<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 9, 1996
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
INCONTROL, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 91-1501619
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
6675 - 185TH AVENUE N.E.
REDMOND, WASHINGTON 98052
(Address of Principal Executive Offices)(Zip Code)
INCONTROL, INC.
1996 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
RESTATED 1990 STOCK OPTION PLAN
(FULL TITLES OF THE PLANS)
KURT C. WHEELER
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
INCONTROL, INC.
6675 - 185TH AVENUE N.E.
REDMOND, WASHINGTON 98052
(206) 861-9800
(Name, address and telephone number of agent for service)
COPY TO:
STEPHEN M. GRAHAM
PERKINS COIE
1201 THIRD AVENUE, 40TH FLOOR
SEATTLE, WASHINGTON 98101-3099
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================================================
TITLE OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SHARE(1) PRICE(1) FEE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share . . . . . . 300,000(2)(4) $ 14.875 $ 4,462,500 $ 1,539
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock, par value
$.01 per share . . . . . . 1,000,000(3)(4) $ 14.875 $14,875,000 $ 5,130
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated pursuant to Rule 457(c) solely for the purpose of calculating
the registration fee. The price per share is estimated to be $14.875,
based on the average of the high and low sale price for the Common Stock
on May 7, 1996, as reported by the Nasdaq National Market.
(2) These shares are being registered for issuance under the 1996 Stock Option
Plan for Nonemployee Directors.
(3) These shares are being registered for issuance under the Restated 1990
Stock Option Plan.
(4) The number of shares registered includes such indeterminate number of
additional shares which may be necessary to adjust the number of shares
reserved for issuance pursuant to the 1996 Stock Option Plan for
Nonemployee Directors and the Restated 1990 Stock Option Plan, as the case
may be, as the result of any future stock split, stock dividend or similar
adjustment of the outstanding Common Stock. This number also includes
associated preferred share purchase rights. Prior to the occurrence of
certain events, such rights will not be evidenced or traded separately
from the Common Stock.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated by reference in this
Registration Statement:
(a) The Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995;
(b) All other reports filed by the Registrant pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), since the end of the year covered by the Annual Report
referred to in (a) above;
(c) The description of the Registrant's Common Stock
contained in the Registration Statement on Form 8-A filed with the Securities
and Exchange Commission (the "Commission") on July 19, 1994, including any
amendment or report filed for the purpose of updating such description; and
(d) The description of the Registrant's rights contained
in the Registration Statement on Form 8-A filed with the Commission on March 1,
1996, including any amendment or report filed for the purpose of updating such
description.
All documents filed by the Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act, after the date hereof and prior to the
filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities covered
hereby then remaining unsold, shall also be deemed to be incorporated by
reference into this Registration Statement and to be a part hereof commencing
on the respective dates on which such documents are filed.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides that a corporation may indemnify directors and officers as well as
other employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation, a
"derivative action") if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that (i) indemnification
only extends to expenses (including attorneys' fees) incurred in connection
with the defense or settlement of such actions and (ii) the statute requires
court approval before there can be any indemnification where the person seeking
indemnification has been found liable to the corporation. The statute provides
that it is not exclusive of other indemnification that may be granted by a
corporation's charter, bylaws, disinterested director vote, stockholder vote or
otherwise.
Section 10 of the Registrant's Amended and Restated Bylaws (the
"Bylaws") requires indemnification to the fullest extent permitted under
Delaware law as from time to time in effect. Subject to any restrictions
imposed by Delaware law, the Bylaws provide an unconditional right to
indemnification for all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) actually and reasonably incurred or suffered by any person in
connection with any actual or threatened action, suit or proceeding, whether
civil, criminal, administrative or investigative by reason of the fact that
such person is or was serving as a director or officer of the Registrant or
that, being or having been a director or officer or an employee of the
Registrant, such person is or was serving at the request of the Registrant as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including an employee benefit plan. The
Bylaws also provide that the Registrant may, by action of its Board of
Directors, provide indemnification to its employees and agents with the same
scope and effect as the foregoing indemnification of directors and officers.
II-1
<PAGE> 3
Section 102(b)(7) of the DGCL permits a corporation to provide it its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability for (i) any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) payments of
unlawful dividends or unlawful stock repurchases or redemptions, or (iv) any
transaction from which the director derived an improper personal benefit.
Article 10 of the Registrant's Restated Certificate of Incorporation
provides that to the fullest extent that the DGCL, as it now exists or may
hereafter be amended, permits the limitation or elimination of the liability of
directors, a director of the Registrant shall not be liable to the Registrant
or its stockholders for monetary damages for breach of fiduciary duty as a
director. Any amendment to or repeal of such Article 10 shall not adversely
affect any right or protection of a director of the Registrant for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
The Registrant has entered into an Indemnification Agreement with each
of its executive officers and directors in which the Registrant agrees to hold
harmless and indemnify the officer or director to the fullest extent permitted
by Delaware law. Under these Indemnification Agreements, the officer or
director is not indemnified for any action, suit, claim or proceeding
instituted by or at the direction of the officer or director unless such
action, suit, claim or proceeding is or was authorized by the Registrant's
Board of Directors or unless the action is to enforce the provisions of the
Indemnification Agreement.
No indemnity pursuant to the Indemnification Agreements shall be
provided by the Registrant on account of any suit in which a final unappealable
judgment is rendered against an executive officer or director for an accounting
of profits made from the purchase or sale of the Registrant's securities by the
executive officer or director in violation of the provisions of Section 16(b)
of the Exchange Act and amendments thereto, or for damages that have been paid
directly to the executive officer or director by an insurance carrier under a
directors' and officers' liability insurance policy maintained by the
Registrant.
ITEM 8. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- ------------
<S> <C>
5.1 Opinion of Perkins Coie regarding legality of the Common
Stock being registered
23.1 Consent of Ernst & Young LLP (see page II-5)
23.2 Consent of Perkins Coie (included in opinion filed as
Exhibit 5.1)
24.1 Power of Attorney (see signature page)
99.1 InControl, Inc. 1996 Stock Option Plan for Nonemployee
Directors
99.2 InControl, Inc. Restated 1990 Stock Option Plan
</TABLE>
II-2
<PAGE> 4
ITEM 9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this Registration
Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefits plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-3
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-8 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Redmond, State of
Washington, on the 7th day of May, 1996.
INCONTROL, INC.
