<PAGE> 1
As filed with the Securities and Exchange Commission on August ________, 1998
Registration No. 333-___________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
SYNOPSYS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-1546236
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
700 EAST MIDDLEFIELD ROAD
MOUNTAIN VIEW, CALIFORNIA 94043
(Address of principal executive offices) (Zip Code)
SYSTEMS SCIENCE INC. 1998 STOCK OPTION PLAN
(Full title of the Plan)
AART J. DE GEUS
CHIEF EXECUTIVE OFFICER
SYNOPSYS, INC.
700 EAST MIDDLEFIELD ROAD
MOUNTAIN VIEW, CALIFORNIA 94043
(Name and address of agent for service)
(650) 962-5000
(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>
Common Stock 318,114 shares $16.57 $5,271,148.98 $1,554.99
$0.01 par value
=====================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Systems Science Inc. 1998
Stock Option Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the
Registrant's receipt of consideration which results in an increase in
the number of the outstanding shares of the Registrant's Common Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the weighted average
exercise price of the outstanding options.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
Synopsys, Inc. (the "Registrant") hereby incorporates by reference into
this Registration Statement the following documents previously filed with the
Securities and Exchange Commission (the "Commission"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1997 filed with the Commission on December 3,
1997 pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "1934 Act");
(b) The Registrant's Quarterly Reports on Forms 10-Q for the fiscal
quarters ended January 3, 1998 and April 4, 1998 filed with the
Commission on February 13, 1998 and May 19, 1998, respectively,
pursuant to Section 13 of the 1934 Act;
(c) The Registrant's current report on Form 8-K filed with the
Commission on December 19, 1997; and
(d) The Registrant's Registration Statement on Form 8-A, No.
000-19807, filed with the Commission on January 24, 1992,
pursuant to Section 12(g) of the 1934 Act, 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
Delaware law authorizes corporations to eliminate the personal liability
of directors to corporations and their stockholders for monetary damages for
breach or alleged breach of the directors' "duty of care." While the relevant
statute does not change directors' duty of care, it enables corporations to
limit available relief to equitable remedies such as injunction or rescission.
The statute has no effect on directors' duty of loyalty, acts or omissions not
in good faith or involving intentional misconduct or knowing violations of law,
illegal payment of dividends or approval of any transaction from which a
director derives an improper personal benefit.
The Registrant has adopted provisions in its Certificate of
Incorporation which eliminate the personal liability of its directors to the
Registrant and its stockholders for monetary damages for breach or alleged
breach of their duty of care. The Bylaws of the Registrant provide for
indemnification of its directors, officers, employees and agents to the fullest
extent permitted by the General Corporation Law of the State of Delaware (the
"DGCL"), the Registrant's state of incorporation, including those circumstances
in which indemnification would otherwise be
<PAGE> 3
discretionary under the DGCL. Section 145 of the DGCL provides for
indemnification in terms sufficiently broad to indemnify such individuals, under
certain circumstances, for liabilities (including reimbursement of expenses
incurred) arising under the Securities Act of 1933, as amended (the "1933 Act").
The Registrant has entered into indemnification agreements with its
directors and executive officers and intends to enter into indemnification
agreements with any new directors and executive officers in the future. The
Registrant has also obtained liability insurance for the benefit of its
directors and officers.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
<TABLE>
<CAPTION>
Exhibit Number Exhibit
-------------- -------
<S> <C>
4.1 Instruments Defining the Rights of Stockholders. Reference
is made to the Registrant's Registration Statement on Form
8-A, No. 000-19807, including the exhibits thereto,
incorporated herein by reference pursuant to Item 3(d) of
this Registration Statement.
5.1 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors.
23.2 Consent of Deloitte & Touche LLP, Independent Auditors.
23.3 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Systems Science Inc. 1998 Stock Option Plan.
99.2 Form of Incentive Stock Option Agreement in connection with
the Systems Science Inc. 1998 Stock Option Plan.
99.3 Form of Nonstatutory Stock Option Agreement in connection
with the Systems Science Inc. 1998 Stock Option Plan.
99.4 General Form of Stock Option Assumption Agreement.
99.5 Stock Option Assumption Agreement - David Allenbaugh.
99.6 Stock Option Assumption Agreement - Kent Brittain.
99.7 Stock Option Assumption Agreement - Bruce Gladstone.
99.8 Stock Option Assumption Agreement - Mehdi Mohtashemi.
99.9 Stock Option Assumption Agreement - Ghulam Nurie.
99.10 Stock Option Assumption Agreement - Ravi Ravikumar.
</TABLE>
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 this Registration Statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
this Registration Statement and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; provided, however, that 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
II-2
<PAGE> 4
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 Systems Science Inc. 1998 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 indemnity provisions summarized in Item 6, or otherwise, the
Registrant has been advised that, in the opinion of the Commission, 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 Mountain View, State of California, on
this 3rd day of August, 1998.
SYNOPSYS, INC.
By: /s/Aart J. de Geus
-------------------------------------
Aart J. de Geus
Chief Executive Officer and
Chairman of the Board of Directors
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Synopsys, Inc., a
Delaware corporation, do hereby constitute and appoint Aart J. de Geus and David
M. Sugishita, their 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, 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 said attorneys and agents, 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.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Aart J. de Geus Chief Executive Officer and August 3, 1998
- ------------------------------- Chairman of the Board of Directors
Aart J. de Geus (Principal Executive Officer)
/s/Chi-Foon Chan President, Chief Operating Officer August 3,1998
- ------------------------------- and Director
Chi-Foon Chan
/s/William W. Lattin Executive Vice President and Director August 3, 1998
- ------------------------------
William W. Lattin
</TABLE>
II-4
<PAGE> 6
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Deborah A. Coleman Director August 3, 1998
- ------------------------------
Deborah A. Coleman
/s/Harvey C. Jones, Jr. Director August 3, 1998
- ------------------------------
Harvey C. Jones, Jr.
/s/A. Richard Newton Director August 3, 1998
- ------------------------------
A. Richard Newton
/s/Steven C. Walske Director August 3, 1998
- ------------------------------
Steven C. Walske
/s/David M. Sugishita Senior Vice President of Finance August 3, 1998
- ------------------------------ and Chief Financial Officer
David M. Sugishita (Principal Financial Officer)
/s/Mark D. Nelson Vice President of Finance August 3, 1998
- ------------------------------ and Controller
Mark D. Nelson (Principal Accounting Officer)
</TABLE>
II-5
<PAGE> 7
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
SYNOPSYS, INC.
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibit
-------------- -------
<S> <C>
4.1 Instruments Defining the Rights of Stockholders. Reference
is made to the Registrant's Registration Statement on Form
8-A, No. 000-19807, including the exhibits thereto,
incorporated herein by reference pursuant to Item 3(d) of
this Registration Statement.
5.1 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors.
23.2 Consent of Deloitte & Touche LLP, Independent Auditors.
23.3 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Systems Science Inc. 1998 Stock Option Plan.
99.2 Form of Incentive Stock Option Agreement in connection with
the Systems Science Inc. 1998 Stock Option Plan.
99.3 Form of Nonstatutory Stock Option Agreement in connection
with the Systems Science Inc. 1998 Stock Option Plan.
99.4 General Form of Stock Option Assumption Agreement.
99.5 Stock Option Assumption Agreement - David Allenbaugh.
99.6 Stock Option Assumption Agreement - Kent Brittain.
99.7 Stock Option Assumption Agreement - Bruce Gladstone.
99.8 Stock Option Assumption Agreement - Mehdi Mohtashemi.
99.9 Stock Option Assumption Agreement - Ghulam Nurie.
99.10 Stock Option Assumption Agreement - Ravi Ravikumar.
</TABLE>
<PAGE> 1
EXHIBIT 5.1
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
August 3, 1998
Synopsys, Inc.
700 East Middlefield Road
Mountain View, CA 94043
Re: SYNOPSYS, INC.
REGISTRATION STATEMENT FOR OFFERING OF 318,114 SHARES OF COMMON
STOCK
Ladies and Gentlemen:
We have acted as counsel to Synopsys, Inc., a Delaware corporation (the
"Company"), in connection with the registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of 318,114 shares of
Synopsys, Inc. common stock (the "Shares") and related stock options for
issuance under the Systems Science Inc. 1998 Stock Option Plan (the "Plan").
This opinion is being furnished in accordance with the requirements of
Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the assumption of the Plan
and the options outstanding thereunder. Based on such review, we are of the
opinion that, if, as and when the Shares have been issued and sold (and the
consideration therefor received) pursuant to the provisions of option agreements
duly authorized under the Plan and in accordance with the Registration
Statement, such Shares will be duly authorized, legally issued, fully paid and
nonassessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement.
This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Plan or the Shares.
Very truly yours,
/s/BROBECK, PHLEGER & HARRISON LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
Synopsys, Inc.
We consent to incorporation herein by reference of our report dated October 17,
1997, relating to the consolidated balance sheets of Synopsys, Inc. and
subsidiaries as of September 30, 1996 and 1997, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the years
in the three-year period ended September 30, 1997, and the related schedule,
which reports appear in the September 30, 1997, annual report on Form 10-K of
Synopsys, Inc.
KPMG PEAT MARWICK LLP
/s/KPMG PEAT MARWICK LLP
Mountain View, California
August 3, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF DELOITTE & TOUCHE LLP
We consent to the incorporation by reference in this Registration Statement of
Synopsys, Inc. on Form S-8 of our report dated October 11, 1996 (relating to the
consolidated financial statements of EPIC Design Technology, Inc. not presented
separately therein), appearing in and incorporated by reference in the Annual
Report on Form 10-K of Synopsys, Inc. for the year ended September 30, 1997.
DELOITTE & TOUCHE LLP
/s/DELOITTE & TOUCHE LLP
San Jose, California
August 3, 1998
<PAGE> 1
EXHIBIT 99.1
SYSTEMS SCIENCE INC
1998 STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Systems Science Inc. 1998 Stock Option
Plan (the "PLAN") is hereby established effective as of March ____, 1998 (the
"EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the interests
of the Participating Company Group and its shareholders by providing an
incentive to attract, retain and reward persons performing services for the
Participating Company Group and by motivating such persons to contribute to the
growth and profitability of the Participating Company Group.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board, the date on which all of the shares of
Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed or ten (10) years from the
date the Plan was adopted.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Whenever used herein, the following terms shall
have their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company.
If one or more Committees have been appointed by the Board to administer the
Plan, "Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. Unless the powers of the Committee
have been specifically limited, the Committee shall have all of the powers of
the Board granted herein, including, without limitation, the power to amend or
terminate the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.
(d) "COMPANY" means Systems Science Inc., a California
corporation, or any successor corporation thereto.
1
<PAGE> 2
(e) "CONSULTANT" means any person, including an advisor,
engaged by a Participating Company to render services other than as an Employee
or a Director.
(f) "DIRECTOR" means a member of the Board or of the board
of directors of any other Participating Company.
(g) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company; provided, however, that neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
employment for purposes of the Plan.
(h) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(i) "FAIR MARKET VALUE" means, as of any date, the value
of a share of stock or other property as determined by the Board, in its sole
discretion, or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein.
(j) "INCENTIVE STOCK OPTION" means an Option intended to
be (as set forth in the Option Agreement) and which qualifies as an incentive
stock option within the meaning of Section 422(b) of the Code.
(k) "INSIDER" means an officer or a Director of the
Company or any other person whose transactions in Stock are subject to Section
16 of the Exchange Act.
(l) "NONSTATUTORY STOCK OPTION" means an Option not
intended to be (as set forth in the Option Agreement) or which does not qualify
as an Incentive Stock Option.
(m) "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions of
the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory
Stock Option.
(n) "OPTION AGREEMENT" means a written agreement between
the Company and an Optionee setting forth the terms, conditions and restrictions
of the Option granted to the Optionee and any shares acquired upon the exercise
thereof.
(o) "OPTIONEE" means a person who has been granted one or
more Options.
(p) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
2
<PAGE> 3
(q) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation.
(r) "PARTICIPATING COMPANY GROUP" means, at any point in
time, all corporations collectively which are then Participating Companies.
(s) "RULE 16B-3" means Rule 16b-3 under the Exchange Act,
as amended from time to time, or any successor rule or regulation.
(t) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.2.
(u) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
(v) "TEN PERCENT OWNER OPTIONEE" means an Optionee who, at
the time an Option is granted to the Optionee, owns stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
a Participating Company within the meaning of Section 422(b)(6) of the Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered
by the Board, including any duly appointed Committee of the Board. All questions
of interpretation of the Plan or of any Option shall be determined by the Board,
and such determinations shall be final and binding upon all persons having an
interest in the Plan or such Option. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, determination or election which is the responsibility
of or which is allocated to the Company herein, provided the officer has
apparent authority with respect to such matter, right, obligation, determination
or election.
3.2 POWERS OF THE BOARD. In addition to any other powers set
forth in the Plan and subject to the provisions of the Plan and the applicable
rules of the California Department of Corporations, the Board shall have the
full and final power and authority, in its sole discretion:
(a) to determine the persons to whom, and the time or
times at which, Options shall be granted and the number of shares of Stock to be
subject to each Option;
3
<PAGE> 4
(b) to designate Options as Incentive Stock Options or
Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of Stock
or other property;
(d) to determine the terms, conditions and restrictions
applicable to each Option (which need not be identical) and any shares acquired
upon the exercise thereof, including, without limitation, (i) the exercise price
of the Option, (ii) the method of payment for shares purchased upon the exercise
of the Option, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with the Option or such shares, including by
the withholding or delivery of shares of stock, (iv) the timing, terms and
conditions of the exercisability of the Option or the vesting of any shares
acquired upon the exercise thereof, (v) the time of the expiration of the
Option, (vi) the effect of the Optionee's termination of employment or service
with the Participating Company Group on any of the foregoing, and (vii) all
other terms, conditions and restrictions applicable to the Option or such shares
not inconsistent with the terms of the Plan;
(e) to approve one or more forms of Option Agreement;
(f) to amend, modify, extend, or renew, or grant a new
Option in substitution for, any Option or to waive any restrictions or
conditions applicable to any Option or any shares acquired upon the exercise
thereof;
(g) to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and
(h) to correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option Agreement and to make all
other determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent consistent with the Plan
and applicable law.
3.3 DISINTERESTED ADMINISTRATION. With respect to participation
by Insiders in the Plan, at any time that any class of equity security of the
Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall
be administered in compliance with the "disinterested administration"
requirements of Rule 16b-3.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be one hundred one million seven hundred
fifty thousand
4
<PAGE> 5
(101,750,000) and shall consist of authorized but unissued or reacquired shares
of Stock or any combination thereof. If an outstanding Option for any reason
expires or is terminated or canceled or shares of Stock acquired, subject to
repurchase, upon the exercise of an Option are repurchased by the Company, the
shares of Stock allocable to the unexercised portion of such Option, or such
repurchased shares of Stock, shall again be available for issuance under the
Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of
any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and class of shares
subject to the Plan and to any outstanding Options and in the exercise price per
share of any outstanding Options. If a majority of the shares which are of the
same class as the shares that are subject to outstanding Options are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change Event, as defined in Section 8.1) shares of another corporation
(the "NEW SHARES"), the Board may unilaterally amend the outstanding Options to
provide that such Options are exercisable for New Shares. In the event of any
such amendment, the number of shares subject to, and the exercise price per
share of, the outstanding Options shall be adjusted in a fair and equitable
manner as determined by the Board, in its sole discretion. Notwithstanding the
foregoing, any fractional share resulting from an adjustment pursuant to this
Section 4.2 shall be rounded up or down to the nearest whole number, as
determined by the Board, and in no event may the exercise price of any Option be
decreased to an amount less than the par value, if any, of the stock subject to
the Option. The adjustments determined by the Board pursuant to this Section 4.2
shall be final, binding and conclusive.
5. ELIGIBILITY AND OPTION LIMITATIONS.
5.1 PERSONS ELIGIBLE FOR OPTIONS. Options may be granted only to
Employees, Consultants, and Directors. For purposes of the foregoing sentence,
"Employees" shall include prospective Employees to whom Options are granted in
connection with written offers of employment with the Participating Company
Group, and "Consultants" shall include prospective Consultants to whom Options
are granted in connection with written offers of engagement with the
Participating Company Group. Eligible persons may be granted more than one (1)
Option.
5.2 DIRECTORS SERVING ON COMMITTEE. At any time that any class of
equity security of the Company is registered pursuant to Section 12 of the
Exchange Act, no member of a Committee established to administer the Plan in
compliance with the "disinterested administration" requirements of Rule 16b-3,
while a member, shall be eligible to be granted an Option.
5.3 OPTION GRANT RESTRICTIONS. Any person who is not an Employee
on the effective date of the grant of an Option to such person may be granted
only a Nonstatutory Stock Option. An Incentive Stock Option granted to a
prospective
5
<PAGE> 6
Employee upon the condition that such person become an Employee shall be deemed
granted effective on the date such person commences service with a Participating
Company, with an exercise price determined as of such date in accordance with
Section 6.1.
5.4 FAIR MARKET VALUE LIMITATION. To the extent that the
aggregate Fair Market Value of stock with respect to which options designated as
Incentive Stock Options are exercisable by an Optionee for the first time during
any calendar year (under all stock option plans of the Participating Company
Group, including the Plan) exceeds One Hundred Thousand Dollars ($100,000), the
portion of such options which exceeds such amount shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5.4, options designated
as Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of stock shall be determined as of
the time the option with respect to such stock is granted. If the Code is
amended to provide for a different limitation from that set forth in this
Section 5.4, such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason of the
limitation set forth in this Section 5.4, the Optionee may designate which
portion of such Option the Optionee is exercising and may request that separate
certificates representing each such portion be issued upon the exercise of the
Option. In the absence of such designation, the Optionee shall be deemed to have
exercised the Incentive Stock Option portion of the Option first.
6. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by Option
Agreements specifying the number of shares of Stock covered thereby, in such
form as the Board shall from time to time establish. Option Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:
6.1 EXERCISE PRICE. The exercise price for each Option shall be
established in the sole discretion of the Board; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of a share
of Stock on the effective date of grant of the Option, and (c) no Option granted
to a Ten Percent Owner Optionee shall have an exercise price per share less than
one hundred ten percent (110%) of the Fair Market Value of a share of Stock on
the effective date of grant of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for
another option in a manner qualifying under the provisions of Section 424(a) of
the Code.
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<PAGE> 7
6.2 EXERCISE PERIOD. Options shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the Board and
set forth in the Option Agreement evidencing such Option; provided, however,
that (a) no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option, (b) no Incentive Stock Option
granted to a Ten Percent Owner Optionee shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option,
and (c) no Option granted to a prospective Employee or prospective Consultant
may become exercisable prior to the date on which such person commences service
with a Participating Company.
6.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash, by check, or
cash equivalent, (ii) by tender to the Company of shares of Stock owned by the
Optionee having a Fair Market Value (as determined by the Company without regard
to any restrictions on transferability applicable to such stock by reason of
federal or state securities laws or agreements with an underwriter for the
Company) not less than the exercise price, (iii) by the assignment of the
proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System) (a
"CASHLESS EXERCISE"), (iv) by such other consideration as may be approved by the
Board from time to time to the extent permitted by applicable law, or (v) by any
combination thereof. The Board may at any time or from time to time, by adoption
of or by amendment to the standard forms of Option Agreement described in
Section 7, or by other means, grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price or
which otherwise restrict one or more forms of consideration.
(b) TENDER OF STOCK. Notwithstanding the foregoing, an
Option may not be exercised by tender to the Company of shares of Stock to the
extent such tender of Stock would constitute a violation of the provisions of
any law, regulation or agreement restricting the redemption of the Company's
stock. Unless otherwise provided by the Board, an Option may not be exercised by
tender to the Company of shares of Stock unless such shares either have been
owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. The Company reserves, at any and
all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.
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<PAGE> 8
6.4 TAX WITHHOLDING. The Company shall have the right, but not
the obligation, to deduct from the shares of Stock issuable upon the exercise of
an Option, or to accept from the Optionee the tender of, a number of whole
shares of Stock having a Fair Market Value, as determined by the Company, equal
to all or any part of the federal, state, local and foreign taxes, if any,
required by law to be withheld by the Participating Company Group with respect
to such Option or the shares acquired upon the exercise thereof. Alternatively
or in addition, in its sole discretion, the Company shall have the right to
require the Optionee, through payroll withholding, cash payment or otherwise,
including by means of a Cashless Exercise, to make adequate provision for any
such tax withholding obligations of the Participating Company Group arising in
connection with the Option or the shares acquired upon the exercise thereof. The
Company shall have no obligation to deliver shares of Stock or to release shares
of Stock from an escrow established pursuant to the Option Agreement until the
Participating Company Group's tax withholding obligations have been satisfied by
the Optionee.
6.5 REPURCHASE RIGHTS. Shares issued under the Plan may be
subject to a right of first refusal, one or more repurchase options, or other
conditions and restrictions as determined by the Board in its sole discretion at
the time the Option is granted. The Company shall have the right to assign at
any time any repurchase right it may have, whether or not such right is then
exercisable, to one or more persons as may be selected by the Company. Upon
request by the Company, each Optionee shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder and
shall promptly present to the Company any and all certificates representing
shares of Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions.
7. STANDARD FORMS OF OPTION AGREEMENT.
7.1 INCENTIVE STOCK OPTIONS. Unless otherwise provided by the
Board at the time the Option is granted, an Option designated as an "Incentive
Stock Option" shall comply with and be subject to the terms and conditions set
forth in the form of Incentive Stock Option Agreement adopted by the Board
concurrently with its adoption of the Plan and as amended from time to time.
7.2 NONSTATUTORY STOCK OPTIONS. Unless otherwise provided by the
Board at the time the Option is granted, an Option designated as a "Nonstatutory
Stock Option" shall comply with and be subject to the terms and conditions set
forth in the form of Nonstatutory Stock Option Agreement adopted by the Board
concurrently with its adoption of the Plan and as amended from time to time.
7.3 STANDARD TERM OF OPTIONS. Except as otherwise provided in
Section 6.2 or by the Board in the grant of an Option, any Option granted
hereunder shall have a term of ten (10) years from the effective date of grant
of the Option.
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<PAGE> 9
7.4 AUTHORITY TO VARY TERMS. The Board shall have the authority
from time to time to vary the terms of any of the standard forms of Option
Agreement described in this Section 7 either in connection with the grant or
amendment of an individual Option or in connection with the authorization of a
new standard form or forms; provided, however, that the terms and conditions of
any such new, revised or amended standard form or forms of Option Agreement
shall be in accordance with the terms of the Plan. Such authority shall include,
but not by way of limitation, the authority to grant Options which are
immediately exercisable subject to the Company's right to repurchase any
unvested shares of Stock acquired by an Optionee upon the exercise of an Option
in the event such Optionee's employment or service with the Participating
Company Group is terminated for any reason, with or without cause.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a
single or series of related transactions by the shareholders of the Company of
more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company
is a party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the shareholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock
9
<PAGE> 10
of the Company or multiple Ownership Change Events are related, and its
determination shall be final, binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTIONS. In the event of a
Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under
outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiring Corporation's stock. If the Option is not
assumed or substituted for by the Acquiring Corporation in connection with the
Transfer of Control, the Option shall terminate and cease to be outstanding
effective as of the date of the Transfer of Control to the extent the Option is
not exercised. In such event, the Company will give written notice to each
holder of an Option of the pending Transfer of Control and the corresponding
termination of Options issued hereunder not less than fifteen (15) days prior to
the proposed effective date of such Transfer of Control, and each holder of an
Option shall have the right to exercise the Option to the extent then
exercisable prior to such effective date. Notwithstanding the foregoing, shares
acquired upon exercise of an Option prior to the Transfer of Control and any
consideration received pursuant to the Transfer of Control with respect to such
shares shall continue to be subject to all applicable provisions of the Option
Agreement evidencing such Option except as otherwise provided in such Option
Agreement. Furthermore, notwithstanding the foregoing, if the corporation the
stock of which is subject to the outstanding Options immediately prior to an
Ownership Change Event described in Section 8.1(a)(1) constituting a Transfer of
Control is the surviving or continuing corporation and immediately after such
Ownership Change Event less than fifty percent (50%) of the total combined
voting power of its voting stock is held by another corporation or by other
corporations that are members of an affiliated group within the meaning of
Section 1504(a) of the Code without regard to the provisions of Section 1504(b)
of the Code, the outstanding Options shall not terminate unless the Board
otherwise provides in its sole discretion.
9. PROVISION OF INFORMATION. At least annually, copies of the Company's
balance sheet and income statement for the just completed fiscal year shall be
made available to each Optionee and purchaser of shares of Stock upon the
exercise of an Option. The Company shall not be required to provide such
information to persons whose duties in connection with the Company assure them
access to equivalent information.
10. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or the Optionee's guardian
or legal representative. No Option shall be assignable or transferable by the
Optionee, except by will or by the laws of descent and distribution.
11. INDEMNIFICATION. In addition to such other rights of indemnification
as they may have as members of the Board or officers or employees of the
Participating Company Group, members of the Board and any officers or employees
of the
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<PAGE> 11
Participating Company Group to whom authority to act for the Board is delegated
shall be indemnified by the Company against all reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided, however,
that within sixty (60) days after the institution of such action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at its own expense to handle and defend the same.
12. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or amend
the Plan at any time. However, subject to changes in the law or other legal
requirements that would permit otherwise, without the approval of the Company's
shareholders, there shall be (a) no increase in the maximum aggregate number of
shares of Stock that may be issued under the Plan (except by operation of the
provisions of Section 4.2), (b) no change in the class of persons eligible to
receive Incentive Stock Options, and (c) no expansion in the class of persons
eligible to receive Nonstatutory Stock Options. In any event, no termination or
amendment of the Plan may adversely affect any then outstanding Option or any
unexercised portion thereof, without the consent of the Optionee, unless such
termination or amendment is required to enable an Option designated as an
Incentive Stock Option to qualify as an Incentive Stock Option or is necessary
to comply with any applicable law or government regulation.
13. SHAREHOLDER APPROVAL. The Plan or any increase in the maximum number
of shares of Stock issuable thereunder as provided in Section 4.1 (the "MAXIMUM
SHARES") shall be approved by the shareholders of the Company within twelve (12)
months of the date of adoption thereof by the Board. Options granted prior to
shareholder approval of the Plan or in excess of the Maximum Shares previously
approved by the shareholders shall become exercisable no earlier than the date
of shareholder approval of the Plan or such increase in the Maximum Shares, as
the case may be.
11
<PAGE> 1
EXHIBIT 99.2
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
SYSTEMS SCIENCE INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT (the "OPTION AGREEMENT") is made
and entered into as of ________, 199___, by and between Systems Science Inc. and
______________ (the "OPTIONEE").
The Company has granted to the Optionee an option to purchase certain
shares of Stock, upon the terms and conditions set forth in this Option
Agreement (the "OPTION"). The Option shall in all respects be subject to the
terms and conditions of the Systems Science Inc. 1998 Stock Option Plan (the
"PLAN"), the provisions of which are incorporated herein by reference.
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Plan. Whenever used
herein, the following terms shall have their respective meanings set forth
below:
(a) "DATE OF OPTION GRANT" means __________, 199____.
(b) "NUMBER OF OPTION SHARES" means __________ shares of
Stock, as adjusted from time to time pursuant to Section 9.
(c) "EXERCISE PRICE" means $ ________ per share of Stock,
as adjusted from time to time pursuant to Section 9.
(d) "INITIAL EXERCISE DATE" means the Initial Vesting
Date.
(e) "INITIAL VESTING DATE" means the date occurring one
(1) year after (check one):
_______ the Date of Option Grant.
_______ _________, 199____, a date not later than
the Date of Option Grant.
<PAGE> 2
(f) "VESTED RATIO" means, on any relevant date, the ratio
determined as follows:
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee's 1/5
Service is continuous from the Date of Option Grant
until the Initial Vesting Date
Plus
For each full year of the Optionee's continuous 1/5
Service from the Initial Vesting Date until the
Vested Ratio equals 1/1, an additional
</TABLE>
(g) "OPTION EXPIRATION DATE" means the date ten (10) years
after the Date of Option Grant.
(h) "COMPANY" means Systems Science Inc., a California
corporation, or any successor corporation thereto.
(i) "DISABILITY" means the inability of the Optionee, in
the opinion of a qualified physician acceptable to the Company, to perform the
major duties of the Optionee's position with the Participating Company Group
because of the sickness or injury of the Optionee.
(j) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(k) "SERVICE" means the Optionee's employment or service
with the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. The Optionee's Service shall be deemed to have
terminated if the Optionee ceases to render Service to the Participating Company
Group in such initial capacity. However, the Optionee's Service shall not be
deemed to have terminated merely because of a change in the Participating
Company for which the Optionee renders Service in such initial capacity,
provided that there is no interruption or termination of the Optionee's Service.
The Optionee's Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Optionee performs
Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its sole discretion, shall determine whether the Optionee's Service
has terminated and the effective date of such termination.
2
<PAGE> 3
1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement.
2. TAX CONSEQUENCES. This Option is intended to be an Incentive Stock
Option within the meaning of Section 422(b) of the Code, but the Company does
not represent or warrant that this Option qualifies as such. The Optionee should
consult with the Optionee's own tax advisor regarding the tax effects of this
Option and the requirements necessary to obtain favorable income tax treatment
under Section 422 of the Code, including, but not limited to, holding period
requirements. (NOTE: If the aggregate Exercise Price of the Option (that is, the
Exercise Price multiplied by the Number of Option Shares) plus the aggregate
exercise price of any other Incentive Stock Options held by the Optionee
(whether granted pursuant to the Plan or any other stock option plan of the
Participating Company Group) is greater than One Hundred Thousand Dollars
($100,000), the Optionee should contact the Chief Financial Officer of the
Company to ascertain whether the entire Option qualifies as an Incentive Stock
Option.)
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
4. EXERCISE OF THE OPTION.
4.1 RIGHT TO EXERCISE. Except as otherwise provided herein, the
Option shall be exercisable on and after the Initial Exercise Date and prior to
the termination of the Option (as provided in Section 6) in an amount not to
exceed the Number of Option Shares multiplied by the Vested Ratio less the
number of shares previously acquired upon exercise of the Option.
Notwithstanding the foregoing, the Optionee's initial exercise of the Option
shall be in an amount not less than the lesser of one-fifth of the Number of
Option Shares or such number of Option Shares the aggregate exercise price for
which equals or exceeds five thousand dollars ($5,000.00). In no event shall the
Option be exercisable for more shares than the Number of Option Shares.
4.2 METHOD OF EXERCISE.
(a) IF COMPANY IS AN S CORPORATION. If, at the time of the
Optionee's proposed exercise of the Option, the Company is an S Corporation
within the meaning of Section 1361 of the Code (an "S Corporation"), the Option
may be exercised only in compliance with the requirements of Section 12 below.
The Optionee should contact the Chief Financial Officer of the Company to
ascertain whether the Company is an S Corporation.
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<PAGE> 4
(b) IF COMPANY IS NOT AN S CORPORATION. If, at the time of
the Optionee's proposed exercise of the Option, the Company is not an S
Corporation, the exercise of an Option shall be by written notice to the Company
which must state the election to exercise the Option, the number of whole shares
of Stock for which the Option is being exercised and such other representations
and agreements as to the Optionee's investment intent with respect to such
shares as may be required pursuant to the provisions of this Option Agreement.
The written notice must be signed by the Optionee and must be delivered in
person, by certified or registered mail, return receipt requested, by confirmed
facsimile transmission, or by such other means as the Company may permit, to the
Chief Financial Officer of the Company, or other authorized representative of
the Participating Company Group, prior to the termination of the Option as set
forth in Section 6, accompanied by (i) full payment of the aggregate Exercise
Price for the number of shares of Stock being purchased and (ii) an executed
copy, if required herein, of the then current form of escrow agreement
referenced below. The Option shall be deemed to be exercised upon receipt by the
Company of such written notice, the aggregate Exercise Price, and, if required
by the Company, such executed agreements.
4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of whole shares of
Stock owned by the Optionee having a Fair Market Value (as determined by the
Company without regard to any restrictions on transferability applicable to such
stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the aggregate Exercise Price, or
(iii) by means of a Cashless Exercise, as defined in Section 4.3(c).
(b) TENDER OF STOCK. Notwithstanding the foregoing, the
Option may not be exercised by tender to the Company of shares of Stock to the
extent such tender of Stock would constitute a violation of the provisions of
any law, regulation or agreement restricting the redemption of the Company's
stock. The Option may not be exercised by tender to the Company of shares of
Stock unless such shares either have been owned by the Optionee for more than
six (6) months or were not acquired, directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. A "CASHLESS EXERCISE" means the
assignment in a form acceptable to the Company of the proceeds of a sale or loan
with respect to some or all of the shares of Stock acquired upon the exercise of
the Option pursuant to a program or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
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<PAGE> 5
4.4 TAX WITHHOLDING. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Participating Company Group, if any, which arise
in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the
Option, (iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares acquired upon exercise of the Option. The Optionee is cautioned that
the Option is not exercisable unless the tax withholding obligations of the
Participating Company Group are satisfied. Accordingly, the Optionee may not be
able to exercise the Option when desired even though the Option is vested, and
the Company shall have no obligation to issue a certificate for such shares or
release such shares from any escrow provided for herein.
4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares as
to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.
The grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares subject to the Option shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of the
Option, the Company may require the Optionee to satisfy any qualifications that
may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.
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<PAGE> 6
4.7 FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution. Following the death of the
Optionee, the Option, to the extent provided in Section 7, may be exercised by
the Optionee's legal representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable laws of descent and
distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Service as described in Section 7, or (c) a Transfer of Control to the extent
provided in Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABILITY.
(a) DISABILITY. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. (NOTE: If
the Option is exercised more than three (3) months after the date on which the
Optionee's Service as an Employee terminated as a result of a Disability other
than a permanent and total disability as defined in Section 22(e)(3) of the
Code, the Option will be treated as a Nonstatutory Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.)
(b) DEATH. If the Optionee's Service with the
Participating Company Group is terminated because of the death of the Optionee,
the Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee (or the
Optionee's legal representative, or other person who acquired the right to
exercise the Option by reason of the Optionee's death) at any time prior to the
expiration of six (6) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. The
Optionee's Service shall be deemed to have terminated on account of death if the
Optionee dies within three (3) months after the Optionee's termination of
Service.
(c) OTHER TERMINATION OF SERVICE. If the Optionee's
Service with the Participating Company Group terminates for any reason, except
Disability or death, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee's Service terminated, may be
exercised by the Optionee within thirty (30) days (or such other longer period
of time as determined by the Board, in its
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sole discretion) after the date on which the Optionee's Service terminated, but
in any event no later than the Option Expiration Date.
7.2 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option
shall remain exercisable until thirty (30) days after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date. The Company makes no representation as to
the tax consequences of any such delayed exercise. The Optionee should consult
with the Optionee's own tax advisor as to the tax consequences of any such
delayed exercise.
7.3 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date. The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisor as to the tax consequences of any such delayed exercise.
7.4 LEAVE OF ABSENCE. For purposes of Section 7.1, the Optionee's
Service with the Participating Company Group shall not be deemed to terminate if
the Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave of absence in excess of ninety (90) days, the Optionee's Service shall be
deemed to terminate on the ninety-first (91st) day of such leave unless the
Optionee's right to reemployment with the Participating Company Group remains
guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company (or required by law), a leave of absence
shall not be treated as Service for purposes of determining the Optionee's
Vested Ratio.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a
single or series of related transactions by the shareholders of the Company of
more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company
is a party;
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<PAGE> 8
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "TRANSFER OF CONTROL", as defined in the Plan,
generally means one or more related Ownership Change Events after which the
shareholders do not own, directly or indirectly, more than fifty percent (50%)
of the outstanding stock of the Company or, in the case of an asset transfer,
the transferee corporation(s).
