Common Stock for such date (or, in the event that the Common Stock
is not traded on such date, on the immediately preceding trading date), as
reported by the National Association of Securities Dealers Automated Quotation
(Nasdaq) National Market or, if such price is not reported, the mean of the bid
and asked prices per share of the Common Stock as reported by NASDAQ or, in the
event the Common Stock is listed on a stock exchange, the fair market value per
share shall be the closing price on such exchange on such date (or, in the event
that the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported in The Wall Street Journal.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in paragraph 10, his or her option for the purchase of shares will be
exercised automatically on the Exercise Date of the Offering Period, and the
maximum number of full shares subject to option will be
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<PAGE> 71
purchased at the applicable option price with the accumulated Contributions in
his or her account. The shares purchased upon exercise of an option hereunder
shall be deemed to be transferred to the participant on the Exercise Date.
During his or her lifetime, a participant's option to purchase shares hereunder
is exercisable only by him or her. No fractional shares shall 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 Offering 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.
9. Delivery. As promptly as practicable after the Exercise Date of each
Offering Period, the Company shall arrange the delivery to each participant or
as otherwise instructed by the participant, as appropriate, of a certificate
representing the shares purchased upon exercise of his or her option. Any cash
remaining to the credit of a participant's account under the Plan after a
purchase by him or her of shares at the termination of each Offering Period, or
which is insufficient to purchase a full share of Common Stock of the Company,
shall be rolled over to the participant's account for the next Offering Period.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
the Exercise Date of the Offering Period by giving written notice to the
Company. All of the participant's Contributions credited to his or her account
will be paid to him or her promptly after receipt of his or her notice of
withdrawal and his or her option for the current period will be automatically
terminated, and no further Contributions for the purchase of shares will be made
during the Offering Period.
(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Exercise Date of the Offering Period for any reason,
including retirement or death, the Contri butions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
be automatically terminated.
(c) A participant's withdrawal from an offering will not have any
effect upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
11. Interest. No interest shall accrue on the Contributions of a
participant in the Plan.
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 1,300,000 shares,
subject to adjustment upon changes in capitalization of the Company as provided
in Section 18. If the total number of shares
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<PAGE> 72
which would otherwise be subject to options granted pursuant to Section 7(a) on
the Offering Date of an Offering Period exceeds the number of shares then
available under the Plan (after deduction of all shares for which options have
been exercised or are then outstanding), the Company shall make a pro rata
allocation of the shares remaining available for option grant in as uniform a
manner as shall be practicable and as it shall determine to be equitable. In
such event, the Company shall give written notice of such reduction of the
number of shares subject to the option to each Employee affected thereby and
shall similarly reduce the rate of Contributions, if necessary.
(b) The participant will have no interest or voting right in
shares covered by his or her 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. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan.
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 partici pant's death subsequent to the end
of the Offering Period but prior to delivery to him or her 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 the Exercise Date of the Offering
Period. 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 (and his or her spouse, if any) 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 parti
cipant'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, depen dent or relative is known to the Company, then to such other
person as the Company may designate.
15. Transferability. Neither Contributions 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) by the participant. Any such attempt
at assignment,
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transfer, pledge or other disposition shall be without effect, except that the
Company may treat such act as an election to withdraw funds in accordance with
Section 10.
16. Use of Funds. All Contributions 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 segre gate such Contributions.
17. Reports. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees
promptly following the Exercise Date, which statements will set forth the
amounts of Contributions, the per share purchase price, the number of shares
purchased and the remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but have not yet been placed under option (collectively, 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 issue 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.
