<PAGE> 1
As filed with the Securities and Exchange Commission on November 19, 1996
Registration No. 333-___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
CORVEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 33-0282651
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1920 Main Street, Suite 1090
Irvine, California 92614
(Address of principal executive offices) (Zip Code)
CORVEL CORPORATION
RESTATED 1988 EXECUTIVE STOCK OPTION PLAN
(Full title of the Plan)
V. Gordon Clemons
President and Chief Executive Officer
CorVel Corporation
1920 Main Street, Suite 1090, Irvine, CA 92614
(Name and address of agent for service)
(714) 851-1473
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee
---------- ------------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Restated 1988 Executive Stock Option Plan:
Options to purchase Common Stock 200,000 N/A N/A N/A
Common Stock, $0.0001 par value 200,000 shares $28.0625 $5,612,500 $1,701
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the CorVel Corporation Restated
1988 Executive Stock Option Plan, by reason of any stock dividend, stock
split, recapitalization or other similar transaction effected without the
receipt of consideration which results in an increase in the number of the
outstanding shares of Common Stock of CorVel Corporation.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the
high and low selling prices per share of Common Stock of CorVel
Corporation on November 14, 1996, as reported on the Nasdaq National
Market.
<PAGE> 2
PART II
Information Required in the Registration Statement
Item 3. Incorporation of Documents by Reference
The Registrant hereby incorporates by reference into this
Registration Statement the following documents previously filed with the
Securities and Exchange Commission ("SEC"):
a. The Registrant's Annual Report on Form 10-K for the fiscal
year ended March 31, 1996, filed with the SEC on June 26,
1996;
b. The Registrant's Quarterly Reports on Form 10-Q for the
quarters ended June 30, 1996 and September 30, 1996, filed
with the SEC on August 14, 1996 and November 12, 1996,
respectively; and
c. The Registrant's Registration Statement No. 00-19291 on Form
8-A filed with the SEC on May 16, 1991 pursuant to Section 12
of the Securities Exchange Act of 1934 (the "1934 Act"), as
amended by Amendment No. 1 thereto filed with the SEC on June
28, 1991, in which there is described the terms, rights and
provisions applicable to the Registrant's outstanding Common
Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
Item 4. Description of Securities
Not Applicable.
Item 5. Interests of Named Experts and Counsel
Not Applicable.
Item 6. Indemnification of Directors and Officers
Under Section 145 of the Delaware General Corporation Law ("Delaware
Law"), the Registrant has broad powers to indemnify its directors and officers
against liabilities they may incur in such capacities, including liabilities
under the Securities Act of 1933, as amended (the "1933 Act"). The Registrant's
Bylaws provide that the Registrant will indemnify its directors and officers to
the fullest extent permitted by law and require the Registrant to advance
litigation expenses upon receipt by the Registrant of an undertaking by the
director or officer to repay such advances if it is ultimately determined that
the director or officer is not entitled to indemnification. The Bylaws further
provide that rights conferred under such Bylaws shall not be deemed to be
exclusive of any other right such persons may have or acquire under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
The Registrant's Certificate of Incorporation provides that, pursuant to
Delaware Law, its directors shall not be liable for monetary damages for breach
of the director's fiduciary duty of care to the Registrant and its stockholders.
This provision in the Certificate of Incorporation does not eliminate the duty
of care, and in appropriate circumstances equitable remedies such as injunctive
or other forms of non-monetary relief will
<PAGE> 3
remain available under Delaware Law. In addition, each director will continue to
be subject to liability for breach of the director's duty of loyalty to the
Registrant or its stockholders, for acts or omissions not in good faith or
involving intentional misconduct or knowing violations of law, for actions
leading to improper personal benefit to the director and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware Law. The provision also does not effect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
In addition, the Registrant has entered into agreements to indemnify its
directors and certain of its officers in addition to the indemnification
provided for in the Certificate of Incorporation and Bylaws. These agreements
will, among other things, indemnify the Registrant's directors and certain of
its officers for certain expenses (including attorneys' fees), judgments, fines
and settlement amounts incurred by such person in any action or proceeding,
including any action by or in the right of the Registrant, on account of
services as a director or officer of the Registrant or as a director or officer
of any other company or enterprise that the person provides services to at the
request of the Registrant.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
Exhibit Number Exhibit
4 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 00-19291 on Form 8-A, as
amended, which is incorporated herein by reference pursuant to Item
3(c).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP - Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit
5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement
99.1 Restated 1988 Executive Stock Option Plan.
99.2* Form of Notice of Grant to be generally used under the Restated 1988
Executive Stock Option Plan.
99.3* Form of Stock Option Agreement to be generally used under the
Restated 1988 Executive Stock Option Plan.
99.4* Form of Addendum to Stock Option Agreement (Limited Stock
Appreciation Right).
99.5* Form of Addendum to Stock Option Agreement (Special Tax Elections).
99.6* Form of Addendum to Stock Option Agreement (Tandem Stock
Appreciation Right).
99.7* Form of Notice of Grant of Non-Employee Director Automatic Stock
Option generally to be used under the Restated 1988 Executive Stock
Option Plan.
99.8* Form of Non-Employee Director Automatic Stock Option Agreement
generally to be used under the Restated 1988 Executive Stock Option
Plan.
* Exhibits 99.2, 99.3, 99.4, 99.5, 99.6, 99.7, and 99.8 are incorporated by
reference to Exhibits 99.2, 99.3, 99.4, 99.5, 99.6, 99.7 and 99.8, respectively,
to Registrant's Registration Statement on Form S-8, File Number 33-94440, filed
with the SEC on July 10, 1995.
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include any prospectus required
by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts
or events arising after the effective date of 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
II-2
<PAGE> 4
Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are
incorporated by reference into this Registration Statement; (2) that for the
purpose of determining any liability under the 1933 Act each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof and (3) to remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the Registrant's
Restated 1988 Executive Stock Option Plan.
B. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the 1933 Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act that is incorporated by reference into 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
1933 Act may be permitted to directors, officers or controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the SEC, such indemnification is
against public policy as expressed in the 1933 Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Irvine, State of California, on this
12th day of November, 1996.
