<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(AMENDMENT NO.1)
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
Commission File Number: 0-21131
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INTERNATIONAL NETWORK SERVICES
(Exact name of registrant as specified in its charter)
California 77-0289509
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1213 Innsbruck Drive, Sunnyvale, CA 94089
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (408) 542-0100
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
The number of shares outstanding of the registrant's Common Stock as of
October 30, 1998 was 33,346,831.
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PART II -- OTHER INFORMATION
This Quarterly Report on Form 10-Q/A is being filed as Amendment No. 1 to
the Registrant's Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on November 12, 1998 ("Form 10-Q") for the purpose of
amending Item 6 of Part II of the Registrant's Form 10-Q so as to add three
exhibits and update the exhibit list.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Number Description
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<S> <C>
10.3 1996 Stock Plan, as amended.
10.4 1996 Employee Stock Purchase Plan, as amended.
10.10 1998 Director Option Plan.
27.1* Financial Data Schedule.
</TABLE>
* Previously filed.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
INTERNATIONAL NETWORK SERVICES
By: /s/ Kevin J. Laughlin
----------------------------------------
Kevin J. Laughlin
Vice President, Chief Financial Officer
and Secretary
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
Date: December 21, 1998
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INTERNATIONAL NETWORK SERVICES
1996 STOCK PLAN
(AMENDED AND RESTATED April 3, 1998)
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for
positions of substantial responsibility,
- to provide additional incentive to Employees,
Directors and Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options
or Nonstatutory Stock Options, as determined by the Administrator
at the time of grant. Stock Purchase Rights may also be granted
under the Plan.
2. DEFINITIONS. As used herein, the following definitions
shall apply:
(a) "ADMINISTRATOR" means the Board or any of its
Committees as shall be administering the Plan, in accordance with
Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to
the administration of stock option plans under U. S. state
corporate laws, U.S. federal and state securities laws, the Code,
any stock exchange or quotation system on which the Common Stock is
listed or quoted and the applicable laws of any foreign country or
jurisdiction where Options or Stock Purchase Rights are, or will
be, granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as
amended.
(e) "COMMITTEE" means a committee of Directors appointed
by the Board in accordance with Section 4 of the Plan.
(f) "COMMON STOCK" means the Common Stock of the Company.
(g) "COMPANY" means International Network Services, a
California corporation.
(h) "CONSULTANT" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services
and who is compensated for such services.
(i) "DIRECTOR" means a member of the Board.
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(j) "DISABILITY" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Section 16(b)
Officers and Directors, employed by the Company or any Parent or
Subsidiary of the Company. A Service Provider shall not cease to
be an Employee in the case of (i) any leave of absence approved by
the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed
ninety days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon expiration
of a leave of absence approved by the Company is not so guaranteed,
on the 181st day of such leave any Incentive Stock Option held by
the Optionee shall cease to be treated as an Incentive Stock Option
and shall be treated for tax purposes as a Nonstatutory Stock
Option. Neither service as a Director nor payment of a director's
fee by the Company shall be sufficient to constitute "employment"
by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market
of The Nasdaq Stock Market, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or system on the date of
determination (or if such date is not a market trading day, the
most recent prior market trading day), as reported in THE WALL
STREET JOURNAL or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported,
the Fair Market Value of a Share of Common Stock shall be the mean
between the high bid and low asked prices for the Common Stock on
the date of determination (or if such date is not a market trading
day, the most recent prior market trading day), as reported in THE
WALL STREET JOURNAL or such other source as the Administrator deems
reliable;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good
faith by the Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of
Section 422 of the Code and the regulations promulgated thereunder.
(o) "NONSTATUTORY STOCK OPTION" means an Option not
intended to qualify as an Incentive Stock Option.
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(p) "NOTICE OF GRANT" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or
Stock Purchase Right grant. The Notice of Grant is part of the
Option Agreement.
