<PAGE> 1
As filed with the Securities and Exchange Commission on November 24, 1997
Registration No.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SPARTA, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 63-0775889
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23041 AVENIDA DE LA CARLOTA, SUITE 325
LAGUNA HILLS, CALIFORNIA 92653-1507
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(Address and zip code of principal executive offices)
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1997 STOCK PLAN
(Full title of the plan)
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WAYNE R. WINTON
23041 AVENIDA DE LA CARLOTA, SUITE 400
LAGUNA HILLS, CALIFORNIA 92653-1507
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(Name and address of agent for service)
(714) 768-8161
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(Telephone number, including area code, of agent for service)
Copy to:
Scott E. McConnell, Esq.
Higham, McConnell & Dunning
28202 Cabot Road, Suite 450
Laguna Niguel, California 92677-1250
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of Proposed Proposed
Securities Amount Maximum Maximum Amount of
To Be To Be Offering Price Aggregate Registration
Registered Registered Per Share(1) Offering Price(1) Fee
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value 14,000,000 shs. $6.90 $96,600,000 $29,273
- -------------------------------------------------------------------------------
</TABLE>
(1) Estimated pursuant to Rule 457(h) solely for the purpose of computing
the registration fee, based upon the "Formula Price" of the
Registrant's common stock on November 24, 1997.
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<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
---------------------------------------
The following documents are incorporated into this Registration
Statement by reference:
(a) The Registrant's Report on Form 10-K for the fiscal year ended
January 3, 1997.
(b) The Registrant's Report on Form 10-Q for the quarter ended
March 31, 1997.
(c) The Registrant's Report on Form 10-Q for the quarter ended
June 30, 1997.
(d) The Registrant's Report on Form 10-Q for the quarter ended
September 30, 1997.
(e) All other reports filed pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") since
the end of the fiscal year covered by the document referred to
in (a) above.
In addition, all reports and other documents subsequently filed by the
Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act,
prior to the filing of a post-effective amendment which indicates that all
securities reserved for issuance under the Registrant's 1997 Employee Stock Plan
(the "Stock Plan") have been sold or which deregisters all such securities then
remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be a part hereof from the date of the filing of
each such report or document, except as to any portion of any future Annual or
Quarterly Report to Shareholders which is not deemed filed under such
provisions.
Item 4. Description of Securities
-------------------------
General
- -------
Holders of shares of Common Stock are entitled to one vote per share on
all matters to be voted on by stockholders and are entitled to cumulate their
votes for the election of directors. Cumulative voting entitles each stockholder
to cast the number of votes that equals the number of shares of Common Stock
held by such stockholder multiplied by the number of directors to be elected.
Under cumulative voting, the stockholder may cast all of such votes for a single
nominee or may distribute them among any two or more nominees as such
stockholder sees fit.
In the event of the liquidation, dissolution or winding up of the
Registrant, the net assets of the Registrant available for distribution shall be
distributed ratably to the holders of the Preferred Stock of the Registrant
until there has been distributed to such holders an amount per share of
Preferred Stock equal to the weighted average price per share paid to the
Registrant upon the original issuance of all shares of Preferred Stock then
outstanding (the "Liquidation Preference"). Thereafter, any remaining assets
available for distribution shall be distributed ratably to the holders of the
Common Stock of the Registrant until there has been distributed to such holders
an amount per share of Common Stock equal to the Liquidation
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Preference. Thereafter, any remaining assets available for distribution shall
be distributed ratably to the holders of the Common Stock and Preferred Stock.
Holders of Common Stock are entitled to receive ratably dividends, out
of funds legally available therefor, when and as declared by the Board of
Directors. Holders of Common Stock have no preemptive, redemption, subscription
or conversion rights. All shares of Common Stock presently outstanding are, and
the shares offered hereby upon full payment therefor will be, fully paid and
nonassessable.
Restrictions on the Common Stock
- --------------------------------
All of the shares of Common Stock presently outstanding are, and all
shares of Common Stock offered hereby will be, subject to certain restrictions
(including restrictions on their transferability and rights of the Registrant to
repurchase the same under certain circumstances) set forth in Article 5 of the
Registrant's Certificate of Incorporation. The following is a summary of those
restrictions:
Right of Repurchase Upon Termination of Association. All shares of
Common Stock which are owned, beneficially or of record, by a person who is a
director of the Registrant or an employee of the Registrant or any subsidiary of
the Registrant, including, without limitation, any such shares held of record by
any trustee for the benefit or account of such person pursuant to any benefit
plan adopted and maintained by the Registrant (including, without limitation,
the Registrant's Profit Sharing Plan), are subject to the rights of the
Registrant and the remaining stockholders of the Registrant to repurchase all of
such shares of Common Stock in the event of a termination of such person's
association with the Registrant (as hereinafter defined) for any reason
whatsoever, including but not limited to death, disability, voluntary
resignation or involuntary termination, with or without cause. Such rights to
repurchase are applicable in all respects to all shares of Common Stock which
such person owns (beneficially or of record) as of the date of the termination
as well as to all such shares which such person has the right to acquire
subsequent to such termination pursuant to any employee benefit plan adopted and
maintained by the Registrant (including without limitation the Profit Sharing
Plan) or pursuant to any option, warrant, or other right, contractual or
otherwise, to acquire shares of Common Stock which was outstanding on the date
of such termination. "Termination of association with the Registrant" means (i)
for any person who is an employee but not also a director of the Registrant, the
cessation of such person's employment with the Registrant, (ii) for any person
who is a director but not also an employee of the Registrant, the cessation of
such person's status as a director of the Registrant, and (iii) for any person
who is both a director and an employee of the Registrant, the cessation of both
such person's employment and status as a director.
The Registrant has the first option to repurchase any shares of Common
Stock, at any time within 30 days following the termination date.
Notwithstanding the foregoing, the Registrant's right to repurchase any shares
of Common Stock which are acquired by a terminated person subsequent to the
termination date of such person upon the exercise of any option, warrant or
other right held by such person on the date of the termination may be exercised
by the Registrant at any time within 30 days following the exercise of such
option, warrant or right.
In the event that the Registrant does not elect to repurchase all of
the shares of Common Stock, the Secretary of the Registrant shall so notify all
other holders of record of the then outstanding Common Stock (the "Remaining
Stockholders") and each Remaining Stockholder shall thereupon have the right to
purchase (or, if the Remaining Stockholder is a participant in the Registrant's
Profit Sharing Plan, to direct the Special Trustee of the Profit
3
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Sharing Plan to purchase for the account of such Remaining Stockholder) all of
the shares of Common Stock of the terminated person which the Registrant has not
elected to repurchase. The Remaining Stockholders' right to purchase shall be
exercisable at any time within 60 days following the termination date; provided
however, that the Remaining Stockholders' right to repurchase any shares of
Common Stock which are acquired by a terminated employee subsequent to the
termination date upon the exercise of any option, warrant or other right may be
exercised by the Remaining Stockholders at any time within 60 days following the
exercise of such option, warrant or right. The option to purchase granted to the
Remaining Stockholders may be exercised by them pro rata, based on the ratio
which the number of shares of the Registrant's Common Stock held by each such
Remaining Stockholder bears to the total number of shares of the Common Stock
held by all Remaining Stockholders electing to purchase. Should any of the
Remaining Stockholders fail to exercise such option, the Remaining Stockholders
who have elected to purchase have the option for a further period of 10 days to
purchase, on a pro rata basis, in one or more successive allocations on the same
principle, the shares of the Common Stock not so purchased by the declining
Remaining Stockholders.