CORVEL CORPORATION
By: /s/ V. Gordon Clemons
-----------------------------------------------
V. Gordon Clemons
Chairman of the Board, Chief Executive Officer,
and President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of CorVel Corporation, a
Delaware corporation, do hereby constitute and appoint V. Gordon Clemons and
Richard J. Schweppe and each of them, the lawful attorneys-in-fact and agents
with full power and authority to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, and any one of them,
determine may be necessary or advisable or required to enable said corporation
to comply with the Securities Act of 1933, as amended, and any rules or
regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
that all said attorneys and agents, or any one of them, shall do or cause to be
done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power
of Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ V. Gordon Clemons Chairman of the Board, November 12, 1996
- ----------------------- Chief Executive Officer, and
V. Gordon Clemons President
(Principal Executive Officer)
/s/ Richard J. Schweppe Chief Financial Officer November 12, 1996
- ----------------------- and Assistant Secretary
Richard J. Schweppe (Principal Financial and
Accounting Officer)
II-4
<PAGE> 6
Signature Title Date
- --------- ----- ----
/s/ Thomas R. Brown Director November 12, 1996
- -----------------------
Thomas R. Brown
/s/ Peter E. Flynn Director November 12, 1996
- -----------------------
Peter E. Flynn
/s/ Steven J. Hamerslag Director November 12, 1996
- -----------------------
Steven J. Hamerslag
/s/ Jeffrey J. Michael Director November 12, 1996
- -----------------------
Jeffrey J. Michael
II-5
<PAGE> 7
EXHIBIT INDEX
Exhibit
Number Exhibit
------- -------
4 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 00-19291 on Form 8-A, as
amended, which is incorporated herein by reference pursuant to Item
3(c).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP - Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit
5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement
99.1 Restated 1988 Executive Stock Option Plan.
99.2* Form of Notice of Grant to be generally used under the Restated 1988
Executive Stock Option Plan.
99.3* Form of Stock Option Agreement to be generally used under the
Restated 1988 Executive Stock Option Plan.
99.4* Form of Addendum to Stock Option Agreement (Limited Stock
Appreciation Right).
99.5* Form of Addendum to Stock Option Agreement (Special Tax Elections).
99.6* Form of Addendum to Stock Option Agreement (Tandem Stock
Appreciation Right).
99.7* Form of Notice of Grant of Non-Employee Director Automatic Stock
Option generally to be used under the Restated 1988 Executive Stock
Option Plan.
99.8* Form of Non-Employee Director Automatic Stock Option Agreement
generally to be used under the Restated 1988 Executive Stock Option
Plan.
* Exhibits 99.2, 99.3, 99.4, 99.5, 99.6, 99.7, and 99.8 are incorporated by
reference to Exhibits 99.2, 99.3, 99.4, 99.5, 99.6, 99.7 and 99.8, respectively,
to Registrant's Registration Statement on Form S-8, File Number 33- 94440, filed
with the SEC on July 10, 1995.
<PAGE> 1
EXHIBIT 5
Opinion and consent of Brobeck, Phleger & Harrison LLP
November 14, 1996
CorVel Corporation
1920 Main Street, Suite 1090
Irvine, CA 92614
Re: CorVel Corporation (the "Company")
Registration Statement for an increase of
200,000 Shares of Common Stock
Ladies and Gentlemen:
We refer to your registration on Form S-8 (the "Registration Statement")
under the Securities Act of 1933, as amended, of the additional 200,000 shares
of Common Stock available for issuance under the Company's Restated 1988
Executive Stock Option Plan, as amended. We advise you that, in our opinion,
when such shares have been issued and sold pursuant to the applicable provisions
of the Company's Restated 1988 Executive Stock Option Plan and in accordance
with the Registration Statement, such shares will be validly issued, fully paid
and nonassessable shares of the Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference of our report dated May 8, 1996,
with respect to the consolidated financial statements and schedule of CorVel
Corporation included in its Annual Report (Form 10-K) for the year ended March
31, 1996, filed with the Securities and Exchange Commission in the Registration
Statement (Form S-8) pertaining to the Restated 1988 Executive Stock Option Plan
for the registration of 200,000 options to purchase common stock and 200,000
shares of common stock.
/s/ Ernst & Young LLP
Orange County, California
November 15, 1996
<PAGE> 1
Exhibit 99.1
CORVEL CORPORATION
RESTATED 1988 EXECUTIVE STOCK OPTION PLAN
AS RESTATED AND THROUGH JUNE 21, 1996
<PAGE> 2
ARTICLE ONE
GENERAL
I. PURPOSES OF THE PLAN
A. This Restated 1988 Executive Stock Option Plan (the "Plan"), as
restated through June 21, 1996, is intended to promote the interests of CorVel
Corporation, a Delaware corporation (the "Company"),(1) by providing a method
whereby (i) key employees (including officers and directors) of the Company (or
its parent or subsidiary corporations) responsible for the management, growth
and financial success of the Company (or its parent or subsidiary corporations),
(ii) the non-employee members of the Company's Board of Directors (the "Board"),
and (iii) consultants and independent contractors who provide valuable services
to the Company (or its parent or subsidiary corporations) are to be offered
equity incentives and rewards intended to encourage such individuals to acquire
a proprietary interest, or otherwise increase their proprietary interest, in the
Company and to continue to render services to the Company or its parent or
subsidiary corporations.
B. For purposes of the Plan, the following definitions shall be in
effect:
COMMON STOCK: The Common Stock issuable under the Plan shall
be shares of the Company's common stock, $.0001 par value.
EMPLOYEE: An individual shall be considered to be an Employee
for so long as such individual remains in the employ of the Company or one
or more of its parent or subsidiary corporations, subject to the control
and direction of the employer entity as to both the work to be performed
and the method and manner of performance.
FAIR MARKET VALUE: The Fair Market Value per share of Common
Stock on any relevant date under the Plan shall be the closing selling
price per share of Common Stock on such date, as quoted by the National
Association of Securities Dealers through the Nasdaq National Market (or
any successor system). Should the Common Stock become traded on a national
securities exchange, then the Fair Market Value per share shall be the
closing selling price on such exchange on the date in question, as such
price is quoted on the composite tape of transactions on such exchange. If
there is no closing selling price of Common Stock on the Nasdaq National
- --------
(1) The Company was previously known as FORTIS Corporation and assumed all of
the rights and responsibilities of FORTIS Corporation, a Minnesota corporation
("FORTIS Minnesota"), with respect to the Plan pursuant to the Agreement and
Plan of Merger by and between the Company and FORTIS Minnesota, effective May
16, 1991, under which FORTIS Minnesota changed its state of incorporation from
Minnesota to Delaware by merging with and into the Company which was a wholly
owned subsidiary of FORTIS Minnesota.
2.
<PAGE> 3
Market (or national securities exchange) on the date in question, then the
Fair Market Value shall be the closing selling price on the last preceding
date for which such quotation exists.
OPTIONEE: Any person to whom an option is granted under the
Discretionary Option Grant Program of Article Two or the Automatic Option
Grant Program of Article Three of this Plan.
PARENT: A corporation shall be deemed to be a parent of the
Company if it is a corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, provided each such
corporation in the unbroken chain (other than the Company) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the
other corporations in such chain.
SECTION 16(b) INSIDER: An individual shall be considered to be
a Section 16(b) Insider on any relevant date under the Plan if such
individual is at the time subject to the short-swing profit restrictions
of Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") by reason of his or her affiliation with the Company.
SERVICE PROVIDER: An individual shall be deemed to be a
Service Provider for the Company for so long as such individual renders
service on a periodic basis to the Company or one or more of its parent or
subsidiary corporations as an Employee.