In the event of the proposed dissolution or liquidation of the Company,
the Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. 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 assumption or substitution, to shorten the Offering Period then in
progress by setting a new Exercise Date (the "New Exercise Date"). If the Board
shortens the Offering Period 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) days prior to the New Exercise
Date, that the Exercise Date for his or her option has been changed to the New
Exercise Date and that his or her option will be exercised automatically on the
New Exercise Date, unless prior to such date he or she has withdrawn from the
Offering Period as provided in Section 10. 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
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(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, 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.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time
terminate or amend the Plan. Except as provided in Section 18, no such
termination may affect options previously granted, nor may an amendment make any
change in any option theretofore granted which adversely affects the rights of
any participant. In addition, to the extent necessary to comply with Section 423
of the Code (or any successor rule or provision or any applicable law or
regulation), the Company shall obtain stockholder approval in such a manner and
to such a degree as so required.
(b) Without stockholder 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.
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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 Exchange Act, 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; Effective Date. The Plan shall become effective upon
the earlier to occur of its adoption by the Board of Directors or its approval
by the stockholders of the Company. It shall continue in effect for a term of
twenty (20) years unless sooner terminated under Section 19.
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New Election ______
Change of Election ______
AUSPEX SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
1. I, ________________________, hereby elect to participate in the
Auspex Systems, Inc. Employee Stock Purchase Plan (the "Plan") for the Offering
Period ______________, 199__ to _______________, 199__, and subscribe to
purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 10% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Exercise
Date of the Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the Exercise
Date my participation in the Plan as provided in Section 10 of the Plan. I also
understand that on one occasion only during the Offering Period I may increase
or decrease the rate of my Contributions during the Offering Period by
completing and filing with the Company a new Subscription Agreement. The change
in rate shall be effective as of the beginning of the calendar quarter following
the date of filing of the new Subscription Agreement.
5. I have received a copy of the Company's most recent description of
the Plan and a copy of the complete "Auspex Systems, Inc. Employee Stock
Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan.
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6. Shares purchased for me under the Plan should be issued in the
name(s) of (name of employee or employee and spouse only):
- ------------------------
- ------------------------
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print)
-------------------------------------
(First) (Middle) (Last)
- --------------------- -------------------------------------
(Relationship) (Address)
-------------------------------------
8. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Offering Date (the first day of the
Offering Period during which I purchased such shares) or within 1 year after the
date of the end of the Offering Period, I will be treated for federal income tax
purposes as having received ordinary compensation 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 transferred to me over the price which I
paid for the shares, regardless of whether I disposed of the shares at a price
less than their fair market value at transfer. The remainder of the gain or
loss, if any, recognized on such disposition will be treated as capital gain or
loss.
I hereby agree to notify the Company in writing within 30 days
after the date of any such disposition, 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 the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after 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 com pensation 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 under the option, or (2) 15% of the fair market
value of the shares on the Offering Date. The remainder of the gain or loss, if
any, recognized on such disposition will be treated as capital gain or loss.
I understand that this tax summary is only a summary and is
subject to change.
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10. I hereby agree to be bound by the terms of the Plan. The effectiveness
of this Subscription Agreement is dependent upon my eligibility to participate
in the Plan.
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN
EFFECT THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY
ME.
SIGNATURE:
----------------------------------
SOCIAL SECURITY #:
--------------------------
DATE:
---------------------------------------
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
- ------------------------------
(Signature)
- ------------------------------
(Print name)
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AUSPEX SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I, __________________________, hereby elect to withdraw my participation
in the Auspex Systems, Inc. Employee Stock Purchase Plan (the "Stock Purchase
Plan") for the Offering Period _________. This withdrawal covers all
Contributions credited to my account and is effective on the date designated
below.
I understand that all Contributions credited to my account will be paid
to me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
I understand that my withdrawal from this Offering will not affect my
eligibility to participate in a succeeding offering period or in any similar
plan that may hereafter be adopted by the Company. I understand and agree,
however, that I will be eligible to participate in succeeding offering periods
only by delivering to the Company a new Subscription Agreement.
I understand that if I am an officer or director of the Company and
other person subject to Section 16 of the Securities and Exchange Act of 1934,
under rules promulgated by the U.S. Securities and Exchange Commission I may not
re-enroll in the Stock Purchase Plan for a period of six (6) months after
withdrawal.
