<PAGE>
As filed with the Securities and Exchange Commission on November 26, 1997.
Registration No. 333-_______
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------------
CONDUCTUS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 77-0162388
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
969 WEST MAUDE AVENUE
SUNNYVALE, CALIFORNIA 94086
(Address of principal executive offices) (Zip Code)
--------------------
1992 STOCK OPTION/STOCK ISSUANCE PLAN
1994 EMPLOYEE STOCK PURCHASE PLAN
STOCK OPTION AGREEMENT (KAPLAN)
(Full title of the Plans)
--------------------
CHARLES E. SHALVOY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
969 WEST MAUDE AVENUE, SUNNYVALE, CA 94086
(Name and address of agent for service)
(408)-523-9950
(Telephone number, including area code, of agent for service)
--------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
1992 STOCK OPTION/STOCK ISSUANCE PLAN:
Options to Purchase Common Stock 200,000 Shares N/A N/A N/A
Common Stock, $0.0001 par value 200,000 Shares $4.875 $975,000 $295.45
1994 EMPLOYEE STOCK PURCHASE PLAN:
Common Stock, $0.0001 par value 150,000 Shares $4.875 $731,250 $221.59
OPTION AGREEMENT
Options to Purchase 15,000 Shares N/A N/A N/A
Common Stock (Kaplan) 15,000 Shares $4.875 $ 73,125 $ 22.16
</TABLE>
(1) This Registration Statement shall also cover any additional
shares of Common Stock which become issuable under the Conductus, Inc.
1992 Stock Option/Stock Issuance Plan, by reason of any stock
dividend, stock split, recapitalization or other similar transaction
effected without the receipt of consideration which results in an
increase in the number of the outstanding shares of Common Stock of
Conductus, Inc.
(2) Calculated solely for purposes of this offering under Rule 457(h)
of the Securities Act of 1933, as amended, on the basis of the average
of the high and low price per share of Common Stock of Conductus, Inc.
as reported on the Nasdaq National Market on November 21, 1997.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE
Conductus, Inc. (the "Registrant") hereby incorporates by reference
into this Registration Statement the following documents previously filed
with the Securities and Exchange Commission (the "SEC"):
(a) The Registrant's report on Form 10-K for the fiscal year ended
December 27, 1996, and on Form 10-Q for the quarters ended
March 28, 1997, June 30, 1997, and September 30, 1997;
(b) The Registrant's Registration Statement No. 0-19915 on Form 8-A
filed with the SEC on March 6, 1992, and amended on July 6, 1993,
pursuant to Section 12(b) of the Securities Exchange Act of 1934
(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.
Item 4. DESCRIPTION OF SECURITIES
Not Applicable.
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a
court to award or a corporation's Board of Directors to grant indemnification
to directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the 1933 Act. The
Registrant's Bylaws provide for mandatory indemnification of its directors
and officers and permissible indemnification of employees and other agents to
the maximum extent permitted by the Delaware General Corporation Law. The
Registrant's Certificate of Incorporation provides that, pursuant to Delaware
law, its directors shall not be liable for monetary damages for breach of the
directors' fiduciary duty as directors to the Registrant and its
stockholders. This provision in the Certificate of Incorporation does not
eliminate the directors' fiduciary duty, and in appropriate circumstances
equitable remedies, such as injunctive or other forms of non-monetary relief,
will remain available under Delaware law. In addition, each director will
continue to be subject to liability for breach of the director's duty of
loyalty to the Registrant for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for actions
leading to improper personal benefit of the director, and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware law.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
II-1
<PAGE>
Item 8. EXHIBITS
Exhibit Number Exhibit
- -------------- -------
5 Opinion and consent of Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP.
23.1 Consent of Coopers & Lybrand L.L.P. - Independent
Accountants.
23.2 Consent of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-3 of this
Registration Statement.
Item 9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include any prospectus
required by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the
prospectus any facts or events arising after the effective date of this
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in
the information set forth in this Registration Statement and (iii) to include
any material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change to
such information in this Registration Statement; PROVIDED, however, that
clauses (1)(i) and (1)(ii) shall not apply if the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section
15(d) of the 1934 Act that are incorporated by reference into this
Registration Statement; (2) that for the purpose of determining any liability
under the 1933 Act each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof and (3) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the Registrant's 1992 Stock Option/Stock
Issuance Plan and 1994 Employee Stock Purchase 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 indemnification provisions summarized in Item
6, or otherwise, the Registrant has been advised that, in the opinion of the
SEC, such indemnification is against public policy as expressed in the 1933
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933
Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
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 Sunnyvale, state of California, on
this 26th day of November 1997.
CONDUCTUS, INC.
By: /s/ CHARLES E. SHALVOY
-----------------------------------
Charles E. Shalvoy
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Conductus, Inc., a
Delaware corporation, do hereby constitute and appoint Charles E. Shalvoy, the
lawful attorney-in-fact and agent with full power and authority to do any and
all acts and things and to execute any and all instruments which said
attorney and agent, determines 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 all that said attorney and agent,
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/ CHARLES E. SHALVOY President, Chief Executive Officer November 26, 1997
- ------------------------------- and Director
Charles E. Shalvoy (Principal Executive Officer)
/s/ DONALD F. DePASCAL Controller (Principal November 26, 1997
- ------------------------------- Financial and Accounting Officer)
Donald F. DePascal
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ JOHN F. SHOCH Chairman of the Board November 26, 1997
- -------------------------------
John F. Shoch
- ------------------------------- Director _________, 1997
Martin Cooper
/s/ ROBERT JANOWIAK Director November 26, 1997
- -------------------------------
Robert Janowiak
/s/ MARTIN A. KAPLAN Director November 26,1997
- -------------------------------
Martin A. Kaplan
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibit Sequentially Numbered Page
- -------------- ------- --------------------------
<S> <C> <C>
5 Opinion and consent of Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP.
23.1 Consent of Coopers & Lybrand L.L.P. - Independent Accountants.
23.2 Consent of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 1992 Stock Option/Stock Issuance Plan.
99.2 Form of Notice of Grant of Stock Option (incorporated by
reference to Registration Statement No. 33-82454 on Form
S-8 filed with the SEC on August 5, 1994).
99.3 Form of Stock Option Agreement (incorporated by reference to
Registration Statement No. 33-82454 on Form S-8 filed with
the SEC on August 5, 1994).
99.4 Addendum to Stock Option Agreement - Financial Assistance
(incorporated by reference to Registration Statement No.
33-82454 on Form S-8 filed with the SEC on August 5, 1994).
99.5 Addendum to Stock Option Agreement - Limited Stock
Appreciation Right (incorporated by reference to
Registration Statement No. 33-82454 on Form S-8 filed with
the SEC on August 5, 1994).
99.6 Form of Stock Issuance Agreement (incorporated by
reference to Registration Statement No. 33-82454 on Form
S-8 filed with the SEC on August 5, 1994).
99.7 Form of Stock Purchase Agreement (incorporated by
reference to Registration Statement No. 33-82454 on Form
S-8 filed with the SEC on August 5, 1994).
99.8 Form of Notice of Grant (Non-Employee Director) to be
generally used in connection with the automatic grant
program of the 1992 Stock Option/Stock Issuance Plan.
99.9 Form of Stock Option Agreement (Non-Employee Director) to
be generally used in connection with the automatic grant
program of the 1992 Stock Option/Stock Issuance Plan.
99.10 Option Agreement with Notice of Grant between Martin A.
Kaplan and Registrant dated November 12, 1997.
</TABLE>
<PAGE>
November 21, 1997
Conductus, Inc.
969 West Maude Avenue
Sunnyvale, California 94086
Re: Conductus, Inc. (the "Company")
Registration Statement for
365,000 Shares of Common Stock
Ladies and Gentlemen:
We refer to your registration on Form S-8 (the "Registration Statement")
under the Securities Act of 1933, as amended, of the 200,000 shares of Common
Stock available for issuance under the Company's 1992 Stock Option/Stock
Issuance Plan; of the 150,000 shares of Common Stock available for issuance
under the Company's 1994 Employee Stock Purchase Plan and of the 15,000 shares
of Common Stock available for issuance under under a Written Option Agreement
dated November 12, 1997. We advise you that, in our opinion, when such shares
have been issued and sold pursuant to the applicable provisions of the Company's
1992 Stock Option/Stock Issuance Plan, the Company's 1994 Employee Stock
Purchase Plan or the Written Option Agreement in accordance with the
Registration Statement, such shares will be validly issued, fully paid and
nonassessable shares of the Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP
Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP
<PAGE>
EXHIBIT 23.1
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statement of
Conductus, Inc. on Form S-8 (File Registration No. 333-_______________) of our
report dated February 7, 1997, on our audits of the consolidated financial
statements and financial statement schedules of Conductus, Inc. as of December
31, 1996 and 1995, and for the years ended December 31, 1996, 1995 and 1994,
which report is included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand LLP
San Jose, California
November 25, 1997
<PAGE>
CONDUCTUS, INC.
1992 STOCK OPTION/STOCK ISSUANCE PLAN
(AMENDED AND RESTATED EFFECTIVE OCTOBER 1996)
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1992 Stock Option/Stock Issuance Plan ("Plan") is intended
to promote the interests of Conductus, Inc., a Delaware corporation (the
"Corporation"), by providing eligible individuals with the opportunity to
acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Corporation as an incentive for them to remain in the
service of the Corporation (or its parent or subsidiary corporations).
B. The Plan was restated effective on the first date on which the
shares of the Corporation's common stock were registered under Section 12(g)
of the Securities Exchange Act of 1934, as amended (the "1934 Act") (such
date is hereby designated as the "IPO Effective Date"). The Plan serves as
the successor to the Corporation's 1987 Stock Option Plan and 1989 Stock
Option Plan (collectively, the "Predecessor Plans") and no further option
grants shall be made under the Predecessor Plans. All options outstanding
under the Predecessor Plans have been incorporated into this Plan and shall
accordingly be treated as outstanding options under this Plan.
C. For purposes of the Plan, the following provisions shall be
applicable in determining the parent and subsidiary corporations of the
Corporation:
Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation
shall be considered to be a PARENT of the Corporation, provided
each such corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation
shall be considered to be a SUBSIDIARY of the Corporation,
provided each such corporation (other than the last corporation)
in the unbroken chain owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the
other corporations in such chain.
<PAGE>
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate components: the
Discretionary Option Grant Program specified in Article Two, the Automatic
Option Grant Program specified in Article Three, and the Stock Issuance
Program specified in Article Four. Under the Discretionary Option Grant
Program, eligible individuals may be granted options to purchase shares of
the Corporation's common stock. Under the Automatic Option Grant Program,
non-employee Board members automatically receive non-statutory options to
purchase shares of the Corporation's common stock. The Stock Issuance Program
shall allow eligible individuals to purchase shares of the Corporation's
common stock; such shares may be issued as fully-vested shares or as shares
vesting over time.
B. The provisions of Articles One and Five of the Plan shall apply
to the Discretionary Option Grant Program, the Automatic Option Grant
Program, and the Stock Issuance Program unless otherwise indicated.
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by a committee ("Committee") of
two (2) or more non-employee Board members appointed by the Board. No Board
member shall be eligible to serve on the Committee if such individual has,
within the relevant period designated below, received an option grant (other
than an Automatic Grant) or stock issuance under this Plan or any other stock
plan of the Corporation (or any parent or subsidiary corporation):
(1) for each of the initial members of the Committee, the
period commencing with the IPO Effective Date and ending with the date of his
or her appointment to the Committee, or
(2) for any successor or substitute member, the twelve
(12)-month period immediately preceding the date of his or her appointment to
the Committee.
Members of the Committee shall serve for such period of time as the
Board may determine and shall be subject to removal by the Board at any time.
B. The Committee as Plan Administrator shall have full power and
authority (subject to the express provisions of the Plan) to establish such
rules and regulations as it may deem appropriate for the proper
administration of the Plan and to make such determinations under, and issue
such interpretations of, the Plan and any outstanding option grants or stock
issuances as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest
in the Plan or any outstanding option or stock issuance.
C. Service on the Committee shall constitute service as a Board
member, and members of the Committee shall accordingly be entitled to full
indemnification and
2
<PAGE>
reimbursement as Board members for their service on the Committee. No member
of the Committee shall be liable for any act or omission made in good faith
with respect to the Plan or any option granted under the Plan.
IV. OPTION GRANTS AND STOCK ISSUANCES
A. The persons eligible to receive stock issuances under the Stock
Issuance Program ("Participant") and/or option grants pursuant to the
Discretionary Option Grant Program ("Optionee") are as follows:
(1) key employees (including officers and directors) of the
Corporation (or its parent or subsidiary corporations) who render services
which contribute to the management, growth and financial success of the
Corporation (or its parent or subsidiary corporations), and
(2) those consultants or other independent contractors who
provide valuable services to the Corporation (or its parent or subsidiary
corporations).
B. Members of the Board who are not employees of the Corporation
or its subsidiaries ("Outside Directors") will receive options in accordance
with, and only in accordance with, the Plan's Automatic Option Grant Program;
provided, however, that nothing in this Plan shall be construed to prevent an
Outside Director from declining to receive an option under this Plan.
C. The Plan Administrator shall have full authority to determine
(i) with respect to the discretionary option grants made under Article Two,
which eligible individuals are to receive option grants, the number of shares
to be covered by each such grant, whether the granted option is to be an
incentive stock option ("Incentive Option") which satisfies the requirements
of Section 422 of the Internal Revenue Code or a non-statutory option not
intended to meet such requirements, the time or times at which each granted
option is to become exercisable and the maximum term for which the option may
remain outstanding and (ii) with respect to stock issuances under the Stock
Issuance Program, which eligible individuals are to be selected for
participation, the number of shares to be issued to each Participant, the
vesting schedule (if any) to be applicable to the issued shares, and the
consideration to be paid by the Participant for such shares.
D. The Plan Administrator shall have the absolute discretion
either to grant options in accordance with Article Two of the Plan or to
effect stock issuances in accordance with Article Four of the Plan.
V. STOCK SUBJECT TO THE PLAN
A. Shares of the Corporation's common stock (the "Common Stock")
shall be available for issuance under the Plan and shall be drawn from either
the Corporation's authorized
3
<PAGE>
but unissued shares of Common Stock or from reacquired shares of Common
Stock, including shares repurchased by the Corporation on the open market.
The maximum number of shares of Common Stock which may be issued over the
term of the Plan shall not exceed 2,080,000 shares of Common Stock, subject
to adjustment from time to time in accordance with the provisions of this
Section V. To the extent one or more outstanding options under the
Predecessor Plans which have been incorporated into this Plan are
subsequently exercised, the number of shares issued with respect to each such
option shall reduce, on a share-for-share basis, the number of shares
available for issuance under this Plan.