SUBSIDIARY: A corporation shall be deemed to be a subsidiary
of the Company if it is one of the corporations (other than the Company)
in an unbroken chain of corporations beginning with the Company, provided
each such corporation (other than the last corporation in the unbroken
chain) owns, at the time of determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain. For purposes of all
non-statutory option grants under the Plan and all Corporate Transaction
provisions of the Plan, the term "subsidiary" shall also include any
partnership, joint venture or other business entity of which the Company
owns, directly or indirectly through another subsidiary corporation, more
than a fifty percent (50%) interest in voting power, capital or profits.
C. Stock option grants made to any individual under the
Discretionary Option Grant Program of Article Two shall not in any way affect,
limit or restrict such individual's eligibility to participate in any other
stock plan or other compensation or benefit plan, arrangement or practice now or
hereafter maintained by the Company or any parent or subsidiary corporation.
3.
<PAGE> 4
II. STRUCTURE OF THE PLAN
A. Stock Programs. The Plan shall be divided into two separate
components: the Discretionary Option Grant Program specified in Article Two and
the Automatic Option Grant Program specified in Article Three. Under the
Discretionary Option Grant Program, eligible individuals may, at the discretion
of the Committee, be granted options to purchase shares of Common Stock in
accordance with the provisions of Article Two. Under the Automatic Option Grant
Program, non-employee members of the Board will receive at periodic intervals
special option grants to purchase shares of Common Stock in accordance with the
provisions of Article Three.
B. General Provisions. Unless the context clearly indicates
otherwise, the provisions of Articles One and Four shall apply to both the
Discretionary Option Grant Program and the Automatic Option Grant Program and
shall accordingly govern the interests of all individuals under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Company's Compensation
Committee (the "Committee") consisting of two (2) or more members of the Board
appointed by the Board. Members of the Committee shall serve for such period of
time as the Board may determine and shall be subject to removal by the Board at
any time. However, no Board member shall be eligible to serve on such Committee
if such individual shall have received, at any time during the twelve (12)-month
period preceding the date of his or her appointment to the Committee, any stock
options, stock appreciation rights or stock issuances under this Plan or under
any other stock option, stock appreciation, stock bonus, stock purchase or other
stock plan of the Company or its parent or subsidiary corporations other than
options granted pursuant to the Automatic Option Grant Program or stock
issuances made pursuant to the exercise of outstanding options granted under the
Plan prior to May 15, 1991.
B. Subject to the express provisions of the Plan, the Committee
shall have the sole and exclusive authority with respect to the Discretionary
Option Grant Program:
(i) to make option grants to any and all eligible individuals;
(ii) to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, and to make all other determinations
deemed necessary or advisable in administering the Discretionary Option Grant
Program; and
(iii) to change the terms and conditions of any outstanding
option grant under this Article Two, provided such action does not, without the
consent of the holder, adversely affect the rights and obligations such
individual may have under the outstanding grant.
4.
<PAGE> 5
C. Determinations of the Committee on all matters relating to the
Plan and any option grants or stock issuances made hereunder shall be final,
binding and conclusive on all persons having any interest in the Plan or any
options granted or shares issued under the Plan.
D. Administration of the Automatic Option Grant Program shall be
self- executing in accordance with the express terms and conditions of Article
Three, and the Committee shall exercise no discretionary functions with respect
to option grants made pursuant to that program.
IV. ELIGIBILITY
A. The persons eligible to receive option grants under the
Discretionary Option Grant Program are as follows:
(i) key employees of the Company (or its parent or subsidiary
corporations) who are members of the management team and who render services
which contribute directly to the success and growth of the Company (or its
parent or subsidiary corporations) or which may reasonably be anticipated to
directly contribute to the future success and growth of the Company (or its
parent or subsidiary corporations); and
(ii) those consultants or independent contractors who provide
valuable services to the Company (or its parent or subsidiary corporations).
B. Non-employee members of the Board shall not participate in the
Discretionary Option Grant Program or in any other stock option, stock
appreciation right, stock bonus, stock purchase or other stock plan of the
Company or its parent or subsidiary corporations. Such non-employee Board
members shall, however, be eligible to receive automatic option grants pursuant
to the provisions of Article Three.
V. STOCK SUBJECT TO THE PLAN
A. The Common Stock issuable under the Plan shall be made available
either from authorized but unissued shares of Common Stock or from shares of
Common Stock reacquired by the Company on the open market. The aggregate number
of shares of Common Stock issuable over the term of this Plan shall not exceed
1,535,000 shares (subject to adjustment from time to time in accordance with
paragraph V.C. below).
B. Should an option granted under this Plan expire or terminate for
any reason prior to exercise or surrender in full (including options cancelled
in accordance with the cancellation-regrant provisions of Section V of Article
Two), the shares subject to the portion of the option not so exercised or
surrendered shall be available for subsequent option grants under this Plan.
Shares subject to stock appreciation rights exercised in accordance with the
Stock Appreciation Rights provisions of Section II of Article Two and Section
III of Article Three and all stock issuances under the Plan, whether or not the
5.
<PAGE> 6
shares are subsequently repurchased by the Company pursuant to its repurchase
rights under the Plan, shall reduce on a share-for-share basis the number of
shares of Common Stock available for subsequent option grants under this Plan.
Should the exercise price of an outstanding option under the Plan be paid with
shares of Common Stock or should shares of Common Stock otherwise issuable under
the Plan be withheld by the Company in satisfaction of the withholding taxes
incurred in connection with the exercise of an outstanding option under the
Plan, then the number of shares of Common Stock available for issuance under the
Plan shall be reduced by the gross number of shares for which the option is
exercised, and not by the net number of shares of Common Stock actually issued
to the option holder.
C. In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock dividend, stock split, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Company's receipt of consideration, then
appropriate adjustments shall be made by the Committee to (i) the aggregate
number and/or class of securities issuable under the Plan, to reflect the effect
of such change upon the Company's capital structure, (ii) the maximum number
and/or class of securities for which any one individual participating in the
Plan may be granted stock options and separately exercisable stock appreciation
rights over the term of the Plan, (iii) the number and/or class of securities
for which automatic option grants are to be subsequently made to non-employee
Board members under the Automatic Option Grant Program, (iv) the number and/or
class of securities and the exercise price per share of the stock subject to
each option outstanding under the Plan in order to preclude the dilution or
enlargement of benefits thereunder and (v) the number and/or class of securities
and the exercise price per share in effect under each outstanding stock
appreciation right in order to preclude the dilution or enlargement of benefits
thereunder. All adjustments made by the Committee pursuant to this paragraph
V.C. shall be final, binding and conclusive.
