<PAGE>
As filed with the Securities and Exchange Commission on September 5, 1997
Registration No. 333-__________
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________
MOLECULAR DYNAMICS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-3090031
(State of incorporation) (I.R.S. Employer Identification No.)
928 EAST ARQUES AVENUE
SUNNYVALE, CA 94086
(Address of principal executive offices)
_______________________
RESTATED 1997 STOCK OPTION PLAN
(Full title of the Plan)
_______________________
JAY FLATLEY
CHIEF EXECUTIVE OFFICER
MOLECULAR DYNAMICS, INC.
928 EAST ARQUES AVENUE
SUNNYVALE, CA 94086
(408) 773-1222
(Name, address and telephone number, including area code, of agent for service)
_______________________
Copy to:
Jeffrey Y. Suto
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
(650) 854-4488
Page 1 of 31 Pages
Exhibit Index on Page 7
(Calculation of Registration Fee on following page)
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum Maximum Amount of
Amount to be Offering Price Aggregate Registration
Title of Securities to be Registered Registered(1) Per Share Offering Price Fee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock issuable upon exercise of
options granted pursuant to the Restated 500,000 Shares $ 22.69(2)(3) $ 11,345,000.00 $3,437.88
1997 Stock Option Plan
$0.01 par value
Options to purchase Common Stock
(under Restated 1997 Stock Option Plan) 500,000 Shares $ n/a $ n/a $ n/a
$0.01 par value
TOTAL 500,000 Shares $ 22.69 $ 11,345,000.00 $3,437.88
</TABLE>
_______________________
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under any of the Plans being registered
pursuant to this Registration Statement by reason of any stock dividend,
stock split, recapitalization or any other similar transaction effected
without the receipt of consideration which results in an increase in the
number of the Registrant's outstanding shares of Common Stock.
(2) Computed in accordance with Rule 457(h) under the Securities Act of 1933
(the "SECURITIES ACT") solely for the purpose of calculating the
registration fee. Computation based on the weighted average per share
exercise price (rounded to nearest cent) of outstanding options under the
referenced plan, the shares issuable under which are registered hereby.
(3) Estimated in accordance with Rule 457(h) under the Securities Act solely
for the purpose of calculating the registration fee. The computation with
respect to unissued options is based upon the average high and low sale
prices of the Common Stock as reported on the Nasdaq National Market on
September 4, 1997.
-2-
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed with the Securities and Exchange
Commission (the "COMMISSION") are hereby incorporated by reference:
(a) The Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 filed pursuant to Section 13(a) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), which contains audited
financial statements for the Registrant's latest fiscal year for which such
statements have been filed.
(b) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the Annual Report
referred to in (a) above.
(c) The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A filed with the Commission
under Section 12 of the Exchange Act on January 11, 1993 including any
amendment or report filed for the purpose of updating such description.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered hereby
have been sold or which deregisters all securities then remaining unsold,
shall be deemed to be incorporated by reference in this Registration
Statement and to be part hereof from the date of filing 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.
The Registrant's Certificate of Incorporation reduces the liability of a
director to the corporation or its shareholders for monetary damages for
breaches of his or her fiduciary duty of care to the fullest extent
permissible under Delaware law. The Bylaws of the Registrant further provide
for indemnification of corporate agents to the maximum extent permitted by
the Delaware General Corporation Law. In addition, the Registrant has entered
into Indemnification Agreements with its officers and directors.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable.
Item 8. EXHIBITS.
Exhibit
Number
-------
5.1 Opinion of Venture Law Group, a Professional Corporation.
23.1 Consent of Venture Law Group, a Professional Corporation
(included in Exhibit 5.1).
23.2 Consent of Independent Auditors.
24.1 Powers of Attorney.
99.1 Restated 1997 Stock Option Plan
_______________
-3-
<PAGE>
Item 9. UNDERTAKINGS.
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 to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) that, for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as the indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in a successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel the question has already been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
[Signature Pages Follow]
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Molecular Dynamics, Inc., a corporation organized and existing
under the laws of the State of Delaware, 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 5th day of September, 1997.
MOLECULAR DYNAMICS, INC.
By: /s/ Jay Flatley
---------------------------------------
Jay Flatley
President, Chief Executive Officer,
Acting Chief Financial Officer and
Director.
-5-
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jay Flatley and Lynne Wagoner jointly
and severally, his or her attorneys-in-fact and agents, each with the power
of substitution and resubstitution, for him or her and in his or her name,
place or stead, in any and all capacities, to sign any amendments to this
Registration Statement on Form S-8, and to file such amendments, together
with exhibits and other documents in connection therewith, with the
Securities and Exchange Commission, granting to each attorney-in-fact and
agent, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
as he or she might or could do in person, and ratifying and confirming all
that the attorney-in-facts and agents, or his or her substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jay Flatley President, Chief Executive Officer, September 5, 1997
- ------------------------- Acting Chief Financial Officer and
Jay Flatley Director (Principal Executive Officer)
/s/ Lynne Wagoner
- ------------------------- Director of Finance (Principal September 5, 1997
Lynne Wagoner Accounting Officer)
/s/ James Schlater
- ------------------------- Chairman of the Board of September 5, 1997
James Schlater Directors
/s/ Robert Keeley
- ------------------------- Director September 5, 1997
Robert Keeley
/s/ Janice M. LeCocq
- ------------------------- Director September 5, 1997
Janice M. LeCocq
/s/ Jack Lloyd
- ------------------------- Director September 5, 1997
Jack Lloyd
/s/ C. Woodrow Rea, Jr.