In the event that the Registrant and/or the Remaining Stockholders
elect to exercise their purchase rights described above, the price per share of
Common Stock (other than shares of Unvested Stock, as hereinafter defined) is
the higher of (A) the Formula Price (as such term is defined below) per share of
the Registrant's Common Stock as of the date of the termination giving rise to
such purchase and sale, or (B) the price per share paid for such shares upon the
issuance thereof or, with respect to shares issued as a stock bonus (pursuant to
the Stock Plan, the Registrant's Profit Sharing Plan, or otherwise), the Formula
Price per share of the Registrant's Common Stock as of the date of issuance of
such shares. The term "Formula Price" refers to the price calculated four times
a year, generally in January, April, July and October, according to a formula
established by the Registrant's Board of Directors. The formula is subject to
revision by the Board of Directors from time to time. Notwithstanding the
foregoing, however, if the person whose association with the Registrant has
terminated shall have theretofore taken a leave of absence in excess of 90 days
and shall not have completed one full year of service with the Registrant
subsequent to the end of such leave of absence, the price per share (other than
shares of Unvested Stock) is the higher of (A) the price per share paid for such
shares upon the issuance thereof or, with respect to shares issued as a stock
bonus (pursuant to the Stock Plan, directly to the employee's account in the
Registrant's Profit Sharing Plan, or otherwise), the Formula Price per share of
the Registrant's Common Stock as of the date of issuance of such shares, or (B)
the lesser of (1) the Formula Price of the Registrant's Common Stock as of the
date of the termination, or (2) the Formula Price of the Registrant's Common
Stock as of the date of commencement of such leave of absence.
The price per share of Common Stock purchased by the Registrant or the
Remaining Stockholders upon exercise of their repurchase rights which are shares
which were issued as a stock bonus or upon exercise of a right to purchase
granted under any stock option, bonus or purchase plan of the Registrant, and
which have not, as of the date of the event giving rise to the purchase and sale
of the same, "vested" under the terms of the Stock Bonus Agreement or Stock
Purchase Agreement pursuant to which the same were issued ("Unvested Stock"), is
the lower of (A) the Formula Price per share of the Registrant's Common Stock as
of the date of the termination giving rise to such purchase and sale, or (B) the
price per share paid for such shares upon the issuance thereof or, with respect
to shares issued as a stock bonus (pursuant to the Stock Plan, the Registrant's
Profit Sharing Plan, or otherwise), the Formula Price per share of the
Registrant's Common Stock as of the date of the issuance of such shares.
Notwithstanding the foregoing, however, if the person whose association with the
Registrant has terminated shall have theretofore taken a leave of absence in
excess of 90 days and shall
4
<PAGE> 5
not have completed one full year of service with the Registrant subsequent to
the end of such leave of absence, the price per share for such Unvested Stock is
the lower of (A) the price per share paid for such shares upon the issuance
thereof or, with respect to shares issued as a stock bonus (pursuant to the
Stock Plan, the Registrant's Profit Sharing Plan, or otherwise), the Formula
Price per share of the Registrant's Common Stock as of the date of issuance of
such shares, or (B) the lesser of (1) the Formula Price of the Registrant's
Common Stock as of the date of the termination, or (2) the Formula Price of the
Registrant's Common Stock as of the date of commencement of such leave of
absence.
Under applicable law governing the Registrant's Profit Sharing Plan,
the purchase price for shares acquired by the Registrant from employees'
accounts in the Profit Sharing Plan must be paid in cash. The purchase price of
all other shares of Common Stock repurchased by the Registrant or the Remaining
Stockholders must also be paid in cash; provided, however, that with respect to
shares of Common Stock which were not originally issued by the Registrant (i)
pursuant to the Registrant's 1987 Nonqualified Stock Option Plan (the "1987
Plan"), or (ii) in exchange for shares issued under the 1987 Plan by Sparta,
Inc., an Alabama corporation and predecessor to the Registrant, if payment for
the same in cash would cause the Registrant to violate any applicable laws
governing the right of the Registrant to purchase its own shares or to violate
the Repurchase Limitation (as hereinafter defined), the Registrant may pay cash
for those of such shares which it can purchase for cash without violating such
restrictions, and deliver a non-negotiable promissory note for the remaining
shares (unless the delivery of such note would itself cause the repurchase to
violate applicable law). Subject to the provisions of any agreement establishing
the terms of any such promissory note entered into between the payee thereof and
the Registrant, each such promissory note has such term, not exceeding seven
years, as the Registrant's Board of Directors determines. Currently, the term of
each such promissory note is determined by the original principal amount
thereof, and ranges from six months for notes of less than $20,000 to seven
years for notes of more than $1,200,000. Recipients of promissory notes may,
however, request a note with a longer term. Each promissory note bears interest
at a rate equal to the lesser of ten percent or the discount rate of the Federal
Reserve Bank of San Francisco, as the same may change from time to time, and is
amortized over the term of the note in equal monthly payments which are
calculated based on the interest rate applicable to the note at the time of its
issuance. Payment of each note with a term of 18 months or more is subordinate
to the Registrant's obligations to its principal bank lender pursuant to a
subordination agreement between the recipient of the note and the bank.
Pursuant to the Registrant's Certificate of Incorporation, the
Registrant is subject to self-imposed limitations on the amount of shares of the
Registrant's stock which it may repurchase during each three-month period (the
"Repurchase Limitation"). The Registrant is also subject to additional
limitations imposed by applicable law on the number of shares of its stock which
it may repurchase at any point in time.
Restrictions on Transferability. No holder of shares of Common Stock
may sell, transfer, assign, pledge, hypothecate or in any way dispose of or
alienate any such shares, or any right or interest therein, whether voluntarily
or by operation of law, except (i) transfers to such holder's account in the
Registrant's Profit Sharing Plan, or (ii) transfers to the Registrant, or (iii)
transfers to Remaining Stockholders (or to the accounts of the Remaining
Stockholders in the Profit Sharing Plan) pursuant to their repurchase rights
described above, or (iv) hypothecation to any lender which has been specifically
designated by the Registrant's Board of Directors, provided that the loan to
which such hypothecation relates has been specifically approved by the
Registrant's Board of Directors and is made on
5
<PAGE> 6
terms which include the right of the Registrant to repurchase such shares in the
event of default under the loan.
In the event that any holder of Common Stock shall desire to sell or
otherwise transfer all or any portion of the same other than to the Registrant,
he or she may do so provided that he or she first shall have offered such shares
(the "Offered Shares") to the Registrant as described below. At least 30 days
prior to any proposed sale or other transfer, the holder of the Offered Shares
must give written notice (the "Notice") of such proposed transfer to the
Registrant. The Notice must set forth the name of the proposed transferee, the
number of shares to be transferred, the price per share, and all other terms and
conditions of the proposed transfer, and must state that the same constitutes a
bona fide, good faith transaction. The Notice constitutes the grant of an option
to the Registrant to purchase the Offered Shares. The Registrant thereupon, for
a period of 30 days following receipt of the Notice, has the right to purchase
all, but not less than all, of the Offered Shares for a price equal to the price
specified in the Notice. The terms of payment are, at the Registrant's election,
(A) cash, or (B) as provided in the Notice (with the Registrant paying the
equivalent value of any non-cash consideration as mutually agreed upon by the
Registrant and the holder of the Offered Shares). In the event that the
Registrant does not elect to purchase all of the Offered Shares within 30 days
after its receipt of the Notice, the holder of the same may transfer the Offered
Shares within 30 days to the person, at the price, and on the terms specified in
the Notice. If the Offered Shares have not been transferred within such 30 day
period, the Offered Shares again become subject to all of the restrictions on
transfer and rights of first refusal described above. Any of the Offered Shares
which have been transferred by an employee of the Registrant or any subsidiary
of the Registrant or by a director of the Registrant shall, in the hands of the
transferee and any successive transferee, be and remain subject to all of the
provisions and restrictions contained in the Registrant's Certificate of
Incorporation, including but not limited to the Registrant's and Remaining
Stockholders' rights to repurchase such shares upon the termination of
association of the employee or director with the Registrant.
Termination of Transfer Restrictions and Repurchase Rights. The
foregoing transfer restrictions and repurchase rights of the Registrant shall
automatically terminate upon the earliest to occur of either of the following:
(i) the closing of the first underwritten public offering of
any class of the Registrant's equity securities pursuant to an effective
registration statement under the Securities Act of 1933, as amended; or
(ii) the listing by the Registrant of any class of its equity
securities for trading on the National Association of Securities Dealers
Automated Quotation System or on any securities exchange.