D. In the event that (i) the Company is the surviving entity in any
Corporate Transaction which does not result in the termination of outstanding
options pursuant to the Corporate Transaction provisions of the Plan or (ii) the
outstanding options under the Plan are to be assumed in connection with such
Corporate Transaction, then each such continuing or assumed option shall,
immediately after such Corporate Transaction, be appropriately adjusted to apply
and pertain to the number and class of securities which would have been
issuable, in consummation of such Corporate Transaction, to an actual holder of
the same number of shares of Common Stock as are subject to such option
immediately prior to such Corporate Transaction. Appropriate adjustments shall
also be made to the exercise price payable per share, provided the aggregate
option price shall remain the same. In addition, the number and class of
securities which remain issuable under this Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
E. From and after January 1, 1994, in no event may any one
individual participating in the Plan be granted stock options and separately
exercisable stock
6.
<PAGE> 7
appreciation rights exceeding 800,000 shares in the aggregate over the term of
the Plan, subject to adjustment from time to time in accordance with the
provisions of Section V.C.
7.
<PAGE> 8
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
A. The Committee shall have sole and exclusive authority (subject to
the express provisions of the Plan) to determine which eligible individuals are
to be granted options under the Discretionary Option Grant Program, the number
of shares to be covered by each such option, the status of the granted option as
either an incentive stock option which meets the requirements of Section 422 of
the Internal Revenue Code ("Incentive Option") or a non-statutory option not
intended to meet such requirements, the time or times at which such option is to
become exercisable and the maximum term for which the option is to remain
outstanding.
B. The granted options shall be evidenced by instruments in such
form as the Committee shall from time to time approve; provided, however, that
each such instrument shall comply with the terms and conditions specified below.
1. Option Price.
a. The option price per share shall be fixed by the Committee,
but in no event shall the option price per share be less than eighty-five
percent (85%) of the Fair Market Value per share of Common Stock on the date of
the option grant.
b. The option price shall become immediately due upon exercise
of the option and shall, subject to the loan provisions of Section I of Article
Four, be payable in one of the alternative forms specified below:
1. full payment in cash or check payable to the
Company's order; or
2. full payment in shares of Common Stock held by the
Optionee for the requisite period necessary to avoid a charge to the Company's
reported earnings (which in any event shall not be less than six (6) months) and
valued at Fair Market Value on the Exercise Date (as such term is defined
below); or
3. full payment in a combination of shares of Common
Stock held by the Optionee for the requisite period necessary to avoid a charge
to the Company's reported earnings (which in any event shall not be less than
six (6) months) and valued at Fair Market Value on the Exercise Date and cash or
check payable to the Company's order, equal in the aggregate to the option
price; or
4. full payment through a special sale and remittance
procedure pursuant to which the Optionee is to provide irrevocable written
instructions
8.
<PAGE> 9
(i) to a designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Company, out of the sale proceeds available on the
settlement date, an amount sufficient to cover the aggregate option price
payable for the purchased shares plus all applicable Federal and State income
and employment taxes required to be withheld by the Company by reason of such
purchase and (ii) to the Company to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.
c. The Exercise Date shall be the date on which written notice
of the option exercise is delivered to the Company. Except to the extent the
sale and remittance procedure specified in clause 4 of subparagraph b. is
utilized in connection with the option exercise, payment of the option price for
the purchased shares must accompany such notice.
2. Term and Exercise of Options.
(i) Each option granted under the Discretionary Option
Grant Program shall be exercisable in one or more installments as shall be
determined by the Committee and set forth in the instrument evidencing such
option; provided, however, no such option shall have a maximum term in excess of
ten (10) years.
(ii) During the lifetime of the Optionee, the option,
together with any stock appreciation rights pertaining to such option, shall be
exercisable only by the Optionee and shall not be assignable or transferable by
the Optionee otherwise than by a transfer effected by the Optionee by will or by
the laws of descent and distribution following the Optionee's death.
3. Termination of Service.
(i) Should an Optionee cease to be a Service Provider for
any reason including death or permanent disability as defined in Section
22(e)(3) of the Internal Revenue Code (other than termination set forth in
subparagraph (iii) below) while the holder of one or more outstanding options
under this Article Two, then such options shall not be exercisable at any time
after the earlier of (i) the specified expiration date of the option term or
(ii) the expiration of the limited period of time (not to exceed twelve (12)
months after the Optionee ceases to be a Service Provider) specified by the
Committee in the option agreement. Each such option shall, during such twelve
(12)-month or shorter period following cessation of Service Provider status, be
exercisable only to the extent of the number of shares (if any) in which the
Optionee is vested on the date of such cessation of Service Provider status.
(ii) Any option granted to an Optionee under this Article
Two and outstanding in whole or in part on the date of the Optionee's death may
be subsequently exercised, but only to the extent of the number of shares (if
any) in which the Optionee is vested on the date the Optionee ceases to be a
Service Provider (less any of
9.
<PAGE> 10
those shares subsequently purchased by the Optionee prior to death), by the
personal representative of the Optionee's estate or by the person or persons to
whom the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution. Any such exercise must occur prior to
the earlier of (i) the expiration date of the option term or (ii) the first
anniversary of the date of the Optionee's death.
(iii) If the Optionee's Service Provider status is
terminated for any of the following reasons, then all outstanding options
granted the Optionee under this Article Two shall immediately terminate and
cease to be exercisable immediately upon such termination:
(1) Optionee's intentional misconduct or continuing
gross neglect of duties which materially and adversely affects the business and
operations of the Company or any parent or subsidiary corporation employing
Optionee;
(2) Optionee's unauthorized use or disclosure (or
attempt thereat) of confidential information or trade secrets of the Company or
its parent or subsidiary corporations; or
(3) Optionee's commission of an act involving
embezzlement, theft, fraud, falsification of records, destruction of property or
commission of a crime or other offense involving money or other property of the
Company or any parent or subsidiary corporation employing Optionee.
The reasons for termination of Optionee as a Service Provider
set forth in this subparagraph (iii) are not intended to be, and are not
inclusive, of all acts or omissions which the Company may deem to constitute
misconduct or other grounds for terminating the Optionee (or any other
individual).
(iv) The Committee shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to permit one or more options held by the Optionee
under this Article Two to be exercised, during the limited period of
exercisability following cessation of Service Provider status, not only with
respect to the number of shares in which the Optionee is vested at the time of
such cessation of Service Provider status but also with respect to one or more
subsequent installments of purchasable shares in which the Optionee would
otherwise have vested had the Optionee continued as a Service Provider.
(v) If the option is granted to an individual who is not
an Employee of the Company, then the option agreement evidencing the granted
option shall include provisions comparable to those set forth in subparagraphs
(i), (ii) and (iii) above, and may include provisions comparable to subparagraph
(iv) above, with respect to the Optionee's termination of service with the
Company or its parent or subsidiary corporations.
10.
<PAGE> 11
4. Stockholder Rights.
An option holder shall have none of the rights of a
stockholder with respect to any shares covered by the option until such
individual shall have exercised the option, paid the option price and satisfied
all other conditions precedent to the issuance of certificates for the purchased
shares.