- ------------------------- Director September 5, 1997
C. Woodrow Rea, Jr.
</TABLE>
-5-
<PAGE>
INDEX TO EXHIBITS
Exhibit Page
Number No.
- ------- ----
5.1 Opinion of Venture Law Group, a Professional Corporation 8
23.1 Consent of Venture Law Group, a Professional Corporation 8
(included in Exhibit 5.1)
23.2 Consent of Independent Auditors 9
24.1 Powers of Attorney (see page number) 6
99.1 Restated 1997 Stock Option Plan 10
<PAGE>
EXHIBIT 5.1
September 5, 1997
Molecular Dynamics, Inc.
928 East Arques Avenue
Sunnyvale, CA 94086
REGISTRATION STATEMENT ON FORM S-8
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 (the
"REGISTRATION STATEMENT") filed by you with the Securities and Exchange
Commission (the "COMMISSION") on September 5, 1997 in connection with the
registration under the Securities Act of 1933, as amended, of a total of
500,000 shares of your Common Stock (the "SHARES") reserved for issuance
under the Restated 1997 Stock Option Plan. As your counsel in connection
with this transaction, we have examined the proceedings taken and are
familiar with the proceedings proposed to be taken by you in connection with
the sale and issuance of the Shares.
It is our opinion that upon conclusion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states where required, the Shares when issued and sold in the
manner described in the Registration Statement will be legally and validly
issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in
the Registration Statement, including the Prospectus constituting a part
thereof, and in any amendment thereto.
Very truly yours,
VENTURE LAW GROUP
A Professional Corporation
/s/ Venture Law Group
JYS
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Molecular Dynamics, Inc.:
We consent to the use of our reports incorporated herein by reference.
/s/ KPMG Peat Marwick LLP
Oakland, California
September 5, 1997
<PAGE>
EXHIBIT 99.1
MOLECULAR DYNAMICS, INC.
RESTATED 1997 STOCK OPTION PLAN
(RESTATED ON APRIL 11, 1997)
ARTICLE ONE
GENERAL
I. PURPOSES OF THE PLAN
This Restated 1997 Stock Option Plan (the "Plan") is intended to promote
the interests of Molecular Dynamics, Inc., a Delaware corporation (the
"Corporation"), by providing incentives to eligible individuals to acquire a
proprietary interest, or otherwise increase their proprietary interest, in
the Corporation and remain in the employ or service of the Corporation (or
its parent or subsidiary corporations). The Plan amends and restates its
predecessor Restated 1987 Stock Option Plan (the "1987 Plan"). The first
restatement of the 1987 Plan was adopted by the Board on March 12, 1992 and
approved by the Corporation's stockholders in April 1992. The Discretionary
Option Grant Program in effect under Article Two became 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 shall be designated as the Effective
Date of the Discretionary Option Grant Program. The Automatic Option Grant
Program in effect under Article Three became effective immediately upon the
execution of the Underwriters Agreement between the Corporation and the
underwriters of the initial public offering of the Company's common stock.
The execution date of such Underwriters Agreement is hereby designated as the
Effective Date of such Automatic Option Grant Program. The Plan, as amended
and restated, was adopted by the Board on April 11, 1997 and approved by the
Corporation's stockholders in May 1997 to extend the term through April 11,
2007. For purposes of Internal Revenue Code Section 422 and with respect to
any options issuable or issued after the date of the Board approval of the
second restatement of the Plan, the second restatement of the Plan shall be
deemed to constitute adoption of a new stock option plan.
For purposes of the Plan, the following provisions shall be applicable
in determining the parent and subsidiary corporations of the Corporation:
(i) Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation shall be
considered to be a PARENT corporation 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.
(ii) 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. ADMINISTRATION OF THE PLAN
A. The Plan shall be comprised of two separate programs: (i) the
Discretionary Option Grant Program under Article Two pursuant to which option
grants may be made to key employees and consultants at the discretion of the
Plan Administrator and (ii) the Automatic Option Grant Program under Article
Three pursuant to which option grants will automatically be made to
non-employee members of the Board of Directors at periodic intervals upon the
express terms and provisions of the Article Three program.
B. The Discretionary Option Grant Program shall be administered by one
or more committees comprised of members of the Corporation's Board of
Directors (the "Board"). The primary committee (the "Primary Committee")
shall be comprised of two or more non-employee Board members and shall have
sole and exclusive authority to grant stock options and stock appreciation
rights under the Discretionary Option Grant Program to officers and
employee-directors of the Company subject to the short-swing profit
restrictions of the Federal securities laws. Stock options may be granted
under the Discretionary Option Grant Program to all other eligible employees
and consultants by either the Primary Committee or a second committee
comprised of one or more Board members (the "Secondary Committee"). No Board
member shall be eligible to serve on the Primary Committee if such individual
has, within the relevant period designated below, received an option grant or
stock issuance under this Plan (other than pursuant to the Automatic Option
Grant Program in effect under Article Three) or under any other stock plan of
the Corporation (or any parent or subsidiary corporation):
(i) for each of the initial members of the Primary Committee, the
period commencing with the Effective Date of the Discretionary Option Grant
Program and ending with the date of his or her appointment to the Primary
Committee, or
(ii) for any successor or substitute member, the twelve (12)-month
period immediately preceding the date of his or her appointment to the
Primary Committee or (if shorter) the period commencing with the Effective
Date of the Discretionary Option Grant Program and ending with the date of
his or her appointment to the Primary Committee.