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTION. In the event of a
Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under the
Option or substitute for the Option a substantially equivalent option for the
Acquiring Corporation's stock. If the Option is not assumed or substituted for
by the Acquiring Corporation in connection with the Transfer of Control, the
Option shall terminate and cease to be outstanding effective as of the date of
the Transfer of Control to the extent the Option is not exercised. In such
event, the Company will give written notice to the holder of the Option of the
pending Transfer of Control and the corresponding termination of the Option not
less than fifteen (15) days prior to the proposed effective date of such
Transfer of Control, and the holder of the Option shall have the right to
exercise the Option to the extent then exercisable prior to such effective date.
Notwithstanding the foregoing, if the corporation the stock of which is subject
to the Option immediately prior to an Ownership Change Event described in
Section 8.1(a)(i) constituting a Transfer of Control is the surviving or
continuing corporation and immediately after such Ownership Change Event less
than fifty percent (50%) of the total combined voting power of its voting stock
is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the provisions of Section 1504(b) of the Code, the Option shall not
terminate unless the Board otherwise provides in its sole discretion.
9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of
shares of stock subject to the Option but the sale of additional Shares for fair
market value as determined by the Board shall not result in any adjustment of
the Option. If a majority of the shares which are of the same class as the
shares that are subject to the Option are exchanged for, converted into, or
otherwise become (whether or not pursuant to an Ownership Change Event) shares
of another corporation (the "NEW SHARES"), the Board may unilaterally amend the
Option to provide that the Option is exercisable for New Shares. In the event of
any such amendment, the Number of Option Shares and the Exercise Price shall be
adjusted in a fair and equitable manner, as determined by the Board, in its sole
discretion. Notwithstanding the foregoing, any fractional share resulting from
an adjustment pursuant to this Section 9 shall be rounded up or down to the
nearest whole number, as determined by the Board, and in no event may the
Exercise Price be decreased to an
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<PAGE> 9
amount less than the par value, if any, of the stock subject to the Option. The
adjustments determined by the Board pursuant to this Section 9 shall be final,
binding and conclusive.
10. RIGHTS AS A SHAREHOLDER, EMPLOYEE OR CONSULTANT. The Optionee shall
have no rights as a shareholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 9. Nothing in this Option Agreement shall confer upon the
Optionee any right to continue in the Service of a Participating Company or
interfere in any way with any right of the Participating Company Group to
terminate the Optionee's Service as an Employee or Consultant, as the case may
be, at any time.
11. RIGHT OF FIRST REFUSAL.
11.1 GRANT OF RIGHT OF FIRST REFUSAL. Except as provided in
Section 11.7 below, in the event the Optionee, the Optionee's legal
representative, or other holder of shares acquired upon exercise of the Option
proposes to sell, exchange, transfer, pledge, or otherwise dispose of any shares
acquired upon exercise of the Option (the "TRANSFER SHARES") to any person or
entity, including, without limitation, any shareholder of the Participating
Company Group, the Company shall have the right to repurchase the Transfer
Shares under the terms and subject to the conditions set forth in this Section
11 (the "RIGHT OF FIRST REFUSAL").
11.2 NOTICE OF PROPOSED TRANSFER.
(a) WRITTEN NOTICE. Prior to any proposed transfer of the
Transfer Shares, the Optionee shall give a written notice (the "TRANSFER
NOTICE") to the Company describing fully the proposed transfer, including the
number of Transfer Shares, the name and address of the proposed transferee (the
"PROPOSED TRANSFEREE") and, if the transfer is voluntary, the proposed transfer
price, and containing such information necessary to show the bona fide nature of
the proposed transfer, including the investment intent of the Proposed
Transferee. In the event of a bona fide gift or involuntary transfer, the
proposed transfer price shall be deemed to be the Fair Market Value of the
Transfer Shares, as determined by the Board in good faith. The Optionee may not
transfer Transfer Shares to more than one Proposed Transferee in any one
transaction. The Transfer Notice shall be signed by both the Optionee and the
Proposed Transferee and must constitute a binding commitment of the Optionee and
the Proposed Transferee for the transfer of the Transfer Shares to the Proposed
Transferee subject only to the Right of First Refusal.
(b) BONA FIDE GIFT OR INVOLUNTARY TRANSFER. In the event
of a bona fide gift or involuntary transfer, the proposed transfer price shall
be deemed to be the Fair Market Value of the Transfer Shares, as determined by
the Board in good faith. If the Optionee disagrees with the valuation determined
by the Board, the Optionee may,
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<PAGE> 10
by giving written notice to the Company within ten (10) days after being
informed of the valuation, request that the value of the shares at issue be
determined by an independent appraiser. The Company shall select an appraiser to
determine the value of such shares within fifteen (15) days after the Company's
actual receipt of the Optionee's notice disputing the valuation determined by
the Board. Such appraiser shall be subject to the approval of the Optionee,
which approval the Optionee shall not unreasonably withhold or delay. The
Optionee's approval or refusal to approve the appraiser must be given before the
appraiser announces a valuation. The value of such shares, as determined by the
appraiser, shall be conclusively binding on all of the parties concerned. The
expenses of appraisal shall be borne equally by the Company and the Optionee.
Any time required to resolve a valuation dispute shall be added to the time
periods in which the Company may exercise its Right of First Refusal.
11.3 BONA FIDE TRANSFER. If the Company determines that the
information provided by the Optionee in the Transfer Notice is insufficient to
establish the bona fide nature of a proposed voluntary transfer, the Company
shall give the Optionee written notice of the Optionee's failure to comply with
the procedure described in this Section 11, and the Optionee shall have no right
to transfer the Transfer Shares without first complying with the procedure
described in this Section 11. The Optionee shall not be permitted to transfer
the Transfer Shares if the proposed transfer is not bona fide.
11.4 EXERCISE OF RIGHT OF FIRST REFUSAL. If the Company
determines the proposed transfer to be bona fide, the Company shall have the
right to purchase all, but not less than all, of the Transfer Shares (except as
the Company and the Optionee otherwise agree) at the purchase price and on the
terms set forth in the Transfer Notice by delivery to the Optionee of a notice
of exercise of the Right of First Refusal within thirty (30) days after the date
the Transfer Notice is delivered to the Company. The Company's exercise or
failure to exercise the Right of First Refusal with respect to any proposed
transfer described in a Transfer Notice shall not affect the Company's right to
exercise the Right of First Refusal with respect to any proposed transfer
described in any other Transfer Notice, whether or not such other Transfer
Notice is issued by the Optionee or issued by a person other than the Optionee
with respect to a proposed transfer to the same Proposed Transferee. If the
Company exercises the Right of First Refusal, the Company and the Optionee shall
thereupon consummate the sale of the Transfer Shares to the Company on the terms
set forth in the Transfer Notice within sixty (60) days after the date the
Transfer Notice is delivered to the Company (unless a longer period is offered
by the Proposed Transferee); provided, however, that in the event the Transfer
Notice provides for the payment for the Transfer Shares other than in cash, the
Company shall have the option of paying for the Transfer Shares by the present
value cash equivalent of the consideration described in the Transfer Notice as
reasonably determined by the Company. For purposes of the foregoing,
cancellation of any indebtedness of the Optionee to any Participating Company
shall be treated as payment to the Optionee in cash to the extent of the unpaid
principal and any accrued interest canceled.
11.5 FAILURE TO EXERCISE RIGHT OF FIRST REFUSAL. If the Company
fails to exercise the Right of First Refusal in full (or to such lesser extent
as the Company and
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the Optionee otherwise agree) within the period specified in Section 11.4 above,
the Optionee may conclude a transfer to the Proposed Transferee of the Transfer
Shares on the terms and conditions described in the Transfer Notice, provided
such transfer occurs not later than ninety (90) days following delivery to the
Company of the Transfer Notice. The Company shall have the right to demand
further assurances from the Optionee and the Proposed Transferee (in a form
satisfactory to the Company) that the transfer of the Transfer Shares was
actually carried out on the terms and conditions described in the Transfer
Notice. No Transfer Shares shall be transferred on the books of the Company
until the Company has received such assurances, if so demanded, and has approved
the proposed transfer and investment intent as bona fide. Any proposed transfer
on terms and conditions different from those described in the Transfer Notice,
as well as any subsequent proposed transfer by the Optionee, shall again be
subject to the Right of First Refusal and shall require compliance by the
Optionee with the procedure described in this Section 11.
11.6 TRANSFEREES OF TRANSFER SHARES. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interest therein subject to the Right of First Refusal, any
underwriter's lockup, the S Corporation restrictions and this Section 11
providing for the Right of First Refusal with respect to any subsequent
transfer. Any sale or transfer of any shares acquired upon exercise of the
Option shall be void unless the provisions of this Section 11 are met.
11.7 TRANSFERS NOT SUBJECT TO RIGHT OF FIRST REFUSAL. The Right
of First Refusal shall not apply to any transfer or exchange of the shares
acquired upon exercise of the Option if such transfer or exchange is in
connection with an Ownership Change Event. If the consideration received
pursuant to such transfer or exchange consists of stock of a Participating
Company, such consideration shall remain subject to the Right of First Refusal
unless the provisions of Section 11.9 below result in a termination of the Right
of First Refusal.
11.8 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. The Company shall have
the right to assign the Right of First Refusal at any time, whether or not there
has been an attempted transfer, to one or more persons as may be selected by the
Company.
11.9 EARLY TERMINATION OF RIGHT OF FIRST REFUSAL. The other
provisions of this Option Agreement notwithstanding, the Right of First Refusal
shall terminate and be of no further force and effect upon (a) the occurrence of
a Transfer of Control, unless the Acquiring Corporation assumes the Company's
rights and obligations under the Option or substitutes a substantially
equivalent option for the Acquiring Corporation's stock for the Option, or (b)
the existence of a public market for the class of shares subject to the Right of
First Refusal. A "PUBLIC MARKET" shall be deemed to exist if (i) such stock is
listed on a national securities exchange (as that term is used in the Exchange
Act) or (ii) such stock is traded on the over-the-counter market and prices
therefor are published daily on business days in a recognized financial journal.
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12. S CORPORATION STATUS.
12.1 EFFECT OF S CORPORATION STATUS ON OPTION. The Optionee
acknowledges that the Company has elected to be classified as an S Corporation
for federal and state income tax purposes and, following the exercise of the
Option with respect to all or any part of the shares of Stock subject to the
Option, agrees to provide to the Company, immediately upon the Company's
request, such properly signed consents or other documents as, in the opinion of
counsel for the Company, may be necessary or useful to maintaining the Company's
status as an S Corporation. Except with the written consent of the Company
specifically referring to this Section 12, the following provisions set forth in
this Section 12 (the "S CORPORATION PROVISIONS") shall apply to the exercise of
the Option and the shares of Stock acquired upon exercise of the Option until
such time as the Company ceases to qualify as an S Corporation.
12.2 METHOD OF EXERCISE.
(a) ADVANCE NOTICE OF INTENT TO EXERCISE. The Optionee
shall give written notice (the "ADVANCE NOTICE") of the Optionee's intent to
exercise the Option, which must be received by the Company no later than ten
(10) days prior to the date on which such exercise is proposed to be effective
(the "PROPOSED EXERCISE DATE"). The Advance Notice shall be in a form approved
by the Company and must state the election to exercise the Option, the Proposed
Exercise Date, the number of whole shares of Stock for which the Option is to be
exercised, such information as required by the Company to enable the Company to
determine whether the proposed exercise of the Option may cause the Company to
cease to qualify as an S Corporation, and such other representations and
agreements as to the Optionee's investment intent with respect to such shares as
may be required pursuant to the provisions of this Option Agreement. The Advance
Notice must be signed by the Optionee and must be delivered in person, by
certified or registered mail, return receipt requested, by confirmed facsimile
transmission, or by such other means as the Company may permit, to the Chief
Financial Officer of the Company, or other authorized representative of the
Participating Company Group, at least thirty (30) days prior to the termination
of the Option (as provided in Section 6). Except as otherwise permitted by the
Company, the Optionee's failure to comply with the requirements of this Section
12.2(a) shall extend the Proposed Exercise Date to a date at least thirty (30)
days following the Company's receipt of an Advance Notice which complies in full
with such requirements. If the Proposed Exercise Date, as extended pursuant to
the preceding sentence, would follow the termination of the Option as provided
in Section 6, the Option shall terminate at the time provided in Section 6, and
the Company shall not be required to make any payment to the Optionee that would
otherwise be required pursuant to Section 12.2(b) below. The provisions of this
Section 12.2 shall cease to apply as provided in Section 12.7 below, and
thereafter the Option may be exercised pursuant to Section 4.2(b) above.
(b) GRANT OF OPTION REDEMPTION RIGHT. If, following its
receipt of the Optionee's Advance Notice, the Company determines, in its sole
discretion, that the Optionee's exercise of the Option may cause the Company to
cease to qualify as an S Corporation, the Company shall so notify the Optionee
(a "DISQUALIFICATION
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NOTICE") no later than five (5) days prior to the Proposed Exercise Date.
Following receipt of a Disqualification Notice, the Optionee may withdraw the
Optionee's Advance Notice. If, following receipt of a Disqualification Notice,
the Optionee does not withdraw the Optionee's Advance Notice, the Company shall
have the right (the "OPTION REDEMPTION RIGHT") to cancel the Option for the
number of shares set forth in the Optionee's Advance Notice in exchange for
payment to the Optionee of an amount equal to the excess, if any, of (i) the
fair market value, determined as of the Proposed Exercise Date by the Company in
good faith, of the number of shares of Stock set forth in the Optionee's Advance
Notice over (ii) the aggregate Exercise Price for such shares (the "OPTION
REDEMPTION PRICE"). The Optionee hereby agrees that the Company may withhold
from the Option Redemption Price, or the Optionee shall otherwise make adequate
provision for, the foreign, federal, state and local tax withholding obligations
of the Participating Company Group, if any, which arise in connection with the
payment of the Option Redemption Price. If the Company exercises its Option
Redemption Right, the Company shall cancel the Option, effective as of the
Proposed Exercise Date, for the number of shares of Stock set forth in the
Optionee's Advance Notice and shall pay the Option Redemption Price (reduced by
any applicable withholding tax) to the Optionee in cash within thirty (30) days
following the Proposed Exercise Date. For purposes of the foregoing,
cancellation of any indebtedness of the Optionee to the Company shall be treated
as payment to the Optionee in cash to the extent of the unpaid principal and any
accrued interest canceled.
(c) FAILURE TO EXERCISE OPTION REDEMPTION RIGHT. If,
following receipt of the Optionee's Advance Notice, the Company does not give
the Optionee a Disqualification Notice or otherwise does not exercise the Option
Redemption Right, the Optionee may exercise the Option effective as of the
Proposed Exercise Date by delivering to the Company on or before the Proposed
Exercise Date (but in any event no later than the termination of the Option as
provided in Section 6) (i) full payment of the aggregate Exercise Price for the
number of shares of Stock being purchased, as set forth in the Optionee's
Advance Notice, and (ii) an executed copy, if required herein, of the then
current form of escrow agreement referenced in this Option Agreement. If the
Optionee fails to deliver full payment of the aggregate Exercise Price for the
number of shares of Stock being purchased on or before the Proposed Exercise
Date, the Optionee may only exercise the Option by again complying with the
requirements of Section 12.2(a).
12.3 RESTRICTION ON TRANSFER. No transfer of any shares acquired
by the Optionee pursuant to the Option, whether voluntary or involuntary, shall
be effective unless the Optionee's shares are transferred to a transferee who is
a permitted shareholder of an S Corporation with a bona fide investment intent
(a "PERMITTED TRANSFEREE").
12.4 RESTRICTION ON OTHER ACTION. The Optionee shall not take any
action or fail to take any action which shall result in the Company being unable
to maintain the Company's status as an S Corporation. This provision shall
require, without limitation, that the Optionee notify the Company prior to the
Optionee ceasing to qualify as an eligible shareholder of an S Corporation.
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12.5 TRANSFER BY TRUST. If any transfer by the Optionee is by
operation of law or by right of succession under a revocable trust, the
transferees shall be obligated to make such transfers as shall reasonably be
necessary, in the opinion of counsel for the Company, to avoid termination of
the Company's status as an S Corporation.
12.6 OTHER RESTRICTIONS. The provisions of this Section 12 are in
addition to the provisions of Sections 11 hereof. By way of example and not
limitation, a transfer by divorce or otherwise to a Permitted Transferee
pursuant to this Section 12 shall be subject to the Right of First Refusal set
forth in Section 11 hereof.
12.7 TERMINATION OF RESTRICTIONS. The restrictions imposed by
this Section 12 shall terminate upon the occurrence of the first of any of the
following events: (i) the written agreement of the Company and the Optionee
terminating such restrictions, (ii) the bankruptcy, receivership or complete
dissolution of the Company, (iii) the existence of a public market, as defined
in Section 11.9, for the class of shares subject to the S Corporation
Provisions, or (iv) a revocation of the Company's S Corporation status pursuant
to Section 1362(d) of the Code.
13. ESCROW.
13.1 ESTABLISHMENT OF ESCROW. To ensure that the S Corporation
Provisions will be followed, the Company may require the Optionee to deposit the
certificate evidencing the shares which the Optionee purchases upon exercise of
the Option with an agent designated by the Company under the terms and
conditions of an escrow agreement approved by the Company. If the Company does
not require such deposit as a condition of exercise of the Option, the Company
reserves the right at any time to require the Optionee to so deposit the
certificate in escrow. Upon the occurrence of an Ownership Change Event or a
change, as described in Section 9, in the character or amount of any of the
outstanding stock of the corporation the stock of which is subject to the
provisions of this Option Agreement, any and all new, substituted or additional
securities or other property to which the Optionee is entitled by reason of the
Optionee's ownership of shares of Stock acquired upon exercise of the Option
that remain, following such Ownership Change Event or change described in
Section 9, subject to the Right of First Refusal, shall be immediately subject
to the escrow to the same extent as such shares of Stock immediately before such
event. The Company shall bear the expenses of the escrow.