5. Repurchase Rights. The shares of Common Stock acquired upon the
exercise of any Article Two option grant may be subject to one or more
repurchase rights of the Company in accordance with the following provisions:
(i) The Committee shall have the discretion to authorize the
issuance of unvested shares of Common Stock under this Article Two. Should the
Optionee cease Service Provider status while holding such unvested shares, the
Company shall have the right to repurchase any or all of those unvested shares
at the option price paid per share. The terms and conditions upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Committee and set forth in the instrument evidencing such
repurchase right.
(ii) All of the Company's outstanding repurchase rights shall
automatically terminate, and all shares subject to such terminated rights shall
immediately vest in full, upon the occurrence of any Corporate Transaction under
Section III of Article Two of this Plan, except to the extent: (i) any such
repurchase right is expressly assigned to the successor corporation (or parent
thereof) in connection with the Corporate Transaction or (ii) such termination
is precluded by other limitations imposed by the Committee at the time the
repurchase right is issued.
(iii) The Committee shall have the discretionary authority,
exercisable either before or after the Optionee's cessation of Service Provider
status, to cancel the Company's outstanding repurchase rights with respect to
one or more shares purchased or purchasable by the Optionee under this Article
Two and thereby accelerate the vesting of such shares in whole or in part at any
time.
II. STOCK APPRECIATION RIGHTS
A. The Committee shall have full power and authority, exercisable in
its sole discretion, to grant selected Optionees tandem stock appreciation
rights ("Tandem Rights") and/or limited stock appreciation rights ("Limited
Rights") pertaining to all or part of the shares of Common Stock subject to one
or more of their option grants under this Article Two.
B. Tandem Rights may be granted at the same time the underlying
option is granted or any time thereafter while the option remains outstanding.
The Optionee may exercise such Tandem Right by surrendering the underlying
option in whole or in part to
11.
<PAGE> 12
the Company, to the extent such option is at the time exercisable for vested
shares of Common Stock. In exchange for the surrendered option, the Optionee
shall receive a distribution from the Company in an amount equal to the excess
of (i) the Fair Market Value (on the option surrender date) of the number of
shares in which the Optionee is at the time vested under the surrendered option
(or surrendered portion) over (ii) the aggregate option price payable for such
vested shares. However, the exercise of the Tandem Right shall be effective only
if approved by the Committee. If so approved, the distribution to which the
Optionee shall accordingly become entitled with respect to the surrendered
option may be made in shares of Common Stock valued at Fair Market Value on the
option surrender date, in cash, or partly in shares and partly in cash, as the
Committee shall in its sole discretion deem appropriate.
C. If the surrender of an option is rejected by the Committee, then
the Optionee shall retain whatever rights the Optionee had under the surrendered
option (or surrendered portion) on the option surrender date and may exercise
such rights at any time prior to the later of (i) five (5) business days after
the receipt of the rejection notice or (ii) the last day on which the option is
otherwise exercisable in accordance with the terms of the instrument evidencing
such option, but in no event may such rights be exercised more than ten (10)
years after the date of the option grant.
D. One or more Section 16(b) Insiders may, in the Committee's sole
discretion, be granted Limited Rights(2) in conjunction with their outstanding
options under this Article Two. Upon the occurrence of a Hostile Take-Over, each
outstanding option with such a Limited Right in effect for at least six (6)
months shall automatically be cancelled, to the extent such option is at the
time exercisable for fully-vested shares of Common Stock. The Optionee shall in
return be entitled to a cash distribution from the Company in an amount equal to
the excess of (i) the Take-Over Price of the vested shares of Common Stock at
the time subject to the cancelled option (or cancelled portion of such option)
over (ii) the aggregate exercise price payable for such shares. The cash
distribution payable upon such cancellation shall be made within five (5) days
following the consummation of the Hostile Take-Over. Neither the approval of the
Committee nor the consent of the Board shall be required in connection with such
option cancellation and cash distribution. The balance of the option (if any)
shall continue to remain outstanding and exercisable in accordance with the
terms and conditions of the instrument evidencing such option.
- --------
(2) Options granted to Section 16(b) Insiders prior to the effective date of the
June 15, 1992 Restatement contain a different form of Limited Right. Such right
will provide each Section 16(b) Insider with a thirty (30)-day election period,
following the successful completion of a hostile tender offer for fifty percent
(50%) or more of the Company's outstanding voting securities, to surrender the
underlying option for a cash distribution from the Company in an amount per
share of Common Stock in which the Section 16(b) Insider is at the time vested
under the surrendered option equal to the excess of the highest price per share
paid in effecting such tender offer over the exercise price payable per share
under the surrendered option.
12.
<PAGE> 13
E. For purposes of subparagraph D. above, the following definitions
shall be in effect:
A HOSTILE TAKE-OVER shall be deemed to occur in the event (i)
any person or related group of persons (other than the Company or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Company) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities pursuant to a tender
or exchange offer made directly to the Company's stockholders which the
Board does not recommend such stockholders to accept and (ii) more than
fifty percent (50%) of the securities so acquired in such tender or
exchange offer are accepted from holders other than the officers and
directors of the Company who are Section 16 Insiders.
The TAKE-OVER PRICE per share shall be deemed to be equal to
the greater of (a) the Fair Market Value per share on the option
cancellation date or (b) the highest reported price per share paid by the
acquiring entity in effecting such Hostile Take-Over. However, if the
cancelled option is an Incentive Option, the Take-Over Price shall not
exceed the clause (a) price per share.
F. The shares of Common Stock subject to any option surrendered or
cancelled for an appreciation distribution pursuant to this Section II shall NOT
be available for subsequent option grant under the Plan.
III. CORPORATE TRANSACTION
A. Upon the occurrence of any of the following transactions (a
"Corporate Transaction") for which the approval of the Company's stockholders is
obtained:
(i) a merger or acquisition in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company to any entity other than a parent
or subsidiary of the Company, or
(iii) any reverse merger in which the Company is the surviving
entity but in which fifty percent (50%) or more of the Company's outstanding
voting stock is transferred to holders different from those who held such fifty
percent (50%) or greater interest immediately prior to such merger,
13.
<PAGE> 14
then the exercisability of each option outstanding under this
Article Two shall be automatically accelerated so that each such option shall,
immediately prior to the specified effective date for the Corporate Transaction,
become fully exercisable with respect to the total number of shares of Common
Stock at the time subject to such option and may be exercised for all or any
portion of such shares. However, an outstanding option under this Article Two
shall not be so accelerated if and to the extent: (i) such option is, in
connection with the Corporate Transaction, either to be assumed by the successor
corporation or parent thereof or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation or parent
thereof, or (ii) such option is to be replaced with a cash incentive program of
the successor corporation designed to preserve the option spread existing at the
time of the Corporate Transaction and incorporating the same vesting schedule
applicable to such option, or (iii) the acceleration of such option is subject
to other applicable limitations imposed by the Committee at the time of grant.
The determination of comparability under clause (i) above shall be made by the
Committee, and its determination shall be final, binding and conclusive.