Item 5. Interests of Named Experts and Counsel
--------------------------------------
Not applicable
Item 6. Indemnification of Directors and Officers
-----------------------------------------
Section 145 of the Delaware General Corporation Law makes provision for
the indemnification of officers and directors in terms sufficiently broad to
include indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Act"). The Certificate of Incorporation of the Registrant, and
Indemnification Agreements entered into by the Registrant and its officers
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and directors, provide that the Registrant shall indemnify officers and
directors to the fullest extent permitted by statute.
In addition, as permitted by Section 102(b)(7) of the Delaware General
Corporation Law, the Certificate of Incorporation of the Registrant provides
that a director of the Registrant shall not be liable to the Registrant or its
stockholders for monetary damages for breach of the director's fiduciary duty of
care. However, as provided by Delaware law, such limitation of liability will
not act to limit liability (i) for any breach of the director's duty of loyalty
to the Registrant or its stockholders, (ii) for any acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) arising under the provisions of the Delaware General Corporation Law
relating to unlawful distributions, or (iv) for any transaction from which the
director derived an improper benefit.
Item 7. Exemption From Registration Claimed
-----------------------------------
Not applicable
Item 8. Exhibits
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4.1 Certificate of Incorporation, as amended, which is
incorporated herein by reference to Exhibit 3.1 to the
Registrant's Report on Form 10-K for the year ended December
30, 1994.
4.2 1997 Stock Plan, together with the forms of Stock Option
Agreement and Stock Bonus Agreement.
5 Opinion of Higham, McConnell & Dunning
23.1 Consent of Higham, McConnell & Dunning (included in the
opinion of counsel filed as Exhibit 5 hereto).
23.2 Consent of Price Waterhouse LLP.
24 Power of Attorney (included on the signature page).
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;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represents a fundamental
change in the information set forth in the Registration
Statement;
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
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<PAGE> 8
Provided, however, that Paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if 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 Securities Exchange Act of 1934
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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 of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 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 Act and will
be governed by the final adjudication of such issue.
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<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds t 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 Laguna Hills, State of California on the 24th
day of November, 1997.
SPARTA, INC.
By: /s/ WAYNE R. WINTON
---------------------------
Wayne R. Winton,
Chairman of the Board
and Chief Executive Officer
We, the undersigned directors and officers of SPARTA, Inc., do hereby
constitute and appoint Wayne R. Winton and Jerry R. Fabian, or either of them,
our true and lawful attorneys and agents, to do any and all acts and things in
our name and behalf in our capacities as directors and officers and to execute
any and all instruments for us and in our names in the capacities indicated
below, which said attorneys and agents, or either of them, may deem necessary
and advisable to enable said corporation to comply with the Securities Act of
1933, as amended, and any rules, regulations and requirements of the Securities
and Exchange Commission, in connection with this Registration Statement,
including specifically, but without limitation, power and authority to sign for
us or any of us in our names and in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto; and we do hereby ratify
and confirm all that said attorneys and agents, or either of them, shall 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 by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ WAYNE R. WINTON Chairman of the Board, November 24, 1997
- ------------------------- Chief Executive Officer
Wayne R. Winton and Director
/s/ ROBERT C. SEPUCHA Director November 24, 1997
- -------------------------
Robert C. Sepucha
Director , 1997
- -------------------------
John L. Allen
/s/ R. STEVE MCCARTER Director November 24, 1997
- -------------------------
R. Steve McCarter
Director , 1997
- -------------------------
Robert L. Johnson
</TABLE>
S-1
<PAGE> 10
<TABLE>
<S> <C> <C>
/s/ JOHN L. PIOTROWSKI Director November 24, 1997
- -------------------------
John L. Piotrowski
/s/ CARL T. CASE Director November 24, 1997
- -------------------------
Carl T. Case
Director , 1997
- -------------------------
Rock N. Hankin
Director , 1997
- -------------------------
Clarke E. Reynolds
/s/ JAMES B. IDELL Director November 24, 1997
- --------------------------
James B. Idell
/s/ B. WARREN KNUDSON Chief Financial Officer November 24, 1997
- --------------------------
B. Warren Knudson
</TABLE>
S-2
<PAGE> 11
INDEX TO EXHIBITS
Exhibit
No. Description
------- -----------
4.1 Certificate of Incorporation, as amended, which is
incorporated herein by reference to Exhibit 3.1 to the
Registrant's Report on Form 10-K for the year ended December
30, 1994.
4.2 1997 Stock Plan, together with the forms of Stock Option
Agreement and Stock Bonus Agreement.
5 Opinion of Higham, McConnell & Dunning
23.1 Consent of Higham, McConnell & Dunning (included in the
opinion of counsel filed as Exhibit 5 hereto).
23.2 Consent of Price Waterhouse LLP.
24 Power of Attorney (included on the signature page).
<PAGE> 1
EXHIBIT 4.2
1997 STOCK PLAN OF SPARTA, INC.
1. OBJECTIVES OF THE PLAN
The Plan is intended to encourage ownership of Common Stock of Sparta,
Inc., a Delaware corporation (the "Corporation"), by key employees and directors
who contribute to the success of the Corporation. By extending to such persons
the opportunity to achieve a proprietary interest in the Corporation and to
participate in its success, the Plan may be expected to benefit the Corporation
and its shareholders by making it possible to attract and retain the best
available talent and by providing incentives for employees and directors to
exert their best efforts to increase the value of the stock of the Corporation.
2. STOCK RESERVED FOR THE PLAN
The total number of shares of the Common Stock of the Corporation
reserved for issuance under the Plan shall not exceed 14,000,000 shares. Such
shares shall be comprised of authorized but unissued shares of the Corporation's
Common Stock, and/or Treasury shares. The limitation established by the first
sentence of this Section 2 shall be subject to adjustment as provided in Section
13 below. If any option granted under the Plan expires or terminates for any
reason without being exercised in full, then the unpurchased shares subject
thereto shall again be available for the grant of new options or the issuance of
new stock bonuses or rights to purchase under the Plan.
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Chief Executive Officer of the
Corporation.(1) Subject to the express provisions of the Plan, the Administrator
shall have full authority, in his or its discretion, to determine the
individuals to whom, and the time or times at which, options, stock bonuses or
rights to purchase shall be granted under the Plan, and the number of shares to
be subject to such options, stock bonuses or rights to purchase. In making such
determinations, the Administrator may
- --------
(1) The Board of Directors may at any time designate an officer or other
employee of the Corporation, the Board itself, or a committee thereof, to
act as Plan administrator pursuant to Section 3 in place of the Chief
Executive Officer. The Chief Executive Officer or other individual or group
administering the Plan pursuant to the immediately preceding sentence shall
hereinafter be referred to as the "Administrator."
<PAGE> 2
take into account the nature of the services rendered by persons the
Administrator deems eligible hereunder, and such other factors as the
Administrator in his or its discretion shall deem relevant. Subject to the
express provisions of the Plan, the Administrator shall also have full authority
to interpret the Plan and to make all other determinations necessary or
advisable for the administration of the Plan.
Each option granted under the Plan shall be evidenced by a written
option agreement in such form as the Administrator shall deem appropriate.
4. PLAN DURATION
All stock options, stock bonuses and rights to purchase granted under
the Plan must be granted no later than September 30, 2007.
5. PARTICIPATION
Options, stock bonuses and rights to purchase may be granted only to
full-time or near full-time, non-temporary employees of the Corporation or any
subsidiary of the Corporation, and members of the Corporation's Board of
Directors, as selected by the Administrator. However, options, stock bonuses and
rights to purchase may be granted to full-time employees in recognition of
contributions previously made while such persons were part-time employees or
consultants of the Corporation or a subsidiary of the Corporation. Stock bonuses
may not be granted under the Plan to any person who, at the time of the grant of
the stock bonus, owns stock possessing 10% or more of the total combined voting
power of all classes of stock of the Corporation.