13.2 DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after
the expiration of the S Corporation Provisions, the escrow agent shall deliver
to the Optionee the shares and any other property no longer subject to such
restrictions.
13.3 NOTICES AND PAYMENTS. In the event the shares and any other
property held in escrow are subject to the Company's exercise of the Right of
First Refusal, the notices required to be given to the Optionee shall be given
to the escrow agent, and any payment required to be given to the Optionee shall
be given to the escrow agent. Within thirty (30) days after payment by the
Company, the escrow agent shall
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deliver the shares and any other property which the Company has purchased to the
Company and shall deliver the payment received from the Company to the Optionee.
14. STOCK DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT. If, from time to
time, there is any stock dividend, stock split or other change, as described in
Section 9, in the character or amount of any of the outstanding stock of the
corporation the stock of which is subject to the provisions of this Option
Agreement, then in such event any and all new, substituted or additional
securities to which the Optionee is entitled by reason of the Optionee's
ownership of the shares acquired upon exercise of the Option shall be
immediately subject to the Right of First Refusal, and the S Corporation
Provisions with the same force and effect as the shares subject to the Right of
First Refusal and the S Corporation Provisions immediately before such event.
15. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION. The Optionee shall
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year after the date the Optionee exercises all or part of the Option or within
two (2) years after the Date of Option Grant. Until such time as the Optionee
disposes of such shares in a manner consistent with the provisions of this
Option Agreement, unless otherwise expressly authorized by the Company, the
Optionee shall hold all shares acquired pursuant to the Option in the Optionee's
name (and not in the name of any nominee) for the one-year period immediately
after the exercise of the Option and the two-year period immediately after Date
of Option Grant. At any time during the one-year or two-year periods set forth
above, the Company may place a legend on any certificate representing shares
acquired pursuant to the Option requesting the transfer agent for the Company's
stock to notify the Company of any such transfers. The obligation of the
Optionee to notify the Company of any such transfer shall continue
notwithstanding that a legend has been placed on the certificate pursuant to the
preceding sentence.
16. LEGENDS. The Company may at any time place legends referencing the
Right of First Refusal and any applicable federal, state or foreign securities
law restrictions on all certificates representing shares of stock subject to the
provisions of this Option Agreement. The Optionee shall, at the request of the
Company, promptly present to the Company any and all certificates representing
shares acquired pursuant to the Option in the possession of the Optionee in
order to carry out the provisions of this Section. Unless otherwise specified by
the Company, legends placed on such certificates may include, but shall not be
limited to, the following:
16.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE
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COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
16.2 Any legend required to be placed thereon by the Commissioner
of Corporations of the State of California.
16.3 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN
AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THIS CORPORATION."
16.4 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION
AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE
SHARES SHOULD NOT BE TRANSFERRED PRIOR TO ___________. SHOULD THE REGISTERED
HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX
TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION
IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE
INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF
ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE."
17. PUBLIC OFFERING. The Optionee hereby agrees that in the event of any
underwritten public offering of stock, including an initial public offering of
stock, made by the Company pursuant to an effective registration statement filed
under the Securities Act, the Optionee shall not offer, sell, contract to sell,
pledge, hypothecate, grant any option to purchase or make any short sale of, or
otherwise dispose of any shares of stock of the Company or any rights to acquire
stock of the Company for such period of time from and after the effective date
of such registration statement as may be established by the underwriter for such
initial public offering; provided, however, that such period of time shall not
exceed one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing
limitation shall not apply to shares registered in the public offering under the
Securities Act. The foregoing limitation shall remain in effect for the two (2)
year period immediately following the effective date of the Company's initial
public offering and shall thereafter terminate and cease to have any force or
effect. The Optionee shall be subject to this Section provided and only if the
officers and directors of the Company are also subject to similar arrangements.
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<PAGE> 17
18. BINDING EFFECT. Subject to the restrictions on transfer set forth
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
19. TERMINATION OR AMENDMENT. The Board may terminate or amend the Plan
or the Option at any time; provided, however, that except as provided in Section
8.2 in connection with a Transfer of Control, no such termination or amendment
may adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee unless such termination or amendment is necessary to
comply with any applicable law or government regulation or is required to enable
the Option to qualify as an Incentive Stock Option. No amendment or addition to
this Option Agreement shall be effective unless in writing.
20. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein and there are no agreements,
understandings, restrictions, representations, or warranties among the Optionee
and the Participating Company Group with respect to such subject matter other
than those as set forth or provided for herein or therein. To the extent
contemplated herein or therein, the provisions of this Option Agreement shall
survive any exercise of the Option and shall remain in full force and effect.
21. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
SYSTEMS SCIENCE INC.
By:___________________________________
Title:________________________________
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<PAGE> 18
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement, including the Right of First Refusal
set forth in Section 11, and the S Corporation Provisions set forth in Section
13, and hereby accepts the Option subject to all of the terms and provisions
thereof. The Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Board upon any questions arising under
this Option Agreement.
OPTIONEE
Date:_____________________________ ________________________________________
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<PAGE> 19
CONSENT OF SPOUSE
The undersigned, being the spouse of the above-named Optionee, does
hereby acknowledge that the undersigned has read and is familiar with the
provisions of the above Option Agreement. The undersigned is aware that Section
11 provides a right of first refusal in favor of the Company upon certain
changes in record ownership of shares acquired upon exercise of the Option (the
"SHARES"), including, without limitation, any change pursuant to a decree of
divorce or marital separation, and that the provisions of Section 13 set forth
certain restrictions necessary or useful in maintaining the Company's status as
an S Corporation.
I hereby agree that my interest, if any, in the Shares will be
irrevocably bound by the Option Agreement and further understand and agree that
any community property interest I may have in the Shares will be similarly bound
by the Option Agreement.
I am aware that the legal, financial and related matters contained in
the Option Agreement are complex and that I am free to seek independent
professional guidance or counsel with respect to this Consent. I have either
sought such guidance or counsel or determined after reviewing the Option
Agreement carefully that I waive such right.
Dated:__________________________ _______________________________
(signature)
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<PAGE> 1
EXHIBIT 99.3
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
SYSTEMS SCIENCE INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS NONSTATUTORY STOCK OPTION AGREEMENT (the "OPTION
AGREEMENT") is made and entered into as of _______________, 199___, by and
between Systems Science Inc. and _________________ (the "OPTIONEE").
The Company has granted to the Optionee an option to purchase
certain shares of Stock, upon the terms and conditions set forth in this Option
Agreement (the "OPTION"). The Option shall in all respects be subject to the
terms and conditions of the Systems Science Inc. 1998 Stock Option Plan (the
"PLAN"), the provisions of which are incorporated herein by reference.
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Plan. Whenever used
herein, the following terms shall have their respective meanings set forth
below:
(a) "DATE OF OPTION GRANT" means
_______________,199________.
(b) "NUMBER OF OPTION SHARES" means ____________ shares of
Stock, as adjusted from time to time pursuant to Section 9.
(c) "EXERCISE PRICE" means $_______ per share of Stock, as
adjusted from time to time pursuant to Section 9.
(d) "INITIAL EXERCISE DATE" means the Initial Vesting
Date.
(e) "INITIAL VESTING DATE" means the date occurring one
(1) year after (check one):
_____ the Date of Option Grant.
_____ ___________, 199____, a date not later than
the Date of Option Grant.
<PAGE> 2
(f) "VESTED RATIO" means, on any relevant date, the ratio
determined as follows:
<TABLE>
<CAPTION>
Vested Ratio
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee's 1/5
Service is continuous from the Date of Option Grant
until the Initial Vesting Date
Plus
For each full year of the Optionee's continuous 1/5
Service from the Initial Vesting Date until the Vested
Ratio equals 1/1, an additional
</TABLE>
(g) "OPTION EXPIRATION DATE" means the date ten (10) years
after the Date of Option Grant.
(h) "COMPANY" means Systems Science Inc., a California
corporation, or any successor corporation thereto.
(i) "DISABILITY" means the inability of the Optionee, in
the opinion of a qualified physician acceptable to the Company, to perform the
major duties of the Optionee's position with the Participating Company Group
because of the sickness or injury of the Optionee.
(j) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(k) "SERVICE" means the Optionee's employment or service
with the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. The Optionee's Service shall be deemed to have
terminated if the Optionee ceases to render Service to the Participating Company
Group in such initial capacity. However, the Optionee's Service shall not be
deemed to have terminated merely because of a change in the Participating
Company for which the Optionee renders Service in such initial capacity,
provided that there is no interruption or termination of the Optionee's Service.
The Optionee's Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Optionee performs
Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its sole discretion, shall determine whether the Optionee's Service
has terminated and the effective date of such termination.
2
<PAGE> 3
1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement.
2. TAX CONSEQUENCES. This Option is intended by the Company and the
Optionee to be a Nonstatutory Stock Option, and does not qualify for any special
tax benefits to the Optionee. The Optionee should consult with the Optionee's
own tax advisor regarding the tax effects of this Option.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
4. EXERCISE OF THE OPTION.
4.1 RIGHT TO EXERCISE. Except as otherwise provided herein, the
Option shall be exercisable on and after the Initial Exercise Date and prior to
the termination of the Option (as provided in Section 6) in an amount not to
exceed the Number of Option Shares multiplied by the Vested Ratio less the
number of shares previously acquired upon exercise of the Option.
Notwithstanding the foregoing, the Optionee's initial exercise of the Option
shall be in an amount not less than the lesser of one-fifth of the Number of
Option Shares or such number of Option Shares the aggregate exercise price for
which equals or exceeds five thousand dollars ($5,000.00). In no event shall the
Option be exercisable for more shares than the Number of Option Shares.
4.2 METHOD OF EXERCISE.
(a) IF COMPANY IS AN S CORPORATION. If, at the time of the
Optionee's proposed exercise of the Option, the Company is an S Corporation
within the meaning of Section 1361 of the Code (an "S CORPORATION"), the Option
may be exercised only in compliance with the requirements of Section 12 below.
The Optionee should contact the Chief Financial Officer of the Company to
ascertain whether the Company is an S Corporation.
(b) IF COMPANY IS NOT AN S CORPORATION. If, at the time of
the Optionee's proposed exercise of the Option, the Company is not an S
Corporation, the exercise of an Option shall be by written notice to the Company
which must state the election to exercise the Option, the number of whole shares
of Stock for which the Option is being exercised and such other representations
and agreements as to the Optionee's investment intent with respect to such
shares as may be required pursuant to the provisions of this Option Agreement.
The written notice must be signed by the Optionee and must be delivered in
person, by certified or registered mail, return receipt requested, by confirmed
facsimile transmission, or by such other means as the Company may permit, to the
Chief Financial Officer of the Company, or other authorized representative of
the Participating Company Group, prior to the termination of the Option as set
3
<PAGE> 4
forth in Section 6, accompanied by (i) full payment of the aggregate Exercise
Price for the number of shares of Stock being purchased and (ii) an executed
copy, if required herein, of the then current form of escrow agreement
referenced below. The Option shall be deemed to be exercised upon receipt by the
Company of such written notice, the aggregate Exercise Price, and, if required
by the Company, such executed agreements.
4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of whole shares of
Stock owned by the Optionee having a Fair Market Value (as determined by the
Company without regard to any restrictions on transferability applicable to such
stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the aggregate Exercise Price, or
(iii) by means of a Cashless Exercise, as defined in Section 4.3(c).
(b) TENDER OF STOCK. Notwithstanding the foregoing, the
Option may not be exercised by tender to the Company of shares of Stock to the
extent such tender of Stock would constitute a violation of the provisions of
any law, regulation or agreement restricting the redemption of the Company's
stock. The Option may not be exercised by tender to the Company of shares of
Stock unless such shares either have been owned by the Optionee for more than
six (6) months or were not acquired, directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. A "CASHLESS EXERCISE" means the
assignment in a form acceptable to the Company of the proceeds of a sale or loan
with respect to some or all of the shares of Stock acquired upon the exercise of
the Option pursuant to a program or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
4.4 TAX WITHHOLDING. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Participating Company Group, if any, which arise
in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the
Option, (iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares acquired upon exercise of the Option. The Optionee is cautioned that
the Option is not exercisable unless the tax withholding obligations of the
Participating Company Group are satisfied. Accordingly, the Optionee may not be
able to exercise the Option when desired even though the Option is vested,
4
<PAGE> 5
and the Company shall have no obligation to issue a certificate for such shares
or release such shares from any escrow provided for herein.
4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares as
to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.
The grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares subject to the Option shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of the
Option, the Company may require the Optionee to satisfy any qualifications that
may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.
4.7 FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution. Following the death of the
Optionee, the Option, to the extent provided in Section 7, may be exercised by
the Optionee's legal representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable laws of descent and
distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Service as described in Section 7, or (c) a Transfer of Control to the extent
provided in Section 8.
5
<PAGE> 6
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABILITY.
(a) DISABILITY. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.
(b) DEATH. If the Optionee's Service with the
Participating Company Group is terminated because of the death of the Optionee,
the Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee (or the
Optionee's legal representative, or other person who acquired the right to
exercise the Option by reason of the Optionee's death) at any time prior to the
expiration of six (6) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. The
Optionee's Service shall be deemed to have terminated on account of death if the
Optionee dies within three (3) months after the Optionee's termination of
Service.
(c) OTHER TERMINATION OF SERVICE. If the Optionee's
Service with the Participating Company Group terminates for any reason, except
Disability or death, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee's Service terminated, may be
exercised by the Optionee within thirty (30) days (or such other longer period
of time as determined by the Board, in its sole discretion) after the date on
which the Optionee's Service terminated, but in any event no later than the
Option Expiration Date.
7.2 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option
shall remain exercisable until thirty (30) days after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date. The Company makes no representation as to
the tax consequences of any such delayed exercise. The Optionee should consult
with the Optionee's own tax advisor as to the tax consequences of any such
delayed exercise.
7.3 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date. The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisor as to the tax consequences of any such delayed exercise.
6
<PAGE> 7
7.4 LEAVE OF ABSENCE. For purposes of Section 7.1, the Optionee's
Service with the Participating Company Group shall not be deemed to terminate if
the Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave of absence in excess of ninety (90) days, the Optionee's Service shall be
deemed to terminate on the ninety-first (91st) day of such leave unless the
Optionee's right to reemployment with the Participating Company Group remains
guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company (or required by law), a leave of absence
shall not be treated as Service for purposes of determining the Optionee's
Vested Ratio.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a
single or series of related transactions by the shareholders of the Company of
more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company
is a party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "TRANSFER OF CONTROL", as defined in the Plan,
generally means one or more related Ownership Change Events after which the
shareholders do not own, directly or indirectly, more than fifty percent (50%)
of the outstanding stock of the Company or, in the case of an asset transfer,
the transferee corporation(s).
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTION. In the event of a
Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under the
Option or substitute for the Option a substantially equivalent option for the
Acquiring Corporation's stock. If the Option is not assumed or substituted for
by the Acquiring Corporation in connection with the Transfer of Control, the
Option shall terminate and cease to be outstanding effective as of the date of
the Transfer of Control to the extent the Option is not exercised. In such
event, the Company will give written notice to the holder of the Option of the
pending Transfer of Control and the corresponding termination of the Option not
less than fifteen (15) days prior to the proposed effective date of such
Transfer of Control, and the holder of the Option shall have the right to
exercise the Option to the extent then exercisable prior to such effective date.
Notwithstanding the foregoing, if the corporation the stock of which is subject
to the Option immediately prior to an Ownership Change Event described in
Section 8.1(a)(i) constituting a Transfer of Control is the surviving or
continuing corporation and
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<PAGE> 8
immediately after such Ownership Change Event less than fifty percent (50%) of
the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the Option shall not terminate unless
the Board otherwise provides in its sole discretion.
9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of
shares of stock subject to the Option but the sale of additional Shares for fair
market value as determined by the Board shall not result in any adjustment of
the Option. If a majority of the shares which are of the same class as the
shares that are subject to the Option are exchanged for, converted into, or
otherwise become (whether or not pursuant to an Ownership Change Event) shares
of another corporation (the "NEW SHARES"), the Board may unilaterally amend the
Option to provide that the Option is exercisable for New Shares. In the event of
any such amendment, the Number of Option Shares and the Exercise Price shall be
adjusted in a fair and equitable manner, as determined by the Board, in its sole
discretion. Notwithstanding the foregoing, any fractional share resulting from
an adjustment pursuant to this Section 9 shall be rounded up or down to the
nearest whole number, as determined by the Board, and in no event may the
Exercise Price be decreased to an amount less than the par value, if any, of the
stock subject to the Option. The adjustments determined by the Board pursuant to
this Section 9 shall be final, binding and conclusive.
10. RIGHTS AS A SHAREHOLDER, EMPLOYEE OR CONSULTANT. The Optionee shall
have no rights as a shareholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 9. Nothing in this Option Agreement shall confer upon the
Optionee any right to continue in the Service of a Participating Company or
interfere in any way with any right of the Participating Company Group to
terminate the Optionee's Service as an Employee or Consultant, as the case may
be, at any time.
11. RIGHT OF FIRST REFUSAL.
11.1 GRANT OF RIGHT OF FIRST REFUSAL. Except as provided in
Section 11.7 below, in the event the Optionee, the Optionee's legal
representative, or other holder of shares acquired upon exercise of the Option
proposes to sell, exchange, transfer, pledge, or otherwise dispose of any shares
acquired upon exercise of the Option (the "TRANSFER SHARES") to any person or
entity, including, without limitation, any shareholder of the Participating
Company Group, the Company shall have the right to repurchase the Transfer
Shares under the terms and subject to the conditions set forth in this Section
11 (the "RIGHT OF FIRST REFUSAL").