B. The Committee shall have the discretion, exercisable either in
advance of any actually-anticipated Corporate Transaction or at the time of an
actual Corporate Transaction, to provide (upon such terms and conditions as it
may deem appropriate) for either the automatic acceleration of one or more
assumed or replaced options which do not accelerate in connection with the
Corporate Transaction or for the automatic vesting of any cash incentive
programs implemented in replacement of such options, in the event the Optionee's
employment should subsequently terminate within a designated period following
the effective date of such Corporate Transaction.
C. The exercisability as incentive stock options under the Federal
tax laws of any options accelerated under this Section III in connection with a
Corporate Transaction shall remain subject to the applicable dollar limitation
of Section IV.A.(iii) of this Article Two below.
D. Upon the consummation of the Corporate Transaction, all
outstanding options under this Article Two shall, to the extent not previously
exercised or assumed by the successor corporation or its parent company,
terminate and cease to be outstanding.
E. The grant of options under this Article Two shall in no way
affect the right of the Company to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
IV. INCENTIVE OPTIONS
A. The terms and conditions specified below shall be applicable to
all Incentive Options granted under this Article Two. Options which are
specifically designated as "non-statutory" options when issued under this
Article Two shall not be subject to such terms and conditions.
14.
<PAGE> 15
(i) Option Price. The option price per share of the Common Stock
subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the grant
date.
(ii) 10% Stockholder. If any individual to whom an Incentive
Option is to be granted pursuant to the provisions of this Article Two is on the
grant date the owner of stock (as determined under Section 424(d) of the
Internal Revenue Code) possessing 10% or more of the total combined voting power
of all classes of stock of the Company or any one of its parent or subsidiary
corporations (such person to be herein referred to as a 10% Stockholder), then
(i) the option price per share shall not be less than one hundred and ten
percent (110%) of the Fair Market Value per share of Common Stock on the grant
date and (ii) the maximum term of the option shall not exceed five (5) years
from the grant date.
(iii) Dollar Limitation. The aggregate fair market value
(determined on the basis of the Fair Market Value in effect on the respective
date or dates of grant) of the Common Stock for which one or more options
granted to any Employee under this Plan (or any other option plan of the Company
or its parent or subsidiary corporations) may for the first time become
exercisable as incentive stock options under the Federal tax laws during any one
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability thereof as incentive stock options under the
Federal tax laws shall be applied on the basis of the order in which such
options are granted.
B. Except as modified by the preceding provisions of this Incentive
Options section, all the provisions of the Plan shall be applicable to the
Incentive Options granted hereunder.
V. CANCELLATION AND RE-GRANT OF OPTIONS
The Committee shall have the authority to effect, at any time and
from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under this Article Two and to
grant in substitution therefor new options under this Article Two covering the
same or different numbers of shares of Common Stock but having an option price
per share not less than (i) eighty-five percent (85%) of the Fair Market Value
per share of Common Stock on the new grant date, (ii) one hundred percent (100%)
of such Fair Market Value for an Incentive Option, or (iii) one hundred and ten
percent (110%) of such Fair Market Value in the case of a 10% Stockholder.
15.
<PAGE> 16
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
A. Eligible Directors. The individuals eligible to receive automatic
option grants pursuant to the provisions of this Article Three program shall be
limited to (i) those individuals who are serving as non-employee Board members
on August 5, 1993, the effective date of this Automatic Option Grant Program
(the "Effective Date"), and (ii) those individuals who are first elected or
appointed as non-employee Board members on or after the Effective Date, whether
through appointment by the Board or election by the Company's stockholders. Any
non-employee Board member eligible to participate in the Automatic Option Grant
Program pursuant to the foregoing criteria shall be designated an Eligible
Director for purposes of this Plan.
B. Limitation. Except for the option grants to be made pursuant to
the provisions of this Automatic Option Grant Program, an Eligible Director
serving on the Committee shall not be eligible during such period of service to
receive any additional option grants or stock issuances under this Plan or any
other stock plan of the Company (or its parent or subsidiaries).
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants shall be made under this Article Three
on the dates specified below:
(i) Each Eligible Director who first becomes a
non-employee Board member on or after the Effective Date of this Automatic
Option Grant Program, whether through election by the Company's
stockholders or appointment by the Board and who has not at any time been
in the prior employ of the Company (or any parent or subsidiary
corporation), shall automatically be granted, at the time of such initial
election or appointment, a non-statutory stock option to purchase 5,000
shares of Common Stock upon the terms and conditions of this Article
Three.
(ii) On the date of each Annual Stockholders Meeting,
commencing with the 1993 Annual Stockholders Meeting, each individual who
is at the time serving as an Eligible Director shall automatically be
granted at that meeting, whether or not such individual is standing for
re-election as a Board member at that particular meeting and whether or
not such individual has at any time been in the prior employ of the
Company (or any parent or subsidiary corporation), a non-statutory stock
option to purchase 1,500 shares of Common Stock upon the terms and
conditions of this Article
16.
<PAGE> 17
Three, provided he or she has served as a non-employee Board member for at
least six (6) months prior to the date of such meeting. There shall be no
limit on the number of 1,500-share option grants any one Eligible Director
may receive over his or her period of Board service.
The number of shares for which the automatic grants are to be made
to each newly-elected or continuing Eligible Director shall be subject to
periodic adjustment pursuant to the applicable provisions of Section V.C of
Article One.
B. Exercise Price. The exercise price per share of Common Stock
subject to each automatic option grant made under this Article Three shall be
equal to one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the automatic grant date.
C. Payment.
The exercise price shall be payable in one of the alternative
forms specified below:
(i) full payment in cash or check payable to the
Company's order; or
(ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Company's reported
earnings (which in any event shall not be less than six (6) months) and
valued at Fair Market Value on the Exercise Date (as such term is defined
below); or
(iii) full payment in a combination of shares of Common
Stock held for the requisite period necessary to avoid a charge to the
Company's reported earnings (which in any event shall not be less than six
(6) months) and valued at Fair Market Value on the Exercise Date and cash
or check payable to the Company's order, equal in aggregate to the option
price; or
(iv) full payment through a sale and remittance procedure
pursuant to which the non-employee Board member is to provide irrevocable
written instructions (I) to a designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Company, out of
the sale proceeds available on the settlement date, an amount sufficient
to cover the aggregate option price payable for the purchased shares and
(II) to the Company to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale transaction.
17.
<PAGE> 18
The Exercise Date shall be the date on which written notice of the
option exercise is delivered to the Company. Except to the extent the sale and
remittance procedure specified in clause (iv) is utilized in connection with the
option exercise, payment of the option price for the purchased shares must
accompany such notice.
D. Option Term. Each automatic grant under this Article Three shall
have a maximum term of ten (10) years measured from the automatic grant date.
E. Exercisability. Each automatic grant shall become exercisable in
a series of four (4) equal and successive annual installments over the
Optionee's period of service on the Board, with the first such installment to
become exercisable twelve (12) months after the automatic grant date. The
exercisability of each automatic grant shall be subject to acceleration in
accordance with the provisions of Section II.G and Section III of this Article
Three.