Dated:
------------------- -------------------------------------------
Signature of Employee
--------------------------------------------
Social Security Number
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APPENDIX 3
AUSPEX SYSTEMS, INC.
1993 DIRECTORS' STOCK OPTION PLAN
(AS AMENDED THROUGH SEPTEMBER 1997)
1. Purposes of the Plan. The purposes of this Directors' Stock Option
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be "nonstatutory stock
options".
2. Definitions. As used herein, the following definitions shall apply:
(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 Auspex Systems, Inc., a Delaware
corporation.
(e) "Continuous Status as a Director" shall mean the absence of
any interruption or termination of service as a Director.
(f) "Director" shall mean a member of the Board.
(g) "Employee" shall mean any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(i) "Option" shall mean a stock option granted pursuant to the
Plan.
(j) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(k) "Optionee" shall mean an Outside Director who receives an
Option.
(l) "Outside Director" shall mean a Director who is not an
Employee.
(m) "Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
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(n) "Plan" shall mean this 1993 Directors' Stock Option Plan.
(o) "Share" shall mean a share of the Common Stock, as adjusted
in accordance with Section 11 of the Plan.
(p) "Subsidiary" shall mean 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 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 175,000 Shares (the "Pool") of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. If Shares which were acquired upon exercise of an
Option are subsequently repurchased by the Company, such Shares shall not in any
event be returned to the Plan and shall not become available for future grant
under the Plan.
4. Administration of and Grants of Options under the Plan.
(a) Administrator. Except as otherwise required herein, the Plan
shall be administered by the Board.
(b) Procedure for Grants. All grants of Options hereunder shall
be automatic and nondiscretionary and shall be made strictly in accordance with
the following provisions:
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options granted to Outside Directors.
(ii) Each current Outside Director and each Outside
Director who first becomes a member of the Board of Directors after the date the
Company first registers any class of any equity security pursuant to the
Exchange Act shall be automatically granted an Option to purchase 16,000 Shares
(the "First Option") on the date on which the later of the following events
occurs: (A) the effective date of this Plan, as determined in accordance with
Section 6 hereof, or (B) the date on which such person first becomes an Outside
Director, whether through election by the stockholders of the Company or
appointment by the Board of Directors to fill a vacancy.
(iii) Each Outside Director, whether first elected or
appointed a member of the Board of Directors before or after the Company first
registers any class of any equity security pursuant to the Exchange Act, shall
be automatically granted an Option to purchase 4,000 Shares (a
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"Subsequent Option") on the first business day of the Company's fiscal year of
each year, if on such date, he or she shall have served on the Board for at
least six (6) months.
(iv) Notwithstanding the provisions of subsections (ii)
and (iii) hereof, in the event that a grant would cause the number of Shares
subject to outstanding Options plus the number of Shares previously purchased
upon exercise of Options to exceed the Pool, then each such automatic grant
shall be for that number of Shares determined by dividing the total number of
Shares remaining available for grant by the number of Outside Directors on the
automatic grant date. Any further grants shall then be deferred until such time,
if any, as additional Shares become available for grant under the Plan through
action of the stockholders to increase the number of Shares which may be issued
under the Plan or through cancellation or expiration of Options previously
granted hereunder.
(v) Notwithstanding the provisions of subsections (ii)
and (iii) hereof, any grant of an Option made before the Company has obtained
stockholder approval of the Plan in accordance with Section 17 hereof shall be
conditioned upon obtaining such stockholder approval of the Plan in accordance
with Section 17 hereof.
(vi) The terms of a First Option granted hereunder shall
be as follows:
(A) the First Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Section 9 hereof.
(B) the exercise price per Share shall be 100% of
the fair market value per Share on the date of grant of the First Option.
(C) the First Option shall become exercisable in
installments cumulatively as to 1/16th of the Shares subject to the First Option
on the last day of each calendar quarter beginning with the first full calendar
quarter after the date of grant of the First Option.
(vii) The terms of a Subsequent Option granted hereunder
shall be as follows:
(A) the Subsequent Option shall be exercisable
only while the Outside Director remains a Director of the Company, except as set
forth in Section 9 hereof.