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<PAGE> 9
11.2 NOTICE OF PROPOSED TRANSFER.
(a) WRITTEN NOTICE. Prior to any proposed transfer of the
Transfer Shares, the Optionee shall give a written notice (the "TRANSFER
NOTICE") to the Company describing fully the proposed transfer, including the
number of Transfer Shares, the name and address of the proposed transferee (the
"PROPOSED TRANSFEREE") and, if the transfer is voluntary, the proposed transfer
price, and containing such information necessary to show the bona fide nature of
the proposed transfer, including the investment intent of the Proposed
Transferee. In the event of a bona fide gift or involuntary transfer, the
proposed transfer price shall be deemed to be the Fair Market Value of the
Transfer Shares, as determined by the Board in good faith. The Optionee may not
transfer Transfer Shares to more than one Proposed Transferee in any one
transaction. The Transfer Notice shall be signed by both the Optionee and the
Proposed Transferee and must constitute a binding commitment of the Optionee and
the Proposed Transferee for the transfer of the Transfer Shares to the Proposed
Transferee subject only to the Right of First Refusal.
(b) BONA FIDE GIFT OR INVOLUNTARY TRANSFER. In the event
of a bona fide gift or involuntary transfer, the proposed transfer price shall
be deemed to be the Fair Market Value of the Transfer Shares, as determined by
the Board in good faith. If the Optionee disagrees with the valuation determined
by the Board, the Optionee may, by giving written notice to the Company within
ten (10) days after being informed of the valuation, request that the value of
the shares at issue be determined by an independent appraiser. The Company shall
select an appraiser to determine the value of such shares within fifteen (15)
days after the Company's actual receipt of the Optionee's notice disputing the
valuation determined by the Board. Such appraiser shall be subject to the
approval of the Optionee, which approval the Optionee shall not unreasonably
withhold or delay. The Optionee's approval or refusal to approve the appraiser
must be given before the appraiser announces a valuation. The value of such
shares, as determined by the appraiser, shall be conclusively binding on all of
the parties concerned. The expenses of appraisal shall be borne equally by the
Company and the Optionee. Any time required to resolve a valuation dispute shall
be added to the time periods in which the Company may exercise its Right of
First Refusal.
(c) BONA FIDE TRANSFER. If the Company determines that the
information provided by the Optionee in the Transfer Notice is insufficient to
establish the bona fide nature of a proposed voluntary transfer, the Company
shall give the Optionee written notice of the Optionee's failure to comply with
the procedure described in this Section 11, and the Optionee shall have no right
to transfer the Transfer Shares without first complying with the procedure
described in this Section 11. The Optionee shall not be permitted to transfer
the Transfer Shares if the proposed transfer is not bona fide.
11.3 EXERCISE OF RIGHT OF FIRST REFUSAL If the Company determines
the proposed transfer to be bona fide, the Company shall have the right to
purchase all, but not less than all, of the Transfer Shares (except as the
Company and the Optionee otherwise agree) at the purchase price and on the terms
set forth in the Transfer Notice by delivery to the Optionee of a notice of
exercise of the Right of First Refusal within thirty (30) days after the date
the Transfer Notice is delivered to the Company. The Company's exercise or
failure to exercise the Right of
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<PAGE> 10
First Refusal with respect to any proposed transfer described in a Transfer
Notice shall not affect the Company's right to exercise the Right of First
Refusal with respect to any proposed transfer described in any other Transfer
Notice, whether or not such other Transfer Notice is issued by the Optionee or
issued by a person other than the Optionee with respect to a proposed transfer
to the same Proposed Transferee. If the Company exercises the Right of First
Refusal, the Company and the Optionee shall thereupon consummate the sale of the
Transfer Shares to the Company on the terms set forth in the Transfer Notice
within sixty (60) days after the date the Transfer Notice is delivered to the
Company (unless a longer period is offered by the Proposed Transferee);
provided, however, that in the event the Transfer Notice provides for the
payment for the Transfer Shares other than in cash, the Company shall have the
option of paying for the Transfer Shares by the present value cash equivalent of
the consideration described in the Transfer Notice as reasonably determined by
the Company. For purposes of the foregoing cancellation of any indebtedness of
the Optionee to any Participating Company shall be treated as payment to the
Optionee in cash to the extent of the unpaid principal and any accrued interest
canceled.
11.4 FAILURE TO EXERCISE RIGHT OF FIRST REFUSAL. If the Company
fails to exercise the Right of First Refusal in full (or to such lesser extent
as the Company and the Optionee otherwise agree) within the period specified in
Section 11.4 above, the Optionee may conclude a transfer to the Proposed
Transferee of the Transfer Shares on the terms and conditions described in the
Transfer Notice, provided such transfer occurs not later than ninety (90) days
following delivery to the Company of the Transfer Notice. The Company shall have
the right to demand further assurances from the Optionee and the Proposed
Transferee (in a form satisfactory to the Company) that the transfer of the
Transfer Shares was actually carried out on the terms and conditions described
in the Transfer Notice. No Transfer Shares shall be transferred on the books of
the Company until the Company has received such assurances, if so demanded, and
has approved the proposed transfer and investment intent as bona fide. Any
proposed transfer on terms and conditions different from those described in the
Transfer Notice, as well as any subsequent proposed transfer by the Optionee,
shall again be subject to the Right of First Refusal and shall require
compliance by the Optionee with the procedure described in this Section 11.
11.5 TRANSFEREES OF TRANSFER SHARES. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interest therein subject to the Right of First Refusal, any
underwriter's lockup, the S Corporation restrictions and this Section 11
providing for the Right of First Refusal with respect to any subsequent
transfer. Any sale or transfer of any shares acquired upon exercise of the
Option shall be void unless the provisions of this Section 11 are met.
11.6 TRANSFERS NOT SUBJECT TO RIGHT OF FIRST REFUSAL. The Right
of First Refusal shall not apply to any transfer or exchange of the shares
acquired upon exercise of the Option if such transfer or exchange is in
connection with an Ownership Change Event. If the consideration received
pursuant to such transfer or exchange consists of stock of a Participating
Company, such consideration shall remain subject to the Right of First Refusal
unless the provisions of Section 11.9 below result in a termination of the Right
of First Refusal.
10
<PAGE> 11
11.7 ASSIGNMENT OF RIGHT OF FIRST REFUSAL The Company shall have
the right to assign the Right of First Refusal at any time, whether or not there
has been an attempted transfer, to one or more persons as may be selected by the
Company.
11.8 EARLY TERMINATION OF RIGHT OF FIRST REFUSAL. The other
provisions of this Option Agreement notwithstanding, the Right of First Refusal
shall terminate and be of no further force and effect upon (a) the occurrence of
a Transfer of Control, unless the Acquiring Corporation assumes the Company's
rights and obligations under the Option or substitutes a substantially
equivalent option for the Acquiring Corporation's stock for the Option, or (b)
the existence of a public market for the class of shares subject to the Right of
First Refusal. A "PUBLIC MARKET" shall be deemed to exist if (i) such stock is
listed on a national securities exchange (as that term is used in the Exchange
Act) or (ii) such stock is traded on the over-the-counter market and prices
therefor are published daily on business days in a recognized financial journal.
12. S CORPORATION STATUS.
12.1 EFFECT OF S CORPORATION STATUS ON OPTION. The Optionee
acknowledges that the Company has elected to be classified as an S Corporation
for federal and state income tax purposes and, following the exercise of the
Option with respect to all or any part of the shares of Stock subject to the
Option, agrees to provide to the Company, immediately upon the Company's
request, such properly signed consents or other documents as, in the opinion of
counsel for the Company, may be necessary or useful to maintaining the Company's
status as an S Corporation. Except with the written consent of the Company
specifically referring to this Section 12, the following provisions set forth in
this Section 12 (the "S CORPORATION PROVISIONS") shall apply to the exercise of
the Option and the shares of Stock acquired upon exercise of the Option until
such time as the Company ceases to qualify as an S Corporation.
12.2 METHOD OF EXERCISE.
(a) ADVANCE NOTICE OF INTENT TO EXERCISE. The Optionee
shall give written notice (the "ADVANCE NOTICE") of the Optionee's intent to
exercise the Option, which must be received by the Company no later than ten
(10) days prior to the date on which such exercise is proposed to be effective
(the "PROPOSED EXERCISE DATE"). The Advance Notice shall be in a form approved
by the Company and must state the election to exercise the Option, the Proposed
Exercise Date, the number of whole shares of Stock for which the Option is to be
exercised, such information as required by the Company to enable the Company to
determine whether the proposed exercise of the Option may cause the Company to
cease to qualify as an S Corporation, and such other representations and
agreements as to the Optionee's investment intent with respect to such shares as
may be required pursuant to the provisions of this Option Agreement. The Advance
Notice must be signed by the Optionee and must be delivered in person, by
certified or registered mail, return receipt requested, by confirmed facsimile
transmission, or by such other means as the Company may permit, to the Chief
Financial Officer of the Company, or other authorized representative of the
Participating Company Group, at least thirty (30) days prior to the termination
of the Option (as provided in Section 6). Except as otherwise permitted by the
Company, the Optionee's failure to comply with the requirements of
11
<PAGE> 12
this Section 12.2(a) shall extend the Proposed Exercise Date to a date at least
thirty (30) days following the Company's receipt of an Advance Notice which
complies in full with such requirements. If the Proposed Exercise Date, as
extended pursuant to the preceding sentence, would follow the termination of the
Option as provided in Section 6, the Option shall terminate at the time provided
in Section 6, and the Company shall not be required to make any payment to the
Optionee that would otherwise be required pursuant to Section 12.2(b) below. The
provisions of this Section 12.2 shall cease to apply as provided in Section 12.7
below, and thereafter the Option may be exercised pursuant to Section 4.2(b)
above.
(b) GRANT OF OPTION REDEMPTION RIGHT. If, following its
receipt of the Optionee's Advance Notice, the Company determines, in its sole
discretion, that the Optionee's exercise of the Option may cause the Company to
cease to qualify as an S Corporation, the Company shall so notify the Optionee
(a "DISQUALIFICATION NOTICE") no later than five (5) days prior to the Proposed
Exercise Date. Following receipt of a Disqualification Notice, the Optionee may
withdraw the Optionee's Advance Notice. If, following receipt of a
Disqualification Notice, the Optionee does not withdraw the Optionee's Advance
Notice, the Company shall have the right (the "OPTION REDEMPTION RIGHT") to
cancel the Option for the number of shares set forth in the Optionee's Advance
Notice in exchange for payment to the Optionee of an amount equal to the excess,
if any, of (i) the fair market value, determined as of the Proposed Exercise
Date by the Company in good faith, of the number of shares of Stock set forth in
the Optionee's Advance Notice over (ii) the aggregate Exercise Price for such
shares (the "OPTION REDEMPTION PRICE"). The Optionee hereby agrees that the
Company may withhold from the Option Redemption Price, or the Optionee shall
otherwise make adequate provision for, the foreign, federal, state and local tax
withholding obligations of the Participating Company Group, if any, which arise
in connection with the payment of the Option Redemption Price. If the Company
exercises its Option Redemption Right, the Company shall cancel the Option,
effective as of the Proposed Exercise Date, for the number of shares of Stock
set forth in the Optionee's Advance Notice and shall pay the Option Redemption
Price (reduced by any applicable withholding tax) to the Optionee in cash within
thirty (30) days following the Proposed Exercise Date. For purposes of the
foregoing, cancellation of any indebtedness of the Optionee to the Company shall
be treated as payment to the Optionee in cash to the extent of the unpaid
principal and any accrued interest canceled.
(c) FAILURE TO EXERCISE OPTION REDEMPTION RIGHT. If,
following receipt of the Optionee's Advance Notice, the Company does not give
the Optionee a Disqualification Notice or otherwise does not exercise the Option
Redemption Right, the Optionee may exercise the Option effective as of the
Proposed Exercise Date by delivering to the Company on or before the Proposed
Exercise Date (but in any event no later than the termination of the Option as
provided in Section 6) (i) full payment of the aggregate Exercise Price for the
number of shares of Stock being purchased, as set forth in the Optionee's
Advance Notice, and (ii) an executed copy, if required herein, of the then
current form of escrow agreement referenced in this Option Agreement. If the
Optionee fails to deliver full payment of the aggregate Exercise Price for the
number of shares of Stock being purchased on or before the Proposed Exercise
Date, the Optionee may only exercise the Option by again complying with the
requirements of Section 12.2(a).
12
<PAGE> 13
12.3 RESTRICTION ON TRANSFER. No transfer of any shares acquired
by the Optionee pursuant to the Option, whether voluntary or involuntary, shall
be effective unless the Optionee's shares are transferred to a transferee who is
a permitted shareholder of an S Corporation with a bona fide investment intent
(a "PERMITTED TRANSFEREE").
12.4 RESTRICTION ON OTHER ACTION. The Optionee shall not take any
action or fail to take any action which shall result in the Company being unable
to maintain the Company's status as an S Corporation. This provision shall
require, without limitation, that the Optionee notify the Company prior to the
Optionee ceasing to qualify as an eligible shareholder of an S Corporation.
12.5 TRANSFER BY TRUST. If any transfer by the Optionee is by
operation of law or by right of succession under a revocable trust, the
transferees shall be obligated to make such transfers as shall reasonably be
necessary, in the opinion of counsel for the Company, to avoid termination of
the Company's status as an S Corporation.
12.6 OTHER RESTRICTIONS. The provisions of this Section 12 are in
addition to the provisions of Sections 11 hereof. By way of example and not
limitation, a transfer by divorce or otherwise to a Permitted Transferee
pursuant to this Section 12 shall be subject to the Right of First Refusal set
forth in Section 11 hereof.
12.7 TERMINATION OF RESTRICTIONS. The restrictions imposed by
this Section 12 shall terminate upon the occurrence of the first of any of the
following events: (i) the written agreement of the Company and the Optionee
terminating such restrictions, (ii) the bankruptcy, receivership or complete
dissolution of the Company, (iii) the existence of a public market, as defined
in Section 11.9, for the class of shares subject to the S Corporation
Provisions, or (iv) a revocation of the Company's S Corporation status pursuant
to Section 1362(d) of the Code.
13. ESCROW.
13.1 ESTABLISHMENT OF ESCROW. To ensure that the S Corporation
Provisions will be followed, the Company may require the Optionee to deposit the
certificate evidencing the shares which the Optionee purchases upon exercise of
the Option with an agent designated by the Company under the terms and
conditions of an escrow agreement approved by the Company. If the Company does
not require such deposit as a condition of exercise of the Option, the Company
reserves the right at any time to require the Optionee to so deposit the
certificate in escrow. Upon the occurrence of an Ownership Change Event or a
change, as described in Section 9, in the character or amount of any of the
outstanding stock of the corporation the stock of which is subject to the
provisions of this Option Agreement, any and all new, substituted or additional
securities or other property to which the Optionee is entitled by reason of the
Optionee's ownership of shares of Stock acquired upon exercise of the Option
that remain, following such Ownership Change Event or change described in
Section 9, subject to the Right of First Refusal, shall be immediately subject
to the escrow to the same extent as such shares of Stock immediately before such
event. The Company shall bear the expenses of the escrow.
13
<PAGE> 14
13.2 DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after
the expiration of the S Corporation Provisions, the escrow agent shall deliver
to the Optionee the shares and any other property no longer subject to such
restrictions.
13.3 NOTICES AND PAYMENTS. In the event the shares and any other
property held in escrow are subject to the Company's exercise of the Right of
First Refusal, the notices required to be given to the Optionee shall be given
to the escrow agent, and any payment required to be given to the Optionee shall
be given to the escrow agent. Within thirty (30) days after payment by the
Company, the escrow agent shall deliver the shares and any other property which
the Company has purchased to the Company and shall deliver the payment received
from the Company to the Optionee.
14. STOCK DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT. If, from time to
time, there is any stock dividend, stock split or other change, as described in
Section 9, in the character or amount of any of the outstanding stock of the
corporation the stock of which is subject to the provisions of this Option
Agreement, then in such event any and all new, substituted or additional
securities to which the Optionee is entitled by reason of the Optionee's
ownership of the shares acquired upon exercise of the Option shall be
immediately subject to the Right of First Refusal, and the S Corporation
Provisions with the same force and effect as the shares subject to the Right of
First Refusal and the S Corporation Provisions immediately before such event.
15. WITHHOLDING UPON EXERCISE OF OPTION. Optionee understands that, upon
exercise of the Option, the Optionee will recognize income for tax purposes in
an amount equal to the excess of the then fair market value of the shares over
the exercise price. The Company will be required to withhold tax with respect to
such exercise as set forth in Section 4.4 hereof.
16. LEGENDS. The Company may at any time place legends referencing the
Right of First Refusal and any applicable federal, state or foreign securities
law restrictions on all certificates representing shares of stock subject to the
provisions of this Option Agreement. The Optionee shall, at the request of the
Company, promptly present to the Company any and all certificates representing
shares acquired pursuant to the Option in the possession of the Optionee in
order to carry out the provisions of this Section. Unless otherwise specified by
the Company, legends placed on such certificates may include, but shall not be
limited to, the following:
16.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT
OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT."
16.2 Any legend required to be placed thereon by the Commissioner
of Corporations of the State of California.
14
<PAGE> 15
16.3 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN
AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THIS CORPORATION."
17. PUBLIC OFFERING. The Optionee hereby agrees that in the event of any
underwritten public offering of stock, including an initial public offering of
stock, made by the Company pursuant to an effective registration statement filed
under the Securities Act, the Optionee shall not offer, sell, contract to sell,
pledge, hypothecate, grant any option to purchase or make any short sale of, or
otherwise dispose of any shares of stock of the Company or any rights to acquire
stock of the Company for such period of time from and after the effective date
of such registration statement as may be established by the underwriter for such
initial public offering; provided, however, that such period of time shall not
exceed one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing
limitation shall not apply to shares registered in the public offering under the
Securities Act. The foregoing limitation shall remain in effect for the two (2)
year period immediately following the effective date of the Company's initial
public offering and shall thereafter terminate and cease to have any force or
effect. The Optionee shall be subject to this Section provided and only if the
officers and directors of the Company are also subject to similar arrangements.