F. Non-Transferability. During the lifetime of the Optionee, each
automatic option grant, together with the Limited Right pertaining to such
option, shall be exercisable only by the Optionee and shall not be assignable or
transferable by the Optionee other than a transfer of the option effected by
will or by the laws of descent and distribution following Optionee's death.
G. Termination of Board Service.
1. Should the Optionee's service as a Board member cease for
any reason (other than death or permanent disability) while holding one or more
automatic option grants under this Article Three, then such individual shall
have a six (6)-month period following the date of such cessation of Board
service in which to exercise each such option for any or all of the shares of
Common Stock for which the option is exercisable at the time of such cessation
of Board service. However, each such option shall immediately terminate and
cease to be outstanding, at the time of such cessation of Board service, with
respect to any shares for which the option is not otherwise at that time
exercisable.
2. Should the Optionee die within six (6) months after
cessation of Board service, then each outstanding automatic option grant held by
the Optionee at the time of death may subsequently be exercised, for any or all
of the shares of Common Stock for which such option is exercisable at the time
of the Optionee's cessation of Board service (less any option shares
subsequently purchased by the Optionee prior to death), by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution. Any such exercise must occur within twelve
(12) months after the date of the Optionee's death.
3. Should the Optionee die or become permanently disabled
while serving as a Board member, then each automatic option grant held by such
Optionee under this Article Three shall accelerate in full, and the Optionee (or
the representative of the
18.
<PAGE> 19
Optionee's estate or the person or persons to whom the option is transferred
upon the Optionee's death) shall have a twelve (12)-month period following the
date of the Optionee's cessation of Board service in which to exercise each such
option for any or all of the shares of Common Stock subject to that option at
the time of such cessation of Board service.
4. In no event shall any automatic grant under this Article
Three remain exercisable after the specified expiration date of the ten
(10)-year option term. Upon the expiration of the applicable post-service
exercise period under subparagraph 1, 2 or 3 above or (if earlier) upon the
expiration of the ten (10)-year option term, the automatic grant shall terminate
and cease to be outstanding for any unexercised shares for which the option was
otherwise exercisable at the time of the Optionee's cessation of Board service.
H. Stockholder Rights. The holder of an automatic option grant under
this Article Three shall have none of the rights of a stockholder with respect
to any shares subject to such option until such individual shall have exercised
the option and paid the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each
automatic option grant shall be as set forth in the prototype Non-Statutory
Stock Option Agreement attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, each automatic option
grant at the time outstanding under this Article Three shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for the Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of such shares. Upon the
consummation of the Corporate Transaction, all automatic option grants under
this Article Three shall terminate and cease to be outstanding.
B. In connection with any Change in Control of the Company, each
automatic option grant at the time outstanding under this Article Three shall
automatically accelerate so that each such option shall, immediately prior to
the specified effective date for the Change in Control, become fully exercisable
with respect to the total number of shares of Common Stock at the time subject
to such option and may be exercised for all or any portion of such shares. For
purposes of this Article Three, a Change in Control shall be deemed to occur in
the event:
(i) any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is controlled
by, or is under common control with, the Company) directly or indirectly
acquires
19.
<PAGE> 20
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange
Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities pursuant to
a tender or exchange offer which the Board does not recommend the
Company's stockholders to accept; or
(ii) there is a change in the composition of the Board over
a period of twenty-four (24) consecutive months or less such that a
majority of the Board members (rounded up to the next whole number) cease,
by reason of one or more proxy contests for the election of Board members,
to be comprised of individuals who either (I) have been Board members
continuously since the beginning of such period or (II) have been elected
or nominated for election as Board members during such period by at least
two-thirds of the Board members described in clause (I) who were still in
office at the time such election or nomination was approved by the Board.
C. A Limited Right shall be granted with respect to each automatic
option granted under this Article Three. Upon the occurrence of a Hostile
Take-Over, each such option which has been outstanding for a period of at least
six (6) months shall automatically be cancelled, to the extent such option is at
the time exercisable for fully-vested shares of Common Stock. The Optionee shall
in return be entitled to a cash distribution from the Company in an amount equal
to the excess of (i) the Take-Over Price of the vested shares of Common Stock at
the time subject to the cancelled option (or cancelled portion of such option)
over (ii) the aggregate exercise price payable for such shares. The cash
distribution payable upon such cancellation shall be paid within five (5) days
following the consummation of the Hostile Take-Over. Neither the approval of the
Committee nor the consent of the Board shall be required in connection with the
exercise of such Limited Right and cash distribution. The balance of the option
(if any) shall continue to remain outstanding and exercisable in accordance with
the terms and conditions of the instrument evidencing such option.
D. The shares of Common Stock subject to each option surrendered in
connection with the Hostile Take-Over shall NOT be available for subsequent
option grant under this Plan.
E. The automatic option grants outstanding under this Article Three
shall in no way affect the right of the Company to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
A. Limited Amendments. The provisions of this Automatic Option Grant
Program, together with the automatic option grants outstanding under this
Article Three,
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may not be amended at intervals more frequently than once every six (6) months,
other than to the extent necessary to comply with applicable Federal income tax
laws and regulations.
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ARTICLE FOUR
MISCELLANEOUS
I. LOANS OR GUARANTEE OF LOANS
The Committee may assist any Optionee (including any officer or
director) in the exercise of one or more outstanding options under the
Discretionary Option Grant Program by (a) authorizing the extension of a loan to
such Optionee from the Company, (b) permitting the Optionee to pay the option
price for the purchased Common Stock in installments over a period of years or
(c) authorizing a guarantee by the Company of a third-party loan to the
Optionee. The terms of any loan, installment method of payment or guarantee
(including the interest rate and terms of repayment) shall be established by the
Committee in its sole discretion. Loans, installment payments and guarantees may
be granted without security or collateral, but the maximum credit available to
the Optionee shall not exceed the sum of (i) the aggregate option price of the
purchased shares (less the par value) plus (ii) any Federal and State income and
employment tax liability incurred by the Optionee in connection with the
exercise of the option.
II. TAX WITHHOLDING
A. The Company's obligation to deliver shares or cash upon the
exercise or surrender of stock options or stock appreciation rights granted
under the Plan shall be subject to the satisfaction by the Optionee of all
applicable Federal, State and local income and employment tax withholding
requirements.
B. The Committee may, in its discretion and upon such terms and
conditions as it may deem appropriate (including the applicable safe-harbor
provisions of SEC Rule 16b-3 or any successor rule or regulation) provide any or
all holders of outstanding option grants under the Plan (other than automatic
option grants made pursuant to the provisions of Article Three) with the
election to have the Company withhold, from the shares of Common Stock otherwise
issuable upon the exercise of such options, a portion of such shares with an
aggregate Fair Market Value equal to the designated percentage (any multiple of
five percent (5%) specified by the Optionee) of the Federal and state income
taxes ("Taxes") incurred in connection with the acquisition of such shares. In
lieu of such direct withholding, one or more Optionees may also be granted the
right to deliver pre-existing shares of Common Stock to the Company in
satisfaction of such Taxes. The withheld or delivered shares shall be valued at
the Fair Market Value on the applicable determination date for such Taxes or
such other date required by the applicable safe-harbor provisions of SEC Rule
16b-3.