B. In no event may any one individual participating in the Plan be
granted stock options and direct stock issuances for more than 240,000 shares
of Common Stock in the aggregate over the remaining term of the Plan, subject
to adjustment from time to time in accordance with the provisions of this
Section V. For purposes of such limitation, no stock options or direct stock
issuances granted prior to January 1, 1994, shall be taken into account.
C. Should one or more outstanding options under this Plan
(including outstanding options under the Predecessor Plans incorporated into
this Plan) expire or terminate for any reason prior to exercise in full
(including any option cancelled in accordance with the cancellation-regrant
provisions of Section V of Article Two of the Plan), then the shares subject
to the portion of each option not so exercised shall be available for
subsequent option grant or share issuance under the Plan. Shares subject to
any option or portion thereof cancelled in accordance with Section V of
Article Two and shares repurchased by the Corporation pursuant to its
repurchase rights under the Plan or otherwise surrendered for cancellation
under Section I.B(3) of Article Four shall NOT be available for subsequent
option grant or stock issuance under the Plan. In addition, should the
exercise price of an outstanding option under the Plan (including any option
incorporated from the Predecessor Plans) be paid with shares of Common Stock,
then the number of shares of Common Stock available for issuance under the
Plan shall be reduced by the gross number of shares for which the option is
exercised, and not by the net number of shares of Common Stock actually
issued to the option holder.
D. In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without receipt of
consideration, then appropriate adjustments shall be made to (i) the maximum
number and/or class of shares issuable under the Plan, (ii) the maximum
number and/or class of shares for which any one individual participating in
the Plan may be granted stock options and direct stock issuances in the
aggregate over the term of the Plan, (iii) the number and/or class of shares
and price per share in effect under each outstanding option under the Plan
and (iv) the number and/or class of shares and price per share in effect
under each outstanding option incorporated into this Plan from the
Predecessor Plans. Such adjustments to the outstanding options are to be
effected in a manner which shall preclude the enlargement or dilution of
rights and benefits under such options. The adjustments determined by the
Plan Administrator shall be final, binding and conclusive.
4
<PAGE>
E. Common Stock issuable under the Plan, whether under the
Discretionary Option Grant Program or the Stock Issuance Program, may be
subject to such restrictions on transfer, repurchase rights or other
restrictions determined by the Plan Administrator.
5
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Discretionary options granted pursuant to the Plan shall be
authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or non-statutory
options. Individuals who are not Employees may only be granted non-statutory
options. Each granted option shall be evidenced by one or more instruments
in the form approved by the Plan Administrator; PROVIDED, however, that each
such instrument shall comply with the terms and conditions specified below.
Each instrument evidencing an Incentive Option shall, in addition, be subject
to the applicable provisions of Section II of this Article Two.
A. OPTION PRICE.
(1) The option price per share shall be fixed by the Plan
Administrator. In no event, however, shall it be less than eighty-five
percent (85%) of the fair market value per share of Common Stock on the date
of the option grant.
(2) The option price shall become immediately due upon
exercise of the option and, subject to the provisions of Article Five,
Section I and the instrument evidencing the grant, shall be payable in one of
the following alternative forms specified below:
- payment in cash or check payable to the
Corporation; or
- payment in shares of Common Stock held for at
least six (6) months and valued at fair market value on the Exercise
Date (as such term is defined below).
- payment through a broker-dealer sale and
remittance procedure pursuant to which the Optionee shall
provide irrevocable written instructions (i) to a designated
brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the
aggregate option price payable for the purchased shares plus
all applicable Federal and State income and employment taxes
required to be withheld by the Corporation in connection with
such purchase and (ii) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage
firm in order to complete the sale transaction.
For purposes of this subparagraph (2), the Exercise Date shall be
the date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent
6
<PAGE>
the sale and remittance procedure is used in connection with the exercise of
the option, payment of the option price for the purchased shares must
accompany such notice.
B. FAIR MARKET VALUE. The fair market value per share of Common
Stock shall be determined in accordance with the following provisions:
(1) If the Common Stock is not at the time listed or admitted
to trading on any stock exchange but is traded on the Nasdaq National Market,
the fair market value shall be the closing price of one share of Common Stock
on the date in question, as such price is reported by the National
Association of Securities Dealers through its Nasdaq system or any successor
system. If there is no closing price for the Common Stock on the date in
question, then the closing price on the last preceding date for which such
quotation exists shall be determinative of fair market value.
(2) If the Common Stock is at the time listed or admitted to
trading on any national stock exchange, then the fair market value shall be
the closing selling price per share of Common Stock on the date in question
on the stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the fair
market value shall be the closing selling price on the exchange on the last
preceding date for which such quotation exists.
C. TERM AND EXERCISE OF OPTIONS. Each option granted under this
Article Two shall be exercisable at such time or times and during such period
as is determined by the Plan Administrator and set forth in the stock option
agreement evidencing the grant. No such option, however, shall have a maximum
term in excess of ten (10) years from the grant date. During the lifetime of
the Optionee, the option shall be exercisable only by the Optionee and shall
not be assignable or transferable by the Optionee otherwise than by will or
by the laws of descent and distribution following the Optionee's death.
D. TERMINATION OF SERVICE.
(1) Except to the extent otherwise provided pursuant to
subparagraph (3) below, the following provisions shall govern the exercise
period applicable to any outstanding options under the Plan which are held by
the Optionee at the time of his or her cessation of Service or death.
- Should an Optionee cease to remain in
Service for any reason other than death or permanent
disability, then the period for which each outstanding option
held by such Optionee is to remain exercisable shall be
limited to the three (3)-month period following the date of
such cessation of Service.
7
<PAGE>
- In the event such Service terminates
by reason of permanent disability (as defined in Section
22(e)(3) of the Internal Revenue Code), then the period for
which each outstanding option held by an Optionee is to
remain exercisable shall be limited to the twelve (12)-month
period following the date of such cessation of Service.
- Should an Optionee die while in Service or
during the three (3)-month period following his or her
cessation of Service, then the period for which each of his
or her outstanding options is to remain exercisable shall be
limited to the three (3)-year period following the date of
the Optionee's death. During such limited period, the option
may be exercised by the personal representative of the
Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution.
- Under no circumstances, however, shall
any such option be exercisable after the specified expiration
date of the option term.
- During the limited post-termination
period of exercisability, the option may not be exercised for
more than the number of shares for which the option is
exercisable on the date the Optionee's Service terminates.
Upon the expiration of such limited exercise period or (if
earlier) upon the expiration of the option term, the option
shall terminate and cease to be exercisable.
(2) Should (i) the Optionee's Service be terminated for
misconduct (including, but not limited to, any act of dishonesty, willful
misconduct, fraud or embezzlement) or (ii) the Optionee make any unauthorized
use or disclosure of confidential information or trade secrets of the
Corporation or its parent or subsidiaries, then in any such event all
outstanding options held by the Optionee under this Article Two shall
terminate immediately and cease to be outstanding.
(3) The Plan Administrator shall have full power and authority
to extend the period of time for which the option is to remain exercisable
following the Optionee's cessation of Service or death from the limited
period provided under subparagraph (1) above to such greater period of time
as the Plan Administrator shall deem appropriate under the circumstances. In
no event, however, shall such option be exercisable after the specified
expiration date of the option term.
(4) The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to permit one or more options held by the
Optionee under this Article Two to be exercised, during the limited period of
exercisability provided under subparagraph (1) above, not only with respect
to the number of shares for which each such option is exercisable at the time
of the Optionee's
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cessation of Service but also with respect to one or more
subsequent installments of purchasable shares for which the option would
otherwise have become exercisable had such cessation of Service not occurred.
(5) For purposes of the foregoing provisions of this Section
I.C (and for all other purposes under the Plan):
- The Optionee shall (except to the extent
otherwise specifically provided in the applicable option or
issuance agreement) be deemed to remain in the SERVICE of
the Corporation for so long as such individual renders
services on a periodic basis to the Corporation (or any
parent or subsidiary corporation) in the capacity of an
Employee, a non-employee member of the Board or an independent
consultant or advisor.
- The Optionee shall be considered to be an
EMPLOYEE for so long as he or she remains in the employ of
the Corporation or one or more parent or subsidiary
corporations, subject to the control and direction of the
employer entity not only as to the work to be performed but
also as to the manner and method of performance.
E. STOCKHOLDER RIGHTS. An Optionee shall have no stockholder rights
with respect to any shares covered by the option until such individual shall
have exercised the option and paid the option price for the purchased shares.
F. REPURCHASE RIGHTS. The shares of Common Stock acquired upon
the exercise of options granted under this Article Two may be subject to
repurchase by the Corporation in accordance with the following provisions:
(1) The Plan Administrator shall have the discretion to
authorize the issuance of unvested shares of Common Stock under this Article
Two. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase any or all of those
unvested shares at the option price paid per share. The terms and conditions
upon which such repurchase right shall be exercisable (including the period
and procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan Administrator and set
forth in the instrument evidencing such repurchase right.
(2) All of the Corporation's outstanding repurchase rights
shall automatically terminate, and all shares subject to such terminated
rights shall immediately vest in full, upon the occurrence of any Corporate
Transaction under Section III of this Article Two, except to the extent: (i)
any such repurchase right is to be assigned to the successor corporation (or
parent thereof) in connection with the Corporate Transaction or (ii) such
termination is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
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(3) The Plan Administrator shall have the discretionary
authority, exercisable either before or after the Optionee's cessation of
Service, to cancel the Corporation's outstanding repurchase rights with
respect to one or more shares purchased or purchasable by the Optionee under
this Article Two and thereby accelerate the vesting of such shares in whole
or in part at any time.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Article Two. Incentive Options may only
be granted to individuals who are Employees of the Corporation. Options
which are specifically designated as "non-statutory" options when issued
under the Plan shall NOT be subject to such terms and conditions.
A. OPTION PRICE. The option price per share of the Common Stock
subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the fair market value of such Common Stock on the grant
date.
B. DOLLAR LIMITATION. The aggregate fair market value (determined
as of the respective date or dates of grant) of the Common Stock for which
one or more options granted to any Employee under this Plan (or any other
option plan of the Corporation or its parent or subsidiary corporations) may
for the first time become exercisable as Incentive Options during any one
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two or more such options which
become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive
Options shall be applied on the basis of the order in which such options are
granted. Should the number of shares of Common Stock for which any Incentive
Option first becomes exercisable in any calendar year exceed the applicable
One Hundred Thousand Dollar ($100,000) limitation, then the option may
nevertheless be exercised in that calendar year for the excess number of
shares as a non-statutory option under the Federal tax laws.
C. 10% STOCKHOLDER. If any individual to whom an Incentive Option
is granted is the owner of stock (as determined under Section 424(d) of the
Internal Revenue Code) possessing ten percent (10%) or more of the total
combined voting power of all classes of stock of the Corporation or any one
of its parent or subsidiary corporations, then the option price per share
shall not be less than one hundred ten percent (110%) of the fair market
value per share of Common Stock on the grant date, and the option term shall
not exceed five (5) years measured from the grant date.
Except as modified by the preceding provisions of this Section II,
the provisions of Articles One, Two and Four of the Plan shall apply to all
Incentive Options granted hereunder.
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III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL
A. In the event of any of the following stockholder-approved
transactions to which the Corporation is a party (a "Corporate Transaction"):
(1) a merger or consolidation in which the Corporation is not
the surviving entity, except for a transaction the principal purpose of which
is to change the State of the Corporation's incorporation,
(2) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in liquidation or
dissolution of the Corporation, or
(3) any reverse merger in which the Corporation is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's outstanding
securities are transferred to holders different from those who held such
securities immediately prior to such merger,
then the exercisability of each option outstanding under this
Article Two shall automatically accelerate so that each such option shall,
immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable with respect to the total number of
shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of such shares. However, an outstanding
option under this Article Two shall not so accelerate if and to the extent:
(i) such option is, in connection with the Corporate Transaction, to be
assumed by the successor corporation or parent thereof or replaced with a
comparable option to purchase shares of the capital stock of the successor
corporation or parent thereof, (ii) such option is to be replaced by a
comparable cash incentive program of the successor corporation based on the
option spread at the time of the Corporate Transaction, or (iii) the
acceleration of such option is subject to other limitations imposed by the
Plan Administrator at the time of the option grant. The determination of
comparability under clause (i) or (ii) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.
The Plan Administrator shall also have full power and authority to grant
options under the Plan which are to automatically accelerate in whole or in
part immediately prior to the Corporate Transaction or upon the subsequent
termination of the Optionee's Service, whether or not those options are
otherwise to be assumed or replaced in connection with the consummation of
such Corporate Transaction.
B. Upon the consummation of the Corporate Transaction, all
outstanding options under this Article Two shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation or its
parent company.
C. Each outstanding option under this Article Two which is assumed
in connection with the Corporate Transaction or is otherwise to continue in
effect shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issued to the option holder, in
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consummation of such Corporate Transaction, had such person exercised the
option immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the option price payable per share,
PROVIDED the aggregate option price payable for such securities shall remain
the same. In addition, the class and number of securities available for
issuance under the Plan following the consummation of the Corporate
Transaction shall be appropriately adjusted.
D. The grant of options under this Article Two shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
E. The Plan Administrator shall have the discretionary authority,
exercisable either in advance of any actually-anticipated Change in Control
or at the time of an actual Change in Control, to provide for the automatic
acceleration of one or more outstanding options under this Article Two (and
the termination of one or more of the Corporation's outstanding repurchase
rights under this Article Two) upon the occurrence of the Change in Control.
The Plan Administrator shall also have full power and authority to condition
any such option acceleration (and the termination of any outstanding
repurchase rights) upon the subsequent termination of the Optionee's Service
within a specified period following the Change in Control.
F. For purposes of this Section III, a Change in Control shall be
deemed to occur in the event:
(1) any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled
by, or is under common control with, the Corporation) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 of the 1934
Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to
a tender or exchange offer made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to accept; or
(2) there is a change in the composition of the Board over a
period of twenty-four (24) consecutive months or less such that a majority of
the Board members (rounded up to the next whole number) cease, by reason of
one or more proxy contests for the election of Board members, to be comprised
of individuals who either (i) have been Board members continuously since the
beginning of such period or (ii) have been elected or nominated for election
as Board members during such period by at least a majority of the Board
members described in clause (i) who were still in office at the time such
election or nomination was approved by the Board.
G. Any options accelerated in connection with the Change in
Control shall remain fully exercisable until the expiration or sooner
termination of the option term.