Members of the Primary Committee and the Secondary 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.
C. Subject to the limited authority provided the Secondary Committee
to effect option grants in accordance with the provisions of Section II.B of
this Article One, the Primary Committee shall serve as the Plan Administrator
and 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 Discretionary Option Grant Program and
to make such determinations under, and issue such interpretations of, such
program and any outstanding option thereunder 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 Discretionary Option Grant Program or
any outstanding option.
-2-
<PAGE>
D. Service on the Primary or Secondary Committee shall constitute
service as a Board member, and members of either committee shall accordingly
be entitled to full indemnification and reimbursement as Board members for
their service on the committee. No member of either 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.
E. Administration of the Automatic Option Grant Program shall be
self-executing, and the Plan Administrator shall not exercise any
discretionary functions under such program.
III. ELIGIBILITY FOR OPTION GRANTS
A. The persons eligible to receive option grants under the Plan shall
be limited to the following individuals:
(i) key employees (including officers and directors) of the
Corporation (or its parent or subsidiary corporations) who render services
which contribute to the success and growth of the Corporation (or its parent
or subsidiary corporations) or which may reasonably be anticipated to
contribute to the future success and growth of the Corporation (or its parent
or subsidiary corporations);
(ii) the non-employee members of the board of directors of any
subsidiary corporations; and
(iii) those consultants or independent contractors who provide
valuable services to the Corporation (or its parent or subsidiary
corporations).
From and after the Effective Date of the Automatic Option Grant Program,
the non-employee members of the Board shall not be eligible to receive grants
under the Discretionary Option Grant Program but shall be eligible to receive
automatic option grants pursuant to Article Three of the Plan.
B. The Plan Administrator shall have full authority to determine which
eligible individuals are to receive option grants under the Discretionary
Option Grant Program, the number of shares subject to each such grant, the
status of the granted option as either an incentive stock option ("Incentive
Option") designed to satisfy the requirements of Internal Revenue Code
Section 422 or a non-statutory option not intended to meet such requirements,
the time or times at which the option is to become exercisable, and the
maximum term for which the option is to remain outstanding.
IV. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of the
Corporation's authorized but unissued or reacquired Common Stock. The
aggregate number of shares which may be issued over the term of the Plan
shall not exceed 4,004,500 shares.(1) The total number of shares
- ---------------------------
(1) Includes (i) the 500,000 share increase authorized by the Board on
February 13, 1997 and approved at the 1997 Annual Stockholders Meeting and
(ii) the 250,000 share increase authorized by the Board on February 7, 1996
and
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<PAGE>
issuable under the Plan shall be subject to adjustment from time to time in
accordance with the provisions of this Section IV.
B. In no event may the maximum number of shares of Common Stock for
which any one individual participating in the Plan may be granted stock
options and separately exercisable stock appreciation rights exceed 1,500,000
shares in the aggregate over the remaining term of the Plan. For purposes of
this limitation, no stock options or stock appreciation rights granted prior
to January 1, 1994 shall be taken into account. Such limitation shall be
subject to periodic adjustment in accordance with the provisions of this
Section IV.
C. Should an option expire or terminate for any reason prior to
exercise or surrender in full (including options canceled in accordance with
the cancellation-regrant provisions of Section IV of Article Two of the
Plan), the shares subject to the portion of the option not so exercised or
surrendered shall be available for subsequent option grants under the Plan.
Shares subject to any option or portion thereof surrendered in accordance
with Section V of Article Two of the Plan and Section III of Article Three of
the Plan and all share issuances under the Plan, whether or not the shares
are subsequently repurchased by the Corporation pursuant to its repurchase
rights under the Plan, shall reduce on a share-for-share basis the number of
shares of Common Stock available for subsequent option grants under the Plan.
In addition, should the exercise price of an outstanding option under the
Plan be paid with shares of Common Stock or should shares of Common Stock
otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the
exercise of an outstanding option under the Plan, then the number of shares
of Common Stock available for issuance under the Plan shall be reduced by the
gross number of shares for which the option is exercised, and not by the net
number of shares of Common Stock actually issued to the option holder.
D. In the event any change is made to the Common Stock issuable under
the Plan by reason of any stock split, stock dividend, 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 maximum number and/or class of
securities issuable under the Plan, (II) the maximum number and/or class of
securities for which any one individual participating in the Plan may be
granted stock options and separately exercisable stock appreciation rights
after December 31, 1993, (III) the number and/or class of securities and the
price per share in effect under each outstanding option under the
Discretionary Option Grant Program, (IV) the number and/or class of
securities per non-employee Board member for which automatic option grants
are subsequently to be made under the Automatic Option Grant Program, and (V)
the number and/or class of securities and the price per share in effect under
each automatic grant outstanding under the Automatic Option Grant Program.
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.
- ----------------------------------------------------------------------------
approved at the 1996 Annual Stockholders Meeting. All of the references to
the number of shares issuable under the Plan have been adjusted to reflect
the 3-for-5 reverse stock split effected March 12, 1992.