(B) the exercise price per Share shall be 100% of
the fair market value per Share on the date of grant of the Subsequent Option.
(C) the Subsequent Option shall become exercisable
in installments cumulatively as to 1/16th of the Shares subject to the
Subsequent Option on the last day of each calendar quarter beginning with the
calendar quarter in which the Subsequent Option is granted.
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(c) Powers of the Board. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its discretion:
(i) to determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the fair market value of the Common Stock; (ii) to
determine the exercise price per share of Options to be granted, which exercise
price shall be deter mined in accordance with Section 8(a) of the Plan; (iii) to
interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations
relating to the Plan; (v) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) Suspension or Termination of Option. If the President or his
or her designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the Outside
Director accused of such misconduct). If the Board of Directors (excluding the
Outside Director accused of such misconduct) determines an Optionee has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation
owed to the Company, breach of fiduciary duty or deliberate disregard of the
Company rules resulting in loss, damage or injury to the Company, or if an
Optionee makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the Company
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Optionee nor his or her estate shall be
entitled to exercise any option whatsoever. In making such determination, the
Board of Directors (excluding the Outside Director accused of such misconduct)
shall act fairly and shall give the Optionee an opportunity to appear and
present evidence on Optionee's behalf at a hearing before the Board or a
committee of the Board.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) hereof. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate his or her directorship at any time.
6. Term of Plan; Effective Date. The Plan shall become effective on June
28, 1993. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 13 of the Plan.
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<PAGE> 84
7. Term of Option. The term of each Option shall be ten (10) years
from the date of grant thereof.
8. 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 100% of the fair market
value per Share on the date of grant of the Option.
(b) Fair Market Value. The fair market value shall be determined
by the Board in its discretion; provided, however, that where there is a public
market for the Common Stock, the fair market value per Share shall be the mean
of the bid and asked prices of the Common Stock in the over-the-counter market
on the date of grant, as reported in The Wall Street Journal (or, if not so
reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotation ("NASDAQ") System) or, in the event the Common Stock
is traded on the NASDAQ National Market System or listed on a stock exchange,
the fair market value per Share shall be the closing price on such system or
exchange on the date of grant of the Option, as reported in The Wall Street
Journal.
(c) Form of Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having 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 (which, if acquired from the Company, shall have been
held for at least six months), delivery of a properly executed exercise notice
together with instructions to a broker to deliver promptly to the Company the
amount of sale proceeds required to pay the exercise price, or any combination
of such methods of payment and/or any other consideration or method of payment
as shall be permitted under applicable corporate law.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) hereof; provided, however, that no Options shall be exercisable until
stockholder approval of the Plan in accordance with Section 17 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a
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<PAGE> 85
stockholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. A share certificate for the number of Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Option. 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 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be 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 Status as a Director. If an Outside Director
ceases to serve as a Director, he or she may, but only within three (3) months
(or such other period of time not exceed ing six (6) months as is determined by
the Board) after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has expired.
To the extent that such Outside Director was not entitled to exercise an Option
at the date of such termination, or does not exercise such Option (which he or
she was entitled to exercise) within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event a Director is unable to continue his or her
service as a Director with the Company as a result of his or her total and
permanent disability (as defined in Section 22(e)(3) of the Internal Revenue
Code), he or she may, but only within six (6) months (or such other period of
time not exceeding twelve (12) months as is determined by the Board) from the
date of such termination, exercise his or her Option to the extent he or she was
entitled to exercise it at the date of such termination. Notwithstanding the
foregoing, in no event may the Option be exercised after its term set forth in
Section 7 has expired. To the extent that he or she was not entitled to exercise
the Option at the date of termination, or if he or she does not exercise such
Option (which he or she was entitled to exercise) within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Option who is, at the time
of his or her death, a Director of the Company and who shall have been in
Continuous Status as a Director since the date of grant of the Option, the
Option may be exercised, at any time within six (6) months (or such other period
of time as is determined by the Board) following the date of death, 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 of the right to exercise that
would have accrued had the Optionee continued living and remained in Continuous
Status as Director for six (6) months (or such lesser period of time as is
determined by the Board) after the date of death. Notwithstanding the foregoing,
in no event may the Option be exercised after its term set forth in Section 7
has expired.