III. EXTENSION OF EXERCISE PERIOD
The Committee shall have full power and authority to extend the
period of time for which any option granted under the Discretionary Option Grant
Program is to
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remain exercisable following the Optionee's termination of service from the
twelve (12)-month or shorter period set forth in the option agreement to such
greater period of time as the Committee shall deem appropriate; provided,
however, that in no event shall such option be exercisable after the specified
expiration date of the option term.
IV. AMENDMENT OF THE PLAN
A. The Board shall have the complete and exclusive authority to
amend or modify the Plan in any or all respects whatsoever. However, (i) no such
amendment or modification shall, without the consent of the holders, adversely
affect rights and obligations with respect to any stock options or stock
appreciation rights at the time outstanding under the Plan and (ii) any
amendment made to the Automatic Option Grant Program (or to any options
outstanding thereunder) shall be in compliance with the limitation of Section IV
of Article Three.
B. The Board shall not, without the approval of the Company's
stockholders, (i) materially increase the maximum number of shares issuable
under the Plan, the number of shares for which options may be granted to
newly-elected or continuing Eligible Directors under Article Three of the Plan
or the maximum number of share for which any one person may be granted stock
options or separately exercisable stock appreciation rights over the term of the
Plan, except for permissible adjustments in the event of a change in the
corporate structure of the Company, (ii) materially increase the benefits
accruing to participants under the Plan or (iii) materially modify the
eligibility requirements for participation in the Plan.
V. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan was initially adopted by the Board and approved by the
Company's sole stockholder on August 1, 1988. The Board and sole stockholder
amended and restated the Plan effective May 15, 1991 (i) to increase the number
of shares issuable pursuant to the Plan, (ii) to conform the provisions of the
Plan to the SEC rules under Section 16 of the Exchange Act applicable to certain
transactions effected under the Plan by Section 16(b) Insiders and (iii) to
provide for the grant of Incentive Options. The Plan was further restated on
June 15, 1992 (the "1992 Restatement") to (i) increase the number of shares of
Common Stock authorized for issuance under the Plan by an additional 200,000
shares, (ii) bring the Plan into compliance with revisions to SEC Rule 16b-3
which are to become effective on September 1, 1993 and (iii) effect certain
technical revisions to the provisions of the Plan to facilitate plan
administration and interpretation. The 1992 Restatement was approved by the
Company's stockholders at the 1992 Annual Meeting. The Plan was further restated
and amended by the Board in June, 1993 (the "1993 Restatement") to add the
Automatic Option Grant Program. The 1993 Restatement was approved by the
Company's stockholders at the 1993 Annual Meeting. On May 4, 1994, the Board
approved an amendment to the Plan to (i) increase the aggregate number of shares
issuable over the term thereof by 200,000 shares to a total of 1,335,000 shares
and (ii) impose a limitation of 800,000 shares on the maximum number of shares
of Common Stock
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for which any one participant may be granted stock options and separately
exercisable stock appreciation rights over the remaining term of the Plan. The
amendment was approved by the Company's stockholders at the 1994 Annual Meeting.
On June 21, 1996, the Board approved an amendment to the Plan to (i)
increase the aggregate number of shares issuable over the term thereof by
200,000 shares, and (ii) to extend the expiration date of the Plan to June 30,
2006. These amendments were approved by the Company's stockholders at the 1996
Annual Meeting.
B. The provisions of the 1992 and 1993 Restatements apply only to
stock options and stock appreciation rights granted under the Plan from and
after the respective effective dates of such Restatements. All stock options and
stock appreciation rights issued and outstanding under the Plan immediately
prior to such effective dates of the Restatements shall continue to be governed
by the terms and conditions of the Plan (and the instrument evidencing each such
option or stock appreciation right) as in effect on the date each such option or
stock appreciation was previously granted, and nothing in the 1992 or 1993
Restatements shall be deemed to affect or otherwise modify the rights or
obligations of the holders of such options or stock appreciation rights with
respect to the acquisition of shares of Common Stock thereunder or the exercise
of their outstanding stock appreciation rights.
C. The sale and remittance procedure authorized for the exercise of
outstanding options shall be available for all options granted under the Plan
from and after November 6, 1991 and for all non-qualified options outstanding on
such date. The Committee may also allow such procedure to be utilized in
connection with one or more disqualifying dispositions of incentive stock option
shares effected on or after November 6, 1991, whether or not the option was
granted on or before such date.
D. The Plan shall in all events terminate upon the earlier of (i)
June 30, 2006 or (ii) the date on which all shares available for issuance under
the Plan shall have been issued or cancelled pursuant to the exercise or
surrender of stock options and/or stock appreciation rights under the Plan. If
the date of termination is determined under clause (i) above, then any stock
options and stock appreciation rights at the time outstanding under the Plan
shall continue to have force and effect in accordance with the provisions of the
instruments evidencing such grants.
E. Options may be granted under the Discretionary Option Grant
Program to purchase shares of Common Stock in excess of the number of shares
then available for issuance under the Plan, provided (i) an amendment to
increase the maximum number of shares issuable under the Plan is adopted by the
Board prior to the initial grant of any such option and within one year
thereafter such amendment is approved by the Company's stockholders and (ii)
each option granted is not to become exercisable, in whole or in part, at any
time prior to the obtaining of such stockholder approval.
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VI. MISCELLANEOUS
A. Any cash proceeds received by the Company from the issuance of
shares hereunder shall be used for general corporate purposes.
B. The implementation of the Plan, the granting of any stock option,
and the issuance of Common Stock hereunder, shall be subject to the Company's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, and the stock options granted under it and
the Common Stock issued pursuant to it.
C. Neither the action of the Company in establishing the Plan, nor
any action taken by the Board or the Committee hereunder, nor any provision of
the Plan itself shall be construed so as to grant any individual the right to
remain in the employ or service of the Company or any of its parent or
subsidiary corporations for any period of specific duration, and the Company (or
any parent or subsidiary retaining the services of such individual) may
terminate such individual's employment or service at any time and for any
reason, with or without cause.
D. Nothing contained in the Plan shall be construed to limit the
authority of the Company to exercise its corporate rights and powers, including
(without limitation) the right of the Company (a) to grant options for proper
corporate purposes otherwise than under this Plan to any Employee or other
person, firm or company or association or (b) to grant options to, or assume the
option of, any person in connection with the acquisition (by purchase, lease,
merger, consolidation or otherwise) of the business and assets (in whole or in
part) of any person, firm, company or association.
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