-4-
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANTS
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to this Article Two 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 of the Corporation or its parent or
subsidiary corporations 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. Each such instrument, however, shall
comply with the terms and conditions specified below, and 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 the option price per share be
less than eighty-five percent (85%) of the fair market value per share of
Common Stock on the date of the option grant.
2. The option price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section VI of Article Two
and the instrument evidencing the grant, be payable in one of the alternative
forms specified below:
(i) full payment in cash or check payable to the Corporation;
or
(ii) full payment in shares of Common Stock held by the
optionee for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at fair
market value on the Exercise Date (as such term is defined below); or
(iii) full payment in a combination of shares of Common Stock
held by the optionee for the requisite period necessary to avoid a charge to
the Corporation's earnings for financial reporting purposes and valued at
fair market value on the Exercise Date and cash or check drawn to the
Corporation's order; or
(iv) full payment through a broker-dealer sale and remittance
procedure pursuant to which the optionee shall 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 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
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<PAGE>
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.
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 the sale and remittance procedure is
utilized in connection with the exercise of the option, payment of the option
price for the purchased shares must accompany such notice.
3. The fair market value per share of Common Stock on any
relevant date under subparagraph 1 or 2 above (and for all other valuation
purposes under the Plan) shall be determined in accordance with the following
provisions:
(i) If the Common Stock is traded on the Nasdaq National
Market, the fair market value shall be the closing selling price per share of
Common Stock on the date in question, as such price is reported by the
National Association of Securities Dealers through the Nasdaq National Market
or any successor system. If there is no closing selling price for the Common
Stock on the date in question, the closing selling 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 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 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.
B. TERM AND EXERCISE OF OPTIONS.
Each option granted under this Article Two shall be exercisable at
such time or times, during such period, and for such number of shares as
shall be determined by the Plan Administrator and set forth in the stock
option agreement evidencing such option. However, no such option shall have
a maximum term in excess of ten (10) years measured from the grant date.
During the lifetime of the optionee, the option, together with any stock
appreciation rights pertaining to such option, shall be exercisable only by
the optionee and shall not be assignable or transferable by the optionee
except for a transfer of the option effected by will or by the laws of
descent and distribution following the optionee's death.
C. EFFECT OF TERMINATION OF SERVICE.
1. Should the optionee cease Service for any reason other than
death (including permanent disability as defined in Internal Revenue Code
Section 22(e)(3)) while holding one or more outstanding options under this
Article Two, then such option or options shall not (except to the extent
otherwise provided pursuant to subparagraph 4 below) remain exercisable for
more than a twelve (12) month period (or such shorter period determined by
the Plan Administrator and set forth in the instrument evidencing the grant)
following the date of
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<PAGE>
such cessation of Service. In no event, however, shall any such option be
exercisable after the specified expiration date of the option term. Each
such option shall, during such twelve (12) month or shorter period, be
exercisable only to the extent of the number of vested shares of Common Stock
(if any) for which the option is exercisable on the date of the optionee's
cessation of Service. Upon the expiration of such twelve (12) month or
shorter period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be exercisable. Each such option,
however, shall immediately terminate and cease to be outstanding, at the time
of the optionee's cessation of Service, with respect to any shares of Common
Stock for which such option is not otherwise at that time exercisable or in
which the optionee is not otherwise at that time vested.
2. Any option under the Plan held by the optionee at the time of
death may be subsequently exercised, but only to the extent of the number of
vested shares of Common Stock (if any) for which the option is exercisable on
the date of the optionee's cessation of Service (less any option shares
subsequently purchased by the optionee prior to death), by the personal
representative of the optionee's estate or by the person or persons to whom
the option is transferred pursuant to the optionee's will or in accordance
with the laws of descent and distribution. Any such exercise must, however,
be effected prior to the EARLIER of (i) the third anniversary of the date of
the optionee's cessation of Service (or such shorter period determined by the
Plan Administrator and specified in the instrument evidencing the grant) or
(ii) the specified expiration date of the option term. Upon the occurrence
of the earlier event, the option shall terminate and cease to be outstanding.
3. 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 outstanding options under
this Article Two to be exercised, during the limited post-Service exercise
period applicable under subparagraph 1 or 2 above, not only with respect to
the number of vested shares of Common Stock for which each such option is
exercisable at the time of the optionee's cessation of Service but also with
respect to one or more subsequent installments of vested shares for which the
option would otherwise have become exercisable had such cessation of Service
not occurred.
4. The Plan Administrator shall also 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 in effect under subparagraph 1 or 2 above to such greater
period of time as the Plan Administrator shall deem appropriate. In no
event, however, shall such option be exercisable after the specified
expiration date of the option term.
5. For purposes of the foregoing provisions of this Section I of
Article Two (and all other provisions of the Plan), unless it is specifically
provided otherwise in the option agreement evidencing the option grant and/or
the purchase agreement evidencing the shares purchased under such option, the
optionee shall be deemed to remain in SERVICE 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 of directors or an independent consultant or advisor. The
optionee shall be considered to be an
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EMPLOYEE for so long as such individual remains in the employ of the
Corporation or one or more of its 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.
D. SHAREHOLDER RIGHTS.
An optionee shall have not have any stockholder rights with respect
to any shares subject to the option until such individual shall have
exercised the option and paid the option price for the purchased shares.