By /s/ Kurt C. Wheeler
-------------------------------------
Kurt C. Wheeler, Chairman,
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below authorizes and appoints Kurt
C. Wheeler and Donald F. Seaton III, or either of them, his attorneys-in-fact,
with the power of substitution, for him in any and all capacities, to sign any
amendments to this Registration Statement, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons on
the 7th day of May, 1996 in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
Chairman, President and Chief Executive Officer
/s/ Kurt C. Wheeler (Principal Executive Officer)
------------------------------------
Kurt C. Wheeler
Vice President, Finance, Chief Financial Officer and
/s/ Donald F. Seaton III Secretary (Principal Financial and Accounting Officer)
------------------------------------
Donald F. Seaton III
/s/ Alan D. Frazier Director
------------------------------------
Alan D. Frazier
/s/ Donald C. Harrison Director
------------------------------------
Donald C. Harrison
/s/ Mark B. Knudson Director
------------------------------------
Mark B. Knudson
/s/ Michael J. Levinthal Director
------------------------------------
Michael J. Levinthal
</TABLE>
II-4
<PAGE> 6
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement on Form S-8 pertaining to the InControl, Inc. 1996 Stock Option Plan
for Nonemployee Directors and InControl, Inc. Restated 1990 Stock Option Plan
of our report dated January 26, 1996, with respect to the consolidated
financial statements of InControl, Inc. incorporated by reference in its
Annual Report on Form 10-K for the year ended December 31, 1995, filed with
the Securities and Exchange Commission.
Ernst & Young LLP
Seattle, Washington
May 8, 1996
II-5
<PAGE> 7
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
5.1 Opinion of Perkins Coie regarding legality of the Common
Stock being registered
23.1 Consent of Ernst & Young LLP (see page II-5)
23.2 Consent of Perkins Coie (included in Exhibit 5.1)
24.1 Power of Attorney (see signature page)
99.1 InControl, Inc. 1996 Stock Option Plan for Nonemployee
Directors
99.2 InControl, Inc. Restated 1990 Stock Option Plan
</TABLE>
II-6
<PAGE> 1
EXHIBIT 5.1
<PAGE> 2
[Perkins Coie Letterhead]
May 8, 1996
InControl, Inc.
6675 - 185th Ave. N.E.
Redmond, WA 98052
RE: REGISTRATION STATEMENT ON FORM S-8
Gentlemen and Ladies:
We have acted as counsel to you in connection with the preparation of
a Registration Statement on Form S-8 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"), which you are filing with the
Securities and Exchange Commission with respect to 1,300,000 shares of Common
Stock, $.01 par value (the "Shares"), which may be issued upon the exercise of
stock options granted or to be granted pursuant to the InControl, Inc. 1996
Stock Option Plan for Nonemployee Directors and the InControl, Inc. Restated
1990 Stock Option Plan (the "Plans"). We have examined the Registration
Statement and such documents and records of the Company and other documents as
we have deemed necessary for the purpose of this opinion.
Based upon and subject to the foregoing, we are of the opinion that
the Shares that may be issued upon the exercise of stock options granted or to
be granted pursuant to the Plans have been duly authorized and that, upon the
due execution by the Company and the registration by its registrars of the
Shares and the sale thereof by the Company in accordance with the terms of the
Plans, and the receipt of the consideration therefor in accordance with the
terms of the Plans, the Shares will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
Perkins Coie
<PAGE> 1
EXHIBIT 99.1
<PAGE> 2
INCONTROL, INC.
1996 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
SECTION 1. PURPOSES
The purposes of the InControl, Inc. 1996 Stock Option Plan for
Nonemployee Directors (this "Plan") are to attract and retain the services of
experienced and knowledgeable nonemployee directors for InControl, Inc. (the
"Company") and to provide added incentive to such directors by providing an
opportunity for stock ownership in the Company.
SECTION 2. ADMINISTRATION
The administrator of this Plan (the "Plan Administrator") shall be the
Board of Directors of the Company (the "Board"). Subject to the terms of this
Plan, the Plan Administrator shall have the power to construe the provisions of
this Plan, to determine all questions arising hereunder and to adopt and amend
such rules and regulations for the administration of this Plan as it may deem
desirable. No member of the Plan Administrator shall participate in any vote
by the Plan Administrator on any matter materially affecting the rights of any
such member under this Plan.
SECTION 3. SHARES SUBJECT TO THE PLAN
Subject to adjustment in accordance with Section 6 hereof, the total
number of shares of the Company's common stock (the "Common Stock") for which
options may be granted under this Plan is 300,000, as such Common Stock was
constituted on the effective date of this Plan (the "Shares"). The Shares
shall be shares currently authorized but unissued or subsequently acquired by
the Company as treasury shares and shall include shares representing the
unexercised portion of any option granted under this Plan which expires or
terminates without being exercised in full.
SECTION 4. ELIGIBILITY; PARTICIPATION IN THE PLAN
4.1 ELIGIBLE DIRECTORS
Each member of the Board elected or appointed who is not otherwise an
employee of the Company or any parent or subsidiary corporation (an "Eligible
Director") shall be eligible to participate in this Plan.
4.2 INITIAL GRANTS
Each existing member of the Board immediately prior to the effective
date of this Plan who will continue service as an Eligible Director immediately
following the 1996 Annual Meeting of Stockholders shall automatically receive
the grant of an option to purchase 20,000 Shares on the effective date of this
Plan.
_________________________________________________________________
InControl, Inc. 1996 Stock Option Plan For Nonemployee Directors Page 1
<PAGE> 3
Commencing with the effective date of this Plan, immediately following
his or her initial election or appointment to the Board, each Eligible Director
shall automatically receive an Option to purchase 30,000 Shares.
4.3 ANNUAL GRANTS
Commencing with the 1997 Annual Meeting of Stockholders each Eligible
Director continuing service as an Eligible Director immediately following an
Annual Meeting of Stockholders shall automatically receive an option to
purchase 10,000 Shares immediately following each year's Annual Meeting of
Stockholders as an annual grant; provided that an Eligible Director who has
received an initial grant of 30,000 Shares on such date shall not receive an
annual grant until the next Annual Meeting.