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H. The exercisability as incentive stock options under the Federal
tax laws of any options accelerated under this Section III in connection with
a Corporate Transaction or Change in Control shall remain subject to the
dollar limitation of Section II of this Article Two.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding options under this Article Two
(including outstanding options under the Predecessor Plans incorporated into
this Plan) and to grant in substitution new options under the Plan covering
the same or different numbers of shares of Common Stock but having an option
price per share not less than eighty-five percent (85%) of the fair market
value of the Common Stock on the new grant date (or one hundred percent
(100%) of such fair market value in the case of an Incentive Option or, in
the case of an Incentive Option granted to a 10% Stockholder, not less than
one hundred and ten percent (110%) of fair market value).
V. CASH-OUT OF OPTIONS
A. One or more officers of the Corporation may, in the Plan
Administrator's sole discretion, be granted limited cash-out rights in
connection with their outstanding options under the Plan. Upon the
occurrence of a Hostile Take-Over, each outstanding option with such a
limited cash-out right in effect for at least six (6) months shall
automatically be cancelled, to the extent such option is at the time
exercisable for fully-vested shares of Common Stock. The Optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the vested shares of Common
Stock at the time subject to the cancelled option (or cancelled portion of
such option) over (ii) the aggregate exercise price payable for such shares.
The cash distribution payable upon such cancellation shall be made within
five (5) days following the consummation of the Hostile Take-Over. Neither
the approval of the Plan Administrator nor the consent of the Board shall be
required in connection with such option cancellation and cash distribution.
B. For purposes of Section V.A, the following definitions shall be
in effect:
A Hostile Take-Over shall be deemed to occur in the event
(i) any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to accept AND
(ii) more than fifty percent (50%) of the securities so acquired in
such tender or exchange offer are accepted from holders other than
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officers and directors of the Corporation subject to the
short-swing profit restrictions of Section 16 of the 1934 Act.
The Take-Over Price per share shall be deemed to be equal
to the GREATER of (i) the fair market value per share on the date
of cancellation, as determined pursuant to the valuation
provisions of Section I.A(3) of this Article Two, or (ii) the
highest reported price per share paid in effecting such Hostile
Take-Over. However, if the cancelled option is an Incentive
Option, the Take-Over Price shall not exceed the clause (i) price
per share.
C. The shares of Common Stock subject to any option cancelled for
an appreciation distribution pursuant to this Section V shall NOT be
available for subsequent option grants under the Plan.
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ARTICLE THREE
AUTOMATIC OPTION GRANTS
I. GRANT OF AUTOMATIC OPTIONS
Outside Directors will automatically be granted non-statutory
options ("Automatic Option Grants") to purchase the number of shares of
Common Stock set forth below (subject to adjustment under Article I, Section
V, subsection (d)) on the dates and terms set forth below:
A. NO DISCRETION. No person shall have any discretion to select
which Outside Directors shall be granted Options or to determine the number
of shares to be covered by Options granted to Outside Directors; provided,
however, that nothing in this Plan shall be construed to prevent an Outside
Director from declining to receive an Option under this Plan.
B. GRANT DATE/NUMBER OF SHARES. Options shall be granted on the
dates specified below:
(1) Each individual who is serving as an Outside Director on
January 23, 1995, shall, on that date, automatically be granted a
non-statutory stock option to purchase 15,000 shares of Common Stock.
(2) INITIAL AUTOMATIC OPTION GRANT. A person who is first
elected by the stockholders or appointed by the Board as an Outside Director
(and who is not already a member of the Board of Directors of the
Corporation) shall, on the date such person becomes an Outside Director (or,
if later, the next trading day), automatically receive an option to purchase
15,000 shares of the Corporation's Common Stock ("Initial Automatic Option
Grant").
(3) ANNUAL AUTOMATIC OPTION GRANT. Each individual who is
serving as an Outside Director on October 24, 1996, and has served in that
capacity for the immediately preceeding ninety (90) days shall automatically
receive an option to purchase three thousand (3000) shares of Common Stock
("Annual Automatic Option Grant") on that date. Thereafter, each Outside
Director who has served in that capacity for the immediately preceeding
ninety (90) days and continues to so serve, shall receive as an Annual
Automatic Option Grant an option to purchase three thousand (3000) shares of
Common Stock at the Annual Shareholder Meeting , provided the Outside
Director has not been in the prior employ of the Corporation (or any Parent
or Subsidiary).
II. TERMS AND CONDITIONS
The terms and conditions applicable to each Automatic Option Grant
will be as follows:
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A. PRICE. The option price per share will be equal to one hundred
percent (100%) of the fair market value of one share of Common Stock on the
date of grant.
B. TERM. The options will have terms of ten (10) years, measured
from the date of grant, and will be immediately exercisable. However, any
shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Outside
Director's cessation of Board service prior to vesting in those shares. The
shares subject to each Initial Automatic Option Grant shall vest, and the
Corporation's repurchase right with respect to those shares shall lapse with
respect to twenty percent (20%) of the optioned shares upon completion of
twelve (12) months of Board service from the date of grant, and the remainder
of the optioned shares in forty-eight (48) equal monthly installments;
provided, however, that no options may be exercised prior to approval of the
Plan by the Corporation's stockholders. The shares subject to each Annual
Automatic Option Grant shall vest, and the Corporation's repurchase right
with respect to those shares shall lapse with respect to thirty-three and
one-third percent (33 1/3%) of the optioned shares upon completion of twelve
(12) months of Board service from the date of grant, and the remainder of the
optioned shares in twenty-four (24) equal monthly installments. Vesting of
the option shares shall be subject to acceleration as provided below. In no
event, however, shall any additional option shares vest after the Optionee's
cessation of Board service.
C. PAYMENT. Upon exercise of the option, the option price for the
purchased shares will become payable immediately in cash or in shares of
Common Stock that the optionee has held for at least six (6) months. Payment
may also be made by delivery of a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver to the
Corporation the amount of sale or loan proceeds to pay the option price.
D. CESSATION.
(1) In the event the optionee ceases to provide services to
the Corporation or its subsidiaries as a director for any reason other than
death or disability, each outstanding option may be exercised, within the
term of the option, for a period of three (3) months after the date of such
cessation to the extent that it was vested upon the date that such services
cease.
(2) In the event the optionee ceases to provide such services
by reason of permanent disability, each outstanding option may be exercised,
within the term of the option, for a period of twelve (12) months after the
date of such cessation to the extent that it was vested upon the date that
such services cease.
(3) Should an Outside Director die while in service or during
the three (3)-month period following his or her cessation of Board service,
then each outstanding option may be exercised, within the term of the option,
for a period of three (3) years following the date of the optionee's death to
the extent that it was vested upon the date that such services cease. In the
case of death, the option may be exercised within such period by the estate
or heirs of the optionee.
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III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. CORPORATE TRANSACTION. In the event of any Corporate
Transaction as defined in Article Two, Section III, subsection A, the shares
of Common Stock at the time subject to each outstanding option but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable for all of the shares of Common Stock
at the time subject to that option and may be exercised for all or any
portion of such shares as fully-vested shares of Common Stock. Immediately
following the consummation of the Corporate Transaction, each Automatic
Option Grant under the Plan shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation or its parent
company.
B. CHANGE IN CONTROL. In connection with any Change in Control of
the Corporation, the shares of Common Stock at the time subject to each
outstanding option but not otherwise vested shall automatically vest in full
so that each such option shall, immediately prior to the specified effective
date for the Change in Control, become fully exercisable for all of the
shares of Common Stock at the time subject to that option and may be
exercised for all or any portion of such shares as fully-vested shares of
Common Stock. Each such option shall remain fully exercisable for the option
shares which vest in connection with the Change in Control until the
expiration or sooner termination of the option term or the cash-out of the
option in accordance with Section III.C.
C. HOSTILE TAKE-OVER. Upon the occurrence of a Hostile Take-Over,
the optionee shall have a thirty (30)-day period in which to surrender to the
Corporation each Automatic Option Grant held by him or her under this Plan
for a period of at least six (6) months. The optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to
the excess of (i) the Take-Over Price of the shares of Common Stock at the
time subject to the surrendered option (whether or not the optionee is
otherwise at the time vested in those shares) over (ii) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the surrender of the option to the
Corporation. No approval or consent of the Board shall be required in
connection with such option surrender and cash distribution.
D. REUSE OF SHARES. The shares of Common Stock subject to each
option surrendered in connection with the Hostile Take-Over shall NOT be
available for subsequent option grant under this Plan.
E. NON-TRANSFERABILITY. During the lifetime of the optionee, each
Automatic Option Grant, together with the limited stock appreciation right
pertaining to such option, shall be exercisable only by the optionee and
shall not be assignable or transferable by the optionee other than a transfer
of the option effected by will or by the laws of descent and distribution
following the optionee's death.
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ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares may be issued under the Stock Issuance Program through direct
and immediate purchases without any intervening stock option grants. The
issued shares shall be evidenced by a Stock Issuance Agreement ("Issuance
Agreement") that complies with the terms and conditions of this Article Four.
A. CONSIDERATION.
(1) Shares of Common Stock drawn from the Corporation's
authorized but unissued shares of Common Stock ("Newly Issued Shares") shall
be issued under the Plan for one or more of the following items of
consideration which the Plan Administrator may deem appropriate in each
individual instance:
(i) cash or check payable to the Corporation;
(ii) a promissory note payable to the
Corporation's order in one or more installments, which may be
subject to cancellation in whole or in part upon terms and
conditions established by the Plan Administrator; or
(iii) past services rendered to the Corporation
or any parent or subsidiary corporation.
(2) Newly Issued Shares may, in the absolute discretion of the
Plan Administrator, be issued for consideration with a value less than
one-hundred percent (100%) of the fair market value of the issued shares, but
in no event less than eighty-five percent (85%) of such fair market value.
Fair market value shall be determined in accordance with Article Two, Section
I.B.
(3) Shares of Common Stock reacquired by the Corporation and
held as treasury shares ("Treasury Shares") may be issued under the Plan for
such consideration (in whatever form) as the Plan Administrator may deem
appropriate. Accordingly, such Treasury Shares may, in lieu of any cash
consideration, be issued subject to such vesting requirements tied to the
Participant's period of future Service or the Corporation's attainment of
specified performance objectives as the Plan Administrator may establish at
the time of issuance.
B. VESTING PROVISIONS.
(1) Shares of Common Stock issued under the Plan may, in the
absolute discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service (as such term is
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defined in Section I.C(5) of Article Two). The elements of the vesting
schedule applicable to any unvested shares of Common Stock issued under the
Plan, including the period of Service to be completed or the performance
objectives to be achieved, the number of installments, the interval between
installments, and the effect which death, disability or other event is to
have upon the vesting schedule, shall be determined by the Plan Administrator
and incorporated into the Issuance Agreement executed by the Corporation and
the Participant at the time such unvested shares are issued.
(2) The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to him or her under the Plan,
whether or not his or her interest in those shares is vested. Accordingly,
the Participant shall have the right to vote such shares and to receive any
regular cash dividends paid on such shares. Any new, additional or different
shares of stock or other property (including money paid other than as a
regular cash dividend) which the Participant may have the right to receive
with respect to his or her unvested shares by reason of any stock dividend,
stock split, reclassification of Common Stock or other similar change in the
Corporation's capital structure or by reason of any Corporate Transaction
under Section II of this Article Four shall be issued, subject to (i) the
same vesting requirements applicable to his or her unvested shares and (ii)
such escrow arrangements as the Plan Administrator shall deem appropriate.
(3) Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock under the Plan, then
those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder rights
with respect to those shares. To the extent the surrendered shares were
previously issued to the Participant for consideration paid in cash or cash
equivalent (including the Participant's purchase-money promissory note), the
Corporation shall repay to the Participant the cash consideration paid for
the surrendered shares and shall cancel the principal balance of any
outstanding purchase-money note of the Participant to the extent attributable
to such surrendered shares. The surrendered shares may, at the Plan
Administrator's discretion, be retained by the Corporation as Treasury Shares
or may be retired to authorized but unissued share status.
(4) The Plan Administrator may in its discretion elect to
waive the surrender and cancellation of one or more unvested shares of Common
Stock (or other assets attributable thereto) which would otherwise occur upon
the non-completion of the vesting schedule applicable to such shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares of Common Stock as to which the waiver applies. Such waiver may
be effected at any time, whether before or after the Participant's cessation
of Service or the attainment or non-attainment of the applicable performance
objectives.
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II. CORPORATE TRANSACTIONS/CHANGES IN CONTROL
A. In the event of a Corporate Transaction to which the
Corporation is a party (as defined in Section III of Article Two above), then
all unvested shares of Common Stock shall immediately vest in full, except to
the extent the Plan Administrator imposes limitations in the Issuance
Agreement which preclude such accelerated vesting in whole or in part.
B. The Plan Administrator shall have the discretionary authority,
exercisable either in advance of any actually-anticipated Change in Control
(as defined in Section III of Article Two above) or at the time of an actual
Change in Control, to provide for the immediate and automatic vesting of one
or more unvested shares outstanding under this Article Four at the time of
such Change in Control. The Plan Administrator shall also have full power
and authority to condition any such accelerated vesting upon the subsequent
termination of the Optionee's Service within a specified period following the
Change in Control.
III. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Unvested shares may, in the Plan Administrator's discretion, be
held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing such unvested shares. To the extent
an escrow arrangement is used, the unvested shares and any securities or
other assets issued with respect to such shares (other than regular cash
dividends) shall be delivered in escrow to the Corporation to be held until
the Participant's interest in such shares (or other securities or assets)
vests. Alternatively, if the unvested shares are issued directly to the
Participant, a restrictive legend shall be placed on the certificates for
such shares and shall read substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE
ACCORDINGLY SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND TO
(II) CANCELLATION OR REPURCHASE IN THE EVENT THE REGISTERED HOLDER
(OR HIS/HER PREDECESSOR IN INTEREST) CEASES TO REMAIN IN THE
CORPORATION'S SERVICE. SUCH TRANSFER RESTRICTIONS AND THE TERMS AND
CONDITIONS OF SUCH CANCELLATION OR REPURCHASE ARE SET FORTH IN A
STOCK ISSUANCE AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED
HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) DATED , 19 , A
COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION."
B. The Participant shall have no right to transfer any unvested
shares of Common Stock issued to him or her under the Plan. For purposes of
this restriction, the term "transfer" shall include (without limitation) any
sale, pledge, assignment, encumbrance, gift, or other disposition of such
shares, whether voluntary or involuntary. Upon any such attempted
20
<PAGE>
transfer, the unvested shares shall immediately be cancelled, and neither the
Participant nor the proposed transferee shall have any rights with respect to
those shares. However, the Participant shall have the right to make a gift
of unvested shares acquired under the Plan to his or her spouse or issue,
including adopted children, or to a trust established for such spouse or
issue, provided the donee of such shares delivers to the Corporation a
written agreement to be bound by all the provisions of the Plan and the
Issuance Agreement applicable to the gifted shares.