(ii) within three (3) months (or such lesser period of
time as is determined by the Board) after the termination of Continuous Status
as a Director, the Option may be exercised,
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at any time within six (6) months following the date of death, 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 of the right to exercise that had accrued
at the date of termination. Notwithstanding the foregoing, in no event may the
option be exercised after its term set forth in Section 7 has expired.
10. Nontransferability of Options. Unless otherwise provided for by the
Board, the Option 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. The designation of a beneficiary by an Optionee does not
constitute a transfer. An Option may be exercised during the lifetime of an
Optionee only by the Optionee or a transferee permitted by this Section.
11. Adjustments Upon Changes in Capitalization or Merger.
(a) Change in Capitalization. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such out standing Option, 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.
(b) Dissolution; Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Option will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board. The Board may, in the exercise of its sole discretion in such
instances, declare that any Option shall terminate as of a date fixed by the
Board and give each Optionee the right to exercise his or her Option as to all
or any part of the Optioned Stock, including Shares as to which the Option would
not otherwise be exercisable.
(c) Merger; 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, then, to the extent the Option is unvested,
the Option shall become vested and exercisable as to an additional 25% of the
Shares subject to such Option, in addition to any Shares which may have already
vested under such Option (up to a maximum of 100% of the Optioned Stock
originally granted). In addition, the outstanding Options may be assumed or an
equivalent option may be substituted by the successor corporation or a parent or
subsidiary thereof (the "Successor Corporation"). If the Successor Corporation
does not assume an outstanding Option or substitute an equivalent option
-7-
<PAGE> 87
then, the Optionee shall have the right to exercise the Option as to some or all
of the Optioned Stock, including Shares as to which the Option would not
otherwise be exercisable. If an Option becomes exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the Board shall
notify the Optionee that the Option shall be exercisable for a period of fifteen
(15) days from the date of such notice, and the Option will terminate upon the
expiration of such period.
For the purposes of this Section 11(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
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).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to 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 in the merger or sale of assets.
(d) Certain Business Combinations. In the event it is determined
by the Company's independent public accountants that the acceleration of vesting
of outstanding Options upon a merger pursuant to this Section would preclude
accounting for such merger as a pooling of interests, and the Board desires to
approve such merger which requires as a condition to the closing of such
transaction that it be accounted for as a pooling of interests, then any such
option acceleration shall be null and void, but only if the absence of such
option acceleration would preserve the pooling treatment.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with any
applicable law or regulation, the Company shall obtain approval of the
stockholders of the Company to Plan amendments to the extent and in the manner
required by such law or regulation.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agree ment
must be in writing and signed by the Optionee and the Company.
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<PAGE> 88
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, 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 relevant provisions of law.
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.
15. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. Stockholder Approval.
(a) Continuance of the Plan shall be subject to approval by the
stockholders of the Company at or prior to the first annual meeting of
stockholders held subsequent to the granting of an Option hereunder. If such
stockholder approval is obtained at a duly held stockholders' meeting, it may be
obtained by the affirmative vote of the holders of a majority of the outstanding
shares of the Company present or represented and entitled to vote thereon. If
such stockholder approval is obtained by written consent, it may be obtained by
the written consent of the holders of a majority of the outstanding shares of
the Company.
(b) Any required approval of the stockholders of the Company
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder.
18. Information to Optionees. The Company shall provide to each Optionee,
during the period for which such Optionee has one or more Options outstanding,
copies of all annual reports to stock holders, proxy statements and other
information provided to all stockholders of the Company.
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<PAGE> 89
AUSPEX SYSTEMS, INC.