4.4 AVAILABILITY OF SHARES
No grant shall be made under this Plan if the effect of such grant
would be to obligate the Company to issue more Shares than are reserved under
Section 3. If insufficient Shares are reserved under Section 3 to fully fund
one or more grants to be made under this Section 4 on the same date of grant,
then the Shares available shall be divided by the number of Eligible Directors
then entitled to a grant and each such Eligible Director shall be granted an
option for that number of Shares.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
Each option granted to an Eligible Director under this Plan (such an
Eligible Director, an "Optionee") and the issuance of Shares thereunder shall
be subject to the following terms:
5.1 OPTION AGREEMENT
Each option shall be evidenced by an option agreement (an "Agreement")
duly executed on behalf of the Company. Each Agreement shall comply with and
be subject to the terms and conditions of this Plan. Any Agreement may contain
such other terms, provisions and conditions not inconsistent with this Plan as
may be determined by the Plan Administrator.
5.2 OPTION EXERCISE PRICE
The option exercise price for an option shall be the closing price, or
if there is no closing price, the mean between the high and the low sales price
of shares of Common Stock as reported on the Nasdaq National Stock Market on
the day the option is granted or, if no Common Stock was traded on such date,
on the next succeeding day on which Common Stock is so traded.
5.3 VESTING AND EXERCISABILITY
Each stock option granted hereunder shall vest and become exercisable
in accordance with the following schedule:
_________________________________________________________________
InControl, Inc. 1996 Stock Option Plan For Nonemployee Directors Page 2
<PAGE> 4
<TABLE>
<CAPTION>
Period of Eligible Director's Continuous Portion of Total
Service as a Director With the Company Option Which Is
From the Date the Option is Granted Exercisable
---------------------------------------- ----------------
<S> <C>
Less than twelve months 0%
Twelve months 33-1/3%
Twenty-four months 66-2/3%
Thirty-six months 100%
</TABLE>
5.4 TIME AND MANNER OF EXERCISE OF OPTION
Each option may be exercised in whole or in part at any time and from
time to time, subject to stockholder approval of this Plan; provided, however,
that no fewer than 20% of the Shares purchasable under the option (or the
remaining Shares then purchasable under the option, if less than 20%) may be
purchased upon any exercise of any option hereunder and that only whole Shares
will be issued pursuant to the exercise of any option.
Any option may be exercised by giving written notice, signed by the
person exercising the option, to the Company stating the number of Shares with
respect to which the option is being exercised, accompanied by payment in full
for such Shares, which payment may be in whole or in part (a) in cash or by
check, (b) in shares of Common Stock already owned for at least six months by
the person exercising the option, valued at fair market value at the time of
such exercise, or (c) by delivery of a properly executed exercise notice,
together with irrevocable instructions to a broker, to properly deliver to the
Company the amount of sale or loan proceeds to pay the exercise price, all in
accordance with the regulations of the Federal Reserve Board.
5.5 TERM OF OPTIONS
Each option shall expire ten years from the date of the granting
thereof, but shall be subject to earlier termination as follows:
(a) In the event that an Optionee ceases to be a director
of the Company for any reason other than the death of the Optionee, the options
granted to such Optionee may be exercised by him or her only within three
months after the date such Optionee ceases to be a director of the Company.
(b) In the event of the death of an Optionee, whether
during the Optionee's service as a director or during the three- month period
referred to in Section 5.5(a), the options granted to such Optionee shall be
exercisable, and such options shall expire unless exercised within twelve
months after the date of the Optionee's death, by the legal representatives or
the estate of such Optionee, by any person or persons whom the Optionee shall
have designated in writing on forms prescribed by and filed with the Company
or, if no such designation has been made, by the person or persons to whom the
Optionee's rights have passed by will or the laws of descent and distribution.
_________________________________________________________________
InControl, Inc. 1996 Stock Option Plan For Nonemployee Directors Page 3
<PAGE> 5
5.6 TRANSFERABILITY
During an Optionee's lifetime, an option may be exercised only by the
Optionee. Options granted under this Plan and the rights and privileges
conferred thereby shall not be subject to execution, attachment or similar
process and may not be transferred, assigned, pledged or hypothecated in any
manner (whether by operation of law or otherwise) other than by will or by the
applicable laws of descent and distribution or, to the extent permitted by
applicable law and Rule 16b-3 promulgated under Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (i) designation by the
Optionee in writing during the Optionee's lifetime of a beneficiary to receive
and exercise options in the event of the Optionee's death (as provided in
Section 5.5(b)) or (ii) by gift or other transfer of an option to any trust or
estate in which the original Optionee or such Optionee's spouse or other
immediate family member has a substantial interest; or to a spouse or other
immediate family member, except that any option so assigned or transferred
shall be subject to all the same terms and conditions contained in the
instrument evidencing the option. Any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of any option under this Plan or of any right
or privilege conferred thereby, contrary to the provisions of this Plan, or the
sale or levy or any attachment or similar process upon the rights and
privileges conferred hereby, shall be null and void.
5.7 HOLDING PERIOD
Shares of Common Stock obtained upon the exercise of any option
granted under this Plan may not be sold by persons subject to Section 16 of the
Exchange Act until six (6) months after the date the option was granted.
5.8 PARTICIPANT'S OR SUCCESSOR'S RIGHTS AS STOCKHOLDER
Neither an Optionee nor the Optionee's successor in interest shall
have any rights as a stockholder of the Company with respect to any Shares
subject to an option granted to such person until such person becomes a holder
of record of such Shares.
5.9 LIMITATION AS TO DIRECTORSHIP
Neither this Plan, nor the granting of an option, nor any other action
taken pursuant to this Plan shall constitute or be evidence of any agreement or
understanding, express or implied, that an Optionee has a right to continue as
a director for any period of time or at any particular rate of compensation.
5.10 REGULATORY APPROVAL AND COMPLIANCE
The Company shall not be required to issue any certificate or
certificates for Shares upon the exercise of an option granted under this Plan,
or record as a holder of record of Shares the name of the individual exercising
an option under this Plan, without obtaining to the complete satisfaction of
the Company the approval of all regulatory bodies deemed necessary by the
Company, and without complying, to the Company's complete satisfaction, with
all rules and regulations under federal, state or local law deemed applicable
by the Company.
_________________________________________________________________
InControl, Inc. 1996 Stock Option Plan For Nonemployee Directors Page 4
<PAGE> 6
SECTION 6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
6.1 RECAPITALIZATION
The aggregate number and class of shares for which options may be
granted under this Plan, the number and class of shares covered by each
outstanding option and the exercise price per share thereof (but not the total
price), and the number and class of shares that may be made subject to options
as set forth in Section 4 of the Plan, shall all be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock of
the Company resulting from a split or consolidation of shares or any like
capital adjustment, or the payment of any stock dividend.