E. 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 expressly assigned to the successor corporation
(or parent thereof) in connection with the Corporate Transaction or (ii) such
termination is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
3. The Plan Administrator shall have the discretionary authority,
exercisable either before or after the optionee's cessation of Service, to
cancel the Company's outstanding repurchase rights with respect to one or
more shares purchased or purchasable by the optionee under this Article Two
and thereby accelerate the vesting of such shares in whole or in part at any
time.
II. 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. Options which are specifically
designated as "non-statutory" options when issued under the Plan shall NOT be
subject to such terms and conditions.
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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 per share of 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 Article Two (or under any
other option plan of the Corporation or its parent or subsidiary
corporations) may for the first time become exercisable as incentive stock
options under the Federal tax laws during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability thereof as incentive stock options under the Federal tax laws
shall be applied on the basis of the order in which such options are granted.
Should any option under this Article Two become first exercisable in any
calendar year for shares of Common Stock in excess of such One Hundred
Thousand Dollar ($100,000) limitation, then that 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 option is to be
granted pursuant to the provisions of the Plan is on the date of grant the
owner of stock (as determined under Section 424(d) of the Internal Revenue
Code) possessing 10% or more of the total combined voting power of all
classes of stock of the Corporation or any one of its parent or subsidiary
corporations (such person to be herein referred to as a 10% Stockholder),
then the option price per share shall not be less than one hundred and ten
percent (110%) of the fair market value per share of Common Stock on the
grant date, and 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, all
the provisions of the Plan shall be applicable to the Incentive Options
granted hereunder.
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"):
(i) 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,
(ii) 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
(iii) any reverse merger in which the Corporation is the surviving
entity but in which fifty percent (50%) or more of the Corporation's
outstanding voting stock is transferred to persons different from those who
held the stock immediately prior to such merger,
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each option at the time outstanding under this Article Two but
otherwise not fully exercisable shall automatically accelerate so that such
option shall, immediately prior to the specified effective date for such
Corporate Transaction, become fully exercisable for all the 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 shall not so
accelerate if and to the extent (i) such option is to be assumed by the
successor corporation or parent thereof or replaced with a comparable option
to purchase shares of the capital stock of such successor corporation or
parent, (ii) such option is to be replaced with a cash incentive program of
the successor corporation which preserves the option spread existing at the
time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such option, or (iii)
such acceleration is subject to other limitations imposed by the Plan
Administrator in the relevant option agreement. Option comparability under
clause (i) shall be determined by the Plan Administrator, and its
determination shall be final, binding and conclusive.
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 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 on both an
aggregate and per participant basis following the consummation of the
Corporate Transaction shall be appropriately adjusted.
D. The grant of options under this Plan 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.
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F. For purposes of this Section III, a Change in Control 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 fifty percent (50%) or more 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) 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) ceases, by reason of
one or more proxy contests for the election of Board members, 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 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.
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 and to
grant in substitution therefor new options under this Article Two covering
the same or different numbers of shares of Common Stock but having an option
price per share not less than (i) eighty-five percent (85%) of the fair
market value of the Common Stock on the new grant date or (ii) one hundred
percent (100%) of such fair market value in the case of an Incentive Option
or (iii) one hundred and ten percent (110%) of such fair market value in the
case of an Incentive Option granted to a 10% Stockholder.
V. SURRENDER OF OPTIONS
A. Provided and only if the Plan Administrator determines in its
discretion to implement the stock appreciation right provisions of this
Section V, one or more optionees may be granted the right, exercisable upon
such terms and conditions as the Plan Administrator may establish, to
surrender all or part of an unexercised option under this Article Two in
exchange for a distribution from the Corporation equal in amount to the
excess of (i) the fair market value (on the option surrender date) of the
shares of Common Stock in which the optionee is at the time
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vested under the surrendered option (or surrendered portion thereof) over
(ii) the aggregate option price payable for such vested shares.
B. No surrender of an option shall be effective hereunder unless it is
approved by the Plan Administrator. If the surrender is so approved, then
the distribution to which the optionee shall accordingly become entitled
under this Section V may be made in shares of Common Stock valued at fair
market value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the optionee shall retain whatever rights the optionee
had under the surrendered option (or surrendered portion thereof) on the date
of surrender and may exercise such rights at any time prior to the LATER of
(i) five (5) business days after the receipt of the rejection notice or (ii)
the last day on which the option is otherwise exercisable in accordance with
the terms of the instrument evidencing such option, but in no event may such
rights be exercised more than ten (10) years (or five (5) years in the case
of a 10% Stockholder) after the date of the option grant.
D. One or more officers of the Corporation subject to the short-swing
profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights
in tandem with their outstanding options under this Article Two. Upon the
occurrence of a Hostile Take-Over effected at any time when the Corporation's
outstanding Common Stock is registered under Section 12(g) of the 1934 Act,
each outstanding option with such a limited stock appreciation right in
effect for at least six (6) months shall automatically be canceled, 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 canceled option (or canceled 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. The balance of the
option (if any) shall continue to remain outstanding and become exercisable
in accordance with the terms of the instrument evidencing such grant.