18. BINDING EFFECT. Subject to the restrictions on transfer set forth
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
19. TERMINATION OR AMENDMENT. The Board may terminate or amend the Plan
or the Option at any time; provided, however, that except as provided in Section
8.2 in connection with a Transfer of Control, no such termination or amendment
may adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee unless such termination or amendment is necessary to
comply with any applicable law or government regulation. No amendment or
addition to this Option Agreement shall be effective unless in writing.
20. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein and there are no agreements,
understandings, restrictions, representations, or warranties among the Optionee
and the Participating Company Group with respect to such subject matter other
than those as set forth or provided for herein or therein. To the extent
contemplated herein or therein, the provisions of this Option Agreement shall
survive any exercise of the Option and shall remain in full force and effect.
15
<PAGE> 16
21. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
SYSTEMS SCIENCE INC.
By: ____________________________________
Title:__________________________________
The Optionee represents that the Optionee is familiar with the
terms and provisions of this Option Agreement, including the Right of First
Refusal set forth in Section 11, and the S Corporation Provisions set forth in
Section 13, and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under this Option Agreement.
OPTIONEE
Date: ____________________________ ________________________________________
16
<PAGE> 17
CONSENT OF SPOUSE
The undersigned, being the spouse of the above-named Optionee,
does hereby acknowledge that the undersigned has read and is familiar with the
provisions of the above Option Agreement. The undersigned is aware that Section
11 provides a right of first refusal in favor of the Company upon certain
changes in record ownership of shares acquired upon exercise of the Option (the
"SHARES"), including, without limitation, any change pursuant to a decree of
divorce or marital separation, and that the provisions of Section 13 set forth
certain restrictions necessary or useful in maintaining the Company's status as
an S Corporation.
I hereby agree that my interest, if any, in the Shares will be
irrevocably bound by the Option Agreement and further understand and agree that
any community property interest I may have in the Shares will be similarly bound
by the Option Agreement.
I am aware that the legal, financial and related matters
contained in the Option Agreement are complex and that I am free to seek
independent professional guidance or counsel with respect to this Consent. I
have either sought such guidance or counsel or determined after reviewing the
Option Agreement carefully that I waive such right.
Dated: ___________________________ ________________________________________
17
<PAGE> 1
EXHIBIT 99.4
SYNOPSYS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
SYSTEMS SCIENCE INC.
1998 STOCK OPTION PLAN
OPTIONEE: 1~
STOCK OPTION ASSUMPTION AGREEMENT issued as of the 21st day of
July, 1998 by Synopsys, Inc., a Delaware corporation ("Synopsys").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding options to purchase shares of the common stock of Systems
Science Inc., a California corporation ("SSI"), which were granted to Optionee
under the Systems Science Inc. 1998 Stock Option Plan (the "Plan") and are
evidenced by a Stock Option Agreement (the "Option Agreement") between SSI and
Optionee.
WHEREAS, SSI has this day been acquired by Synopsys through
Synopsys's purchase of all of the issued and outstanding shares of capital stock
of SSI (the "Acquisition") pursuant to the Stock Purchase Agreement, dated as of
July 17, 1998, by and between Synopsys, SSI and the SSI Securityholders (the
"Purchase Agreement").
WHEREAS, the provisions of the Purchase Agreement require
Synopsys to assume all obligations of SSI under all outstanding options under
the Plan at the consummation of the Acquisition and to issue to the holder of
each outstanding option an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Purchase Agreement,
the exchange ratio (the "Exchange Ratio") in effect for the Acquisition is
0.0096566 of a share of Synopsys common stock ("Synopsys Stock") for each
outstanding share of SSI common stock ("SSI Stock").
WHEREAS, this Agreement is to become effective immediately upon
the consummation of the Acquisition (the "Effective Time") in order to reflect
certain adjustments to Optionee's outstanding options under the Plan which have
become necessary by reason of the assumption of those options by Synopsys in
connection with the Acquisition.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Synopsys Stock subject to the stock
options held by Optionee under the Plan immediately prior to the Effective Time
(the "SSI Options") and the exercise price payable per share are set forth in
Exhibit A hereto. Synopsys hereby assumes, as
<PAGE> 2
of the Effective Time, all the duties and obligations of SSI under each of the
SSI Options. In connection with such assumption, the number of shares of
Synopsys Stock purchasable under each SSI Option hereby assumed and the exercise
price payable thereunder have been adjusted to reflect the Exchange Ratio.
Accordingly, the number of shares of Synopsys Stock subject to each SSI Option
hereby assumed shall be as specified for that option in attached Exhibit A, and
the adjusted exercise price payable per share of Synopsys Stock under the
assumed SSI Option shall be as indicated for that option in attached Exhibit A.
2. The following provisions shall govern each SSI Option hereby
assumed by Synopsys:
(a) Unless the context otherwise requires, all
references in each Option Agreement and in the Plan (as
incorporated into such Option Agreement) (i) to the "Company"
shall mean Synopsys, (ii) to "Stock" shall mean shares of
Synopsys Stock, (iii) to the "Board" shall mean the Board of
Directors of Synopsys and (iv) to the "Committee" shall mean the
Compensation Committee of the Synopsys Board of Directors.
(b) The grant date and the expiration date of each
assumed SSI Option and all other provisions which govern either
the exercisability or the termination of the assumed SSI Option
shall remain the same as set forth in the Option Agreement
applicable to that option and shall accordingly govern and
control Optionee's rights under this Agreement to purchase
Synopsys Stock.
(c) The shares subject to each assumed SSI Option
held by Optionee shall continue to vest in accordance with the
same installment vesting schedule in effect under the applicable
Option Agreement immediately prior to the Effective Time, with
the number of shares of Synopsys Stock subject to each such
installment adjusted to reflect the Exchange Rate. Accordingly,
no acceleration of vesting under the SSI Options held by Optionee
shall be deemed to occur by reason of the Acquisition, and the
vesting dates under each applicable Option Agreement shall remain
the same following the Acquisition.
(d) For purposes of applying any and all provisions
of the Option Agreement relating to Optionee's status as an
employee or a consultant of SSI, Optionee shall be deemed to
continue in such status as an employee or a consultant for so
long as Optionee renders services as an employee or a consultant
to Synopsys or any present or future Synopsys subsidiary.
Accordingly, the provisions of the Option Agreement governing the
termination of the assumed SSI Options upon Optionee's cessation
of service as an employee or a consultant of SSI shall hereafter
be applied on the basis of Optionee's cessation of employee or
consultant status with Synopsys and its subsidiaries, and each
assumed SSI Option shall accordingly terminate, within the
designated time period in effect under the Option Agreement for
that option, following such cessation of service as an
2.
<PAGE> 3
employee or a consultant of Synopsys and its subsidiaries. A
change in status from an employee to a consultant or from a
consultant to an employee will not constitute an interruption of
continuous status as an employee or a consultant.
(e) The adjusted exercise price payable for the
Synopsys Stock subject to each assumed SSI Option shall be
payable in any of the forms authorized under the Option Agreement
applicable to that option. For purposes of determining the
holding period of any shares of Synopsys Stock delivered in
payment of such adjusted exercise price, the period for which
such shares were held as SSI Stock prior to the Acquisition shall
be taken into account.
(f) In order to exercise each assumed SSI Option,
Optionee must deliver to Synopsys a written notice of exercise in
which the number of shares of Synopsys Stock to be purchased
thereunder must be indicated. The exercise notice must be
accompanied by payment of the adjusted exercise price payable for
the purchased shares of Synopsys Stock and should be delivered to
Synopsys at the following address:
Synopsys, Inc.
700 East Middlefield Road
Mountain View, California 94043-4033
Attention: Option Plan Administrator
3. Except to the extent specifically modified by this Stock
Option Assumption Agreement, all of the terms and conditions of each Option
Agreement as in effect immediately prior to the Acquisition shall continue in
full force and effect and shall not in any way be amended, revised or otherwise
affected by this Stock Option Assumption Agreement.
3.
<PAGE> 4
IN WITNESS WHEREOF, Synopsys has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly authorized officer
as of the ____ day of ____________________, 1998.
SYNOPSYS, INC.
By:_____________________________________
Title:__________________________________
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock
Option Assumption Agreement and understands and acknowledges that all rights and
liabilities with respect to each of his or her SSI Options hereby assumed by
Synopsys are as set forth only in the Option Agreement, the Plan and such Stock
Option Assumption Agreement and no other agreements exist with respect to his or
her SSI Options. The undersigned also acknowledges that except to the extent
specifically modified by this Stock Assumption Agreement, all of the terms and
conditions of the Option Agreement as in effect immediately prior to the
effective time shall continue in full force and effect and shall not in any way
be amended, revised or otherwise affected by this Stock Option Assumption
Agreement. The undersigned further acknowledges that the SSI Option or Options
described in Exhibit A hereto constitute all of the options or other rights to
purchase SSI Stock that he or she owned immediately prior to the Effective Time.
______________________________________________
1~, OPTIONEE
DATED: __________________, 1998
4.
<PAGE> 5
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares
of Systems Science Inc. Common Stock (Pre-Acquisition)
and
Optionee's Outstanding Options to Purchase Shares
of Synopsys, Inc. Common Stock (Post-Acquisition)
<PAGE> 1
EXHIBIT 99.5
SYNOPSYS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
SYSTEMS SCIENCE INC.
1998 STOCK OPTION PLAN
OPTIONEE: DAVID ALLENBAUGH
STOCK OPTION ASSUMPTION AGREEMENT issued as of the 21st day of
July, 1998 by Synopsys, Inc., a Delaware corporation ("Synopsys").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding options to purchase shares of the common stock of Systems
Science Inc., a California corporation ("SSI"), which were granted to Optionee
under the Systems Science Inc. 1998 Stock Option Plan (the "Plan") and are
evidenced by (i) a Stock Option Agreement (the "Option Agreement") between SSI
and Optionee and (ii) a Memorandum dated March 17, 1998 from SSI to Optionee
(the "Memorandum"), which in part amends or modifies the Option Agreement. The
Option Agreement as amended by the Memorandum shall be referred to in this
document as the "Modified Option Agreement."
WHEREAS, SSI has this day been acquired by Synopsys through
Synopsys's purchase of all of the issued and outstanding shares of capital stock
of SSI (the "Acquisition") pursuant to the Stock Purchase Agreement, dated as of
July 17, 1998, by and between Synopsys, SSI and the SSI Securityholders (the
"Purchase Agreement").
WHEREAS, the provisions of the Purchase Agreement require
Synopsys to assume all obligations of SSI under all outstanding options under
the Plan at the consummation of the Acquisition and to issue to the holder of
each outstanding option an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Purchase Agreement,
the exchange ratio (the "Exchange Ratio") in effect for the Acquisition is
0.0096566 of a share of Synopsys common stock ("Synopsys Stock") for each
outstanding share of SSI common stock ("SSI Stock").
WHEREAS, this Agreement is to become effective immediately upon
the consummation of the Acquisition (the "Effective Time") in order to reflect
certain adjustments to Optionee's outstanding options under the Plan which have
become necessary by reason of the assumption of those options by Synopsys in
connection with the Acquisition.
<PAGE> 2
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Synopsys Stock subject to the stock
options held by Optionee under the Plan immediately prior to the Effective Time
(the "SSI Options") and the exercise price payable per share are set forth in
Exhibit A hereto. Synopsys hereby assumes, as of the Effective Time, all the
duties and obligations of SSI under each of the SSI Options. In connection with
such assumption, the number of shares of Synopsys Stock purchasable under each
SSI Option hereby assumed and the exercise price payable thereunder have been
adjusted to reflect the Exchange Ratio. Accordingly, the number of shares of
Synopsys Stock subject to each SSI Option hereby assumed shall be as specified
for that option in attached Exhibit A, and the adjusted exercise price payable
per share of Synopsys Stock under the assumed SSI Option shall be as indicated
for that option in attached Exhibit A.
2. The following provisions shall govern each SSI Option hereby
assumed by Synopsys:
(a) Unless the context otherwise requires, all
references in each Modified Option Agreement and in the Plan (as
incorporated into such Modified Option Agreement) (i) to the
"Company" shall mean Synopsys, (ii) to "Stock" shall mean shares
of Synopsys Stock, (iii) to the "Board" shall mean the Board of
Directors of Synopsys and (iv) to the "Committee" shall mean the
Compensation Committee of the Synopsys Board of Directors.
(b) The grant date and the expiration date of each
assumed SSI Option and all other provisions which govern either
the exercisability or the termination of the assumed SSI Option
shall remain the same as set forth in the Modified Option
Agreement applicable to that option and shall accordingly govern
and control Optionee's rights under this Agreement to purchase
Synopsys Stock.
(c) Pursuant to the terms of the Modified Option
Agreement, the installment vesting schedule in effect for each
assumed SSI Option held by Optionee shall automatically
accelerate by one (1) year upon the consummation of the
Acquisition. Each such assumed SSI Option held by Optionee, as so
accelerated and as adjusted in accordance with the provisions of
paragraph 1 above, shall be assumed by Synopsys as of the
Effective Time. Each such assumed SSI Option held by Optionee
shall thereafter continue to become exercisable for the remaining
shares in accordance with the installment exercise schedule in
effect under the applicable Modified Option Agreement immediately
prior to the Effective Time (after giving effect to the one year
of accelerated vesting), with the number of shares of Synopsys
Stock subject to each such installment adjusted to reflect the
Exchange Ratio.
(d) For purposes of applying any and all provisions
of the Modified Option Agreement relating to Optionee's status as
an employee or a
2.
<PAGE> 3
consultant of SSI, Optionee shall be deemed to continue in such
status as an employee or a consultant for so long as Optionee
renders services as an employee or a consultant to Synopsys or
any present or future Synopsys subsidiary. Accordingly, the
provisions of the Modified Option Agreement governing the
termination of the assumed SSI Options upon Optionee's cessation
of service as an employee or a consultant of SSI shall hereafter
be applied on the basis of Optionee's cessation of employee or
consultant status with Synopsys and its subsidiaries, and each
assumed SSI Option shall accordingly terminate, within the
designated time period in effect under the Modified Option
Agreement for that option, following such cessation of service as
an employee or a consultant of Synopsys and its subsidiaries. A
change in status from an employee to a consultant or from a
consultant to an employee will not constitute an interruption of
continuous status as an employee or a consultant.
(e) The adjusted exercise price payable for the
Synopsys Stock subject to each assumed SSI Option shall be
payable in any of the forms authorized under the Modified Option
Agreement applicable to that option. For purposes of determining
the holding period of any shares of Synopsys Stock delivered in
payment of such adjusted exercise price, the period for which
such shares were held as SSI Stock prior to the Acquisition shall
be taken into account.
(f) In order to exercise each assumed SSI Option,
Optionee must deliver to Synopsys a written notice of exercise in
which the number of shares of Synopsys Stock to be purchased
thereunder must be indicated. The exercise notice must be
accompanied by payment of the adjusted exercise price payable for
the purchased shares of Synopsys Stock and should be delivered to
Synopsys at the following address:
Synopsys, Inc.
700 East Middlefield Road
Mountain View, California 94043-4033
Attention: Option Plan Administrator
3. Except to the extent specifically modified by this Stock
Option Assumption Agreement, all of the terms and conditions of each Modified
Option Agreement as in effect immediately prior to the Acquisition shall
continue in full force and effect and shall not in any way be amended, revised
or otherwise affected by this Stock Option Assumption Agreement.
3.
<PAGE> 4
IN WITNESS WHEREOF, Synopsys has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly authorized officer
as of the ____ day of ____________________, 1998.
SYNOPSYS, INC.
By:_____________________________________
Title:__________________________________
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock
Option Assumption Agreement and understands and acknowledges that all rights and
liabilities with respect to each of his or her SSI Options hereby assumed by
Synopsys are as set forth only in the Modified Option Agreement, the Plan and
such Stock Option Assumption Agreement and no other agreements exist with
respect to his or her SSI Options. The undersigned also acknowledges that except
to the extent specifically modified by this Stock Assumption Agreement, all of
the terms and conditions of the Modified Option Agreement as in effect
immediately prior to the effective time shall continue in full force and effect
and shall not in any way be amended, revised or otherwise affected by this Stock
Option Assumption Agreement. The undersigned further acknowledges that the SSI
Option or Options described in Exhibit A hereto constitute all of the options or
other rights to purchase SSI Stock that he or she owned immediately prior to the
Effective Time.
________________________________________
DAVID ALLENBAUGH, OPTIONEE
DATED: __________________, 1998
4.
<PAGE> 5
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares
of Systems Science Inc. Common Stock (Pre-Acquisition)
and
Optionee's Outstanding Options to Purchase Shares
of Synopsys, Inc. Common Stock (Post-Acquisition)
<PAGE> 1
EXHIBIT 99.6
SYNOPSYS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
SYSTEMS SCIENCE INC.
1998 STOCK OPTION PLAN
OPTIONEE: KENT BRITTAIN
STOCK OPTION ASSUMPTION AGREEMENT issued as of the 21st day of
July, 1998 by Synopsys, Inc., a Delaware corporation ("Synopsys").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding options to purchase shares of the common stock of Systems
Science Inc., a California corporation ("SSI"), which were granted to Optionee
under the Systems Science Inc. 1998 Stock Option Plan (the "Plan") and are
evidenced by (i) a Stock Option Agreement (the "Option Agreement") between SSI
and Optionee and (ii) a letter dated March 9, 1998 from SSI to Optionee (the
"Letter"), which in part amends or modifies the Option Agreement. The Option
Agreement as amended by the Letter shall be referred to in this document as the
"Modified Option Agreement."
WHEREAS, SSI has this day been acquired by Synopsys through
Synopsys's purchase of all of the issued and outstanding shares of capital stock
of SSI (the "Acquisition") pursuant to the Stock Purchase Agreement, dated as of
July 17, 1998, by and between Synopsys, SSI and the SSI Securityholders (the
"Purchase Agreement").
WHEREAS, the provisions of the Purchase Agreement require
Synopsys to assume all obligations of SSI under all outstanding options under
the Plan at the consummation of the Acquisition and to issue to the holder of
each outstanding option an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Purchase Agreement,
the exchange ratio (the "Exchange Ratio") in effect for the Acquisition is
0.0096566 of a share of Synopsys common stock ("Synopsys Stock") for each
outstanding share of SSI common stock ("SSI Stock").