6.2 EFFECT OF LIQUIDATION OR REORGANIZATION
Upon a merger (other than a merger of the Company in which the holders
of shares of Common Stock immediately prior to the merger have the same
proportionate ownership of shares of Common Stock in the surviving corporation
immediately after the merger), consolidation, acquisition of property or stock,
separation, reorganization (other than a mere reincorporation or the creation
of a holding company) or liquidation of the Company, as a result of which the
stockholders of the Company receive cash, stock or other property in exchange
for or in connection with their shares of Common Stock, then the exercisability
of each option outstanding under the Plan shall be automatically accelerated so
that each such option shall, immediately prior to the specified effective date
for any such transaction, become fully exercisable with respect to the total
number of shares of Common Stock purchasable under such option and may be
exercised for all or any portion of such shares. To the extent such option is
not exercised, it shall terminate, except that in the event of a merger in
which stockholders of the Company receive capital stock of another corporation
in exchange for their shares of Common Stock, such unexercised option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation. Any such
assumed or equivalent option shall be fully exercisable with respect to the
total number of shares purchasable under such option.
6.2 FRACTIONAL SHARES
In the event of any adjustment in the number of shares covered by any
option, any fractional shares resulting from such adjustment shall be
disregarded and each such option shall cover only the number of full shares
resulting from such adjustment.
SECTION 7. EXPENSES
All costs and expenses of the adoption and administration of this Plan
shall be borne by the Company; none of such expenses shall be charged to any
Optionee.
SECTION 8. COMPLIANCE WITH RULE 16b-3
It is the intention of the Company that this Plan comply in all
respects with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act
and that Plan participants remain
_________________________________________________________________
InControl, Inc. 1996 Stock Option Plan For Nonemployee Directors Page 5
<PAGE> 7
disinterested persons ("Disinterested Persons") for purposes of administering
other employee benefit plans of the Company and having such other plans be
exempt from Section 16(b) of the Exchange Act. Therefore, if any Plan
provision is later found not to be in compliance with Rule 16b-3 or if any
Plan provision would disqualify Plan participants from remaining Disinterested
Persons, that provision shall be deemed null and void, and in all events this
Plan shall be construed in favor of its meeting the requirements of Rule 16b-3.
SECTION 9. AMENDMENT AND TERMINATION
The Board may amend, terminate or suspend this Plan at any time, in
its sole and absolute discretion; provided, however, that if required to
qualify this Plan under Rule 16b-3 under Section 16(b) of the Exchange Act, no
amendment may be made more than once every six months that would change the
amount, price, timing or vesting of the options, other than to comply with
changes in the Internal Revenue Code of 1986, as amended, or the rules and
regulations thereunder; provided further that if required to qualify this Plan
under Rule 16b-3, no amendment that would
(a) materially increase the number of Shares that may be
issued under this Plan,
(b) materially modify the requirements as to eligibility
for participation in this Plan,
(c) materially increase the benefits accruing to
participants under this Plan, or
(d) otherwise require stockholder approval under any
applicable law or regulation
shall be made without the approval of the Company's stockholders.
SECTION 10. EFFECTIVE DATE AND DURATION
This Plan shall be effective upon approval of the Company's
stockholders at or before the next Annual Meeting of Stockholders of the
Company as defined in the Company's Bylaws. This Plan shall continue in effect
unless it is terminated by action of the Board or the Company's stockholders,
but such termination shall not affect the then-outstanding terms of any
options.
Adopted by the Company's Board of Directors on February 27, 1996 and
approved by the Company's stockholders on May 7, 1996.
_________________________________________________________________
InControl, Inc. 1996 Stock Option Plan For Nonemployee Directors Page 6
<PAGE> 1
EXHIBIT 99.2
<PAGE> 2
INCONTROL, INC.
RESTATED 1990 STOCK OPTION PLAN
AS AMENDED AND RESTATED ON FEBRUARY 27, 1996
SECTION 1 PURPOSES
The purpose of the InControl, Inc. Restated 1990 Stock Option Plan
(this "Plan") is to provide a means whereby selected employees, directors,
officers, agents, consultants, advisors and independent contractors of
InControl, Inc. (the "Company"), or of any parent or subsidiary (as defined in
subsection 5.8 and referred to hereinafter as "related corporations") thereof,
may be granted incentive stock options and/or nonqualified stock options to
purchase the Common Stock (as defined in Section 3) of the Company, in order to
attract and retain the services or advice of such employees, directors,
officers, agents, consultants, advisors and independent contractors and to
provide added incentive to such persons by encouraging stock ownership in the
Company.
SECTION 2 ADMINISTRATION
This Plan shall be administered by the Board of Directors of the
Company (the "Board") or, in the event the Board shall appoint and/or authorize
a committee to administer this Plan, by such committee. The administrator of
this Plan shall hereinafter be referred to as the "Plan Administrator."
In the event a member of the Plan Administrator may be eligible,
subject to the restrictions set forth in Section 4, to participate in this
Plan, no member of the Plan Administrator shall vote with respect to the
granting of an option hereunder to himself or herself, as the case may be, and,
if state corporate law does not permit a committee to grant options to
directors, then any option granted under this Plan to a director for his or her
services as such shall be approved by the full Board.
The members of any committee serving as Plan Administrator shall be
appointed by the Board for such term as the Board may determine. The Board may
from time to time remove members from, or add members to, the committee.
Vacancies on the committee, however caused, shall be filled by the Board.
With respect to grants made under this Plan to individuals who are
subject to Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Plan Administrator shall be constituted at all times so as
to meet the requirements
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InControl, Inc. Restated 1990 Stock Option Plan Page 1
<PAGE> 3
of Rule 16b-3 promulgated under Section 16(b) of the Exchange Act if any of the
Company's equity securities are registered pursuant to Section 12(b) or 12(g)
of the Exchange Act.
2.1 PROCEDURES
The Board shall designate one of the members of the Plan Administrator
as chairman. The Plan Administrator may hold meetings at such times and places
as it shall determine. The acts of a majority of the members of the Plan
Administrator present at meetings at which a quorum exists, or acts reduced to
or approved in writing by all Plan Administrator members, shall be valid acts
of the Plan Administrator.