6. EXERCISE AND PURCHASE PRICE, DETERMINATION OF FAIR MARKET VALUE, AND
NOTICE, ETC.
(a) Exercise Price. During such times as there is not a market price
available with respect to the Corporation's Common Stock, the exercise price of
each option granted and the purchase price of shares for which rights to
purchase are offered under the Plan shall be an amount equal to the weighted
average of the Formula Price (as such term is defined below) during the
six-month period ending on the date the option is granted or the right of
purchase is offered; provided, however, that the exercise price of any option
granted, and the purchase price of shares under any right of purchase offered,
to any person who, at the time of grant of the option or offer of the right of
purchase, owns stock possessing 10% or more of the total combined voting power
of all classes of stock of the Corporation, shall not be less than 110% of the
weighted average of the Formula Price during the six-month period ending on the
date of grant of the option or offer of the right of purchase. During such times
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<PAGE> 3
as there is a market price available with respect to the Corporation's Common
Stock, the exercise price of each option granted and the purchase price of
shares for which rights to purchase are offered under the Plan shall be an
amount equal to the weighted average of the fair market value of the
Corporation's Common Stock during the six-month period ending on the date the
option is granted or the right of purchase is offered; provided, however, that
the exercise price of any option granted, and the purchase price of shares under
any right of purchase offered, to any person who, at the time of grant of the
option or offer of the right of purchase, owns stock possessing 10% or more of
the total combined voting power of all classes of stock of the Corporation,
shall not be less than 110% of the weighted average of the fair market value of
the Corporation's Common Stock during the six-month period ending on the date of
grant of the option or offer of the right of purchase. Notwithstanding the
foregoing, the exercise price of each option granted and the purchase price of
shares for which rights to purchase are offered under the Plan to an employee of
the Corporation or any subsidiary in connection with the initial full-time
employment of such employee, and the exercise price of any option granted to a
new director shall be an amount equal to the fair market value of the
Corporation's Common Stock on the date of grant of the option or offer of the
right of purchase. The exercise price of options granted and the purchase price
of shares subject to rights of purchase offered under the Plan shall be subject
to adjustment as provided in Section 13 below.
(b) Determination of Fair Market Value. Whenever for purposes of this
Plan the fair market value of the Common Stock of the Corporation is to be
determined as of a specific date, the fair market value shall, if the Common
Stock is not listed or admitted to trading on a stock exchange, be the average
of the closing bid price and asked price of the Common Stock in the
over-the-counter market on such date or, if the Common Stock is then listed or
admitted to trading on any stock exchange, the closing sale price on such date
on the principal stock exchange on which the Common Stock is then listed or
admitted to trading. If no closing bid and asked prices are quoted on such date,
or if no sale takes place on such date on such principal exchange, as the case
may be, then the closing sale price of the Common Stock on such exchange on the
next preceding date on which a sale occurred, or the average of the closing bid
and asked prices on the next preceding date on which such prices are quoted, as
the case may be, shall be the fair market value of the stock. During such times
as there is not a market price available, the fair market value of the
Corporation's Common Stock shall be an amount equal to the Formula Price in
effect on the date in question.
(c) Formula Price. As used in this Plan, the term "Formula Price" shall
mean the price determined pursuant to the formula adopted by the Board of
Directors of the Corporation for the
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<PAGE> 4
purpose of determining the fair market value of the Corporation's Common Stock,
as such formula may be modified from time to time by the Board of Directors.
(d) Notice, Etc. All persons to whom options, stock bonuses or rights
to purchase have been granted under the Plan during a fiscal year shall be
notified of such grants within 60 days following the end of that fiscal year.
Such notices will identify the number of shares subject to each option, stock
bonus or right of purchase granted, the date of grant of the same, and the
exercise or purchase price thereof. Subject to Section 18 below, the exercise
price of each option granted and the purchase price of each right to purchase
offered under the Plan shall be paid in full in cash upon the exercise of the
same. The proceeds of sale of stock subject to options or rights to purchase are
to be added to the general funds of the corporation and used for such corporate
purposes as the Board of Directors shall determine.
(e) Withholding. The Corporation shall be entitled to deduct from other
compensation payable to each participant under the Plan any sums required by
federal, state or local tax law to be withheld with respect to the exercise of
an option or right to purchase, or with respect to any stock bonus, but, in the
alternative, the Corporation may require the party receiving or exercising the
same to pay, or such party may pay, such sums to the Corporation.
7. TERM OF OPTIONS
The term of each option granted under the Plan shall not be more than
ten years from the date of grant.
8. EXERCISE OF OPTIONS; VESTING
(a) Vesting, Etc. Options granted under the Plan may be exercised only
to the extent that the right to exercise the same shall have vested in the
optionee. The vesting schedule for each option granted under the Plan shall be
determined by the Administrator at the time of the grant of the option;
provided, however, that (except as stated in the following sentence) the
exercisability of each option granted under the Plan shall vest at a rate of not
less than 20% per year, and shall vest in full over a period of not more than
five years following the date of grant of the option. Notwithstanding the
foregoing, in the case of an option granted to an officer or director of the
Company, the exercisability of the option may vest at such time or times or
during such period as is determined by the Administrator at the time of the
grant of the option. To the extent that an option has vested, the same shall be
exercisable, in whole at any time, or in part from time to time, at the
discretion of the optionee during the term of the option. The holder of an
option
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<PAGE> 5
granted under the Plan shall not have any of the rights of a stockholder with
respect to the shares covered by his or her option until such shares shall be
issued to him or her upon the due exercise of the option.
(b) Leaves of Absence. Vesting of options and shares acquired as stock
bonuses or upon exercise of rights to purchase shall not be interrupted due to
any leave of absence by the holder thereof for a period of less than or equal to
90 days, or due to any leave of absence in excess of 90 days provided that the
holder thereafter returns to full-time employment with the Corporation or a
subsidiary of the Corporation for a period of at least one full year. However,
if a holder, subsequent to a leave of absence in excess of 90 days, shall cease
to be a full-time employee of the Corporation or a subsidiary of the
Corporation for any reason whatsoever prior to the expiration of one year
following his or her return from such leave of absence, vesting of all options
held by such person and of all shares acquired by such person as stock bonuses
or upon exercise of rights to purchase shall be deemed to have ceased as of the
date of commencement of such leave of absence.
9. NON-TRANSFERABILITY
No option granted under the Plan shall be transferable otherwise than
by will or the laws of descent and distribution, and an option may be exercised,
during the lifetime of the person receiving the same, only by him or her. No
stock bonus or right to purchase granted under the Plan shall be transferable
under any circumstances.
10. EFFECT ON OPTIONS OF TERMINATION OF EMPLOYMENT OR STATUS AS A DIRECTOR
(a) Termination Other Than in the Event of Death or Disability. In the
event of an optionee's termination of association with the Corporation (as
hereinafter defined) for any reason other than his or her death or disability,
(i) all options granted to such optionee pursuant to the Plan which are not
exercisable at the date of such termination of association shall terminate
immediately and become void and of no effect, and (ii) all options granted to
such optionee pursuant to the Plan which are exercisable at the date of such
termination of association may be exercised (but only to the extent they were
exercisable as of the date of such termination of association) at any time
within a period following the date of such termination of association specified
by the Administrator (which period shall not be less than thirty days), but in
any event no later than the date of expiration of the option, and if not so
exercised within such time shall become void and of no effect at the end of such
time. For purposes of this Plan, "termination of association with the
Corporation" or the like shall mean (A) for any person
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<PAGE> 6
who is an employee of the Corporation or a subsidiary of the Corporation but not
also a director of the Corporation, the cessation of such person's employment
with the Corporation or such subsidiary, (B) for any person who is a director of
the Corporation but not also an employee of the Corporation or any subsidiary of
the Corporation, the cessation of such person's status as a director of the
Corporation, and (C) for any person who is both a director of the Corporation
and an employee of the Corporation or a subsidiary of the Corporation, the
cessation of both such person's employment and status as a director.