DIRECTOR'S NONSTATUTORY STOCK OPTION AGREEMENT
(FIRST OPTION)
Auspex Systems, Inc., a Delaware corporation (the "Company"), has
granted to 1 (the "Optionee"), an option to purchase a total of 16,000 shares of
the Company's Common Stock, at the price determined as provided herein, and in
all respects subject to the terms, definitions and provi sions of the 1993
Directors' Stock Option Plan (the "Plan") adopted by the Company which is
incorporated herein by reference. The terms defined in the Plan shall have the
same defined meanings herein.
1. Nature of the Option. This Option is a nonstatutory option and is not
intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $2 for each share of Common
Stock, which is 100% of the fair market value of the Common Stock on the date of
grant of this Option.
3. Exercise of Option. This Option shall be exercisable during its term
in accordance with the provisions of Section 9 of the Plan as follows:
(i)Right to Exercise.
(a) This Option shall become exercisable in installments,
to the extent of 25% of the Shares (4,000 Shares) subject to the Option on the
first, second, third and fourth anniversaries of the date of the grant of this
Option specified on the signature page; provided, however, that in no event
shall this Option be exercisable until stockholder approval of the Plan has been
obtained in accordance with Section 17 thereof.
(b) This Option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Sections 6, 7 and 8 of this Agreement.
(ii) Method of Exercise. This Option shall be exercisable by
written notice which shall state the election to exercise the Option, the number
of Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such Shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.
<PAGE> 90
4. Method of Payment. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check;
(iii) surrender of other shares which (x) 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 (y) 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; or
(iv) delivery of a properly executed exercise notice together
with such other documentation as the Board and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would consti tute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
6. Termination of Status as a Director. If Optionee ceases to serve as a
Director, he may, but only within thirty (30) days after the date he ceases to
be a Director of the Company, exercise this Option to the extent that he was
entitled to exercise it at the date of such termination. To the extent that he
was not entitled to exercise this Option at the date of such termination, or if
he does not exercise this Option within the time specified herein, the Option
shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
above, if Optionee is unable to continue his service as a Director as a result
of his total and permanent disability (as defined in Section 22(e) (3) of the
Internal Revenue Code), he may, but only within six (6) months from the date of
termination, exercise this Option to the extent he was entitled to exercise it
at the date of such termination. To the extent that he was not entitled to
exercise this Option at the date of termination, or if he does not exercise this
Option within the time specified herein, the Option shall terminate.
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<PAGE> 91
8. Death of Optionee. In the event of the death of Optionee:
(i) during the term of this Option and while a Director of the
Company and having been in Continuous Status as a Director since the date of
grant of this Option, the Option may be exercised, at any time within six (6)
months following the date of death, by Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that would have accrued had Optionee
continued living and remained in Continuous Status as a Director for six (6)
months after the date of death; or
(ii) within thirty (30) days after the termination of Optionee's
Continuous Status as a Director, this Option may be exercised, at any time
within six (6) months following the date of death, by Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent of the right to exercise that had accrued at the date of
termination.
9. 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 him. The terms of this
Option shall be binding upon the executors, administrators, heirs; successors
and assigns of the Optionee.
10. Term of Option. This Option may not be exercised more than ten (10)
years from the date of grant of this Option, and may be exercised during such
term only in accordance with the Plan and the terms of this Option.
11. Taxation Upon Exercise of Option. Optionee understands that, upon
exercise of this Option, he will recognize income for tax purposes in an amount
equal to the excess of the then fair market value of the Shares purchased over
the exercise price paid for such Shares. The Company may require the Optionee to
make a cash payment to cover any applicable withholding tax liability as a
condition of exercise of this Option. Upon a resale of such Shares by the
Optionee, any difference between the sale price and the fair market value of the
Shares on the date of exercise of the Option will be treated as capital gain or
loss.
DATE OF GRANT: 3
AUSPEX SYSTEMS, INC.,
a Delaware corporation
By:
---------------------------
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<PAGE> 92
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
annexed hereto, and represents that he is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof. Optionee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Board upon any questions arising
under the Plan.