2.2 RESPONSIBILITIES
Except for the terms and conditions explicitly set forth in this Plan,
the Plan Administrator shall have the authority, in its discretion, to
determine all matters relating to the options to be granted under this Plan,
including selection of the individuals to be granted options, the number of
shares to be subject to each option, the exercise price, and all other terms
and conditions of the options. Grants under this Plan need not be identical in
any respect, even when made simultaneously. The interpretation and
construction by the Plan Administrator of any terms or provisions of this Plan
or any option issued hereunder, or of any rule or regulation promulgated in
connection herewith, shall be conclusive and binding on all interested parties,
so long as such interpretation and construction with respect to incentive stock
options correspond to the requirements of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), the regulations thereunder and any
amendments thereto.
2.3 RULE 16b-3 COMPLIANCE AND BIFURCATION OF PLAN
It is the intention of the Company that, if any of the Company's
equity securities are registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, this Plan shall comply in all respects with Rule 16b-3 under the
Exchange Act. If any Plan provision is later found not to be in compliance
with such Section, the provision shall be deemed null and void, and in all
events this Plan shall be construed in favor of its meeting the requirements of
Rule 16b-3. Notwithstanding anything in this Plan to the contrary, the Board,
in its absolute discretion, may bifurcate this Plan so as to restrict, limit or
condition the application of any provision of this Plan to participants who are
subject to Section 16 of the Exchange Act without so restricting, limiting or
conditioning this Plan with respect to other participants.
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InControl, Inc. Restated 1990 Stock Option Plan Page 2
<PAGE> 4
SECTION 3 SHARES SUBJECT TO THE PLAN
The shares subject to this Plan shall be the Company's Common Stock,
par value $.01 per share (the "Common Stock"), currently authorized but
unissued or now held or subsequently acquired by the Company as treasury
shares. Subject to adjustment as provided in Section 7, the aggregate amount
of Common Stock to be delivered upon the exercise of all options granted under
this Plan shall not exceed 4,425,000 shares1. If any option granted under this
Plan shall expire or be surrendered, exchanged for another option, cancelled or
terminated for any reason without having been exercised in full, the
unpurchased shares subject thereto shall thereupon again be available for
purposes of this Plan, including for replacement options which may be granted
in exchange for such expired, surrendered, exchanged, cancelled or terminated
options.
SECTION 4 ELIGIBILITY
An incentive stock option may be granted only to an individual who, at
the time the option is granted, is an employee of the Company or a related
corporation. A nonqualified stock option may be granted to any employee,
director, officer, agent, consultant, advisor or independent contractor of the
Company or any related corporation, whether an individual or an entity. Any
party to whom an option is granted under this Plan shall be referred to
hereinafter as an "Optionee." Members of the Board of Directors of the Company
who are not employees of the Company are not eligible to receive grants under
this Plan.
SECTION 5 TERMS AND CONDITIONS OF OPTIONS
Options granted under this Plan shall be evidenced by written
agreements which shall contain such terms, conditions, limitations and
restrictions as the Plan Administrator shall deem advisable and which are not
inconsistent with this Plan. Notwithstanding the foregoing, options shall
include or incorporate by reference the following terms and conditions:
5.1 NUMBER OF SHARES AND PRICE
The maximum number of shares that may be purchased pursuant to the
exercise of each option and the price per share at which such option is
exercisable (the "exercise price") shall be as established by the Plan
Administrator; provided, however, that the maximum number of shares with
respect to which an option or options may
__________________________________
1 As constituted on February 27, 1996, the date of the amendment of the
Plan by the Board of Directors.
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InControl, Inc. Restated 1990 Stock Option Plan Page 3
<PAGE> 5
be granted to any Optionee in any one fiscal year of the Company shall not
exceed 200,000 shares (the "Maximum Annual Optionee Grant"); provided further
that the Plan Administrator shall act in good faith to establish an exercise
price which shall be not less than the fair market value per share of the
Common Stock at the time the option is granted and not less than the par value
per share of the Common Stock at the time the option is granted with respect to
nonqualified stock options and also provided that, with respect to incentive
stock options granted to greater than 10% Stockholders, the exercise price
shall be as required by subsection 6.1.
5.2 TERM AND MATURITY
Subject to the restrictions contained in Section 6 with respect to
granting incentive stock options to greater than 10% Stockholders, the term of
each incentive stock option shall be as established by the Plan Administrator
and, if not so established, shall be 10 years from the date it is granted but
in no event shall it exceed 10 years. The term of each nonqualified stock
option shall be as established by the Plan Administrator and, if not so
established, shall be 10 years. To ensure that the Company or related
corporation will achieve the purpose and receive the benefits contemplated by
this Plan, any option granted to any Optionee hereunder shall, unless the
condition of this sentence is waived or modified in the agreement evidencing
the option or by resolution adopted at any time by the Plan Administrator, be
exercisable according to the following schedule:
<TABLE>
<CAPTION>
Period of Optionee's Continuous Relationship
With the Company or Related Corporation From
the Date the Option Is Granted Portion of Total Option Which Is Exercisable
-------------------------------------------- --------------------------------------------
<S> <C>
After one year 12/48
Each full month of employment completed An additional
thereafter 1/48
</TABLE>
5.3 EXERCISE
Subject to the vesting schedule described in subsection 5.2, each
option may be exercised in whole or in part at any time and from time to time;
provided, however, that no fewer than 100 shares (or the remaining shares then
purchasable under the option, if less than 100 shares) may be purchased upon
any exercise of any option hereunder and that only whole shares will be issued
pursuant to the exercise of any option and that the exercise price shall not be
less than the par value per share of the
- -------------------------------------------------------------------------------
InControl, Inc. Restated 1990 Stock Option Plan Page 4
<PAGE> 6
Common Stock at the time the option is exercised. An Option shall be exercised
by delivery to the Company of notice of the number of shares with respect to
which the option is exercised, together with payment of the exercise price.
5.4 PAYMENT OF EXERCISE PRICE
Payment of the option exercise price shall be made in full at the time
the notice of exercise of the option is delivered to the Company and shall be
in cash, bank certified or cashier's check, or personal check (unless at the
time of exercise the Plan Administrator in a particular case determines not to
accept a personal check) for the shares being purchased.