21
<PAGE>
ARTICLE FIVE
MISCELLANEOUS
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any
employee (including an Optionee or Participant who is an officer or director
of the Corporation) in the exercise of one or more options granted to such
Optionee under the Article Two Discretionary Option Grant Program or the
purchase of one or more shares issued to such Participant under the Article
Four Stock Issuance Program, including the satisfaction of any Federal and
State income and employment tax obligations arising therefrom by (i)
authorizing the extension of a loan from the Corporation to such Optionee or
Participant or (ii) permitting the Optionee or Participant to pay the option
price or purchase price for the purchased Common Stock in installments over a
period of years. The terms of any loan or installment method of payment
(including the interest rate and terms of repayment) will be upon such terms
as the Plan Administrator specifies in the applicable option or issuance
agreement or otherwise deems appropriate under the circumstances. Loans and
installment payments may be granted with or without security or collateral
(other than to individuals who are consultants or independent contractors, in
which event the loan must be adequately secured by collateral other than the
purchased shares). However, the maximum credit available to the Optionee or
Participant may not exceed the option or purchase price of the acquired
shares (less the par value of such shares) plus any Federal and State income
and employment tax liability incurred by the Optionee or Participant in
connection with the acquisition of such shares.
B. The Plan Administrator may, in its absolute discretion,
determine that one or more loans extended under this financial assistance
program shall be subject to forgiveness by the Corporation in whole or in
part upon such terms and conditions as the Plan Administrator may deem
appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to
amend or modify the Plan (or any component thereof) in any or all respects
whatsoever. However, no such amendment or modification may adversely affect
the rights and obligations of an Optionee with respect to options at the time
outstanding under the Plan, nor adversely affect the rights of any
Participant with respect to Common Stock issued under the Plan prior to such
action, unless the Optionee or Participant consents to such amendment. To the
extent necessary to comply with Rule 16b-3, the provisions of the Plan
concerning the eligibility of Outside Directors for awards and the amount,
price and timing of Automatic Option Grants under this Plan may not be
amended more than once every six months, other than to comport with changes
in the Internal Revenue Code or rules thereunder. In addition, the Board may
not, without the approval of the Corporation's stockholders, amend the Plan
to (i) materially increase the maximum number of shares issuable under the
Plan (except for permissible adjustments under Article One,
22
<PAGE>
Section V.D) or (ii) materially modify the eligibility requirements for
participation in the Plan or the benefits accruing to Optionees or
Participants under the Plan.
B. (i) Options to purchase shares of Common Stock may be granted
under the Plan and (ii) shares of Common Stock may be issued under the Stock
Issuance Program, which are in both instances in excess of the number of
shares then available for issuance under the Plan, provided any excess shares
actually issued under the Plan are held in escrow until stockholder approval
is obtained for a sufficient increase in the number of shares available for
issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess option grants or
excess share issuances are made, then (I) any unexercised excess options
shall terminate and cease to be exercisable and (II) the Corporation shall
promptly refund the purchase price paid for any excess shares actually issued
under the Plan and held in escrow, together with interest (at the applicable
Short Term Federal Rate) for the period the shares were held in escrow.
III. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan was initially adopted by the Board on January 11,
1992, and approved by the Corporation's stockholders on April 25, 1992. The
Board subsequently restated the Plan, effective on July 31, 1992, to serve as
the successor to the Predecessor Plans and again restated the Plan on May 25,
1993 to include certain provisions in connection with the initial public
offering of the Common Stock and to increase the number of shares issuable
under the Plan by 82,276 shares (after giving effect to the 1-for-1.6 reverse
stock split approved by the Board on the same date). On April 24, 1994, the
Board adopted a restatement of the Plan which (i) increased the number of
shares of Common Stock issuable thereunder by an additional 500,000 shares
and (ii) imposed a limitation on the maximum number of shares for which any
one individual participating in the Plan may be granted stock options or
direct stock issuances after December 31, 1993. The 1994 restatement was
approved by the Corporation's stockholders at the 1994 Annual Meeting and
became effective when adopted by the Board. On January 23, 1995, the Board
adopted amendments to the Plan which added the Automatic Option Grant Program
to the Plan and increased the number of shares of Common Stock issuable under
the Plan by an additional 300,000 shares. The 1995 restatement was approved
by the Corporation's stockholders at the 1995 Annual Meeting and became
effective when adopted by the Board. In January 1996, the Board adopted
another restatement of the Plan which increased the number of shares of
Common Stock issuable thereunder by an additional 300,000 shares to 1,880,000
shares. The January 1996 restatement became effective when adopted by the
Board and was approved by the stockholders at the 1996 Annual Meeting. On
October 24, 1996, the Board adopted amendments to the Plan which (i)
increased the number of shares of Common Stock issuable thereunder by an
additional 200,000 shares and (ii) added annual option grants to the
Automatic Option Grant Program. The October 1996 amendments became effective
when adopted and were approved by the stockholders at the 1997 Annual
Meeting. Subject to the foregoing limitations, the Plan Administrator may
grant options under the Plan at any time before the date fixed herein for
termination of the Plan.
23
<PAGE>
B. This Plan shall serve as successor to the Predecessor Plans and
no further option grants shall be made under the Predecessor Plans from and
after July 31, 1992. Each option issued and outstanding under the
Predecessor Plans immediately prior to July 31, 1992 shall be incorporated
into this Plan and treated as an outstanding option under this Plan, but each
such option shall continue to be governed solely by the terms and conditions
of the instrument evidencing such grant and nothing in this Plan shall be
deemed to affect or otherwise modify the rights or obligations of the holders
of such options with respect to their acquisition of shares of Common Stock
thereunder.
C. The sale and remittance procedure authorized for the exercise
of outstanding options under this Plan shall be available for all options
granted under this Plan and for all non-statutory options outstanding under
the Predecessor Plans and incorporated into this Plan. The Plan Administrator
may also allow such procedure to be used in connection with one or more
disqualifying dispositions of shares acquired under Incentive Options granted
under the Predecessor Plans which dispositions are effected after the IPO
Effective Date.
D. The option/vesting acceleration provisions of Section III of
Article Two and Section II of Article Four relating to Corporate Transactions
and Changes in Control may, in the Plan Administrator's discretion, be
extended to one or more stock options which are outstanding under the
Predecessor Plans on the IPO Effective Date but which do not otherwise
provide for such acceleration.
E. The Plan shall terminate upon the EARLIER of (i) January 10,
2002, or (ii) the date on which all shares available for issuance under the
Plan shall have been issued or cancelled pursuant to the exercise, surrender
or cash-out of the options granted under the Discretionary Option Grant
Program or Automatic Option Grant Program, or the issuance of shares (whether
vested or unvested) under the Stock Issuance Program. If the date of
termination is determined under clause (i) above, then all option grants and
unvested stock issuances outstanding on such date shall thereafter continue
to have force and effect in accordance with the provisions of the instruments
evidencing such grants or issuances.
IV. USE OF PROCEEDS
Cash proceeds received by the Corporation from the sale of shares
under the Plan shall be used for general corporate purposes.
V. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
under the Plan, the issuance of any shares under the Stock Issuance Program,
and the issuance of Common Stock upon the exercise or surrender of the option
grants made hereunder shall be subject to the Corporation's procurement of
all approvals and permits required by regulatory authorities having
24
<PAGE>
jurisdiction over the Plan, the options granted under it, and the Common
Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance
with all applicable requirements of Federal and State securities laws,
including, at the IPO Effective Date, the filing and effectiveness of the
Form S-8 registration statement for the shares of Common Stock issuable under
the Plan, and all applicable listing requirements of any securities exchange
on which stock of the same class is then listed.
VI. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan, nor
any action taken by the Board or the Plan Administrator hereunder, nor any
provision of the Plan shall be construed so as to grant any individual the
right to remain in the employ or Service of the Corporation (or any parent or
subsidiary corporation) for any period of specific duration, and the
Corporation (or any parent or subsidiary corporation retaining the services
of such individual) may terminate such individual's employment or Service at
any time and for any reason, with or without cause.
VII. WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise of
any options granted under Article Two or Article Three or upon the purchase
of any shares issued under Article Four shall be subject to the satisfaction
of all applicable Federal, State and local income and employment tax
withholding requirements.
VIII. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets under the
Plan may not be assigned, encumbered or otherwise transferred by any optionee
or Participant.
B. The provisions of the Plan shall be governed by the laws of the
State of California, as such laws are applied to contracts entered into and
performed in such State.
C. The provisions of the Plan shall inure to the benefit of, and
be binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
25
<PAGE>
CONDUCTUS, INC.
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
AUTOMATIC STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Conductus, Inc. (the "Corporation"):
OPTIONEE: ____________________________________________________________
GRANT DATE: __________________________________________________________
EXERCISE PRICE: $ _________________________________ per share
NUMBER OF OPTION SHARES: 3,000 shares
EXPIRATION DATE: _____________________________________________________
TYPE OF OPTION: Non-Statutory Stock Option
DATE EXERCISABLE: Immediately Exercisable
VESTING SCHEDULE: The Option Shares shall be unvested and subject to
repurchase by the Corporation at the Exercise Price paid per share.
Optionee shall acquire a vested interest in, and the Corporation's
repurchase right will accordingly lapse with respect to,
(i) thirty-three and one-third percent (33.333%) of the Option
Shares upon Optionee's completion of one (1) year of Board service
measured from the Grant Date and (ii) the balance of the Option
Shares in successive equal monthly installments upon Optionee's
completion of each of the next twenty-four (24) months of Board
service measured from and after the first anniversary of the Grant
Date. In no event shall any additional Option Shares vest after
Optionee's cessation of Board service.
Optionee understands and agrees that the Option is granted subject
to and in accordance with the terms of the automatic option grant program
under the Conductus, Inc. 1992 Stock Option/Stock Issuance Plan (the "Plan").
Optionee further agrees to be bound by the
<PAGE>
terms of the Plan and the terms of the Option as set forth in the Automatic
Stock Option Agreement attached hereto as Exhibit A.
Optionee hereby acknowledges receipt of a copy of the official
prospectus for the Plan in the form attached hereto as Exhibit B. A copy of
the Plan is available upon request made to the Corporate Secretary at the
Corporation's principal offices.
<PAGE>
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO A REPURCHASE
RIGHT EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS. THE TERMS OF SUCH
RIGHT SHALL BE SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE
OPTION EXERCISE.
NO IMPAIRMENT OF RIGHTS. Nothing in this Notice or the attached
Automatic Stock Option Agreement or in the Plan shall interfere with or
otherwise restrict in any way the rights of the Corporation and the
Corporation's stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
DEFINITIONS. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Automatic Stock
Option Agreement.
___________________, 199 __
Date
CONDUCTUS, INC.
By: _________________________________________
Title: ______________________________________
_____________________________________________
OPTIONEE
Address: ____________________________________
_____________________________________________
ATTACHMENTS
Exhibit A - Automatic Stock Option Agreement
Exhibit B - Plan Summary and Prospectus
<PAGE>
EXHIBIT A
CONDUCTUS, INC.
AUTOMATIC STOCK OPTION AGREEMENT
RECITALS
A. The Corporation has implemented an automatic option grant
program under the Plan pursuant to which eligible non-employee members of the
Board will automatically receive stock option grants at periodic intervals
over their period of Board service in order to provide such individuals with
a meaningful incentive to continue to serve as members of the Board.
B. Optionee is an eligible non-employee Board member, and
this Agreement is executed pursuant to, and is intended to carry out the
purposes of, the Plan in connection with the automatic grant of an option to
purchase shares of Common Stock under the Plan.
C. All capitalized terms in this Agreement shall have the
meanings assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to
Optionee, as of the Grant Date, a Non-Statutory Option to purchase up to the
number of Option Shares specified in the Grant Notice. The Option Shares
shall be purchasable from time to time during the option term specified in
Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten
(10) years measured from the Grant Date and shall accordingly expire at the
close of business on the Expiration Date, unless sooner terminated in
accordance with Paragraph 5, 6 or 7.
3. LIMITED TRANSFERABILITY. This option, together with
the special stock appreciation right provided under Paragraph 7(b), shall be
neither transferable nor assignable by Optionee other than by will or by the
laws of descent and distribution following Optionee's death and may be
exercised, during Optionee's lifetime, only by Optionee. However, this
option may also be assigned in whole or in part during Optionee's lifetime in
accordance with the terms of a Qualified Domestic Relations Order. The
assigned portion shall be exercisable only by the person or persons who
acquire a proprietary interest in the option pursuant to such Qualified
Domestic Relations Order. The terms applicable to the assigned portion shall
be the same as those in effect for this option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Board may deem appropriate.
4. EXERCISABILITY/VESTING.
(a) This option shall be immediately exercisable
for any or all of the Option Shares, whether or not the Option Shares are
vested in accordance with the Vesting
<PAGE>
Schedule and shall remain so exercisable until the Expiration Date or sooner
termination of the option term under Paragraph 5, 6 or 7.
(b) Optionee shall, in accordance with the Vesting
Schedule, vest in the Option Shares in one or more installments over his or
her period of Board service. Vesting in the Option Shares may be accelerated
pursuant to the provisions of Paragraph 5, 6 or 7. In no event, however,
shall any additional Option Shares vest following Optionee's cessation of
service as a Board member.
5. CESSATION OF BOARD SERVICE. Should Optionee's
service as a Board member cease while this option remains outstanding, then
the option term specified in Paragraph 2 shall terminate (and this option
shall cease to be outstanding) prior to the Expiration Date in accordance
with the following provisions:
(a) Should Optionee cease to serve as a Board
member for any reason (other than death or Permanent Disability) while
holding this option, then the period for exercising this option shall be
reduced to a three (3)-month period (commencing with the date of such
cessation of Board service), but in no event shall this option be exercisable
at any time after the Expiration Date. During such limited period of
exercisability, this option may not be exercised in the aggregate for more
than the number of Option Shares (if any) in which Optionee is vested on the
date Optionee ceases service as a Board member. Upon the EARLIER of (i) the
expiration of such three (3)-month period or (ii) the specified Expiration
Date, the option shall terminate and cease to be exercisable with respect to
any vested Option Shares for which the option has not been exercised.
(b) Should Optionee die during the three (3)-month
period following his or her cessation of Board service, then the personal
representative of Optionee's estate or the person or persons to whom the
option is transferred pursuant to Optionee's will or in accordance with the
laws of descent and distribution shall have the right to exercise this option
for any or all of the Option Shares in which Optionee is vested at the time
of Optionee's cessation of Board service (less any Option Shares purchased by
Optionee after such cessation of Board service but prior to death). Such
right of exercise shall terminate, and this option shall accordingly cease to
be exercisable for such vested Option Shares, upon the EARLIER of (i) the
expiration of the three (3)-year period measured from the date of Optionee's
death or (ii) the specified Expiration Date.