Dated:
------------------
------------------------
Optionee
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<PAGE> 93
AUSPEX SYSTEMS, INC.
DIRECTOR'S NONSTATUTORY STOCK OPTION AGREEMENT
(SUBSEQUENT OPTION)
Auspex Systems, Inc., a Delaware corporation (the "Company"), has
granted to 1 (the "Optionee"), an option to purchase a total of 4,000 shares of
the Company's Common Stock, at the price determined as provided herein, and in
all respects subject to the terms, definitions and provi sions of the 1993
Directors' Stock Option Plan (the "Plan") adopted by the Company which is
incorporated herein by reference. The terms defined in the Plan shall have the
same defined meanings herein.
1. Nature of the Option. This Option is a nonstatutory option and is not
intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $2 for each share of Common
Stock, which is 100% of the fair market value of the Common Stock on the date of
grant of this Option.
3. Exercise of Option. This Option shall be exercisable during its term
in accordance with the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
(a) This Option shall become exercisable to the extent of
all the Shares subject to the Option on the fourth anniversary of the date of
the grant of this Option specified on the signature page; provided, however,
that in no event shall this Option be exercisable until stockholder approval of
the Plan has been obtained in accordance with Section 17 thereof.
(b) This Option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Sections 6, 7 and 8 of this Agreement.
(ii)Method of Exercise. This Option shall be exercisable by written
notice which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such Shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.
4. Method of Payment. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(i) cash;
<PAGE> 94
(ii) check;
(iii) surrender of other shares which (x) 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 (y) 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; or
(iv) delivery of a properly executed exercise notice together
with such other documentation as the Board and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
6. Termination of Status as a Director. If Optionee ceases to serve as a
Director, he may, but only within thirty (30) days after the date he ceases to
be a Director of the Company, exercise this Option to the extent that he was
entitled to exercise it at the date of such termination. To the extent that he
was not entitled to exercise this Option at the date of such termination, or if
he does not exercise this Option within the time specified herein, the Option
shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
above, if Optionee is unable to continue his service as a Director as a result
of his total and permanent disability (as defined in Section 22(e)(3) of the
Internal Revenue Code), he may, but only within six (6) months from the date of
termination, exercise this Option to the extent he was entitled to exercise it
at the date of such termination. To the extent that he was not entitled to
exercise this Option at the date of termination, or if he does not exercise this
Option within the time specified herein, the Option shall terminate.
8. Death of Optionee. In the event of the death of Optionee:
(i) during the term of this Option and while a Director of the
Company and having been in Continuous Status as a Director since the date of
grant of this Option, the Option may be exercised, at any time within six (6)
months following the date of death, by Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that would have accrued had Optionee
continued living and remained in Continuous Status as a Director for six (6)
months after the date of death; or
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<PAGE> 95
(ii) within thirty (30) days after the termination of Optionee's
Continuous Status as a Director, this Option may be exercised, at any time
within six (6) months following the date of death, by Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent of the right to exercise that had accrued at the date of
termination.
9. 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 him. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
10. Term of Option. This Option may not be exercised more than ten (10)
years from the date of grant of this Option, and may be exercised during such
term only in accordance with the Plan and the terms of this Option.
11. Taxation upon Exercise of Option. Optionee understands that, upon
exercise of this Option, he will recognize income for tax purposes in an amount
equal to the excess of the then fair market value of the Shares purchased over
the exercise price paid for such Shares. The Company may require the Optionee to
make a cash payment to cover any applicable withholding tax liability as a
condition of exercise of this Option. Upon a resale of such Shares by the
Optionee, any difference between the sale price and the fair market value of the
Shares on the date of exercise of the Option will be treated as capital gain or
loss.
DATE OF GRANT: 3
AUSPEX SYSTEMS, INC.,
a Delaware corporation
By:
-----------------------------
Title:
---------------------------
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
annexed hereto, and represents that he is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof. Optionee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Board upon any questions arising
under the Plan.
Dated:
-----------------
------------------------------
Optionee
-3-