The Plan Administrator can determine at any time before exercise that
additional forms of payment will be permitted. To the extent permitted by the
Plan Administrator and applicable laws and regulations (including, but not
limited to, federal tax and securities laws and regulations and state corporate
law), an option may be exercised by:
(a) delivery of shares of Common Stock of the Company
held by an Optionee having a fair market value equal to the exercise price,
such fair market value to be determined in good faith by the Plan
Administrator; provided, however, that payment in stock held by an Optionee
shall not be made unless the stock shall have been owned by the Optionee for a
period of at least six months;
(b) delivery of a full-recourse promissory note executed
by the Optionee in an amount which shall not exceed that portion of the
exercise price which is in excess of the amount determined to be stated capital
pursuant to Section 154 of the Delaware General Corporation Law; provided that
(i) such note delivered in connection with an incentive stock option shall, and
such note delivered in connection with a nonqualified stock option may, in the
sole discretion of the Plan Administrator, bear interest at a rate specified by
the Plan Administrator but in no case less than the rate required to avoid
imputation of interest (taking into account any exceptions to the imputed
interest rules) for federal income tax purposes, (ii) the Plan Administrator in
its sole discretion shall specify the term and other provisions of such note at
the time an incentive stock option is granted or at any time prior to exercise
of a nonqualified stock option, (iii) the Plan Administrator may require that
the Optionee pledge to the Company for the purpose of securing the payment of
such note the shares of Common Stock to be issued to the Optionee upon exercise
of the option and may require that the certificate representing such shares be
held in escrow in order to perfect the Company's security interest, and (iv)
the Plan Administrator in its sole discretion may at any time restrict or
rescind this right upon notification to the Optionee; or
- -------------------------------------------------------------------------------
InControl, Inc. Restated 1990 Stock Option Plan Page 5
<PAGE> 7
(c) delivery of a properly executed exercise notice,
together with irrevocable instructions to a broker, all in accordance with the
regulations of the Federal Reserve Board, to promptly deliver to the Company
the amount of sale or loan proceeds to pay the exercise price and any federal,
state or local withholding tax obligations that may arise in connection with
the exercise.
5.5 WITHHOLDING TAX REQUIREMENT
The Company or any related corporation shall have the right to retain
and withhold from any payment of cash or shares of Common Stock under this Plan
the amount of taxes required by any government to be withheld or otherwise
deducted and paid with respect to such payment. At its discretion, the Company
may require an Optionee receiving shares of Common Stock to reimburse the
Company for any such taxes required to be withheld by the Company and withhold
any distribution in whole or in part until the Company is so reimbursed. In
lieu thereof, the Company shall have the right to withhold from any other cash
amounts due or to become due from the Company to the Optionee an amount equal
to such taxes. The Company may also retain and withhold or the Optionee may
elect, subject to approval by the Company at its sole discretion, to have the
Company retain and withhold a number of shares having a market value not less
than the amount of such taxes required to be withheld by the Company to
reimburse the Company for any such taxes and cancel (in whole or in part) any
such shares so withheld. In order to qualify such election for exemption under
Rule 16b-3 promulgated under Section 16(b) of the Exchange Act, any election
made by an individual who is subject to Section 16 of the Exchange Act must be
an irrevocable election made six months prior to the date the option exercise
becomes taxable or such irrevocable election must become effective during the
quarterly 10-day window period required under Section 16(b) of the Exchange Act
for exercises of stock appreciation rights.
5.6 HOLDING PERIODS
5.6.1 SECTION 16 OF THE EXCHANGE ACT
If an individual subject to Section 16 of the Exchange Act sells
shares of Common Stock obtained upon the exercise of a stock option within six
months after the date the option was granted, such sale may result in
short-swing profit recovery under Section 16(b) of the Exchange Act.
5.6.2 TAXATION OF STOCK OPTIONS
In order to obtain certain tax benefits afforded to incentive stock
options under Section 422 of the Code, an Optionee must hold the shares issued
upon the exercise of an incentive stock option for two years after the date of
grant of the option and one
- -------------------------------------------------------------------------------
InControl, Inc. Restated 1990 Stock Option Plan Page 6
<PAGE> 8
year from the date of exercise. An Optionee may be subject to the alternative
minimum tax at the time of exercise of an incentive stock option.
Tax advice should be obtained by an Optionee when exercising any
option and prior to the disposition of the shares issued upon the exercise of
any option.
5.7 TRANSFERABILITY OF OPTIONS
Options granted under this Plan and the rights and privileges
conferred hereby may not be transferred, assigned, pledged or hypothecated in
any manner (whether by operation of law or otherwise) other than by will or by
the applicable laws of descent and distribution and shall not be subject to
execution, attachment or similar process. During an Optionee's lifetime, any
options granted under this Plan are personal to him or her and are exercisable
solely by such Optionee. Any attempt to transfer, assign, pledge, hypothecate
or otherwise dispose of any option under this Plan or of any right or privilege
conferred hereby, contrary to the Code or to the provisions of this Plan, or
the sale or levy or any attachment or similar process upon the rights and
privileges conferred hereby shall be null and void. Notwithstanding the
foregoing, to the extent permitted by Rule 16b-3 under the Exchange Act and
other applicable law and regulation, the Plan Administrator may permit an
Optionee to (i) during the Optionee's lifetime, designate a person who may
exercise the option after the Optionee's death by giving written notice of such
designation to the Company (such designation may be changed from time to time
by the Optionee by giving written notice to the Company revoking any earlier
designation and making a new designation) or (ii) with respect to nonqualified
stock options, transfer the option and the rights and privileges conferred
hereby.
5.8 TERMINATION OF RELATIONSHIP
If the Optionee's relationship with the Company or any related
corporation ceases for any reason other than termination for cause, death or
total disability, and unless by its terms the option sooner terminates or
expires, then the Optionee may exercise, for a three-month period, that portion
of the Optionee's option which is exercisable at the time of such cessation,
but the Optionee's option shall terminate at the end of such period following
such cessation as to all shares for which it has not theretofore been
exercised, unless such provision is waived in the agreement evidencing the
option. If, in the case of an incentive stock option, an Optionee's
relationship with the Company or any related corporation changes (i.e., from
employee to nonemployee, such as a consultant), such change shall constitute a
termination of an Optionee's employment with the Company or any related
corporation and the Optionee's incentive stock option shall terminate in
accordance with this subsection 5.8. Upon the expiration of the three-month
period following
- -------------------------------------------------------------------------------
InControl, Inc. Restated 1990 Stock Option Plan Page 7
<PAGE> 9
cessation of employment in the case of an incentive stock option, or at any
time prior to the expiration of the option in the case of a nonqualified stock
option, the Plan Administrator shall have sole discretion in a particular
circumstance to extend the exercise period following such cessation to any date
up to the termination or expiration of the option. If, however, in the case of
an incentive stock option, the Optionee does not exercise the Optionee's option
within three months after cessation of employment, the option will no longer
qualify as an incentive stock option under the Code.