(c) Should Optionee cease service as a Board member
by reason of death or Permanent Disability, then Optionee (or the personal
representative of Optionee's estate or the person or persons to whom the
option is transferred upon Optionee's death) shall have the right to exercise
this option for any or all of the Option Shares, to the extent vested on the
date of cessation of service, at any time prior to the EARLIER of (i) the
expiration of the twelve (12)-month period measured from the date of
Optionee's cessation of Board service by reason of Permanent Disability or
the expiration of the three (3)-year period measured from the date of
Optionee's death or (ii) the specified Expiration Date.
2
<PAGE>
(d) Upon Optionee's cessation of Board service for
any reason, this option shall immediately terminate and cease to be
outstanding with respect to any and all Option Shares in which Optionee is
not otherwise at that time vested in accordance with the normal Vesting
Schedule or the special vesting acceleration provisions of Paragraph 6 or 7
below.
(e) In the event of a Corporate Transaction or
Change in Control, the provisions of Paragraph 6 or 7 shall govern the period
for which this option is to remain exercisable following Optionee's cessation
of Board service and shall supersede any provisions to the contrary in this
paragraph.
6. CORPORATE TRANSACTION.
(a) In the event of a Corporate Transaction, all
Option Shares at the time subject to this option but not otherwise vested
shall automatically vest so that this option shall, immediately prior to the
effective date of such Corporate Transaction, become exercisable for any or
all of the Option Shares as fully-vested shares of Common Stock. Immediately
following the Corporate Transaction, this option shall terminate and cease to
be exercisable except to the extent assumed by the successor corporation (or
parent thereof) in connection with such Corporate Transaction.
(b) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and
class of securities which would have been issuable to Optionee in
consummation of such Corporate Transaction had the option been exercised
immediately prior to such Corporate Transaction, and appropriate adjustments
shall also be made to the Exercise Price, PROVIDED the aggregate Exercise
Price shall remain the same.
(c) This Agreement shall not in any way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
7. CHANGE IN CONTROL/HOSTILE TAKE-OVER.
(a) All Option Shares subject to this option at the
time of a Change in Control but not otherwise vested shall automatically vest
so that this option shall, immediately prior to the effective date of such
Change in Control, become fully exercisable for all of the Option Shares at
the time subject to this option and may be exercised for all or any portion
of such shares as fully-vested shares of Common Stock. This option shall
remain exercisable for such fully-vested Option Shares until the earliest to
occur of (i) the Expiration Date, (ii) the sooner termination of this option
in accordance with Paragraph 5 or 6 or (iii) the surrender of the option in
connection with a Hostile Take-Over.
3
<PAGE>
(b) Provided this option has been outstanding for
at least six (6) months prior to the occurrence of a Hostile Take-Over,
Optionee shall have the unconditional right (exercisable during the thirty
(30)-day period immediately following the consummation of such Hostile
Take-Over) to surrender this option to the Corporation in exchange for a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the Option Shares at the time subject to the surrendered
option (whether or not those Option Shares are otherwise at the time vested)
over (ii) the aggregate Exercise Price payable for such shares. This
Paragraph 7(b) limited stock appreciation right shall in all events terminate
upon the expiration or sooner termination of the option term and may not be
assigned or transferred by Optionee.
(c) To exercise the Paragraph 7(b) limited stock
appreciation right, Optionee must, during the applicable thirty (30)-day
exercise period, provide the Corporation with written notice of the option
surrender in which there is specified the number of Option Shares as to which
the Option is being surrendered. Such notice must be accompanied by the
return of Optionee's copy of this Agreement, together with any written
amendments to such Agreement. The cash distribution shall be paid to
Optionee within five (5) days following such delivery date, and no approval
or consent of the Board shall be required in connection with such option
surrender and cash distribution. Upon receipt of such cash distribution,
this option shall be cancelled with respect to the Option Shares subject to
the surrendered option (or the surrendered portion) and Optionee shall cease
to have any further right to acquire those Option Shares under this
Agreement. The option shall, however, remain outstanding for the balance of
the Option Shares (if any) in accordance with the terms of this Agreement,
and the Corporation shall issue a new stock option agreement (substantially
in the same form as this Agreement) for those remaining Option Shares.
8. ADJUSTMENT IN OPTION SHARES. Should any change be
made to the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the
total number and/or class of securities subject to this option and (ii) the
Exercise Price in order to reflect such change and thereby preclude a
dilution or enlargement of benefits hereunder.
9. STOCKHOLDER RIGHTS. The holder of this option shall
not have any stockholder rights with respect to the Option Shares until such
person shall have exercised the option, paid the Exercise Price and become a
holder of record of the purchased shares.
10. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect
to all or any part of the Option Shares for which this option is at the time
exercisable, Optionee (or any other person or persons exercising the option)
must take the following actions:
<PAGE>
(i) To the extent the option is
exercised for vested Option Shares, execute and deliver to the
Corporation a Notice of Exercise for the Option Shares for which
the option is exercised. To the extent this option is exercised for
unvested Option Shares, execute and deliver to the Corporation a
Purchase Agreement.
(ii) Pay the aggregate Exercise Price
for the purchased shares in one or more of the following forms:
(A) cash or check made payable
to the Corporation,
(B) shares of Common Stock held
by Optionee (or any other person or persons exercising the
option) for at least six (6) months and valued at Fair
Market Value on the Exercise Date, or
(C) to the extent the option is
exercised for vested Option Shares, through a special sale
and remittance procedure pursuant to which Optionee (or any
other person or persons exercising the option) shall
concurrently provide irrevocable written instructions (I)
to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason
of such exercise and (II) to the Corporation to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
Except to the extent the sale and remittance
procedure is utilized in connection with the option
exercise, payment of the Exercise Price must accompany the
Notice of Exercise (or the Purchase Agreement) delivered to
the Corporation in connection with the option exercise.
(iii) Furnish to the Corporation
appropriate documentation that the person or persons
exercising the option (if other than Optionee) have the
right to exercise this option.
(b) As soon after the Exercise Date as practical,
the Corporation shall issue to or on behalf of Optionee (or any other person
or persons exercising this option) a certificate for the purchased Option
Shares, with the appropriate legends affixed thereto. To the extent any such
Option Shares are unvested, the certificates for those Option Shares shall be
endorsed with an appropriate legend evidencing the Corporation's repurchase
rights and may be held in escrow with the Corporation until such shares vest.
5
<PAGE>
(c) In no event may this option be exercised for
any fractional shares.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of
the Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the
Nasdaq National Market, if applicable) on which the Common Stock may be
listed for trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain
approval from any regulatory body having authority deemed by the Corporation
to be necessary to the lawful issuance and sale of any Common Stock pursuant
to this option shall relieve the Corporation of any liability with respect to
the non-issuance or sale of the Common Stock as to which such approval shall
not have been obtained. The Corporation, however, shall use its best efforts
to obtain all such approvals.
12. SUCCESSORS AND ASSIGNS. Except to the extent
otherwise provided in Paragraph 3 or 6, the provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Corporation and its
successors and assigns and Optionee, Optionee's assigns and the legal
representatives, heirs and legatees of Optionee's estate.
13. NOTICES. Any notice required to be given or
delivered to the Corporation under the terms of this Agreement shall be in
writing and addressed to the Corporation at its principal corporate offices.
Any notice required to be given or delivered to Optionee shall be in writing
and addressed to Optionee at the address indicated below Optionee's signature
line on the Grant Notice. All notices shall be deemed effective upon personal
delivery or upon deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.
14. CONSTRUCTION. This Agreement and the option
evidenced hereby are made and granted pursuant to the Plan and are in all
respects limited by and subject to the terms of the Plan.
15. GOVERNING LAW. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules.
6
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Conductus, Inc. (the "Corporation") that
I elect to purchase _________ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $_________ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to
me under the Corporation's 1992 Stock Option/Stock Issuance Plan on
___________, 199___.
Concurrently with the delivery of this Exercise Notice to
the Corporation, I shall hereby pay to the Corporation the Exercise Price for
the Purchased Shares in accordance with the provisions of my agreement with
the Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a
condition for exercise. Alternatively, I may utilize the special
broker-dealer sale and remittance procedure specified in my agreement to
effect payment of the Exercise Price for any Purchased Shares in which I am
vested at the time of exercise of the Option.
________________________, 199_
Date
___________________________________
Optionee
Address: __________________________
___________________________________
Print name in exact manner
it is to appear on the
stock certificate: ___________________________________
Address to which certificate
is to be sent, if different
from address above: ___________________________________
___________________________________
Social Security Number: ___________________________________
7
<PAGE>
APPENDIX
The following definitions shall be in effect under the
Agreement:
A. AGREEMENT shall mean this Automatic Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control
of the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the
Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within
the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the
Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such
that a majority of the Board members ceases, by reason of
one or more contested elections for Board membership, to
be comprised of individuals who either (A) have been
Board members continuously since the beginning of such
period or (B) have been elected or nominated for election
as Board members during such period by at least a
majority of the Board members described in clause (A) who
were still in office at the time the Board approved such
election or nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding
securities are transferred to a person or persons
different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
<PAGE>
G. CORPORATION shall mean Conductus, Inc., a Delaware corporation.
H. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or
order (including approval of a property settlement agreement) which provides
or otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of Optionee.
I. EXERCISE DATE shall mean the date on which the option
shall have been exercised in accordance with Paragraph 10 of the Agreement.
J. EXERCISE PRICE shall mean the exercise price per share as
specified in the Grant Notice.
K. EXPIRATION DATE shall mean the date on which the option expires
as specified in the Grant Notice.
L. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is not at the time listed or
admitted to trading on any stock exchange but is traded
on the Nasdaq National Market, the fair market value
shall be the closing price of one share of Common Stock
on the date in question, as such price is reported by the
National Association of Securities Dealers through its
Nasdaq system or any successor system. If there is no
closing price for the Common Stock on the date in
question, then the closing price on the last preceding
date for which such quotation exists shall be
determinative of fair market value.
(ii) If the Common Stock is at the time listed or
admitted to trading on any national stock exchange, then
the fair market value shall be the closing selling price
per share of Common Stock on the date in question on the
stock exchange determined by the Plan Administrator to be
the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions
on such exchange. If there is no reported sale of Common
Stock on such exchange on the date in question, then the
fair market value shall be the closing selling price on
the exchange on the last preceding date for which such
quotation exists.
M. GRANT DATE shall mean the date of grant of the option as
specified in the Grant Notice.
N. GRANT NOTICE shall mean the Notice of Grant of Automatic Stock
Option accompanying the Agreement, pursuant to which Optionee has been
informed of the basic terms of the option evidenced hereby.
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O. HOSTILE TAKE-OVER shall mean a change in ownership of the
Corporation effected through the following transaction:
(i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the
Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within
the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the
Board does not recommend such stockholders to accept, AND
(ii) more than fifty percent (50%) of the acquired
securities are accepted from persons other than the
officers and directors of the Corporation subject to the
short-swing profit restrictions of Section 16 of the
1934 Act.
P. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
Q. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.
R. NOTICE OF EXERCISE shall mean the notice of exercise in the
form of Exhibit I.
S. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option.
T. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
U. PERMANENT DISABILITY shall mean the inability of Optionee to
perform his or her usual duties as a member of the Board by reason of any
medically determinable physical or mental impairment which is expected to
result in death or has lasted or can be expected to last for a continuous
period of twelve (12) months or more.
V. PLAN shall mean the Corporation's 1992 Stock Option/Stock
Issuance Plan.
W. PURCHASE AGREEMENT shall mean the stock purchase agreement (in
form and substance satisfactory to the Corporation) which grants the
Corporation the right to repurchase, at the Exercise Price, any and all
unvested Option Shares held by Optionee at the time of Optionee's cessation
of Board service and which precludes the sale, transfer or other disposition
of any purchased Option Shares while subject to such repurchase right.
X. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic
Relations Order which substantially complies with the requirements of Code
Section 414(p). The Corporation
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<PAGE>
shall have the sole discretion to determine whether a Domestic Relations
Order is a Qualified Domestic Relations Order.
Y. STOCK EXCHANGE shall mean the American Stock Exchange or the
New York Stock Exchange.
Z. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest
reported price per share of Common Stock paid by the tender offeror in
effecting the Hostile Take-Over.
AA. VESTING SCHEDULE shall mean the vesting schedule specified in
the Grant Notice.
<PAGE>
CONDUCTUS, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to purchase
shares of the Common Stock of Conductus, Inc. (the "Corporation"):
OPTIONEE: Martin A. Kaplan
STOCK GRANT NUMBER: OP00340
GRANT DATE: November 12, 1997
VESTING COMMENCEMENT DATE: 7/1/96
EXERCISE PRICE: $6.50 per share
NUMBER OF OPTION SHARES: 15,000 shares
EXPIRATION DATE: 7/1/06
TYPE OF OPTION: Non-Statutory Stock Option
DATE EXERCISABLE: Immediately Exercisable
VESTING SCHEDULE: The Option Shares shall be unvested and subject to repurchase
by the Corporation at the Exercise Price paid per share. Optionee shall acquire
a vested interest in, and the Corporation's repurchase right will accordingly
lapse with respect to, (i) twenty percent (20%) of the Option Shares upon
Optionee's completion of one (1) year of Board service measured from the Vesting
Commencement Date and (ii) the balance of the Option Shares in successive equal
monthly installments upon Optionee's completion of each of the next forty-eight
(48) months of Board service measured from and after the first anniversary of
the Grant Date. In no event shall any additional Option Shares vest after
Optionee's cessation of Board service.
Optionee agrees to be bound by the terms and conditions of the Optin as set
forth in the Stock Option Agreement attached hereto as Exhibit A. Optionee also
acknowledges receipt of a copy of the official prospectus attached hereto as
Exhibit B.
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES ACQUIRED UPON
THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO A REPURCHASE RIGHT EXERCISABLE BY
THE CORPORATION AND ITS ASSIGNS. THE TERMS OF SUCH RIGHT SHALL BE SPECIFIED IN
A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO THE
CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION
<PAGE>
EXERCISE.
NO IMPAIRMENT OF RIGHTS. Nothing in this Notice or the attached
Stock Option Agreement shall interfere with or otherwise restrict in any way the
rights of the Corporation and the Corporation's stockholders to remove Optionee
from the Board at any time in accordance with the provisions of applicable law.
DEFINITIONS. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
November 12, 1997
Date
CONDUCTUS, INC.