(q) "SECTION 16(b) OFFICER" means a person who is an
officer of the Company within the meaning of Section 16(b) of the
Exchange Act and the rules and regulations promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the
Plan.
(s) "OPTION AGREEMENT" means an agreement between the
Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the
terms and conditions of the Plan.
(t) "OPTION EXCHANGE PROGRAM" means a program whereby
outstanding options are surrendered in exchange for options with a
lower exercise price.
(u) "OPTIONED STOCK" means the Common Stock subject to an
Option or Stock Purchase Right.
(v) "OPTIONEE" means the holder of an outstanding Option
or Stock Purchase Right granted under the Plan.
(w) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(x) "PLAN" means this 1996 Stock Plan.
(y) "RESTRICTED STOCK" means shares of Common Stock
acquired pursuant to a grant of Stock Purchase Rights under
Section 11 below.
(z) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written
agreement between the Company and the Optionee evidencing the terms
and restrictions applying to stock purchased under a Stock Purchase
Right. The Restricted Stock Purchase Agreement is subject to the
terms and conditions of the Plan and the Notice of Grant.
(aa) "RULE 16b-3" means Rule 16b-3 of the Exchange
Act or any successor to Rule 16b-3, as in effect when discretion is
being exercised with respect to the Plan.
(bb) "SECTION 16(b)" means Section 16(b) of the
Securities Exchange Act of 1934, as amended.
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(cc) "SERVICE PROVIDER" means an Employee, Director or
Consultant.
(dd) "SHARE" means a share of the Common Stock, as
adjusted in accordance with Section 13 of the Plan.
(ee) "STOCK PURCHASE RIGHT" means the right to purchase
Common Stock pursuant to Section 11 of the Plan, as evidenced by a
Notice of Grant.
(ff) "SUBSIDIARY" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of
the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of Shares that
may be optioned and sold under the Plan is 5,500,000 Shares, plus
(i) any unused Shares, (ii) any forfeited Shares, and (iii) annual
increases on July 1 of each year, beginning on July 1, 1999 and
ending on July 1, 2003, equal to the lesser of (a) 2.5 percent of
the Shares of Common Stock outstanding on the last day of each
preceding fiscal year, (b) 3,750,000 Shares or (c) a lesser
amount determined by the Board. For purposes of this Section 3,
(i) "unused Shares" means Shares reserved for issuance but not
covered by grants under the Amended and Restated 1992 Flexible
Stock Incentive Plan of the Company (the "1992 Plan") (which 1992
Plan shall be terminated as of the effective date of the Plan), and
(ii) "forfeited Shares" means any Shares covered by grants under
the 1992 Plan that are not issued to participants or that are
returned to the Company upon forfeiture of such Shares.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is
surrendered pursuant to an Option Exchange Program, the unpurchased
Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated);
PROVIDED, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future
distribution under the Plan, except that if Shares of Restricted
Stock are repurchased by the Company at their original purchase
price, such Shares shall become available for future grant under
the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be
administered by different Committees with respect to different
groups of Service Providers.
(ii) SECTION 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options
granted hereunder as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the Plan shall be
administered by a Committee of two or more "outside directors"
within the meaning of Section 162(m) of the Code.