If an Optionee's relationship with the Company or any related
corporation ceases because of a total disability, the Optionee's option shall
not terminate or, in the case of an incentive stock option, cease to be treated
as an incentive stock option until the end of the 12-month period following
such cessation (unless by its terms it sooner terminates or expires). As used
in this Plan, the term "total disability" refers to a mental or physical
impairment of the Optionee which is expected to result in death or which has
lasted or is expected to last for a continuous period of 12 months or more and
which causes the Optionee to be unable, in the opinion of the Company and two
independent physicians, to perform his or her duties for the Company and to be
engaged in any substantial gainful activity. Total disability shall be deemed
to have occurred on the first day after the Company and the two independent
physicians have furnished their opinion of total disability to the Plan
Administrator.
Options granted under the Plan shall not be affected by any change of
relationship with the Company so long as the Optionee continues to be an
employee, director, officer, agent, consultant, advisor or independent
contractor of the Company or of a related corporation; however, a change in an
Optionee's status from an employee to a nonemployee (e.g., consultant or
independent contractor) shall result in the termination of an outstanding
incentive stock option held by such Optionee. The Plan Administrator, in its
absolute discretion, may determine all questions of whether particular leaves
of absence constitute a termination of services; provided, however, that with
respect to incentive stock options, such determination shall be subject to any
requirements contained in the Code. The foregoing notwithstanding, with
respect to incentive stock options, employment shall not be deemed to continue
beyond the first 90 days of such leave, unless the Optionee's reemployment
rights are guaranteed by statute or by contract.
As used herein, the term "related corporation," when referring to a
subsidiary corporation, shall mean any corporation (other than the Company) in,
at the time of the granting of the option, an unbroken chain of corporations
ending with the Company, if stock possessing 50% or more of the total combined
voting power of all classes of stock of each of the corporations other than the
Company is owned by one of the other corporations in such chain. When
referring to a parent corporation, the
- -------------------------------------------------------------------------------
InControl, Inc. Restated 1990 Stock Option Plan Page 8
<PAGE> 10
term "related corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if, at the time of the granting of the
option, each of the corporations other than the Company owns stock possessing
50% or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
5.9 DEATH OF OPTIONEE
If an Optionee dies while he or she has a relationship with the
Company or any related corporation or within the three-month period (or
12-month period in the case of totally disabled Optionees) following cessation
of such relationship, any option held by such Optionee to the extent that the
Optionee would have been entitled to exercise such option, may be exercised
within one year after his or her death by the personal representative of his or
her estate or by the person or persons to whom the Optionee's rights under the
option shall pass (i) by will or by the applicable laws of descent and
distribution or (ii) by a designation or transfer pursuant to Section 5.7.
5.10 NO STATUS AS STOCKHOLDER
Neither the Optionee nor any party to which the Optionee's rights and
privileges under the option may pass shall be, or have any of the rights or
privileges of, a Stockholder of the Company with respect to any of the shares
issuable upon the exercise of any option granted under this Plan unless and
until such option has been exercised.
5.11 CONTINUATION OF RELATIONSHIP
Nothing in this Plan or in any option shall confer upon any Optionee
any right to continue in the employ or other relationship of the Company or of
a related corporation, or to interfere in any way with the right of the Company
or of any such related corporation to terminate his or her employment or other
relationship with the Company at any time.
5.12 MODIFICATION AND AMENDMENT OF OPTION
Subject to the requirements of Code Section 422 with respect to
incentive stock options and to the terms and conditions and within the
limitations of this Plan, the Plan Administrator may modify or amend any
outstanding option granted under this Plan. The modification or amendment of
an outstanding option shall not, without the consent of the Optionee, impair or
diminish any of his or her rights or any of the obligations of the Company
under such option. Except as otherwise provided in this Plan, no outstanding
option shall be terminated without the consent of the Optionee.
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InControl, Inc. Restated 1990 Stock Option Plan Page 9
<PAGE> 11
5.13 LIMITATION ON VALUE FOR INCENTIVE STOCK OPTIONS
As to all incentive stock options granted under the terms of this
Plan, to the extent that the aggregate fair market value of the shares
(determined at the time the incentive stock option is granted) with respect to
which incentive stock options are exercisable for the first time by the
Optionee during any calendar year (under this Plan and all other incentive
stock option plans of the Company, a related corporation or a predecessor
corporation) exceeds $100,000, such options shall be treated as nonqualified
stock options. The previous sentence shall not apply if the Internal Revenue
Service issues a public rule, issues a private ruling to the Company, any
Optionee or any legatee, personal representative or distributee of an Optionee
or issues regulations changing or eliminating such annual limit.
SECTION 6 GREATER THAN 10% STOCKHOLDERS
6.1 EXERCISE PRICE AND TERM OF INCENTIVE STOCK OPTIONS
If an incentive stock option is granted under this Plan to any
employee who own more than 10% of the total combined voting power of all
classes of stock of the Company or any related corporation, the term of such
incentive stock options shall not exceed five years and the exercise price
shall be not less than 110% of the fair market value of the shares at the time
the incentive stock option is granted. This provision shall control
notwithstanding any contrary terms contained in an option agreement or any
other document.
6.2 ATTRIBUTION RULE
For purposes of subsection 6.1, in determining stock ownership, an
employee shall be deemed to own the shares owned, directly or indirectly, by or
for his or her brothers, sisters, spouse, ancestors and lineal descendants.
Shares owned, directly or indirectly, by or for a corporation, partnership,
estate or trust shall be deemed to be owned proportionately by or for its
Stockholders, partners or beneficiaries. If an employee or a person related to
the employee owns an unexercised option or warrant to purchase shares of the
Company, the shares subject to that portion of the option or warrant which is
unexercised shall not be counted in determining stock ownership. For purposes
of this Section 6, shares owned by an employee shall include all shares
actually issued and outstanding immediately before the grant of the incentive
stock option to the employee.