By: ______________________________________
Title: ______________________________________
_____________________________________________
MARTIN A. KAPLAN
Address: ____________________________________
_____________________________________________
ATTACHMENTS
Exhibit A - Stock Option Agreement
Exhibit B - Prospectus
<PAGE>
EXHIBIT A
CONDUCTUS, INC.
STOCK OPTION AGREEMENT
WITNESSETH
RECITALS
A. On January 23, 1995, Conductus, Inc. (the "Corporation") established
an Automatic Option Grant Program under its 1992 Stock Option/Stock Issuance
Plan for the purpose of attracting and retaining qualified directors and provide
equity incentives that align thier interests with those of the stockholders.
B. Under the Automatic Option Grant Program, non-employee Directors of
the Corporation ("Outside Directors") receive an initial grant of an option to
purchase 15,000 shares of common stock of the Corporation ("Common Stock") at
100% of the fair market value of the stock on the date they first become a
Director, plus annual grants of 3,000 shares of Commomn Stock.
C. Optionee joined the Board on July 1, 1996 and received an option for
15,000 shares of Common Stock with an exercise price of $11.25 per share.
D. Outside Directors who received an option grant on January 23, 1995,
when the Automatic Option Grant Program was established, have an the option
exercise price was $4.9375. The highest exercise price for initial options
under the Automatic Option Grant Program, other than Optionee's, through October
24, 1997 was $6.563.
E. Optionee's initial Option Grant lacks parity with those of other
Outside Directors who joined the Board either before or after Optionee.
F. The Board of Directors, Optionee abstaining, has, therefore approved
the option as a replacement for the Automatic Option Grant previously awarded
Optionee.
NOW, THEREFORE, it is hereby agreed as follows:
1. SURRENDER OF OPTION Concurrently with the acceptance of this
Stock Option agreement, Optionee surrenders all rights under Stock Option Grant
N0340 dated July 1, 1996.
2. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, a Non-Statutory Option to purchase up to the number of Option
Shares specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term specified in Paragraph 2 at the
Exercise Price.
<PAGE>
3. OPTION TERM. This option shall have a term of ten (10) years
measured from the Vesting Commencement Date and shall accordingly expire at the
close of business on the Expiration Date, unless sooner terminated in accordance
with Paragraph 5, 6 or 7.
4. LIMITED TRANSFERABILITY. This option, together with the special
stock appreciation right provided under Paragraph 7(b), shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, this option may also be
assigned in whole or in part during Optionee's lifetime in accordance with the
terms of a Qualified Domestic Relations Order. The assigned portion shall be
exercisable only by the person or persons who acquire a proprietary interest in
the option pursuant to such Qualified Domestic Relations Order. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Board may deem appropriate.
5. EXERCISABILITY/VESTING.
(a) This option shall be immediately exercisable for any or all
of the Option Shares, whether or not the Option Shares are vested in accordance
with the Vesting Schedule and shall remain so exercisable until the Expiration
Date or sooner termination of the option term under Paragraph 5, 6 or 7.
(b) Optionee shall, in accordance with the Vesting Schedule,
vest in the Option Shares in one or more installments over his or her period of
Board service. Vesting in the Option Shares may be accelerated pursuant to the
provisions of Paragraph 5, 6 or 7. In no event, however, shall any additional
Option Shares vest following Optionee's cessation of service as a Board member.
6. CESSATION OF BOARD SERVICE. Should Optionee's service as a Board
member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
outstanding) prior to the Expiration Date in accordance with the following
provisions:
(a) Should Optionee cease to serve as a Board member for any
reason (other than death or Permanent Disability) while holding this option,
then the period for exercising this option shall be reduced to a three (3)-month
period (commencing with the date of such cessation of Board service), but in no
event shall this option be exercisable at any time after the Expiration Date.
During such limited period of exercisability, this option may not be exercised
in the aggregate for more than the number of Option Shares (if any) in which
Optionee is vested on the date Optionee ceases service as a Board member. Upon
the EARLIER of (i) the expiration of such three (3)-month period or (ii) the
specified Expiration Date, the option shall terminate and cease to be
exercisable with respect to any vested Option Shares for which the option has
not been exercised.
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<PAGE>
(b) Should Optionee die during the three (3)-month period
following his or her cessation of Board service, then the personal
representative of Optionee's estate or the person or persons to whom the option
is transferred pursuant to Optionee's will or in accordance with the laws of
descent and distribution shall have the right to exercise this option for any or
all of the Option Shares in which Optionee is vested at the time of Optionee's
cessation of Board service (less any Option Shares purchased by Optionee after
such cessation of Board service but prior to death). Such right of exercise
shall terminate, and this option shall accordingly cease to be exercisable for
such vested Option Shares, upon the EARLIER of (i) the expiration of the three
(3)-year period measured from the date of Optionee's death or (ii) the specified
Expiration Date.
(c) Should Optionee cease service as a Board member by reason of
death or Permanent Disability, then Optionee (or the personal representative of
Optionee's estate or the person or persons to whom the option is transferred
upon Optionee's death) shall have the right to exercise this option for any or
all of the Option Shares, to the extent vested on the date of cessation of
service, at any time prior to the EARLIER of (i) the expiration of the twelve
(12)-month period measured from the date of Optionee's cessation of Board
service by reason of Permanent Disability or the expiration of the three
(3)-year period measured from the date of Optionee's death or (ii) the
specified Expiration Date.
(d) Upon Optionee's cessation of Board service for any reason,
this option shall immediately terminate and cease to be outstanding with respect
to any and all Option Shares in which Optionee is not otherwise at that time
vested in accordance with the normal Vesting Schedule or the special vesting
acceleration provisions of Paragraph 6 or 7 below.
(e) In the event of a Corporate Transaction or Change in
Control, the provisions of Paragraph 6 or 7 shall govern the period for which
this option is to remain exercisable following Optionee's cessation of Board
service and shall supersede any provisions to the contrary in this paragraph.
7. CORPORATE TRANSACTION.
(a) In the event of a Corporate Transaction, all Option Shares
at the time subject to this option but not otherwise vested shall automatically
vest so that this option shall, immediately prior to the effective date of such
Corporate Transaction, become exercisable for any or all of the Option Shares as
fully-vested shares of Common Stock. Immediately following the Corporate
Transaction, this option shall terminate and cease to be exercisable except to
the extent assumed by the successor corporation (or parent thereof) in
connection with such Corporate Transaction.
(b) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised
6
<PAGE>
immediately prior to such Corporate Transaction, and appropriate adjustments
shall also be made to the Exercise Price, PROVIDED the aggregate Exercise
Price shall remain the same.
(c) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
8. CHANGE IN CONTROL/HOSTILE TAKE-OVER.
(a) All Option Shares subject to this option at the time of a
Change in Control but not otherwise vested shall automatically vest so that this
option shall, immediately prior to the effective date of such Change in Control,
become fully exercisable for all of the Option Shares at the time subject to
this option and may be exercised for all or any portion of such shares as
fully-vested shares of Common Stock. This option shall remain exercisable
for such fully-vested Option Shares until the earliest to occur of (i) the
Expiration Date, (ii) the sooner termination of this option in accordance
with Paragraph 5 or 6 or (iii) the surrender of the option in connection with
a Hostile Take-Over.
(b) Provided this option has been outstanding for at least six
(6) months prior to the occurrence of a Hostile Take-Over, Optionee shall have
the unconditional right (exercisable during the thirty (30)-day period
immediately following the consummation of such Hostile Take-Over) to surrender
this option to the Corporation in exchange for a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of the
Option Shares at the time subject to the surrendered option (whether or not
those Option Shares are otherwise at the time vested) over (ii) the aggregate
Exercise Price payable for such shares. This Paragraph 7(b) limited stock
appreciation right shall in all events terminate upon the expiration or sooner
termination of the option term and may not be assigned or transferred by
Optionee.
(c) To exercise the Paragraph 7(b) limited stock appreciation
right, Optionee must, during the applicable thirty (30)-day exercise period,
provide the Corporation with written notice of the option surrender in which
there is specified the number of Option Shares as to which the Option is being
surrendered. Such notice must be accompanied by the return of Optionee's copy
of this Agreement, together with any written amendments to such Agreement. The
cash distribution shall be paid to Optionee within five (5) days following such
delivery date, and no approval or consent of the Board shall be required in
connection with such option surrender and cash distribution. Upon receipt of
such cash distribution, this option shall be cancelled with respect to the
Option Shares subject to the surrendered option (or the surrendered portion) and
Optionee shall cease to have any further right to acquire those Option Shares
under this Agreement. The option shall, however, remain outstanding for the
balance of the Option Shares (if any) in accordance with the terms of this
Agreement, and the Corporation shall issue a new stock option agreement
(substantially in the same form as this Agreement) for those remaining Option
Shares.
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<PAGE>
9. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price
in order to reflect such change and thereby preclude a dilution or
enlargement of benefits hereunder.
10. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
11. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
i) To the extent the option is exercised for
vested Option Shares, execute and deliver to the Corporation a
Notice of Exercise for the Option Shares for which the option is
exercised. To the extent this option is exercised for unvested
Option Shares, execute and deliver to the Corporation a Purchase
Agreement.
ii) Pay the aggregate Exercise Price for the
purchased shares in one or more of the following forms:
(1) cash or check made payable to the
Corporation,
(2) shares of Common Stock held by
Optionee (or any other person or persons exercising the option) for
at least six (6) months and valued at Fair Market Value on the
Exercise Date, or
(3) to the extent the option is exercised
for vested Option Shares, through a special sale and remittance
procedure pursuant to which Optionee (or any other person or
persons exercising the option) shall concurrently provide
irrevocable written instructions (I) to a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares
and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (II) to
the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the
sale.
EXCEPT TO THE EXTENT THE SALE AND REMITTANCE PROCEDURE IS
UTILIZED IN CONNECTION WITH THE OPTION EXERCISE, PAYMENT OF THE
EXERCISE PRICE MUST
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<PAGE>
ACCOMPANY THE NOTICE OF EXERCISE (OR THE PURCHASE AGREEMENT)
DELIVERED TO THE CORPORATION IN CONNECTION WITH THE OPTION
EXERCISE.
iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if
other than Optionee) have the right to exercise this option.
(b) As soon after the Exercise Date as practical, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option
Shares, with the appropriate legends affixed thereto. To the extent any such
Option Shares are unvested, the certificates for those Option Shares shall be
endorsed with an appropriate legend evidencing the Corporation's repurchase
rights and may be held in escrow with the Corporation until such shares vest.
(c) In no event may this option be exercised for any
fractional shares.
12. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been
obtained. The Corporation, however, shall use its best efforts to obtain all
such approvals.
13. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.
14. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.
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<PAGE>
15. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan.
16. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
10
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Conductus, Inc. (the "Corporation") that I elect to
purchase _________ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $_________ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under
Stock Option Agreement dated November 12, 1997.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price for any Purchased Shares in which I am vested at the time of exercise of
the Option.
________________, 199_
Date
____________________________________
Optionee
Address: ___________________________
____________________________________
Print name in exact manner
it is to appear on the
stock certificate: ____________________________________
Address to which certificate
is to be sent, if different
from address above: ____________________________________
____________________________________
Social Security Number: ____________________________________
<PAGE>
APPENDIX
THE FOLLOWING DEFINITIONS SHALL BE IN EFFECT UNDER THE AGREEMENT:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person
or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act)
of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the Board
does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such
that a majority of the Board members ceases, by reason of one
or more contested elections for Board membership, to be
comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or
(B) have been elected or nominated for election as Board
members during such period by at least a majority of the
Board members described in clause (A) who were still in
office at the time the Board approved such election or
nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction,
or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
G. CORPORATION shall mean Conductus, Inc., a Delaware corporation.
<PAGE>
H. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of Optionee.
I. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 10 of the Agreement.
J. EXERCISE PRICE shall mean the exercise price per share as specified in
the Grant Notice.
K. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
L. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is not at the time listed or
admitted to trading on any stock exchange but is traded on the
Nasdaq National Market, the fair market value shall be the
closing price of one share of Common Stock on the date in
question, as such price is reported by the National
Association of Securities Dealers through its Nasdaq system or
any successor system. If there is no closing price for the
Common Stock on the date in question, then the closing price
on the last preceding date for which such quotation exists
shall be determinative of fair market value.
(ii) If the Common Stock is at the time listed or admitted
to trading on any national stock exchange, then the fair
market value shall be the closing selling price per share of
Common Stock on the date in question on the stock exchange
determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in
the composite tape of transactions on such exchange. If there
is no reported sale of Common Stock on such exchange on the
date in question, then the fair market value shall be the
closing selling price on the exchange on the last preceding
date for which such quotation exists.
M. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.
N. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
O. HOSTILE TAKE-OVER shall mean a change in ownership of the Corporation
effected through the following transaction:
<PAGE>
(i) the acquisition, directly or indirectly, by any person
or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of
beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation's stockholders which the
Board does not recommend such stockholders to accept, AND
(ii) more than fifty percent (50%) of the acquired securities
are accepted from persons other than the officers and directors
of the Corporation subject to the short-swing profit restrictions
of Section 16 of the 1934 Act.
P. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
Q. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
R. NOTICE OF EXERCISE shall mean the notice of exercise in the form of
Exhibit I.
S. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option.
T. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
U. PERMANENT DISABILITY shall mean the inability of Optionee to perform
his or her usual duties as a member of the Board by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.
V. PURCHASE AGREEMENT shall mean the stock purchase agreement (in form
and substance satisfactory to the Corporation) which grants the Corporation the
right to repurchase, at the Exercise Price, any and all unvested Option Shares
held by Optionee at the time of Optionee's cessation of Board service and which
precludes the sale, transfer or other disposition of any purchased Option Shares
while subject to such repurchase right.
W. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
Order which substantially complies with the requirements of Code Section
414(p). The Corporation shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.
X. STOCK EXCHANGE shall mean the American Stock Exchange or the New York
Stock Exchange.
Y. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a
<PAGE>
Hostile Take-Over or (ii) the highest reported price per share of Common
Stock paid by the tender offeror in effecting the Hostile Take-Over.
Z. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice.
<PAGE>
EXHIBIT B
CONDUCTUS, INC.