(b) Termination in the Event of Death or Disability. In the event of an
optionee's termination of association with the Corporation by reason of his or
her death or disability, (i) all options granted to such optionee pursuant to
the Plan which are not exercisable at the date of such termination of
association shall terminate immediately and become void and of no effect, and
(ii) all options granted to such optionee pursuant to the Plan which are
exercisable at the date of such termination of association may be exercised (but
only to the extent they were exercisable as of the date of such termination of
association) at any time within a period following the date of such termination
of association specified by the Administrator (which period shall not be less
than six (6) months after the optionee's death or disability), but in any event
no later than the date of expiration of the option, and if not so exercised
within such time shall become void and of no effect at the end of such time.
11. TERMS AND CONDITIONS APPLICABLE TO RIGHTS OF PURCHASE UNDER THE PLAN
After the Administrator shall have determined to offer to a person
eligible to participate (hereinafter "offeree") the right to purchase shares
under the Plan, it shall cause to be delivered to the offeree a written notice
thereof, together with a Stock Purchase Agreement which shall constitute the
Corporation's offer of the right to purchase and shall contain the terms and
conditions of purchase, including, without limitation, the number of shares
which the offeree shall be entitled to purchase, the purchase price per share,
any other terms, conditions or restrictions relating thereto, and the number of
days or period the offeree shall have to accept such offer. The execution and
delivery of the Stock Purchase Agreement by the offeree to the Corporation
within such number of days or period shall constitute acceptance of the offer
and such Stock Purchase Agreement shall, thereupon, become a binding obligation
of the Corporation and the offeree. Each Stock Purchase Agreement shall be in
such form as the Administrator shall, from time to time, recommend, but shall
comply with and be subject to the following terms and conditions:
(a) Number of Shares. The Stock Purchase Agreement shall state the
total number of shares which the offeree shall be
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<PAGE> 7
entitled to purchase and whether or not the offeree may purchase less than all
of the shares offered.
(b) Term of Offer. The Stock Purchase Agreement shall specify the
number of days or other period the offeree shall have to accept the offer, not
to exceed 90 days from the date of such offer. If not accepted by the offeree
within such number of days or other period, the offer shall automatically
terminate upon the expiration thereof, and the offer shall thereupon be null and
void and without further effect, except that the Administrator may extend such
number of days or other period available for acceptance, not to exceed an
additional 90 days. Acceptance of the offer shall occur when the offeree has
executed and redelivered to the Corporation at least two counterparts of the
Stock Purchase Agreement in the form delivered to him by the Corporation and, to
be effective, such acceptance must be without condition or reservation of any
kind whatsoever.
(c) Vesting. The Administrator may, in his or its discretion, provide
that the shares purchased under any right of purchase granted under the Plan
shall "vest" in full immediately, or in such increments and over such periods of
time as may be determined by the Administrator; provided, however, that (except
as stated in the following sentence) the shares purchased under each right to
purchase granted under the Plan shall vest at a rate of not less than 20% per
year over a period of not more than five years following the date of the grant
of the right to purchase. Notwithstanding the foregoing, in the case of a right
to purchase granted to an officer or director of the Company, the shares
purchased thereunder may vest at such time or times or during such period as is
determined by the Administrator at the time of the grant of the right to
purchase.
12. TERMS AND CONDITIONS APPLICABLE TO STOCK BONUSES UNDER THE PLAN
The Administrator may, in his or its discretion, provide that the
shares acquired under any stock bonus granted under the Plan shall "vest" in
full immediately, or in such increments and over such periods of time as may be
determined by the Administrator; provided, however, that (except as stated in
the following sentence) the shares acquired under each stock bonus granted under
the Plan shall vest at a rate of not less than 20% per year over a period of not
more than five years following the date of the grant of the stock bonus.
Notwithstanding the foregoing, in the case of a stock bonus granted to an
officer or director of the Corporation, the shares acquired thereunder may vest
at such time or times or during such period as is determined by the
Administrator at the time of the grant of the stock bonus.
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<PAGE> 8
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION AND CORPORATION CHANGES
If the outstanding shares of the Common Stock of the Corporation are
changed into, or exchanged for a different number or kind of shares or
securities of the Corporation through recapitalization or reclassification, or
if the number of outstanding shares is changed through a stock split, stock
dividend or reverse stock split, an appropriate adjustment shall be made in the
number and kind of shares as to which options, rights to purchase and stock
bonuses may thereafter be granted. A corresponding adjustment changing the
number or kind of shares allocated to unexercised options and rights to
purchase, or portions thereof, which shall have been granted prior to any such
change, shall likewise be made. Any such adjustment in an outstanding option or
right to purchase, however, shall be made without change in the total price
applicable to the unexercised portion of the option or right to purchase but
with a corresponding adjustment in the price for each share covered by the
option or right to purchase.
In the event that the Corporation at any time proposes to (i) merge
into, consolidate with or to enter into any other reorganization (including the
sale of substantially all of its assets) in which the Corporation is not the
surviving corporation, or (ii) enter into a merger or other reorganization as a
result of which the outstanding shares of Common Stock of the Corporation will
be changed into or exchanged for shares of the capital stock or other securities
of another corporation or for cash or other property, then the Plan and all
unexercised options and rights to purchase granted hereunder shall terminate,
unless provision is made in writing in connection with such transaction for the
continuance of the Plan and for the assumption of options and rights to purchase
theretofore granted, or the substitution for such options and rights to purchase
of new options and rights to purchase covering the shares of a successor
corporation, with appropriate adjustments as to number and kind of shares and
prices, in which event the Plan and the options and rights to purchase
theretofore granted or the new options and rights to purchase substituted
therefor, shall continue in the manner and under the terms so provided. If such
provision is not made in such transaction for the continuance of the Plan and
the assumption of options and rights to purchase theretofore granted or the
substitution for such options and rights to purchase of new options and rights
to purchase covering the shares of a successor corporation, then the Board of
Directors shall cause written notice of the proposed transaction to be given to
the persons holding options and rights to purchase not less than 20 days prior
to the anticipated effective date of the proposed transaction, and all options
and rights to purchase shall be accelerated and, concurrent with the effective
date of the proposed transaction, such persons shall have the right to
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<PAGE> 9
exercise options and rights to purchase in respect of any or all shares then
subject thereto. In such event, all options and rights of purchase outstanding
under the Plan, to the extent not so exercised, shall, concurrently with the
effective date of the proposed transaction, automatically expire and shall
thereafter be void and of no effect.
Adjustments under this Section 13 shall be made by the Board of
Directors, whose determination as to what adjustments shall be made shall be
final and conclusive. No fractional shares of stock shall be issued under the
Plan on account of any such adjustment.
14. CONTINUATION OF EMPLOYMENT OR DIRECTORSHIP
Neither the existence of the Plan nor the grant of any option, right to
purchase or stock bonus under the Plan shall impose any obligation on the
Corporation or its shareholder to continue the directorship or employment with
the Corporation of any participant in the Plan.
15. GOVERNMENT AND STOCK EXCHANGE REGULATIONS
The Corporation shall not be required to issue any shares upon the
exercise of any option or acceptance of any right to purchase unless and until
any then applicable requirements of the Securities and Exchange Commission,
other regulatory agencies having jurisdiction and of any exchanges upon which
stock of the Corporation may be listed, shall have been fully complied with.
16. INFORMATION TO OPTIONEES
The Corporation shall provide to each holder of an outstanding option
under the Plan a copy of the Corporation's financial statements for each fiscal
year of the Corporation within a reasonable time after such financial statements
are prepared and approved by the Corporation's management. The Corporation shall
also provide each holder of an outstanding option under the Plan with a copy of
any annual or other report generally distributed by the Corporation to its
shareholders.
17. AMENDMENT AND TERMINATION
The Plan may be terminated, modified, or amended by the stockholders of
the Corporation or by the Board of Directors at any time they shall deem
advisable; provided, however, that no such amendment shall adversely affect
rights and obligations of an option holder with respect to options at the time
outstanding under the Plan unless the option holder consents to such amendment.