E. For purposes of Section V.D, 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 fifty percent (50%) or more 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
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offer are accepted from holders other than the 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 (a) the fair market value per share of Common Stock on the option
cancellation date, as determined pursuant to the valuation provisions of
Section I.A.3 of this Article Two, or (b) the highest reported price per
share of Common Stock paid by the tender offeror in effecting such Hostile
Take-Over. However, if the canceled option is an Incentive Option, the
Take-Over Price shall not exceed the clause (a) price per share.
F. The shares of Common Stock subject to any option surrendered or
canceled for an appreciation distribution pursuant to this Section V shall
NOT be available for subsequent option grant under the Plan.
VI. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may assist any optionee in the exercise of
one or more options under this Article Two by (i) authorizing the extension
of a loan to such optionee from the Corporation or (ii) permitting the
optionee to pay the option 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) shall
be established by the Plan Administrator in its sole discretion. Loans and
installment payments may be granted without security or collateral, but the
maximum credit available to the optionee shall not exceed the SUM of (i) the
aggregate option price payable for the purchased shares (less the par value
thereof) plus (ii) any Federal and State income and employment tax liability
incurred by the optionee in connection with the exercise of the option.
B. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under subsection A above shall be subject to
forgiveness by the Corporation in whole or in part upon such terms and
conditions as the Plan Administrator in its discretion deems appropriate.
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ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
A. ELIGIBLE OPTIONEES. The individuals eligible to receive automatic
option grants pursuant to the provisions of this Article Three shall be
limited to the following:
(1) each individual who is serving as a non-employee member of the
Board on the Effective Date of the Automatic Option Grant Program, and
(2) each individual who is first appointed or elected as a
non-employee Board member at any time after such Effective Date.
B. LIMITATION. Except for the option grants to be made pursuant to
the provisions of this Article Three, non-employee Board members shall NOT be
eligible to receive any additional option grants under this Plan or any other
stock plan of the Corporation (or its subsidiary corporations).
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. GRANT DATES. Option grants will be made under this Article Three
on the dates specified below:
(i) Each individual who first becomes a non-employee Board member
at any time on or after the 1994 Annual Stockholders Meeting, whether through
election at an Annual Stockholders Meeting or through appointment by the
Board, shall automatically be granted, at the time of such initial election
or appointment, a non-statutory stock option to purchase 10,000 shares of
Common Stock upon the terms and conditions of this Article Three.
(ii) On the date of each Annual Stockholders Meeting, beginning
with the 1994 Annual Meeting, each individual who is at the time re-elected
as a non-employee Board shall automatically be granted a nonstatutory option
under this Article Three to purchase an additional 3,500 shares of the Common
Stock, provided such individual has served as a Board member for at least six
(6) months prior to such automatic grant date.
The 10,000-share limitation and the 3,500-share limitation on the
automatic option grants to be made to each non-employee Board member shall be
subject to periodic adjustment pursuant to the applicable provisions of
paragraph IV.C of Article One. There shall be no limit on the number of
3,500-share option grants any one non-employee Board member may receive under
this Article Three during his or her period of Board service.
B. EXERCISE PRICE. The exercise price per share of Common Stock
subject to each automatic option grant made under this Article Three after
the Effective Date shall be equal to one hundred percent (100%) of the fair
market value per share of Common Stock on the
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automatic grant date, as determined in accordance with the valuation
provisions of Section I.A.3 of Article Two.
C. PAYMENT.
The exercise price shall be payable in one of the alternative forms
specified below:
(i) full payment in cash or check made payable to the
Corporation's order; or
(ii) full payment in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's reported earnings and
valued at fair market value on the Exercise Date (as such term is defined
below); or
(iii)full payment in a combination of shares of Common Stock held
for the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at fair market value on
the Exercise Date and cash or check drawn to the Corporation's order; or
(iv) full payment through a broker-dealer sale and remittance
procedure pursuant to which the optionee shall provide irrevocable written
instructions (A) 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 option price payable for the purchased shares and (B) to the
Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale.
For purposes of this subparagraph, the Exercise Date shall be the date
on which written notice of the option exercise is delivered to the
Corporation, and the fair market value per share of Common Stock on any
relevant date shall be determined in accordance with the provisions of
paragraph I.A.3 of Article Two. Except to the extent the sale and remittance
procedure specified above is utilized for the exercise of the option, payment
of the exercise price for the purchased shares must accompany such notice.
D. OPTION TERM. Each automatic grant under this Article Three shall
have a maximum term of ten (10) years.
E. EXERCISABILITY.
1. The initial 10,000-share automatic grants shall each become
exercisable for the option shares in four (4) installments as follows:
(i) The option shall immediately upon grant be exercisable
for twenty-five percent (25%) of the option shares.
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(ii) The option shall become exercisable for an additional
twenty-five percent (25%) of the option shares upon the optionee's completion
of twelve (12) months of continuous Board service measured from the automatic
grant date.
(iii) The option shall become exercisable for an additional
twenty-five percent (25%) of the option shares upon the optionee's completion
of twenty-four (24) months of continuous Board service measured from the
automatic grant date.
(iv) The option shall become exercisable for the final
twenty-five percent (25%) of the option shares upon the optionee's completion
of thirty-six (36) months of continuous Board service measured from the
automatic grant date.
As the option becomes exercisable for one or more installments of the
option shares, the installments shall accumulate, and the option shall remain
exercisable for the accumulated installments until the expiration or sooner
termination of the option term. The option, however, shall not become
exercisable for any additional option shares following the optionee's
cessation of Board service for any reason.