______________________________________________________
OPTIONS GRANTED UNDER OPTION EXCHANGE
TO MARTIN A. KAPLAN
SUMMARY AND PROSPECTUS
______________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INFORMATION REGARDING THE OPTION . . . . . . . . . . . . . . . . . . . . . . . . . .3
1. General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2. Securities to be Offered . . . . . . . . . . . . . . . . . . . . . . . . . .3
3. Term; Vesting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
4. Exercise of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
5. Exercise Price and Payment . . . . . . . . . . . . . . . . . . . . . . . . .4
6. Early Termination of Option. . . . . . . . . . . . . . . . . . . . . . . . .4
7. Corporate Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
8. Change in control of the Company . . . . . . . . . . . . . . . . . . . . . .5
9. Hostile Takeover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
10. Transfer Restriction. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
11. Stockholder Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
12. Disposition of Option Shares. . . . . . . . . . . . . . . . . . . . . . . .7
13. Reporting Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . .8
14. What restrictions apply if I am an affiliate? . . . . . . . . . . . . . . .8
QUESTIONS AND ANSWERS ON FEDERAL TAX CONSEQUENCES. . . . . . . . . . . . . . . . . .9
T1. Did the grant of my Option result in Federal income tax liability to
me? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
T2. Will the exercise of a Non-Statutory Option result in Federal income
tax liability to me?. . . . . . . . . . . . . . . . . . . . . . . . .9
T3. What if the shares purchased under a Non-Statutory Option are
subject to a substantial risk of forfeiture, such as the Company's
repurchase rights?. . . . . . . . . . . . . . . . . . . . . . . . . 10
T4. What is the effect of making a Section 83(b) election? . . . . . . . 10
T5. Will I recognize additional income when I sell shares acquired
under a Non-Statutory Option? . . . . . . . . . . . . . . . . . . . 10
T6. What are the consequences of paying the exercise price of a
Non-Statutory Option in the form of Common Stock previously
acquired upon the exercise of Options or through open-market
purchases?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
T7. What are the Federal tax consequences to the Company?. . . . . . . . 11
Restricted Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
T1. Will a restricted share award or purchase result in Federal income
tax liability to me?. . . . . . . . . . . . . . . . . . . . . . . . 11
T2. Will the vesting of shares under a restricted share award result in
Federal income tax liability to me? . . . . . . . . . . . . . . . . 11
T3. What is the effect of making a Section 83(b) election? . . . . . . . 12
</TABLE>
<PAGE>
<TABLE>
<S> <C>
T4. What are the Federal tax consequences to me if I receive a
dividend on the restricted shares?. . . . . . . . . . . . . . . . . 12
T5. What are the Federal tax consequences to the Company?. . . . . . . . 12
T6. What is the alternative minimum tax? . . . . . . . . . . . . . . . . 13
T7. How is the alternative minimum taxable income calculated?. . . . . . 13
T8. What is the allowable exemption amount . . . . . . . . . . . . . . . 13
T9. Is the spread on an Incentive Option at the time of exercise
normally included in alternative minimum taxable income?. . . . . . 13
T10. How will the payment of alternative minimum taxes in one year
affect the calculation of my tax liability in a later year? . . . . 13
</TABLE>
<PAGE>
THIS DOCUMENT CONSTITUTES PART OF THE OFFICIAL PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
Conductus, Inc. (the "Corporation") is offering shares of its common
stock to you pursuant to a stock option (the "Option") granted by the
disinterested members of the Board of Directors of the Corporation in exchange
for your surrender of rights under that Automatic Option Grant dated July 1,
1996. Federal securities laws require that corporations making public stock
offerings under registration statements filed with the Securities and Exchange
Commission provide a copy of a prospectus to all prospective purchasers. The
prospectus is designed to enable a prospective investor to make an informed
decision as to the merits of an investment in the Corporation.
This Summary and Prospectus is a description of the principal terms
and conditions of the Option.
INFORMATION REGARDING THE OPTION
1. GENERAL INFORMATION
The Option was granted to you on November __, 1997 in consideration
for your surrender of the Initial Automatic Option Grant dated July 1, 1996.
The Option grants you the right to purchase shares of the Corporation's common
stock (the "Common Stock") at a specified exercise price. The terms and
conditions of the Option are set forth in the written Notice of Grant of Stock
Option and Stock Option Agreement evidencing the Option.
The Option is NOT subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA) or Section 401(a) of the Internal Revenue
Code.
2. SECURITIES TO BE OFFERED
You can purchase up to 15,000 shares of Common Stock under the
Option. The Common Stock will be made available either from authorized but
unissued shares of Common Stock, or from shares of Common Stock reacquired by
the Corporation, including shares repurchased on the open market.
In the event there should be any change in the outstanding Common
Stock by reason of a stock dividend, stock split, recapitalization, combination
of shares or other change affecting the outstanding Common Stock as a class
without receipt of consideration, appropriate adjustments will automatically be
made to the number and/or class of shares and the exercise price per share in
effect under the Option in order to preclude the dilution or enlargement of
benefits thereunder.
3. TERM; VESTING
<PAGE>
The Option has a term of ten (10) years from the vesting commencement
date and will terminate on July 1, 2006. Your Option is immediately
exercisable, subject to a repurchase right that expires on the schedule set
forth in the Notice of Grant. The Option will continue to vest only so long as
you continue as a member of the Board of Directors of the Corporation. However,
the vesting of the option shares under the Option grant will be subject to
acceleration upon an acquisition or other change in control of the Corporation.
See the section below titled "Early Termination of Option."
4. EXERCISE OF OPTION
To exercise your Option, you must deliver an executed Notice of
Exercise to the Stock Administrator at the Corporation's principal offices in
Sunnyvale, California. The notice must specify the number of shares to be
purchased under the option and must be accompanied by appropriate proof that the
person exercising the option, if other than you, has the right to effect the
exercise. The extent that you exercise the Option for unvested shares, you must
also deliver a signed stock purchase agreement (in form and substance
satisfactory to the Corporation) which evidences the Corporation's right to
repurchase those unvested shares, at the exercise price paid per share, upon
your cessation of Board service prior to vesting in those shares and which
precludes the sale or other transfer of those shares while they remain subject
to such repurchase right.
5. EXERCISE PRICE AND PAYMENT
The exercise price is $6.50 per share of Common Stock. The exercise
price for the number of shares you wish to purchase must be paid at the time you
exercise the Option. You may pay (i) in cash or check payable to the
Corporation or (ii) by delivery of shares of Common Stock. Any shares delivered
in payment of the exercise price must have been held for at least six (6) months
and will be valued at fair market value (see section below titled "Valuation")
on the exercise date. You will be required to satisfy all applicable income and
employment tax withholding requirements at that time. For information about the
tax treatment applicable to your Option exercise, see the "Questions and Answers
on Federal Tax Consequences" section below.
6. EARLY TERMINATION OF OPTION
Following your cessation of Board Service you may exercise your
outstanding Option for any or all shares for which the Option is vested on your
termination date. You will have three (3) months following such termination in
which to effect this exercise. However, you must in all events exercise your
Option before July 1, 2006. Upon expiration of the three (3)-month period or
(if earlier) upon the expiration date of the Option, the Option will terminate
and cease to remain outstanding for all vested shares for which the option has
not otherwise been exercised. In addition, if your cessation of Service is due
to misconduct, your Option will terminate immediately.
4
<PAGE>
If you die while your Option is outstanding, the personal
representative of your estate or the person or persons to whom the Option is
transferred by the provisions of your will or the laws of inheritance following
your death may exercise your Option for any or all of the shares for which the
Option was vested on the date your Service terminated. The Option must be
exercised by the EARLIER of (i) the expiration of the third anniversary of your
death or (ii) the expiration date of the Option term.
If you become permanently disabled and cease by reason thereof to
remain in the Service of the Corporation, you will have a period of twelve (12)
months from the date of such cessation of Service during which to exercise your
Option for any or all of the shares for which the Option was vested on the date
your Service terminated. In no event, however, may you exercise the Option
after the specified expiration date of the Option term. For purposes of the
Option, you will be deemed to be permanently disabled if you are unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) consecutive months or more.
7. CORPORATE TRANSACTION
Upon the consummation of a Corporate Transaction, the Option will
automatically become fully vested, then terminate and cease to be outstanding,
unless it is assumed by the successor or corporation or its parent.
A Corporate Transaction is defined under the Option as:
- a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State in which the Corporation is incorporated,
- the sale, transfer or other disposition of all or substantially
all of the assets of the Corporation in liquidation or dissolution of the
Corporation, or
- any reverse merger in which the Corporation is the surviving
entity, but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities are
transferred to holders different from those who held such securities immediately
prior to such merger.
If the Option is assumed, the Option will, immediately after the
Corporate Transaction, be appropriately adjusted to apply and pertain to the
number and class of securities which would have been issuable in completion of
the Corporate Transaction, to an actual holder of the same number of shares of
Common Stock as are subject to the Option immediately prior to the Corporate
Transaction. Appropriate adjustments will also be made to the exercise price
payable per share, PROVIDED the aggregate exercise price will remain the same.
8. CHANGE IN CONTROL OF THE COMPANY
5
<PAGE>
In the event of a Change in Control, the Option will automatically
accelerate so that it will, immediately prior to the specified effective date of
the Corporate Transaction, become fully exercisable for the total number of
shares of Common Stock at the time subject to the Option and may be exercised
for all or any portion of such shares.
Each option accelerated in connection with such a Change in Control
will remain fully exercisable until such option expires or terminates.
9. HOSTILE TAKEOVER
Upon the occurrence of a Hostile Take-Over (as defined below), you
will have a thirty (30) day period immediately following such Hostile Take-Over
in which to surrender the Option, provided you have held the Option for at least
six (6) months from the vesting date, in return for a cash distribution from the
Company. The distribution will be in an amount per share of Common Stock
subject to the cancelled option (whether or not the optionee is otherwise at the
time vested in those shares) equal to the Take-Over Price per share less the
option exercise price payable per share. The Take-Over Price per share will be
deemed to be equal to the greater of (a) the fair market value per share of
Common Stock on the option surrender date, or (b) the highest reported price per
share of Common Stock paid in effecting such Hostile Take-Over. The cash
distribution payable upon such option surrender will be made to you within five
(5) days following the option surrender date.
A Hostile Take-Over will be deemed to occur in the event of:
(i) the acquisition, directly or indirectly, by any person or related
group of persons (other than the Company or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company) of
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities pursuant to a tender or exchange
offer made directly to the Company's stockholders which the Board does not
recommend such stockholders to accept, AND
(2) more than fifty percent (50%) of the securities so acquired are
accepted from persons other than the officers and directors of the Company
subject to the short-swing profit restrictions of Section 16 of the 1934 Act.
The shares of Common Stock subject to each option surrendered in
connection with the Hostile Take-Over will not be available for subsequent
issuance under the Stock Plan.
10. TRANSFER RESTRICTION
Your Option cannot be assigned or transferred, except by the
provisions of your will or the laws of inheritance following your death.
6
<PAGE>
11. STOCKHOLDER RIGHTS
You will not have the rights of a stockholder with respect to the
shares covered by the Option until you exercise the Option and pay the exercise
price.
12. DISPOSITION OF OPTION SHARES
As a member of the Board, you are subject to the short-swing profit
restrictions of the Federal securities laws. Section 16(b) of the 1934 Act
requires the Corporation to recover any profit realized by certain officers and
any director or beneficial owner of ten percent (10%) or more of the outstanding
Common Stock (a "Section 16 Insider") from any purchase and sale, or sale and
purchase, of such Common Stock made within a period of less than six (6) months.
The Securities and Exchange Commission (the "SEC") has issued a series
of rules which govern the short-swing liability treatment of certain
transactions effected by a Section 16 Insider with respect to stock options.
The application of these rules to various Option transactions may be summarized
as follows:
GRANT OF OPTION. The receipt of an option grant will be an exempt
transaction and will not be treated as a "purchase" of the underlying option
shares for short-swing liability purposes, if the grant has "Section 16
Approval." This means that the grant is approved by:
(i) the Board,
(ii) the Plan Administrator, OR
(iii) the stockholders.
If the option grant has not received Section 16 Approval, the grant is
still exempt if the shares acquired under the option are not sold until at least
six (6) months after the grant of the option. Should this six-month requirement
not be satisfied, then the option grant will be treated as a "purchase" of the
option shares retroactive to the grant date. Such purchase will be matched, for
short-swing liability purposes, with any sales of Common Stock made within six
(6) months before or after the grant date of the option.
OPTION EXERCISE BY PAYING CASH OR THROUGH SAME-DAY SALE. The exercise
of an option will be an exempt transaction and will not be treated as a
"purchase" of the acquired shares for short-swing liability purposes, if the
original option grant received Section 16 Approval. If the Section 16 Approval
requirements have not been met, then the exercise of an option is still an
exempt transaction, UNLESS the market price of the Common Stock at the time the
option is exercised is lower than the exercise price paid for the shares.
OPTION EXERCISE BY DELIVERY OF SHARES. The delivery of Common Stock
in payment of the exercise price and the exercise of the option will be an
exempt transaction for short-swing liability purposes if the original option
grant (including the feature permitting the delivery of shares) or the exercise
received Section 16 Approval.
7
<PAGE>
OPTION EXERCISE BY STOCK WITHHOLDING. The exercise of an option and
payment of the exercise price and/or applicable withholding taxes by the
withholding of a portion of the Common Stock otherwise issuable to the Section
16 Insider by the Company is exempt if the original option grant (including the
stock withholding feature) or the exercise received Section 16 Approval.
AWARD OF COMMON STOCK. The award of Common Stock by the Company for
services rendered to the Company, a Parent or Subsidiary is exempt if such award
received Section 16 Approval or the shares of Common Stock acquired were held
for at least six (6) months prior to their disposition.
FORFEITURE OF UNVESTED SHARES. The surrender of unvested shares of
Common Stock to the Company for cancellation or expiration without any cash
payment or other consideration to the participant will not be deemed a "sale" of
those shares for short-swing liability purposes, if the original grant received
Section 16 Approval.
SALE OF SHARES. The sale of Common Stock acquired by a Section 16
Insider under the Plan will be treated as a "sale" transaction for short-swing
liability purposes and will be matched with any non-exempt purchases of Common
Stock (e.g., open-market purchases) made by the Section 16 Insider within six
(6) months before or after the date of such sale.
13. REPORTING REQUIREMENTS
Each of the following Plan transactions involving a Section 16 Insider
must be reported on the annual Form 5 required to be filed by such individual
within 45 days after the close of the Company's fiscal year in which such
transaction occurs and may be reported on any earlier-filed Form 4:
* Receipt of option grant
* Receipt of stock award
* Forfeiture of restricted stock
The following transactions must be reported on a Form 4 filed within
ten days after the close of the calendar month in which the transaction is
effected:
* Exercise of option (1)
* Withholding or delivery of shares to satisfy tax withholding
obligations
* Sale of shares
The surrender of options for cancellation or the expiration of options
for no consideration does not have to be reported.
14. WHAT RESTRICTIONS APPLY IF I AM AN AFFILIATE?
- -----------------
(1) If an option grant has not been reported, such grant must be reported
on the same Form 4 on which the option exercise is reported.