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<PAGE> 10
18. LOANS
The Administrator may, in his or its discretion, assist any person to
whom options or rights to purchase have been granted under the Plan (including
any such person who is an officer or director of the Corporation) in the
exercise of one or more options or rights to purchase under the Plan, including
the satisfaction of any federal and state income and employment tax liabilities
arising therefrom, by authorizing the extension of a loan from the Corporation
to such person. Any such loan shall be extended on such terms and conditions,
with such security and with such repayment provisions (which may include
automatic payroll deductions) as the Administrator may deem appropriate. Loans
may be granted with or without security, collateral or interest, but the maximum
credit available to any person shall not exceed the sum of (i) the aggregate
exercise price payable for the purchased shares plus (ii) any federal and state
income and employment tax withholding liability incurred in connection with such
exercise.
19. RESTRICTIONS ON TRANSFER AND RIGHTS OF FIRST REFUSAL
Pursuant to the Corporation's Certificate of Incorporation, the shares
of the Corporation's Common Stock, including those issued under the Plan, are
subject to (i) certain significant restrictions on transferability, (ii) the
Corporation's right to repurchase such shares in the event of a termination of
the holder's association with the Corporation, and (iii) the Corporation's right
of first refusal in the event that the holder desires to transfer his or her
shares.
20. SHAREHOLDER APPROVAL
Shareholder approval of the Plan shall be obtained in accordance with
applicable law within twelve months following the date on which the Plan is
adopted by the Corporation's Board of Directors. Any option granted under the
Plan which is exercised before shareholder approval is obtained, and any shares
otherwise purchased under the Plan before shareholder approval is obtained, must
be rescinded if shareholder approval is not obtained within twelve months
following the date on which the Plan is adopted by the Corporation's Board of
Directors.
End of Plan
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<PAGE> 11
OPTION AGREEMENT NO. NQSO-_______
NONQUALIFIED STOCK OPTION AGREEMENT
-----------------------------------
THIS NONQUALIFIED STOCK OPTION AGREEMENT, dated ____________
for reference purposes only, is entered into between SPARTA, INC., a Delaware
corporation (the "Company"), and, _________________________ an employee of the
Company or a subsidiary of the Company and/or a director of the Company (the
"Optionee"), with reference to the following fact:
The Company desires, by affording the Optionee an opportunity
to purchase shares of Common Stock in the Company (the "Common Stock"), as
hereinafter provided, to carry out the purpose of the Company's 1997 Stock Plan
(the "Plan").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants
hereinafter set forth, and for good and valuable consideration, the Company and
the Optionee hereby agree as follows:
1. GRANT OF OPTIONS; EXERCISE PRICES. This Agreement pertains
to and governs those Nonqualified Stock Options set forth on Exhibit A attached
hereto, as well as any and all other stock options which may hereafter be
granted by the Company to the Optionee under the Plan (individually an "Option"
and collectively the "Options"). As to each Option which is outstanding as of
the date of this Agreement, the number of shares purchasable upon exercise of
the Option, the date of grant of the Option, the exercise price of the Option,
and the vesting schedule applicable to such Option, are set forth on Exhibit A
attached hereto. As to each Option which may hereafter be granted, the number of
shares purchasable upon exercise of the Option, the date of grant, the exercise
price and the vesting schedule will be set forth in a written notice of grant of
the Option given by the Company to the Optionee (a "Grant Notice"). Each Option
shall terminate at 5:00 p.m. Pacific Time on the last business day immediately
preceding the __________ anniversary of the date of grant of such Option,
subject to earlier termination as provided in this Agreement. The number of
shares subject to any Option and the exercise price thereof shall be subject to
adjustment as provided in Section 6 of this Agreement.
2. VESTING; LEAVES OF ABSENCE.
(a) VESTING. Each Option shall vest separately in the
Optionee (rounded to the nearest whole share) pursuant to
<PAGE> 12
the vesting schedule for that Option which is set forth on Exhibit A attached
hereto or in the Grant Notice pertaining to that Option, subject to the
provisions of this Section 2. Except as may otherwise be provided in this
Agreement, each Option shall be exercisable only to the extent that the right to
exercise the same shall have so vested. The vesting schedule for any Option
shall not be prorated for periods between the vesting dates stated on Exhibit A
or the Grant Notice, as the case may be, and in no event shall fractional shares
be vested. The right to exercise each Option shall be cumulative to the extent
that the right to exercise has accrued and has not been exercised.
(b) LEAVES OF ABSENCE. If the Optionee is an employee
of the Company or a subsidiary of the Company as of the date of grant of any
Option, vesting of that Option shall not be interrupted due to any leave of
absence by the Optionee for a period of less than or equal to ninety (90) days,
or due to any leave of absence in excess of ninety (90) days provided that the
Optionee thereafter returns to full-time employment with the Company or a
subsidiary of the Company for a period of at least one full year. However, if
the Optionee, subsequent to a leave of absence in excess of ninety (90) days,
shall cease to be a full-time employee of the Company or a subsidiary of the
Company for any reason whatsoever prior to the expiration of one year following
his or her return from such leave of absence, vesting of the Option shall be
deemed to have ceased as of the date of commencement of such leave of absence.
3. NONTRANSFERABILITY. The Options shall not be transferable
otherwise than by will or the laws of descent and distribution, and the Options
may be exercised, during the lifetime of the Optionee, only by him or her. More
particularly (but without limiting the generality of the foregoing), the Options
may not be assigned, transferred, pledged or hypothecated in any way, shall not
be assignable by operation of law and shall not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Options contrary to the provisions
hereof, and the levy of any execution, attachment or similar process upon the
Options, shall be null and void and without effect.
4. TERMINATION OF EMPLOYMENT OR STATUS AS A DIRECTOR.
(a) TERMINATION EXCEPT UPON DEATH OR DISABILITY. In
the event of the Optionee's termination of association with the Company (as
hereinafter defined) for any reason other than his or her death or disability
(as hereinafter defined), then the Options may be exercised (but only to the
extent they were exercisable as of the date of such termination of association)
at
2
<PAGE> 13
any time within thirty (30) days of the date of such termination of association,
but in any event no later than the respective dates of expiration of the Options
pursuant to the other provisions of this Agreement, and if not so exercised
within such time shall become void and of no effect at the end of such time.
(b) TERMINATION UPON DEATH OR DISABILITY OF OPTIONEE.
In the event of the Optionee's termination of association with the Company by
reason of his or her death or permanent and total disability within the meaning
of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended
("disability"), then the Options may be exercised (but only to the extent they
were exercisable as of the date of such termination of association) at any time
within one year of the date of such termination of association, but in any event
no later than the respective dates of expiration of the Options pursuant to the
other provisions of this Agreement, and if not so exercised within such time
shall become void and of no effect at the end of such time. The termination of
association with the Company for any reason, including death or disability,
shall not accelerate or otherwise affect the number of shares with respect to
which any Option may be exercised.
(c) DEFINITION OF TERMINATION OF ASSOCIATION. For
purposes of this Agreement, "termination of association with the Company" shall
mean (i) for any person who is an employee of the Company or a subsidiary of the
Company but not also a director of the Company, the cessation of such person's
employment with the Company or a subsidiary of the Company, (ii) for any person
who is a director of the Company but not also an employee of the Company or a
subsidiary of the Company, the cessation of such person's status as a director
of the Company, and (iii) for any person who is both a director of the Company
and an employee of the Company or a subsidiary of the Company, the cessation of
such person's employment and status as a director.
5. OTHER EXPIRATIONS. In addition to any other event causing
an expiration or termination of the Options, the Options shall expire and all
rights to purchase shares shall cease (to the extent not theretofore terminated
or expired as herein provided) upon (i) the effective date of the dissolution or
liquidation of the Company or of a merger, consolidation or reorganization
(including the sale of substantially all of its assets) of the Company with one
or more entities, corporate or otherwise, as a result of which the Company is
not the surviving entity, or (ii) the merger or other reorganization of the
Company with one or more entities, corporate or otherwise, as a result of which
the outstanding shares of Common Stock of the Company are changed into or
exchanged for shares of the capital stock or
3
<PAGE> 14
other securities of another entity or for cash or other property; provided,
however, that the Company may, in its discretion, and immediately prior to any
such transaction, cause new options to be substituted for the Options or cause
the Options to be assumed by a successor entity or a parent or subsidiary of
such entity, with appropriate adjustment of the exercise price per share and the
type and number of securities purchasable upon exercise of the same.