2. Each 3,500-share automatic grant shall become exercisable upon
the optionee's completion of twelve (12) months of continuous Board service
measured from the automatic grant date. The option, however, shall not
become exercisable for any additional option shares following the optionee's
cessation of Board service.
F. NON-TRANSFERABILITY. During the lifetime of the optionee, the
option, 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 except for a transfer of the option effected
by will or by the laws of descent and distribution following the optionee's
death.
G. EFFECT OF TERMINATION OF BOARD MEMBERSHIP.
1. Should the optionee cease to be a Board member for any reason
(other than death) while holding one or more automatic option grants under
this Article Three, then such optionee shall have a six (6)-month period
following the date of such cessation of Board membership in which to exercise
each such option for any or all of the shares of Common Stock for which the
option is exercisable at the time of the optionee's cessation of service as a
Board member.
2. Should the optionee die while serving as a Board member or
during the six (6)-month period following his or her cessation of Board
service, then each automatic option grant held by such optionee at the time
of his or her death may subsequently be exercised, for any or all of the
shares of Common Stock for which the option was exercisable at the time of
the optionee's cessation of Board membership (less any option shares
subsequently purchased by the optionee prior to death), by the personal
representative of the optionee's estate or by the person or persons to whom
the option is transferred pursuant to the optionee's will or in accordance
with the laws of descent and distribution. Any such exercise must, however,
occur within twelve (12) months after the date of the optionee's death.
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3. In no event shall any automatic grant under this Article Three
remain exercisable after the specified expiration date of the ten (10)-year
option term. Upon the expiration of the limited post-service exercise period
under subparagraph 1 or 2 above or (if earlier) upon the expiration of the
ten (10)-year option term, the automatic grant shall terminate and cease to
be outstanding. However, each automatic option grant held by the optionee at
the time of his or her cessation of Board service shall immediately terminate
and cease to be outstanding with respect to any option shares for which such
option is not otherwise at that time exercisable.
H. STOCKHOLDER RIGHTS. The holder of an automatic option grant under
this Article Three shall have no stockholder rights with respect to any
shares subject to such option until such individual shall have exercised the
option and paid the exercise price for the purchased shares.
I. REMAINING TERMS. The remaining terms and conditions of each
automatic option grant shall be as set forth in the prototype Non-Employee
Director Automatic Grant Agreement attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction (as such term is defined
in Section III of Article Two), each automatic option grant at the time
outstanding under this Article Three but not otherwise fully exercisable
shall automatically accelerate so that 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 such
option and may be exercised for all or any portion of such shares. Upon the
consummation of the Corporate Transaction, all automatic option grants under
this Article Three shall terminate and cease to be outstanding.
B. In the event of any Change in Control (as such term is defined in
Section III of Article Two), each automatic option grant at the time
outstanding under this Article Three but not otherwise fully exercisable
shall automatically accelerate so that 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 such
option and may be exercised for all or any portion of those shares. Each
such automatic grant accelerated in connection with the Change in Control
shall remain fully exercisable until the expiration or sooner termination of
the option term.
C. Upon the occurrence of a Hostile Take-Over (as such term is defined
in Section V of Article Two), each automatic option grant which has been
outstanding under this Article Three for a period of at least six (6) months
shall automatically be canceled in return for 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 canceled option
(whether or not the option is otherwise at the time exercisable for such
shares) over (ii) the aggregate exercise price payable for such shares. The
cash distribution payable upon such option cancellation shall be made
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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.
D. For purposes of this Article Three, the Take-Over Price per share
shall be deemed to be equal to the GREATER of (i) the fair market value per
share of Common Stock on the option cancellation date, as determined pursuant
to the valuation provisions of paragraph I.A.3 of Article Two, or (ii) the
highest reported price per share of Common Stock paid by the tender offeror
in effecting such Hostile Take-Over.
E. The shares of Common Stock subject to each option canceled in
connection with the Hostile Take-Over shall NOT be available for subsequent
issuance under this Plan.
F. The automatic option grants outstanding under this Article Three
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.
IV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
The provisions of this Automatic Option Grant Program, including any
automatic option grants outstanding under this Article Three, may not be
amended at intervals more frequently than once every six (6) months, other
than to the extent necessary to comply with applicable Federal income tax
laws and regulations.
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ARTICLE FOUR
MISCELLANEOUS
1. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and authority to amend
or modify the Plan in any or all respects whatsoever. However, (i) no such
amendment or modification shall, without the consent of the holders,
adversely affect rights and obligations with respect to options at the time
outstanding under the Plan and (ii) any amendment to the Automatic Option
Grant Program (or any options outstanding thereunder) shall be made in
compliance with the limitation of Section IV of Article Three. In addition,
the Board shall not, without the approval of the Corporation's stockholders,
(i) increase the maximum number of shares issuable under the Plan or the
maximum number of shares for which any one participant may be granted stock
options and separately exercisable stock appreciation rights after December
31, 1993, except for permissible adjustments under Section IV of Article One,
(ii) materially modify the eligibility requirements for the grant of options
under the Plan or (iii) otherwise materially increase the benefits accruing
to participants under the Plan.
II. EFFECTIVE DATE AND TERM OF PLAN
A. The 1987 Plan was initially adopted by the Board on December 16,
1987, and approved by the Corporation's stockholders on December 14, 1988.