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InControl, Inc. Restated 1990 Stock Option Plan Page 10
<PAGE> 12
SECTION 7 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
7.1 RECAPITALIZATION
The aggregate number and class of shares for which options may be
granted under this Plan, the Maximum Annual Optionee Grant set forth in Section
5.1, the number and class of shares covered by each outstanding option and the
exercise price per share thereof (but not the total price), and each such
option, shall all be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock of the Company resulting from a
split-up or consolidation of shares or any like capital adjustment, or the
payment of any stock dividend.
7.2 EFFECT OF LIQUIDATION OR REORGANIZATION
7.2.1 CASH, STOCK OR OTHER PROPERTY FOR STOCK
Except as provided in subsection 7.2.2, upon a merger (other than a
merger of the Company in which the holders of shares of Common Stock
immediately prior to the merger have the same proportionate ownership of shares
of Common Stock in the surviving corporation immediately after the merger),
consolidation, acquisition of property or stock, separation, reorganization
(other than a mere reincorporation or the creation of a holding company) or
liquidation of the Company, as a result of which the Stockholders of the
Company receive cash, stock or other property in exchange for or in connection
with their shares of Common Stock, any option granted hereunder shall
terminate, but the Optionee shall have the right immediately prior to any such
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to exercise such Optionee's option in whole or in
part whether or not the vesting requirements set forth in the option agreement
have been satisfied.
7.2.2 CONVERSION OF OPTIONS ON STOCK FOR STOCK EXCHANGE
If the Stockholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common Stock in
any transaction involving a merger (other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation
immediately after the merger), consolidation, acquisition of property or stock,
separation or reorganization (other than a mere reincorporation or the creation
of a holding company), all options granted hereunder shall be converted into
options to purchase shares of Exchange Stock unless the Company and the
corporation issuing the Exchange Stock, in their sole discretion, determine
that any or all such options granted hereunder shall not be converted into
options to purchase shares of Exchange Stock but instead shall
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InControl, Inc. Restated 1990 Stock Option Plan Page 11
<PAGE> 13
terminate in accordance with the provisions of subsection 7.2.1. The amount
and price of converted options shall be determined by adjusting the amount and
price of the options granted hereunder in the same proportion as used for
determining the number of shares of Exchange Stock the holders of the shares of
Common Stock receive in such merger, consolidation, acquisition of property or
stock, separation or reorganization. Unless accelerated by the Board, the
vesting schedule set forth in the option agreement shall continue to apply to
the options granted for the Exchange Stock.
7.3 FRACTIONAL SHARES
In the event of any adjustment in the number of shares covered by any
option, any fractional shares resulting from such adjustment shall be
disregarded and each such option shall cover only the number of full shares
resulting from such adjustment.
7.4 DETERMINATION OF BOARD TO BE FINAL
All Section 7 adjustments shall be made by the Board, and its
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. Unless an Optionee agrees otherwise,
any change or adjustment to an incentive stock option shall be made in such a
manner so as not to constitute a "modification" as defined in Code Section
425(h) and so as not to cause his or her incentive stock option issued
hereunder to fail to continue to qualify as an incentive stock option as
defined in Code Section 422(b).
SECTION 8 SECURITIES REGULATION
Shares shall not be issued with respect to an option granted under
this Plan 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, any applicable state securities laws, 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, including the
availability, if applicable, of an exemption from registration for the issuance
and sale of any shares hereunder.
SECTION 9 AMENDMENT AND TERMINATION
9.1 BOARD ACTION
The Board may at any time suspend, amend or terminate this Plan,
provided that, to the extent required for compliance with Rule 16b-3 under the
Exchange Act,
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InControl, Inc. Restated 1990 Stock Option Plan Page 12
<PAGE> 14
Section 422 of the Code or Section 162(m) of the Code or by any applicable law
or regulation, the Company's Stockholders must approve any amendment which
will:
(a) increase the number of shares that may be issued
under this Plan;
(b) with respect to nonqualified stock options,
materially modify the requirements as to eligibility for participation in this
Plan or, with respect to incentive stock options, change the designation of the
participants or class of participants eligible for participation in this Plan;
(c) materially increase the benefits accruing to the
participants under this Plan; or
(d) otherwise require Stockholder approval under any
applicable law or regulation.
Such Stockholder approval must be obtained (i) within 12 months of the
adoption by the Board of such amendment or (ii) if earlier, and to the extent
required for compliance with Rule 16b-3 under the Exchange Act, at the next
annual meeting of Stockholders after such adoption by the Board.
Any amendment made to this Plan which would constitute a
"modification" to incentive stock options outstanding on the date of such
amendment, shall not be applicable to such outstanding incentive stock options,
but shall have prospective effect only, unless the Optionee agrees otherwise.
9.2 AUTOMATIC TERMINATION
Unless sooner terminated by the Board, this Plan shall terminate ten
years from the earlier of (a) the date on which this Plan is adopted by the
Board or (b) the date on which this Plan is approved by the Stockholders of the
Company. No option may be granted after such termination or during any
suspension of this Plan. The amendment or termination of this Plan shall not,
without the consent of the option holder, alter or impair any rights or
obligations under any option theretofore granted under this Plan.
SECTION 10 EFFECTIVENESS OF THIS PLAN
This Plan shall become effective upon adoption by the Board so long as
it is approved by the Company's Stockholders at any time within 12 months of
such adoption of this Plan or, if earlier, and to the extent required for
compliance with Rule 16b-3 under the Exchange Act, at the next annual meeting
of Stockholders after adoption by the Board.
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InControl, Inc. Restated 1990 Stock Option Plan Page 13
<PAGE> 15
Original Plan adopted by the Board of Directors on November 16, 1990
and approved by the Stockholders on December 14, 1990; restated by the Board of
Directors on May 4, 1993 and approved by the Stockholders on May 4, 1993;
restated by the Board of Directors on December 13, 1993 and approved by the
Stockholders on December 27, 1993; restated by the Board of Directors on June
1, 1994 and approved by the Stockholders on June 29, 1994; amended and restated
by the Board of Directors on February 2, 1995 and approved by the Stockholders
on May 9, 1995; amended and restated by the Board of Directors on February 27,
1996 and approved by the Stockholders on May 7, 1996.
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InControl, Inc. Restated 1990 Stock Option Plan Page 14