If no provision is made for the continuance of the Plan and
the assumption of the Options, or the substitution for the Options of new
options as hereinabove provided, then (A) the Company shall cause written notice
to be given to the Optionee of the proposed transaction not less than twenty
(20) days prior to the anticipated effective date thereof, (B) contingent upon
the consummation of the proposed transaction, the vesting of all of the Options
shall be accelerated such that, in connection with the consummation of the
proposed transaction, the Optionee shall have the right to exercise the Options
in respect of any or all shares then subject thereto, and (C) to the extent not
so exercised, all of the Options shall, concurrently with the consummation of
the proposed transaction, automatically expire and shall thereafter be void and
of no effect.
6. ADJUSTMENTS. In the event that the outstanding shares of
Common Stock of the Company are, subsequent to the grant of any Option,
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company by reason of merger,
consolidation or reorganization in which the Company is the surviving
corporation or of a recapitalization, stock split, combination of shares,
reclassification, reincorporation, stock dividend, or other change in the
capital structure of the Company, (and provided that the Option is not
terminated as a result thereof pursuant to Section 5 hereof), then the number
and class of shares subject to that Option, and the exercise price per share
(but not the total exercise price), shall all be proportionately adjusted so
that, upon exercise of the Option, the Optionee shall receive the number and
class of shares he or she would have received had he or she been the holder of
the number of shares of Common Stock in the Company, for which the Option is
being exercised, on the date of such change or increase or decrease in the
number or class of issued shares of Common Stock in the Company. Adjustments
under this Section 6 shall be made by the Board of Directors of the Company
whose determination with respect thereto shall be final and conclusive. No
fractional share shall be issued under the Options or upon any such adjustment.
4
<PAGE> 15
7. METHOD OF EXERCISING OPTIONS. Subject to the terms and
conditions of this Agreement, the Options may be exercised by written notice to
the Company, at its principal office, which presently is located at 23041
Avenida de la Carlota, Laguna Hills, California 92653-1507. Such notice shall
state the election to exercise one or more of the Options, shall specify which
Option or Options is/are being exercised and the number of shares in respect of
which each Option is being exercised, and shall be signed by the person or
persons so exercising the Option(s). Such notice shall be accompanied by payment
for the full exercise price of such shares in cash or by certified check or bank
draft, and the Company shall deliver a certificate or certificates representing
the shares subject to such exercise as soon as practicable after the notice
shall be received. The certificate or certificates for the shares as to which
any Option shall have been so exercised shall be registered in the name of the
person or persons so exercising the Option and shall be delivered as provided
above to or upon the written order of the person or persons exercising the
Option. In the event any Option shall be exercised by any person or persons
other than the Optionee in accordance with the terms hereof, such notice shall
be accompanied by appropriate proof of the right of such person or persons to
exercise the Option. All shares that shall be purchased upon the exercise of any
Option as provided herein shall be fully paid and nonassessable. The holder of
the Options shall not be entitled to the privileges of share ownership as to any
shares of Common Stock not actually issued and delivered to him or her.
8. RESTRICTIONS ON TRANSFER OF OPTION SHARES; REPURCHASE
RIGHTS OF COMPANY. The Optionee acknowledges and agrees that the Company's
Certificate of Incorporation grants to the Company and/or the shareholders of
the Company the option to purchase all shares acquired by the Optionee upon
exercise of the Options, together with all securities of the Company thereafter
issued with respect thereto by reason of stock split, stock dividend or
otherwise (collectively, the "Option Shares"), upon the Optionee's termination
of association with the Company. The Optionee further acknowledges and agrees
that the Company's Certificate of Incorporation impose certain restrictions on
the transferability of the Option Shares and grants a right of first refusal
with respect to the Option Shares in favor of the Company. THE OPTIONEE HEREBY
ACKNOWLEDGES AND AGREES THAT THE OPTIONEE AND THE OPTION SHARES SHALL BE BOUND
BY AND SUBJECT TO ALL OF THE ABOVE-NOTED TERMS AND PROVISIONS OF THE COMPANY'S
CERTIFICATE OF INCORPORATION, AS THE SAME MAY HEREAFTER BE AMENDED FROM TIME TO
TIME, AS FULLY AS THOUGH THE SAME WERE SET FORTH IN FULL HEREIN, AND FURTHER
AGREES THAT THE OPTION SHARES SHALL NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
IN STRICT COMPLIANCE WITH SUCH PROVISIONS.
5
<PAGE> 16
9. LEGEND CONDITION. The Optionee acknowledges that any shares
of Common Stock issued upon exercise of the Options shall bear and be subject to
legends in substantially the following form:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT
THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND TO A REPURCHASE OPTION IN FAVOR OF
THE ISSUER UPON THE OCCURRENCE OF CERTAIN EVENTS PURSUANT TO PROVISIONS
OF THE ISSUER'S CERTIFICATE OF INCORPORATION, A COPY OF WHICH IS ON
FILE IN THE OFFICE OF THE ISSUER'S CORPORATE SECRETARY.
10. TAX WITHHOLDING. The Company shall have the right, in
connection with any exercise of the Options, to deduct from the Optionee's
compensation, or require the Optionee to remit to the Company, an amount
sufficient to satisfy all federal, state and local tax withholding requirements.
11. GENERAL. The Company shall at all times during the term of
the Options reserve and keep available such number of shares of Common Stock as
will be sufficient to satisfy the requirements of this Agreement, shall pay all
original issue and transfer taxes with respect to the issuance of shares upon
the exercise of the Options and all other fees and expenses necessarily incurred
by the Company in connection therewith, and will from time to time use its best
efforts to comply with all laws and regulations, which, in the opinion of
counsel for the Company, shall be applicable thereto.
12. NO AGREEMENT TO RETAIN AS EMPLOYEE OR DIRECTOR. Nothing in
this Agreement shall be construed to constitute or to be evidence of any
agreement or understanding, express or implied, on the part of the Company, its
shareholders or any subsidiary of the Company, to retain the Optionee as a
director of the Company or as an employee of the Company or any subsidiary of
the Company.
13. ADDITIONAL CONDITIONS. Notwithstanding any other provision
of this Agreement, the Company shall not be required to
6
<PAGE> 17
issue or deliver any certificate or certificates for shares of stock upon the
exercise of the Options prior to fulfillment of all of the following conditions:
(a) The listing, or approval for listing upon notice
of issuance, of such shares on any securities exchange as may at the time be the
market for the Company's Common Stock.
(b) Any registration or other qualification of such
shares under any state or federal law or regulation, or the maintaining in
effect of any such registration or other qualification which the Board of
Directors of the Company shall, in its absolute discretion upon the advice of
counsel, deem necessary or advisable.
(c) The obtaining of any other consent, approval or
permit from any state or federal governmental agency which the Board of
Directors of the Company shall, in its absolute discretion upon the advice of
counsel, determine to be necessary or advisable.
The Company shall diligently endeavor to obtain fulfillment of
all the foregoing conditions.
14. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto and supersedes any prior written or oral
agreements between the parties concerning the subject matter contained herein.
There are no representations, agreements, arrangements or understandings, oral
or written, between the parties hereto, relating to the subject matter contained
in this Agreement, which are not fully expressed herein.
15. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but such
counterparts, when taken together, shall constitute but one and the same
agreement.
16. NOTICES. Any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given upon personal
delivery, or, if mailed, 48 hours after deposit with the United States Postal
Service for mailing via registered or certified mail, addressed to the Company
at its then principal executive offices, or to the Optionee at the address set
forth below his or her signature hereto, or at such other address as such
parties may hereafter designate by written notice to the other party.