The 1987 Plan was subsequently amended by the Board in May 1990 and in April
1991 to increase the total number of shares issuable under the 1987 Plan by
300,000 shares and 450,000 shares (adjusted to reflect the 3-for-5 reverse
stock split effected March 12, 1992), respectively, and such amendments were
approved by the stockholders in May 1990 and August 1991, respectively. The
Board restated the 1987 Plan on March 12, 1992 to increase the number of
shares of Common Stock issuable under the 1987 Plan by 500,000 shares with
such increase to become effective upon the Effective Date of the
Discretionary Option Grant Program. The stockholders approved such
restatement in April 1992. Article One, Section II of the 1987 Plan was
subsequently amended to permit the establishment of a secondary committee to
administer the 1987 Plan. Such amendment became effective on the February
17, 1993 date of its approval by the Board.
B. On February 8, 1994, the Board amended the 1987 Plan to (i)
increase the number of shares available for issuance pursuant to the 1987
Plan by 500,000 shares, (ii) impose a limitation on the maximum number of
shares of Common Stock for which any one participant in the 1987 Plan may be
granted stock options and separately exercisable stock appreciation rights
after December 31, 1993 and (iii) increase the number of shares of Common
Stock for which option grants are to be made under the Automatic Grant
Program to each newly elected or re-elected non-employee Board member. The
amendment was approved by the stockholders at the 1994 Annual Stockholders
Meeting. On February 8, 1995, the Board approved an amendment to the 1987
Plan to increase the total number of shares issuable thereunder by 750,000
shares. The amendment was approved at the 1995 Annual Stockholders Meeting.
On February 7, 1996, the Board approved an amendment to the 1987 Plan to
increase the total number of shares issuable
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thereunder by 500,000. The amendment was approved at the 1996 Annual
Shareholders Meeting. On February 13, 1997 the Board approved an amendment
to the 1987 Plan to increase the total number of shares issuable thereunder
by 500,000 and on April 11, 1997 the Board approved the Plan which amends and
restates the predecessor 1987 Plan to extend the term through April 11, 2007
and to rename the 1987 Plan as the "Restated 1997 Stock Option Plan." The
stockholders approved the Plan, including the 500,000 share increase in the
number of shares of Common Stock reserved for issuance thereunder, at the
1997 Annual Stockholders Meeting.
C. Except as provided in paragraph D below, the provisions of the
Discretionary Option Grant Program shall apply only to options granted under
the Plan from and after the Effective Date of that program. All options
issued and outstanding under the Plan immediately prior to such Effective
Date shall continue to be governed by the terms and conditions of the Plan
(and the respective instruments evidencing each such option) as in effect on
the date each such option was previously granted, and nothing in this
restatement 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.
D. The option acceleration provisions of Section III of Article Two
relating to Corporate Transactions and Changes in Control may, in the Plan
Administrator's discretion, be extended to one or more outstanding stock
options under the Plan which were granted prior to the Effective Date of the
Discretionary Option Grant Program and which do not otherwise provide for
such acceleration.
E. The sale and remittance procedure authorized for the exercise of
outstanding options under this Plan shall be available for all options
granted under the Discretionary Option Grant Program on or after the
Effective Date of that program and all non-statutory options outstanding
under the Plan on such Effective Date. The Plan Administrator may also allow
such procedure to be utilized in connection with one or more disqualifying
dispositions of Incentive Option shares effected after the Effective Date,
whether such Incentive Options were granted on or before such Effective Date.
F. Unless sooner terminated in accordance with Section III of Article
Two or Section III of Article Three, the Plan shall terminate upon the
earlier of (i) April 11, 2007, or (ii) the date on which all shares available
for issuance under the Plan shall have been issued or canceled pursuant to
the exercise, surrender or cash-out of options granted hereunder. If the
date of termination is determined under clause (i) above, then each option
outstanding on such date shall thereafter continue to have force and effect
in accordance with the provisions of the instrument evidencing such option.
G. Options to purchase shares of Common Stock may be granted under the
Plan which are in excess of the number of shares then available for issuance
under the Plan, PROVIDED each option granted is not to become exercisable, in
whole or in part, at any time prior to stockholder approval of an amendment
authorizing a sufficient increase in the number of shares available for
issuance under the Plan.
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III. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to options granted under the Plan shall be used for general
corporate purposes.
IV. WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise or
surrender of any options granted under Article Two or Article Three shall be
subject to the satisfaction of all applicable federal, state and local income
and employment tax withholding requirements.
V. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option or
surrender right hereunder, and the issuance of stock upon the exercise or
surrender of any such option shall be subject to the procurement by the
Corporation of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options granted under it and the stock
issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan, unless and until, in the opinion of counsel for the
Corporation (or its successor in the event of any Corporate Transaction),
there shall have been compliance with all applicable requirements of the
federal and state securities laws and the applicable regulations of any
securities exchange on which stock of the same class is then listed, and all
other requirements of law or of any regulatory bodies having jurisdiction
over such issuance and delivery.
VI. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing this Plan, nor any
action taken by the Board or the Plan Administrator hereunder, nor any
provision of this 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 Sentence at
any time and for any reason, with or without cause.
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EXHIBIT A
NON-EMPLOYEE DIRECTOR AUTOMATIC OPTION GRANT AGREEMENT