WHEREAS, this Agreement is to become effective immediately upon
the consummation of the Acquisition (the "Effective Time") in order to reflect
certain adjustments to Optionee's outstanding options under the Plan which have
become necessary by reason of the assumption of those options by Synopsys in
connection with the Acquisition.
<PAGE> 2
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Synopsys Stock subject to the stock
options held by Optionee under the Plan immediately prior to the Effective Time
(the "SSI Options") and the exercise price payable per share are set forth in
Exhibit A hereto. Synopsys hereby assumes, as of the Effective Time, all the
duties and obligations of SSI under each of the SSI Options. In connection with
such assumption, the number of shares of Synopsys Stock purchasable under each
SSI Option hereby assumed and the exercise price payable thereunder have been
adjusted to reflect the Exchange Ratio. Accordingly, the number of shares of
Synopsys Stock subject to each SSI Option hereby assumed shall be as specified
for that option in attached Exhibit A, and the adjusted exercise price payable
per share of Synopsys Stock under the assumed SSI Option shall be as indicated
for that option in attached Exhibit A.
2. The following provisions shall govern each SSI Option hereby
assumed by Synopsys:
(a) Unless the context otherwise requires, all
references in each Modified Option Agreement and in the Plan (as
incorporated into such Modified Option Agreement) (i) to the
"Company" shall mean Synopsys, (ii) to "Stock" shall mean shares
of Synopsys Stock, (iii) to the "Board" shall mean the Board of
Directors of Synopsys and (iv) to the "Committee" shall mean the
Compensation Committee of the Synopsys Board of Directors.
(b) The grant date and the expiration date of each
assumed SSI Option and all other provisions which govern either
the exercisability or the termination of the assumed SSI Option
shall remain the same as set forth in the Modified Option
Agreement applicable to that option and shall accordingly govern
and control Optionee's rights under this Agreement to purchase
Synopsys Stock.
(c) Pursuant to the terms of the Modified Option
Agreement, the installment vesting schedule in effect for each
assumed SSI Option held by Optionee shall automatically
accelerate by one (1) year upon the consummation of the
Acquisition. Each such assumed SSI Option held by Optionee, as so
accelerated and as adjusted in accordance with the provisions of
paragraph 1 above, shall be assumed by Synopsys as of the
Effective Time. Each such assumed SSI Option held by Optionee
shall thereafter continue to become exercisable for the remaining
shares in accordance with the installment exercise schedule in
effect under the applicable Modified Option Agreement immediately
prior to the Effective Time (after giving effect to the one year
of accelerated vesting), with the number of shares of Synopsys
Stock subject to each such installment adjusted to reflect the
Exchange Ratio.
(d) For purposes of applying any and all provisions
of the Modified Option Agreement relating to Optionee's status as
an employee or a
2.
<PAGE> 3
consultant of SSI, Optionee shall be deemed to continue in such
status as an employee or a consultant for so long as Optionee
renders services as an employee or a consultant to Synopsys or
any present or future Synopsys subsidiary. Accordingly, the
provisions of the Modified Option Agreement governing the
termination of the assumed SSI Options upon Optionee's cessation
of service as an employee or a consultant of SSI shall hereafter
be applied on the basis of Optionee's cessation of employee or
consultant status with Synopsys and its subsidiaries, and each
assumed SSI Option held by Optionee shall accordingly terminate,
within the designated time period in effect under the Modified
Option Agreement for that option, following such cessation of
service as an employee or a consultant of Synopsys and its
subsidiaries. A change in status from an employee to a consultant
or from a consultant to an employee will not constitute an
interruption of continuous status as an employee or a consultant.
(e) The adjusted exercise price payable for the
Synopsys Stock subject to each assumed SSI Option shall be
payable in any of the forms authorized under the Modified Option
Agreement applicable to that option. For purposes of determining
the holding period of any shares of Synopsys Stock delivered in
payment of such adjusted exercise price, the period for which
such shares were held as SSI Stock prior to the Acquisition shall
be taken into account.
(f) In order to exercise each assumed SSI Option,
Optionee must deliver to Synopsys a written notice of exercise in
which the number of shares of Synopsys Stock to be purchased
thereunder must be indicated. The exercise notice must be
accompanied by payment of the adjusted exercise price payable for
the purchased shares of Synopsys Stock and should be delivered to
Synopsys at the following address:
Synopsys, Inc.
700 East Middlefield Road
Mountain View, California 94043-4033
Attention: Option Plan Administrator
3. Except to the extent specifically modified by this Stock
Option Assumption Agreement, all of the terms and conditions of each Modified
Option Agreement as in effect immediately prior to the Acquisition shall
continue in full force and effect and shall not in any way be amended, revised
or otherwise affected by this Stock Option Assumption Agreement.
3.
<PAGE> 4
IN WITNESS WHEREOF, Synopsys has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly authorized officer
as of the ____ day of ____________________, 1998.
SYNOPSYS, INC.
By:_____________________________________
Title:__________________________________
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock
Option Assumption Agreement and understands and acknowledges that all rights and
liabilities with respect to each of his or her SSI Options hereby assumed by
Synopsys are as set forth only in the Modified Option Agreement, the Plan and
such Stock Option Assumption Agreement and no other agreements exist with
respect to his or her SSI Options. The undersigned also acknowledges that except
to the extent specifically modified by this Stock Assumption Agreement, all of
the terms and conditions of the Modified Option Agreement as in effect
immediately prior to the effective time shall continue in full force and effect
and shall not in any way be amended, revised or otherwise affected by this Stock
Option Assumption Agreement. The undersigned further acknowledges that the SSI
Option or Options described in Exhibit A hereto constitute all of the options or
other rights to purchase SSI Stock that he or she owned immediately prior to the
Effective Time.
___________________________________
KENT BRITTAIN, OPTIONEE
DATED: __________________, 1998
4.
<PAGE> 5
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares
of Systems Science Inc. Common Stock (Pre-Acquisition)
and
Optionee's Outstanding Options to Purchase Shares
of Synopsys, Inc. Common Stock (Post-Acquisition)
<PAGE> 1
EXHIBIT 99.7
SYNOPSYS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
SYSTEMS SCIENCE INC.
1998 STOCK OPTION PLAN
OPTIONEE: BRUCE GLADSTONE
STOCK OPTION ASSUMPTION AGREEMENT issued as of the 21st day of
July, 1998 by Synopsys, Inc., a Delaware corporation ("Synopsys").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding options to purchase shares of the common stock of Systems
Science Inc., a California corporation ("SSI"), which were granted to Optionee
under the Systems Science Inc. 1998 Stock Option Plan (the "Plan") and are
evidenced by (i) a Stock Option Agreement (the "Option Agreement") between SSI
and Optionee and (ii) a letter dated December 9, 1997 from SSI (the "Letter"),
which in part amends or modifies the Option Agreement. The Option Agreement as
amended by the Letter shall be referred to in this document as the "Modified
Option Agreement."
WHEREAS, SSI has this day been acquired by Synopsys through
Synopsys's purchase of all of the issued and outstanding shares of capital stock
of SSI (the "Acquisition") pursuant to the Stock Purchase Agreement, dated as of
July 17, 1998, by and between Synopsys, SSI and the SSI Securityholders (the
"Purchase Agreement").
WHEREAS, the provisions of the Purchase Agreement require
Synopsys to assume all obligations of SSI under all outstanding options under
the Plan at the consummation of the Acquisition and to issue to the holder of
each outstanding option an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Purchase Agreement,
the exchange ratio (the "Exchange Ratio") in effect for the Acquisition is
0.0096566 of a share of Synopsys common stock ("Synopsys Stock") for each
outstanding share of SSI common stock ("SSI Stock").
WHEREAS, this Agreement is to become effective immediately upon
the consummation of the Acquisition (the "Effective Time") in order to reflect
certain adjustments to Optionee's outstanding options under the Plan which have
become necessary by reason of the assumption of those options by Synopsys in
connection with the Acquisition.
<PAGE> 2
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Synopsys Stock subject to the stock
options held by Optionee under the Plan immediately prior to the Effective Time
(the "SSI Options") and the exercise price payable per share are set forth in
Exhibit A hereto. Synopsys hereby assumes, as of the Effective Time, all the
duties and obligations of SSI under each of the SSI Options. In connection with
such assumption, the number of shares of Synopsys Stock purchasable under each
SSI Option hereby assumed and the exercise price payable thereunder have been
adjusted to reflect the Exchange Ratio. Accordingly, the number of shares of
Synopsys Stock subject to each SSI Option hereby assumed shall be as specified
for that option in attached Exhibit A, and the adjusted exercise price payable
per share of Synopsys Stock under the assumed SSI Option shall be as indicated
for that option in attached Exhibit A.
2. The following provisions shall govern each SSI Option hereby
assumed by Synopsys:
(a) Unless the context otherwise requires, all
references in each Modified Option Agreement and in the Plan (as
incorporated into such Modified Option Agreement) (i) to the
"Company" shall mean Synopsys, (ii) to "Stock" shall mean shares
of Synopsys Stock, (iii) to the "Board" shall mean the Board of
Directors of Synopsys and (iv) to the "Committee" shall mean the
Compensation Committee of the Synopsys Board of Directors.
(b) The grant date and the expiration date of each
assumed SSI Option and all other provisions which govern either
the exercisability or the termination of the assumed SSI Option
shall remain the same as set forth in the Modified Option
Agreement applicable to that option and shall accordingly govern
and control Optionee's rights under this Agreement to purchase
Synopsys Stock.
(c) Synopsys has retained Optionee as an employee
of SSI after the Acquisition and the shares subject to each
assumed SSI Option held by Optionee shall continue to vest in
accordance with the same installment vesting schedule in effect
under the applicable Modified Option Agreement immediately prior
to the Effective Time, with the number of shares of Synopsys
Stock subject to each such installment adjusted to reflect the
Exchange Rate. Accordingly, no acceleration of vesting under the
SSI Options held by Optionee shall be deemed to occur under any
applicable Modified Option Agreement by reason of the
Acquisition, and the vesting dates under each applicable Modified
Option Agreement shall remain the same following the Acquisition.
(d) For purposes of applying any and all provisions
of the Modified Option Agreement relating to Optionee's status as
an employee or a consultant of SSI, Optionee shall be deemed to
continue in such status as an employee or a consultant for so
long as Optionee renders services as an employee
2.
<PAGE> 3
or a consultant to Synopsys or any present or future Synopsys
subsidiary. Accordingly, the provisions of the Modified Option
Agreement governing the termination of the assumed SSI Options
upon Optionee's cessation of service as an employee or a
consultant of SSI shall hereafter be applied on the basis of
Optionee's cessation of employee or consultant status with
Synopsys and its subsidiaries, and each assumed SSI Option shall
accordingly terminate, within the designated time period in
effect under the Modified Option Agreement for that option,
following such cessation of service as an employee or a
consultant of Synopsys and its subsidiaries. A change in status
from an employee to a consultant or from a consultant to an
employee will not constitute an interruption of continuous status
as an employee or a consultant.
(e) The adjusted exercise price payable for the
Synopsys Stock subject to each assumed SSI Option shall be
payable in any of the forms authorized under the Modified Option
Agreement applicable to that option. For purposes of determining
the holding period of any shares of Synopsys Stock delivered in
payment of such adjusted exercise price, the period for which
such shares were held as SSI Stock prior to the Acquisition shall
be taken into account.
(f) In order to exercise each assumed SSI Option,
Optionee must deliver to Synopsys a written notice of exercise in
which the number of shares of Synopsys Stock to be purchased
thereunder must be indicated. The exercise notice must be
accompanied by payment of the adjusted exercise price payable for
the purchased shares of Synopsys Stock and should be delivered to
Synopsys at the following address:
Synopsys, Inc.
700 East Middlefield Road
Mountain View, California 94043-4033
Attention: Option Plan Administrator
3. Except to the extent specifically modified by this Stock
Option Assumption Agreement, all of the terms and conditions of each Modified
Option Agreement as in effect immediately prior to the Acquisition shall
continue in full force and effect and shall not in any way be amended, revised
or otherwise affected by this Stock Option Assumption Agreement.
3.
<PAGE> 4
IN WITNESS WHEREOF, Synopsys has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly authorized officer
as of the ____ day of ____________________, 1998.
SYNOPSYS, INC.
By:_____________________________________
Title:__________________________________
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock
Option Assumption Agreement and understands and acknowledges that all rights and
liabilities with respect to each of his or her SSI Options hereby assumed by
Synopsys are as set forth only in the Modified Option Agreement, the Plan and
such Stock Option Assumption Agreement and no other agreements exist with
respect to his or her SSI Options. The undersigned also acknowledges that except
to the extent specifically modified by this Stock Assumption Agreement, all of
the terms and conditions of the Modified Option Agreement as in effect
immediately prior to the effective time shall continue in full force and effect
and shall not in any way be amended, revised or otherwise affected by this Stock
Option Assumption Agreement. The undersigned further acknowledges that the SSI
Option or Options described in Exhibit A hereto constitute all of the options or
other rights to purchase SSI Stock that he or she owned immediately prior to the
Effective Time.
___________________________________
BRUCE GLADSTONE, OPTIONEE
DATED: __________________, 1998
4.
<PAGE> 5
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares
of Systems Science Inc. Common Stock (Pre-Acquisition)
and
Optionee's Outstanding Options to Purchase Shares
of Synopsys, Inc. Common Stock (Post-Acquisition)
<PAGE> 1
EXHIBIT 99.8
SYNOPSYS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
SYSTEMS SCIENCE INC.
1998 STOCK OPTION PLAN
OPTIONEE: MEHDI MOHTASHEMI
STOCK OPTION ASSUMPTION AGREEMENT issued as of the 21st day of
July, 1998 by Synopsys, Inc., a Delaware corporation ("Synopsys").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding options to purchase shares of the common stock of Systems
Science Inc., a California corporation ("SSI"), which were granted to Optionee
under the Systems Science Inc. 1998 Stock Option Plan (the "Plan") and are
evidenced by (i) a Stock Option Agreement (the "Option Agreement") between SSI
and Optionee and (ii) a letter dated October 21, 1997 from SSI (the "Letter"),
which in part amends or modifies the Option Agreement. The Option Agreement as
amended by the Letter shall be referred to in this document as the "Modified
Option Agreement."
WHEREAS, SSI has this day been acquired by Synopsys through
Synopsys's purchase of all of the issued and outstanding shares of capital stock
of SSI (the "Acquisition") pursuant to the Stock Purchase Agreement, dated as of
July 17, 1998, by and between Synopsys, SSI and the SSI Securityholders (the
"Purchase Agreement").
WHEREAS, the provisions of the Purchase Agreement require
Synopsys to assume all obligations of SSI under all outstanding options under
the Plan at the consummation of the Acquisition and to issue to the holder of
each outstanding option an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Purchase Agreement,
the exchange ratio (the "Exchange Ratio") in effect for the Acquisition is
0.0096566 of a share of Synopsys common stock ("Synopsys Stock") for each
outstanding share of SSI common stock ("SSI Stock").
WHEREAS, this Agreement is to become effective immediately upon
the consummation of the Acquisition (the "Effective Time") in order to reflect
certain adjustments to Optionee's outstanding options under the Plan which have
become necessary by reason of the assumption of those options by Synopsys in
connection with the Acquisition.
<PAGE> 2
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Synopsys Stock subject to the stock
options held by Optionee under the Plan immediately prior to the Effective Time
(the "SSI Options") and the exercise price payable per share are set forth in
Exhibit A hereto. Synopsys hereby assumes, as of the Effective Time, all the
duties and obligations of SSI under each of the SSI Options. In connection with
such assumption, the number of shares of Synopsys Stock purchasable under each
SSI Option hereby assumed and the exercise price payable thereunder have been
adjusted to reflect the Exchange Ratio. Accordingly, the number of shares of
Synopsys Stock subject to each SSI Option hereby assumed shall be as specified
for that option in attached Exhibit A, and the adjusted exercise price payable
per share of Synopsys Stock under the assumed SSI Option shall be as indicated
for that option in attached Exhibit A.
2. The following provisions shall govern each SSI Option hereby
assumed by Synopsys:
(a) Unless the context otherwise requires, all
references in each Modified Option Agreement and in the Plan (as
incorporated into such Modified Option Agreement) (i) to the
"Company" shall mean Synopsys, (ii) to "Stock" shall mean shares
of Synopsys Stock, (iii) to the "Board" shall mean the Board of
Directors of Synopsys and (iv) to the "Committee" shall mean the
Compensation Committee of the Synopsys Board of Directors.
(b) The grant date and the expiration date of each
assumed SSI Option and all other provisions which govern either
the exercisability or the termination of the assumed SSI Option
shall remain the same as set forth in the Modified Option
Agreement applicable to that option and shall accordingly govern
and control Optionee's rights under this Agreement to purchase
Synopsys Stock.
(c) Pursuant to this Agreement, Synopsys hereby
assumes all the duties and obligations of SSI under each of the
SSI Options held by Optionee, and thus the shares subject to each
assumed SSI Option held by Optionee shall continue to vest in
accordance with the same installment vesting schedule in effect
under the applicable Modified Option Agreement immediately prior
to the Effective Time, with the number of shares of Synopsys
Stock subject to each such installment adjusted to reflect the
Exchange Rate. Accordingly, no acceleration of vesting under the
SSI Options held by Optionee shall be deemed to occur under any
applicable Modified Option Agreement by reason of the
Acquisition, and the vesting dates under each applicable Modified
Option Agreement shall remain the same following the Acquisition.
(d) For purposes of applying any and all provisions
of the Modified Option Agreement relating to Optionee's status as
an employee or a consultant of SSI, Optionee shall be deemed to
continue in such status as an
2.