7
<PAGE> 18
IN WITNESS WHEREOF, the Company and the Optionee have executed
this Nonqualified Stock Option Agreement.
SPARTA, INC.
By:
-----------------------
Its:
-----------------------
OPTIONEE
---------------------------
(Signature)
---------------------------
---------------------------
(Address)
8
<PAGE> 19
EXHIBIT A
TO
NONQUALIFIED STOCK OPTION AGREEMENT
<PAGE> 20
AGREEMENT NO.________
STOCK BONUS AGREEMENT
---------------------
THIS STOCK BONUS AGREEMENT (the "Agreement"), dated _______,
is entered into between SPARTA, INC., a Delaware corporation (the "Company"),
and __________________________ ("Recipient"), an employee of the Company or a
subsidiary of the Company and/or a director of the Company.
The Company desires, by affording Recipient an opportunity to
acquire shares of Common Stock of the Company ("Common Stock"), as a bonus as
hereinafter provided, to carry out the purpose of the Company's 1997 Stock Plan
(the "Plan").
NOW, THEREFORE, in consideration of the mutual covenants,
warranties and representations contained herein, the parties hereto agree as
follows:
1. ISSUANCE OF SHARES.
------------------
The Company hereby issues to Recipient and Recipient hereby
accepts from the Company, ________ shares of the authorized but unissued Common
Stock of the Company (the "Shares") upon and subject to the terms and conditions
set forth in this Agreement. The Shares are being issued to Recipient as a bonus
in consideration of services previously rendered to the Company, without the
payment of any additional consideration, and shall constitute fully paid and
nonassessable shares of the Common Stock of the Company.
2. STOCK RIGHTS; RESTRICTIONS ON TRANSFER OF SHARES;
REPURCHASE RIGHTS OF COMPANY.
-------------------------------------------------
2.1 ISSUANCE OF SHARES. The Shares shall be duly
issued and a certificate or certificates for the Shares are concurrently
herewith being issued in the name of Recipient. Recipient shall thereupon be a
shareholder with respect to all the Shares represented by such certificate and
shall have all of the rights of a shareholder with respect to all of the Shares,
including the right to vote the Shares and to receive all dividends and other
distributions paid with respect to the Shares.
2.2 TRANSFER RESTRICTIONS AND REPURCHASE RIGHTS. The
Recipient acknowledges and agrees that the Company's
<PAGE> 21
Certificate of Incorporation grants to the Company and/or the shareholders of
the Company the option to purchase all of the Shares, together with all
securities of the Company hereafter issued with respect thereto by reason of
stock split, stock dividend or otherwise (collectively, the "Plan Shares"), upon
the Recipient's termination of association with the Company (as defined in the
Certificate of Incorporation). The Recipient further acknowledges and agrees
that the Company's Certificate of Incorporation imposes certain restrictions on
the transferability of the Plan Shares and grants a right of first refusal with
respect to the Plan Shares in favor of the Company. THE RECIPIENT HEREBY
ACKNOWLEDGES AND AGREES THAT THE RECIPIENT AND THE PLAN SHARES SHALL BE BOUND BY
AND SUBJECT TO ALL OF THE ABOVE-NOTED TERMS AND PROVISIONS OF THE COMPANY'S
CERTIFICATE OF INCORPORATION, AS THE SAME MAY HEREAFTER BE AMENDED FROM TIME TO
TIME, AS FULLY AS THOUGH THE SAME WERE SET FORTH IN FULL HEREIN, AND FURTHER
AGREES THAT THE PLAN SHARES SHALL NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN
STRICT COMPLIANCE WITH SUCH PROVISIONS.
2.3 LEGENDS ON CERTIFICATES. The Recipient
acknowledges and agrees that any and all stock certificates representing the
Plan Shares, and any and all replacements thereof, shall bear legends in
substantially the following form:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT
THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND TO A REPURCHASE OPTION IN FAVOR OF
THE ISSUER UPON THE OCCURRENCE OF CERTAIN EVENTS PURSUANT TO PROVISIONS
OF THE ISSUER'S CERTIFICATE OF INCORPORATION, A COPY OF WHICH IS ON
FILE IN THE OFFICE OF THE ISSUER'S CORPORATE SECRETARY.
3. NO AGREEMENT TO RETAIN AS EMPLOYEE OR DIRECTOR.
-----------------------------------------------
Nothing in this Agreement shall be construed to constitute or
be evidence of any agreement or understanding, express or implied, on the part
of the Company or its shareholders or any subsidiary of the Company to retain
Recipient as a director of the Company or as an employee of the Company or any
subsidiary of the Company.
2
<PAGE> 22
4. TAX WITHHOLDING.
----------------
The Company shall have the right to deduct from the Optionee's
compensation, or require the Optionee to remit to the Company, an amount
sufficient to satisfy all federal, state and local tax withholding requirements
in connection with the stock bonus contemplated hereby.
5. NONTRANSFERABILTY.
------------------
The offer represented by this Agreement shall not be
assignable or transferable by the Recipient either voluntarily or by operation
of law, and any such attempted assignment or transfer shall be void ab initio.
6. NOTICES.
--------
Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, or, if
mailed, 48 hours after deposit with the United States Postal Service for mailing
via registered or certified mail, addressed to the Company at its then principal
executive offices, or to the Recipient at the address set forth below his or her
signature hereto, or at such other address as such parties may hereafter
designate by written notice to the other party.
7. GOVERNING LAW.
--------------
This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California.
8. CAPTIONS.
---------
The captions to the sections, subsections and paragraphs in
this Agreement are inserted for convenience only and shall not affect the
construction or interpretation thereof.
9. ATTORNEYS' FEES.
----------------
If any party shall bring an action in law or equity against
another to enforce or interpret any of the terms, covenants and provisions of
this Agreement, the prevailing party in such action shall be entitled to
reasonable attorneys' fees which the other party hereby agrees to pay.
3
<PAGE> 23
10. ENTIRE AGREEMENT.
-----------------
This Agreement constitutes the entire agreement between the
parties pertaining to its subject matter and supersedes all prior or
contemporaneous written or oral agreements and understandings of the parties,
either express or implied. There are no representations, agreements, or
arrangements or understandings, oral or written, between the parties hereto,
relating to the subject matter contained in this Agreement, which are not fully
expressed herein.
11. COUNTERPARTS.
-------------
This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but such counterparts, when taken together,
shall constitute but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
RECIPIENT
-----------------------------------
(Signature)
-----------------------------------
-----------------------------------
(Address)
SPARTA, INC.
By:
------------------------------
Its:
------------------------------
4
<PAGE> 1
EXHIBIT 5
(714) 365-5517
November 24, 1997
SPARTA, Inc.
23041 Avenida de la Carlota
Laguna Hills, California 92653
Gentlemen:
At your request, we have examined the Registration Statement on
Form S-8 (the "Registration Statement") filed by SPARTA, Inc., a Delaware
corporation (the "Company"), with the Securities and Exchange Commission in
connection with the registration under the Securities Act of 1933, as amended,
of 14,000,000 shares of Common Stock, $.01 par value per share, of the Company
(the "Shares"), which have been reserved for issuance under the Company's 1997
Stock Plan (the "Plan").
We have examined the proceedings heretofore taken and are familiar
with the additional proceedings proposed to be taken by the Company in
connection with the authorization and issuance of the Shares pursuant to the
Plan.
Based upon such examination and subject to compliance with
applicable state securities and "blue sky" laws, it is our opinion that the
Shares, when issued pursuant to the provisions of the Plan, will constitute
legally issued and outstanding shares of the Company's Common Stock, fully paid
and nonassessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ HIGHAM, McCONNELL & DUNNING
-------------------------------
Higham, McConnell & Dunning
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated March 21, 1997 appearing on page F-2
of Sparta, Inc.'s Annual Report on Form 10-K for the year ended December 31,
1996.
/s/ PRICE WATERHOUSE LLP
- -------------------------------
PRICE WATERHOUSE LLP
Costa Mesa, California
November 20, 1997