8
<PAGE>
In general, executive officers and other persons with power to manage
and direct the policies of the Company, relatives of these persons and trusts,
estates, corporations or other entities controlled by any of these persons or
their relatives may be deemed to be affiliates of the Company. Affiliates of
the Company are obligated to resell their Common Stock in compliance with SEC
Rule 144. This rule requires such sales to be effected in "broker's
transactions," as defined in the rule, and a written notice of each sale must be
filed with the SEC at the time of such sale. The rule also limits the number of
shares which may be sold in any three (3)-month period to the greater of (a) one
percent (1%) of the outstanding Common Stock or (b) the average weekly reported
volume of trading in such shares on all securities exchanges during the four (4)
calendar weeks preceding the filing of the required notice of proposed sale.
However, the holding period requirement of Rule 144 will not be applicable to
any Common Stock acquired under the Plan.
SALE OF SHARES. The sale of shares acquired by you upon exercise of
the Option will be treated as a sale for short-swing liability purposes and will
be matchable against any non-exempt purchases of Common Stock (e.g., open-market
purchases) made by you within six (6) months before or after the sale date.
REPORTING REQUIREMENTS. The exercise of the Option must be reported
on the next Form 4 or 5 otherwise required of you as a Section 16 Insider, but
may be reported on any earlier-filed Form 4. The delivery of shares in payment
of the Option price must be reported on the annual For 5 and may be reported on
any earlier-filed Form 4. The sale of Common Stock must be reported on a Form 4
filed within ten (10) days after the close of the calendar month in which the
sale is effected.
ACCORDINGLY, YOU SHOULD CONSULT WITH COUNSEL BEFORE OFFERING FOR SALE
ANY SHARES OF COMMON STOCK ACQUIRED UNDER THE OPTION IN ORDER TO ASSURE YOUR
COMPLIANCE WITH RULE 144, SECTION 16 AND ALL OTHER APPLICABLE PROVISIONS OF
FEDERAL AND STATE SECURITIES LAWS.
QUESTIONS AND ANSWERS ON FEDERAL TAX CONSEQUENCES
The following is a general description of the Federal income tax
consequences of the Option. State and local tax treatment, which is not
discussed below, may vary from such Federal income tax treatment. You should
consult with your own tax advisor as to the tax consequences of the grant and
exercise of the Option.
T1. DID THE GRANT OF MY OPTION RESULT IN FEDERAL INCOME TAX LIABILITY
TO ME?
No.
T2. WILL THE EXERCISE OF A NON-STATUTORY OPTION RESULT IN FEDERAL
INCOME TAX LIABILITY TO ME?
9
<PAGE>
Normally, you will recognize ordinary income in the year in which the
Non-Statutory Option is exercised in an amount equal to the excess of (a) the
fair market value of the purchased shares on the exercise date over (b) the
exercise price paid for those shares. This income will be reported by the
Company on your W-2 wage statement for the year of exercise, and you will be
required to satisfy the tax withholding requirements applicable to this income
if you are an employee or former employee.
T3. WHAT IF THE SHARES PURCHASED UNDER A NON-STATUTORY OPTION ARE
SUBJECT TO A SUBSTANTIAL RISK OF FORFEITURE, SUCH AS THE
COMPANY'S REPURCHASE RIGHTS?
If the shares you purchase under a Non-Statutory Option are subject to
a substantial risk of forfeiture, such as the Company's right to repurchase
those shares at the original exercise price upon your termination of service
prior to vesting in those shares, then you will not recognize any taxable income
at the time of exercise but will have to report as ordinary income, as and when
the Company's repurchase rights lapse, an amount equal to the excess of (a) the
fair market value of the shares on the date they vest over (b) the exercise
price paid for the shares. In addition, the holding period for determining
whether any additional gain (upon a subsequent disposition of the shares) is a
long-term, mid-term or short-term capital gain will not commence until the
repurchase rights start to lapse.
If you purchase shares subject to a substantial risk of forfeiture,
you may elect under Code Section 83(b) to recognize income at the time of
exercise (see Question T4). If such an election is made, you will not recognize
any additional income with respect to your shares until the shares are sold or
otherwise transferred in a taxable transaction.
T4. WHAT IS THE EFFECT OF MAKING A SECTION 83(b) ELECTION?
If you purchase shares subject to the Company's repurchase right or
other substantial risk of forfeiture, you may elect under Code Section 83(b) to
include as ordinary income in the year of exercise an amount equal to the excess
of (a) the fair market value of the purchased shares on the exercise date over
(b) the exercise price paid for the shares. The fair market value of the
purchased shares will be determined as if the shares were not subject to the
Company's repurchase right or other risk of forfeiture. If you make a Section
83(b) election, you will not recognize any additional income when the Company's
repurchase right or other forfeiture risk subsequently lapses.
The Section 83(b) election must be filed with the Internal Revenue
Service within 30 days following the date the option is exercised. Any ordinary
income resulting from the election will be subject to applicable tax withholding
requirements if you are an employee or former employee. The election generally
is not revocable and cannot be made after the 30-day period has expired.
T5. WILL I RECOGNIZE ADDITIONAL INCOME WHEN I SELL SHARES ACQUIRED
UNDER A NON-STATUTORY OPTION?
10
<PAGE>
Yes. You will recognize a capital gain to the extent the amount
realized upon the sale of such shares exceeds their fair market value at the
time of exercise. The capital gain will be long-term if you held the shares
more than 18 months, mid-term if you held the shares more than one year but not
more than 18 months, and short-term if you held the shares not more than one
year. A capital loss will result to the extent the amount realized upon the
sale is less than such fair market value. The holding period normally starts at
the time the Non-Statutory Option is exercised.
T6. WHAT ARE THE CONSEQUENCES OF PAYING THE EXERCISE PRICE OF A
NON-STATUTORY OPTION IN THE FORM OF COMMON STOCK PREVIOUSLY
ACQUIRED UPON THE EXERCISE OF OPTIONS OR THROUGH OPEN-MARKET
PURCHASES?
You will not recognize any taxable income to the extent the Common
Stock received upon the exercise of the Non-Statutory Option equals in number
the shares of Common Stock delivered in payment of the exercise price. For
Federal income tax purposes, these newly acquired shares will have the same
basis and capital gain holding period as the delivered shares.
The additional shares of Common Stock received upon the exercise of
the Non-Statutory Option will, in general, have to be reported as ordinary
income for the year of exercise in an amount equal to their fair market value on
the exercise date. These additional shares will have a tax basis equal to such
fair market value and a capital gain holding period measured (in general) from
the exercise date.
T7. WHAT ARE THE FEDERAL TAX CONSEQUENCES TO THE COMPANY?
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income you recognize in connection with the exercise of a
Non-Statutory Option. The deduction will, in general, be allowed for the
taxable year of the Company in which you recognize such ordinary income.
RESTRICTED SHARE
T1. WILL A RESTRICTED SHARE AWARD OR PURCHASE RESULT IN FEDERAL
INCOME TAX LIABILITY TO ME?
Restricted shares are shares that are subject to a vesting schedule
(or some other substantial risk of forfeiture). If you separate from service
before vesting in your shares, the shares are forfeited and revert to the
Company. If you paid for the shares, the purchase price will be refunded.
Generally, you will not recognize taxable income at the time of an award or
purchase of restricted shares. However, you may make an election under Code
Section 83(b) to be taxed at the time of the award (see Question T22).
T2. WILL THE VESTING OF SHARES UNDER A RESTRICTED SHARE AWARD RESULT
IN FEDERAL INCOME TAX LIABILITY TO ME?
11
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If you did not elect under Code Section 83(b) to recognize income at
the time of the award or purchase, you will recognize taxable income at the time
of vesting. The taxable income will be equal to the excess of the fair market
value of the restricted shares at the time the shares VEST over the amount (if
any) you paid for the restricted shares.
T3. WHAT IS THE EFFECT OF MAKING A SECTION 83(b) ELECTION?
If you receive or purchase shares that remain subject to vesting, you
may elect under Code Section 83(b) to include as ordinary income in the year of
the award or purchase an amount equal to the excess of (a) the fair market value
of the shares on the transfer date over (b) the purchase price (if any) paid for
the shares. The fair market value of the purchased shares will be determined as
if the shares were not subject to forfeiture. If you make the Section 83(b)
election, you will not recognize any additional income when the shares vest.
Any appreciation in the value of the restricted shares after the award or
purchase is not taxed as compensation, but instead is taxed as capital gain when
the restricted shares are sold or transferred.
If you make a Section 83(b) election and the restricted shares are
later forfeited, you are not entitled to a tax deduction or a refund of the tax
already paid.
The Section 83(b) election must be filed with the Internal Revenue
Service within 30 days following the date the shares are awarded or sold to
you. Any ordinary income resulting from the election will be subject to
applicable tax withholding requirements if you are an employee or former
employee. The election generally is not revocable and cannot be made after
the 30-day period has expired.
T4. WHAT ARE THE FEDERAL TAX CONSEQUENCES TO ME IF I RECEIVE A
DIVIDEND ON THE RESTRICTED SHARES?
Dividends received by you on unvested restricted shares are treated as
taxable compensation and are subject to withholding if you are an employee or
former employee. The Company is entitled to a deduction equal to the amount of
the dividends paid on unvested restricted shares.
Dividends received on restricted shares subject to a Section 83(b)
election are taxed as dividends instead of compensation.
T5. WHAT ARE THE FEDERAL TAX CONSEQUENCES TO THE COMPANY?
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income you recognize in connection with a restricted share
award. The deduction will generally be allowed for the taxable year of the
Company in which you recognize such ordinary income.
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ALTERNATIVE MINIMUM TAX
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T6. WHAT IS THE ALTERNATIVE MINIMUM TAX?
The alternative minimum tax is an alternative method of calculating
the income tax you must pay each year in order to ensure that a minimum amount
of tax is paid for the year. The first $175,000 ($87,500 for a married taxpayer
filing a separate return) of your alternative minimum taxable income for the
year over the allowable exemption amount is subject to alternative minimum
taxation at the rate of 26%. The balance of your alternative minimum taxable
income is subject to alternative minimum taxation at the rate of 28%. The
alternative minimum tax will, however, be payable only to the extent that it
exceeds your regular Federal income tax for the year (computed without regard to
certain credits and special taxes).
T7. HOW IS THE ALTERNATIVE MINIMUM TAXABLE INCOME CALCULATED?
Your alternative minimum taxable income is based upon your regular
taxable income for the year, adjusted to (a) include certain additional items of
income and tax preference and (b) disallow or limit certain deductions otherwise
allowable for regular tax purposes.
T8. WHAT IS THE ALLOWABLE EXEMPTION AMOUNT
The allowable exemption amount is $45,000 for a married taxpayer
filing a joint return, $33,750 for an unmarried taxpayer and $22,500 for a
married taxpayer filing a separate return. The allowable exemption amount is,
however, reduced by 25CENTS for each $1.00 by which the individual's alternative
minimum taxable income for the year exceeds $150,000 for a married taxpayer
filing a joint return, $112,500 for an unmarried taxpayer, and $75,000 for a
married taxpayer filing a separate return. Only your income in excess of the
allowable exemption amount is taken into consideration when calculating the
alternative minimum tax.
T9. IS THE SPREAD ON AN INCENTIVE OPTION AT THE TIME OF EXERCISE
NORMALLY INCLUDED IN ALTERNATIVE MINIMUM TAXABLE INCOME?
Yes. The spread on an Incentive Option (the excess of the fair market
value of the purchased shares at the time of exercise over the exercise price
paid for those shares) is normally included in the optionee's alternative
minimum taxable income at the time of exercise, whether or not the shares are
subsequently made the subject of a disqualifying disposition. If there is a
disposition of the Incentive Option shares in the year of exercise via an arm's
length sale or exchange with an unrelated party, the alternative minimum taxable
income is limited to the amount by which the amount realized upon the
disposition of the shares exceeds the exercise price paid for the shares.
T10. HOW WILL THE PAYMENT OF ALTERNATIVE MINIMUM TAXES IN ONE YEAR
AFFECT THE CALCULATION OF MY TAX LIABILITY IN A LATER YEAR?
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If you pay alternative minimum taxes for one or more taxable years,
the amount of the taxes so paid (subject to certain adjustments and reductions)
will be applied as a partial credit against your regular tax liability (but not
alternative minimum tax liability) for subsequent taxable years. In other
words, you can use this credit only to the extent that your regular taxable
income exceeds your alternative minimum taxable income.
Upon the sale or other disposition of the purchased shares, whether in
the year of exercise or in any subsequent taxable year, your basis for computing
the gain for purposes of alternative minimum taxable income (but not regular
taxable income) will include the amount of the option spread previously included
in your alternative minimum taxable income. If you pay the regular tax in the
year of disposition, your basis will NOT reflect the alternative minimum taxable
income attributable to the exercise.
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THIS DOCUMENT CONSTITUTES PART OF THE OFFICIAL PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
COMPANY INFORMATION
The Company is a Delaware corporation which maintains its principal
executive offices at 969 West Maude Avenue, Sunnyvale, California 94086. The
telephone number at the principal executive offices is (408) 523-9950. You may
contact the Company at this address or telephone number for further information
concerning the Plan and its administration.
A copy of the Company's Annual Report to Stockholders for the most
recent fiscal year will be furnished to each participant in the Plan, and
additional copies will be furnished without charge to each participant upon
written or oral request to the Corporate Secretary of the Company at its
principal executive offices at 969 West Maude Avenue, Sunnyvale, California
94086, or upon telephoning the Company at its principal executive offices at
(408) 523-9950. In addition, any person receiving a copy of this Plan Summary
and Prospectus may obtain without charge, upon written or oral request to the
Corporate Secretary, a copy of any of the documents listed below, which are
hereby incorporated by reference into this Plan Summary and Prospectus, other
than certain exhibits to such documents:
(a) The Company's Prospectus filed with the SEC pursuant to Rule 424(b)
under the Securities Act of 1933, as amended (the "1933 Act"), in
connection with Registration Statement No. 333-3815 on Form S-1 filed
with the SEC on May 15, 1996, together with amendments thereto, in
which there are set forth audited financial statements for the
Company's year ended December 31, 1995;
(b) All other reports filed pursuant to Section 13(a) or 15(d) of the 1934
Act since the end of the year covered by the document referred to in
(a) above;
(c) The Company's Registration Statement No. 0-19915 on Form 8-A filed
with the SEC on March 6, 1992, and amended on July 6, 1993, pursuant
to Section 12(b) of the 1934 Act, in which there is described the
terms, rights and provisions applicable to the Company's outstanding
stock; and
(d) 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 Plan Summary and Prospectus 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.
The Company will also deliver to each participant in the Plan who does
not otherwise receive such materials a copy of all reports, proxy statements and
other communications distributed to the Company's stockholders.