<PAGE> 3
employee or a consultant for so long as Optionee renders services
as an employee or a consultant to Synopsys or any present or
future Synopsys subsidiary. Accordingly, the provisions of the
Modified Option Agreement governing the termination of the
assumed SSI Options upon Optionee's cessation of service as an
employee or a consultant of SSI shall hereafter be applied on the
basis of Optionee's cessation of employee or consultant status
with Synopsys and its subsidiaries, and each assumed SSI Option
shall accordingly terminate, within the designated time period in
effect under the Modified Option Agreement for that option,
following such cessation of service as an employee or a
consultant of Synopsys and its subsidiaries. A change in status
from an employee to a consultant or from a consultant to an
employee will not constitute an interruption of continuous status
as an employee or a consultant.
(e) The adjusted exercise price payable for the
Synopsys Stock subject to each assumed SSI Option shall be
payable in any of the forms authorized under the Modified Option
Agreement applicable to that option. For purposes of determining
the holding period of any shares of Synopsys Stock delivered in
payment of such adjusted exercise price, the period for which
such shares were held as SSI Stock prior to the Acquisition shall
be taken into account.
(f) In order to exercise each assumed SSI Option,
Optionee must deliver to Synopsys a written notice of exercise in
which the number of shares of Synopsys Stock to be purchased
thereunder must be indicated. The exercise notice must be
accompanied by payment of the adjusted exercise price payable for
the purchased shares of Synopsys Stock and should be delivered to
Synopsys at the following address:
Synopsys, Inc.
700 East Middlefield Road
Mountain View, California 94043-4033
Attention: Option Plan Administrator
3. Except to the extent specifically modified by this Stock
Option Assumption Agreement, all of the terms and conditions of each Modified
Option Agreement as in effect immediately prior to the Acquisition shall
continue in full force and effect and shall not in any way be amended, revised
or otherwise affected by this Stock Option Assumption Agreement.
3.
<PAGE> 4
IN WITNESS WHEREOF, Synopsys has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly authorized officer
as of the ____ day of ____________________, 1998.
SYNOPSYS, INC.
By:______________________________________
Title:___________________________________
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock
Option Assumption Agreement and understands and acknowledges that all rights and
liabilities with respect to each of his or her SSI Options hereby assumed by
Synopsys are as set forth only in the Modified Option Agreement, the Plan and
such Stock Option Assumption Agreement and no other agreements exist with
respect to his or her SSI Options. The undersigned also acknowledges that except
to the extent specifically modified by this Stock Assumption Agreement, all of
the terms and conditions of the Modified Option Agreement as in effect
immediately prior to the effective time shall continue in full force and effect
and shall not in any way be amended, revised or otherwise affected by this Stock
Option Assumption Agreement. The undersigned further acknowledges that the SSI
Option or Options described in Exhibit A hereto constitute all of the options or
other rights to purchase SSI Stock that he or she owned immediately prior to the
Effective Time.
___________________________________
MEHDI MOHTASHEMI, OPTIONEE
DATED: __________________, 1998
4.
<PAGE> 5
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares
of Systems Science Inc. Common Stock (Pre-Acquisition)
and
Optionee's Outstanding Options to Purchase Shares
of Synopsys, Inc. Common Stock (Post-Acquisition)
<PAGE> 1
EXHIBIT 99.9
SYNOPSYS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
SYSTEMS SCIENCE INC.
1998 STOCK OPTION PLAN
OPTIONEE: GHULAM NURIE
STOCK OPTION ASSUMPTION AGREEMENT issued as of the 21st day of
July, 1998 by Synopsys, Inc., a Delaware corporation ("Synopsys").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding options to purchase shares of the common stock of Systems
Science Inc., a California corporation ("SSI"), which were granted to Optionee
under the Systems Science Inc. 1998 Stock Option Plan (the "Plan") and are
evidenced by (i) a Stock Option Agreement (the "Option Agreement") between SSI
and Optionee and (ii) a letter dated February 17, 1998 from SSI to Optionee (the
"Letter"), which in part amends or modifies the Option Agreement. The Option
Agreement as amended by the Letter shall be referred to in this document as the
"Modified Option Agreement."
WHEREAS, SSI has this day been acquired by Synopsys through
Synopsys's purchase of all of the issued and outstanding shares of capital stock
of SSI (the "Acquisition") pursuant to the Stock Purchase Agreement, dated as of
July 17, 1998, by and between Synopsys, SSI and the SSI Securityholders (the
"Purchase Agreement").
WHEREAS, the provisions of the Purchase Agreement require
Synopsys to assume all obligations of SSI under all outstanding options under
the Plan at the consummation of the Acquisition and to issue to the holder of
each outstanding option an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Purchase Agreement,
the exchange ratio (the "Exchange Ratio") in effect for the Acquisition is
0.0096566 of a share of Synopsys common stock ("Synopsys Stock") for each
outstanding share of SSI common stock ("SSI Stock").
WHEREAS, this Agreement is to become effective immediately upon
the consummation of the Acquisition (the "Effective Time") in order to reflect
certain adjustments to Optionee's outstanding options under the Plan which have
become necessary by reason of the assumption of those options by Synopsys in
connection with the Acquisition.
<PAGE> 2
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Synopsys Stock subject to the stock
options held by Optionee under the Plan immediately prior to the Effective Time
(the "SSI Options") and the exercise price payable per share are set forth in
Exhibit A hereto. Synopsys hereby assumes, as of the Effective Time, all the
duties and obligations of SSI under each of the SSI Options. In connection with
such assumption, the number of shares of Synopsys Stock purchasable under each
SSI Option hereby assumed and the exercise price payable thereunder have been
adjusted to reflect the Exchange Ratio. Accordingly, the number of shares of
Synopsys Stock subject to each SSI Option hereby assumed shall be as specified
for that option in attached Exhibit A, and the adjusted exercise price payable
per share of Synopsys Stock under the assumed SSI Option shall be as indicated
for that option in attached Exhibit A.
2. The following provisions shall govern each SSI Option hereby
assumed by Synopsys:
(a) Unless the context otherwise requires, all
references in each Modified Option Agreement and in the Plan (as
incorporated into such Modified Option Agreement) (i) to the
"Company" shall mean Synopsys, (ii) to "Stock" shall mean shares
of Synopsys Stock, (iii) to the "Board" shall mean the Board of
Directors of Synopsys and (iv) to the "Committee" shall mean the
Compensation Committee of the Synopsys Board of Directors.
(b) The grant date and the expiration date of each
assumed SSI Option and all other provisions which govern either
the exercisability or the termination of the assumed SSI Option
shall remain the same as set forth in the Modified Option
Agreement applicable to that option and shall accordingly govern
and control Optionee's rights under this Agreement to purchase
Synopsys Stock.
(c) Pursuant to the terms of the Modified Option
Agreement, the installment vesting schedule in effect for each
assumed SSI Option held by Optionee shall automatically
accelerate by two (2) years upon the consummation of the
Acquisition. Each such assumed SSI Option held by Optionee, as so
accelerated and as adjusted in accordance with the provisions of
paragraph 1 above, shall be assumed by Synopsys as of the
Effective Time. Each such assumed SSI Option held by Optionee
shall thereafter continue to become exercisable for the remaining
shares in accordance with the installment exercise schedule in
effect under the applicable Modified Option Agreement immediately
prior to the Effective Time (after giving effect to the two years
of accelerated vesting), with the number of shares of Synopsys
Stock subject to each such installment adjusted to reflect the
Exchange Ratio.
(d) For purposes of applying any and all provisions
of the Modified Option Agreement relating to Optionee's status as
an employee or a
2.
<PAGE> 3
consultant of SSI, Optionee shall be deemed to continue in such
status as an employee or a consultant for so long as Optionee
renders services as an employee or a consultant to Synopsys or
any present or future Synopsys subsidiary. Accordingly, the
provisions of the Modified Option Agreement governing the
termination of the assumed SSI Options upon Optionee's cessation
of service as an employee or a consultant of SSI shall hereafter
be applied on the basis of Optionee's cessation of employee or
consultant status with Synopsys and its subsidiaries, and each
assumed SSI Option shall accordingly terminate, within the
designated time period in effect under the Modified Option
Agreement for that option, following such cessation of service as
an employee or a consultant of Synopsys and its subsidiaries. A
change in status from an employee to a consultant or from a
consultant to an employee will not constitute an interruption of
continuous status as an employee or a consultant.
(e) The adjusted exercise price payable for the
Synopsys Stock subject to each assumed SSI Option shall be
payable in any of the forms authorized under the Modified Option
Agreement applicable to that option. For purposes of determining
the holding period of any shares of Synopsys Stock delivered in
payment of such adjusted exercise price, the period for which
such shares were held as SSI Stock prior to the Acquisition shall
be taken into account.
(f) In order to exercise each assumed SSI Option,
Optionee must deliver to Synopsys a written notice of exercise in
which the number of shares of Synopsys Stock to be purchased
thereunder must be indicated. The exercise notice must be
accompanied by payment of the adjusted exercise price payable for
the purchased shares of Synopsys Stock and should be delivered to
Synopsys at the following address:
Synopsys, Inc.
700 East Middlefield Road
Mountain View, California 94043-4033
Attention: Option Plan Administrator
3. Except to the extent specifically modified by this Stock
Option Assumption Agreement, all of the terms and conditions of each Modified
Option Agreement as in effect immediately prior to the Acquisition shall
continue in full force and effect and shall not in any way be amended, revised
or otherwise affected by this Stock Option Assumption Agreement.
3.
<PAGE> 4
IN WITNESS WHEREOF, Synopsys has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly authorized officer
as of the ____ day of ____________________, 1998.
SYNOPSYS, INC.
By:______________________________________
Title:___________________________________
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock
Option Assumption Agreement and understands and acknowledges that all rights and
liabilities with respect to each of his or her SSI Options hereby assumed by
Synopsys are as set forth only in the Modified Option Agreement, the Plan and
such Stock Option Assumption Agreement and no other agreements exist with
respect to his or her SSI Options. The undersigned also acknowledges that except
to the extent specifically modified by this Stock Assumption Agreement, all of
the terms and conditions of the Modified Option Agreement as in effect
immediately prior to the effective time shall continue in full force and effect
and shall not in any way be amended, revised or otherwise affected by this Stock
Option Assumption Agreement. The undersigned further acknowledges that the SSI
Option or Options described in Exhibit A hereto constitute all of the options or
other rights to purchase SSI Stock that he or she owned immediately prior to the
Effective Time.
___________________________________
GHULAM NURIE, OPTIONEE
DATED: __________________, 1998
4.
<PAGE> 5
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares
of Systems Science Inc. Common Stock (Pre-Acquisition)
and
Optionee's Outstanding Options to Purchase Shares
of Synopsys, Inc. Common Stock (Post-Acquisition)
<PAGE> 1
EXHIBIT 99.10
SYNOPSYS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
SYSTEMS SCIENCE INC.
1998 STOCK OPTION PLAN
OPTIONEE: RAVI RAVIKUMAR
STOCK OPTION ASSUMPTION AGREEMENT issued as of the 21st day of
July, 1998 by Synopsys, Inc., a Delaware corporation ("Synopsys").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding options to purchase shares of the common stock of Systems
Science Inc., a California corporation ("SSI"), which were granted to Optionee
under the Systems Science Inc. 1998 Stock Option Plan (the "Plan") and are
evidenced by (i) a Stock Option Agreement (the "Option Agreement") between SSI
and Optionee and (ii) a letter dated November 5, 1997 from SSI (the "Letter"),
which in part amends or modifies the Option Agreement. The Option Agreement as
amended by the Letter shall be referred to in this document as the "Modified
Option Agreement."
WHEREAS, SSI has this day been acquired by Synopsys through
Synopsys's purchase of all of the issued and outstanding shares of capital stock
of SSI (the "Acquisition") pursuant to the Stock Purchase Agreement, dated as of
July 17, 1998, by and between Synopsys, SSI and the SSI Securityholders (the
"Purchase Agreement").
WHEREAS, the provisions of the Purchase Agreement require
Synopsys to assume all obligations of SSI under all outstanding options under
the Plan at the consummation of the Acquisition and to issue to the holder of
each outstanding option an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Purchase Agreement,
the exchange ratio (the "Exchange Ratio") in effect for the Acquisition is
0.0096566 of a share of Synopsys common stock ("Synopsys Stock") for each
outstanding share of SSI common stock ("SSI Stock").
WHEREAS, this Agreement is to become effective immediately upon
the consummation of the Acquisition (the "Effective Time") in order to reflect
certain adjustments to Optionee's outstanding options under the Plan which have
become necessary by reason of the assumption of those options by Synopsys in
connection with the Acquisition.
<PAGE> 2
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Synopsys Stock subject to the stock
options held by Optionee under the Plan immediately prior to the Effective Time
(the "SSI Options") and the exercise price payable per share are set forth in
Exhibit A hereto. Synopsys hereby assumes, as of the Effective Time, all the
duties and obligations of SSI under each of the SSI Options. In connection with
such assumption, the number of shares of Synopsys Stock purchasable under each
SSI Option hereby assumed and the exercise price payable thereunder have been
adjusted to reflect the Exchange Ratio. Accordingly, the number of shares of
Synopsys Stock subject to each SSI Option hereby assumed shall be as specified
for that option in attached Exhibit A, and the adjusted exercise price payable
per share of Synopsys Stock under the assumed SSI Option shall be as indicated
for that option in attached Exhibit A.
2. The following provisions shall govern each SSI Option hereby
assumed by Synopsys:
(a) Unless the context otherwise requires, all
references in each Modified Option Agreement and in the Plan (as
incorporated into such Modified Option Agreement) (i) to the
"Company" shall mean Synopsys, (ii) to "Stock" shall mean shares
of Synopsys Stock, (iii) to the "Board" shall mean the Board of
Directors of Synopsys and (iv) to the "Committee" shall mean the
Compensation Committee of the Synopsys Board of Directors.
(b) The grant date and the expiration date of each
assumed SSI Option and all other provisions which govern either
the exercisability or the termination of the assumed SSI Option
shall remain the same as set forth in the Modified Option
Agreement applicable to that option and shall accordingly govern
and control Optionee's rights under this Agreement to purchase
Synopsys Stock.
(c) Synopsys has retained Optionee as an employee
of SSI after the Acquisition in an equivalent position to what
Optionee held prior to the Acquisition and the shares subject to
each assumed SSI Option held by Optionee shall continue to vest
in accordance with the same installment vesting schedule in
effect under the applicable Modified Option Agreement immediately
prior to the Effective Time, with the number of shares of
Synopsys Stock subject to each such installment adjusted to
reflect the Exchange Rate. Accordingly, no acceleration of
vesting under the SSI Options held by Optionee shall be deemed to
occur under any Modified Option Agreement by reason of the
Acquisition, and the vesting dates under each applicable Modified
Option Agreement shall remain the same following the Acquisition.
(d) For purposes of applying any and all provisions
of the Modified Option Agreement relating to Optionee's status as
an employee or a consultant of SSI, Optionee shall be deemed to
continue in such status as an
2.
<PAGE> 3
employee or a consultant for so long as Optionee renders services
as an employee or a consultant to Synopsys or any present or
future Synopsys subsidiary. Accordingly, the provisions of the
Modified Option Agreement governing the termination of the
assumed SSI Options upon Optionee's cessation of service as an
employee or a consultant of SSI shall hereafter be applied on the
basis of Optionee's cessation of employee or consultant status
with Synopsys and its subsidiaries, and each assumed SSI Option
shall accordingly terminate, within the designated time period in
effect under the Modified Option Agreement for that option,
following such cessation of service as an employee or a
consultant of Synopsys and its subsidiaries. A change in status
from an employee to a consultant or from a consultant to an
employee will not constitute an interruption of continuous status
as an employee or a consultant.
(e) The adjusted exercise price payable for the
Synopsys Stock subject to each assumed SSI Option shall be
payable in any of the forms authorized under the Modified Option
Agreement applicable to that option. For purposes of determining
the holding period of any shares of Synopsys Stock delivered in
payment of such adjusted exercise price, the period for which
such shares were held as SSI Stock prior to the Acquisition shall
be taken into account.
(f) In order to exercise each assumed SSI Option,
Optionee must deliver to Synopsys a written notice of exercise in
which the number of shares of Synopsys Stock to be purchased
thereunder must be indicated. The exercise notice must be
accompanied by payment of the adjusted exercise price payable for
the purchased shares of Synopsys Stock and should be delivered to
Synopsys at the following address:
Synopsys, Inc.
700 East Middlefield Road
Mountain View, California 94043-4033
Attention: Option Plan Administrator
3. Except to the extent specifically modified by this Stock
Option Assumption Agreement, all of the terms and conditions of each Modified
Option Agreement as in effect immediately prior to the Acquisition shall
continue in full force and effect and shall not in any way be amended, revised
or otherwise affected by this Stock Option Assumption Agreement.
3.
<PAGE> 4
IN WITNESS WHEREOF, Synopsys has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly authorized officer
as of the ____ day of ____________________, 1998.
SYNOPSYS, INC.
By:_____________________________________
Title:__________________________________
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock
Option Assumption Agreement and understands and acknowledges that all rights and
liabilities with respect to each of his or her SSI Options hereby assumed by
Synopsys are as set forth only in the Modified Option Agreement, the Plan and
such Stock Option Assumption Agreement and no other agreements exist with
respect to his or her SSI Options. The undersigned also acknowledges that except
to the extent specifically modified by this Stock Assumption Agreement, all of
the terms and conditions of the Modified Option Agreement as in effect
immediately prior to the effective time shall continue in full force and effect
and shall not in any way be amended, revised or otherwise affected by this Stock
Option Assumption Agreement. The undersigned further acknowledges that the SSI
Option or Options described in Exhibit A hereto constitute all of the options or
other rights to purchase SSI Stock that he or she owned immediately prior to the
Effective Time.
________________________________________
RAVI RAVIKUMAR, OPTIONEE
DATED: __________________, 1998
4.
<PAGE> 5
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares
of Systems Science Inc. Common Stock (Pre-Acquisition)
and
Optionee's Outstanding Options to Purchase Shares
of Synopsys, Inc. Common Stock (Post-Acquisition)