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(iii) RULE 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the Plan shall
be administered by the Board or a Committee of two or more
"non-employee directors" within the meaning of Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a
Committee, which Committee shall be constituted to satisfy
Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provi-
sions of the Plan, and in the case of a Committee, subject to the
specific duties delegated by the Board to such Committee, the
Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom
Options and Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of
Common Stock to be covered by each Option and Stock Purchase Right
granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock
Purchase Right granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the time or
times when Options or Stock Purchase Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or
waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right or the
shares of Common Stock relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall
determine;
(vi) to institute an Option Exchange Program;
(vii) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;
(viii) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations
relating to sub-plans established for the purpose of qualifying for
preferred tax treatment under foreign tax laws;
(ix) to modify or amend each Option or Stock
Purchase Right (subject to Section 15(c) of the Plan), including
the discretionary authority to extend the post-termination
exercisability period of Options longer than is otherwise provided
for in the Plan;
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(x) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the
Shares to be issued upon exercise of an Option or Stock Purchase
Right that number of Shares having a Fair Market Value equal to the
amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by
an Optionee to have Shares withheld for this purpose shall be made
in such form and under such conditions as the Administrator may
deem necessary or advisable;
(xi) to authorize any person to execute on
behalf of the Company any instrument required to effect the grant
of an Option or Stock Purchase Right previously granted by the
Administrator;
(xii) to make all other determinations deemed
necessary or advisable for administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The
Administrator's decisions, determinations and interpretations shall
be final and binding on all Optionees and any other holders of
Options or Stock Purchase Rights.
5. ELIGIBILITY. Nonstatutory Stock Options and Stock Purchase
Rights may be granted to Service Providers. Incentive Stock
Options may be granted only to Employees.
6. LIMITATIONS.
(a) Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonstatutory
Stock Option. However, notwithstanding such designation, to the
extent that the aggregate Fair Market Value of the Shares with
respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all
plans of the Company and any Parent or Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 6(a), Incentive Stock
Options shall be taken into account in the order in which they were
granted. The Fair Market Value of the Shares shall be determined
as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase
Right shall confer upon an Optionee any right with respect to
continuing the Optionee's relationship as a Service Provider with
the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of
Options:
(i) No Service Provider shall be granted, in any
fiscal year of the Company, Options to purchase more than 2,000,000
Shares.
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(ii) In connection with his or her initial service,
a Service Provider may be granted Options to purchase up to an
additional 500,000 Shares which shall not count against the limit
set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's
capitalization as described in Section 13.
(iv) If an Option is cancelled in the same fiscal
year of the Company in which it was granted (other than in
connection with a transaction described in Section 13), the
cancelled Option will be counted against the limits set forth in
subsections (i) and (ii) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. TERM OF PLAN. Subject to Section 19 of the Plan, the Plan
shall become effective upon its adoption by the Board. It shall
continue in effect for a term of ten (10) years unless terminated
earlier under Section 15 of the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in
the Option Agreement. In the case of an Incentive Stock Option,
the term shall be ten (10) years from the date of grant or such
shorter term as may be provided in the Option Agreement. Moreover,
in the case of an Incentive Stock Option granted to an Optionee
who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the
date of grant or such shorter term as may be provided in the Option
Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be
determined by the Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock
of the Company or any Parent or Subsidiary, the per Share exercise
price shall be no less than 110% of the Fair Market Value per Share
on the date of grant.
(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per
Share exercise price shall be no less than 100% of the Fair Market
Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be determined by the Administrator.
In the case of a Nonstatutory Stock Option intended to
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qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of Fair
Market Value on the date of grant pursuant to a merger or other
corporate transaction.
(b) WAITING PERIOD AND EXERCISE DATES. At the time an
Option is granted, the Administrator shall fix the period within
which the Option may be exercised and shall determine any con-
ditions which must be satisfied before the Option may be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall
determine the acceptable form of consideration for exercising an
Option, including the method of payment. In the case of an
Incentive Stock Option, the Administrator shall determine the
acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of
Shares acquired upon exercise of an option, have been owned by the
Optionee for more than six months on the date of surrender, and
(B) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option
shall be exercised;
(v) consideration received by the Company under a
formal cashless exercise program adopted by the Company in
connection with the Plan;
(vi) a reduction in the amount of any Company
liability to the Optionee, including any liability attributable to
the Optionee's participation in any Company-sponsored deferred
compensation program or arrangement;
(vii) any combination of the foregoing methods
of payment; or
(viii) such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable
Laws.
10. EXERCISE OF OPTIONS.
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(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any
Option granted hereunder shall be exercisable according to the
terms of the Plan and at such times and under such conditions as
determined by the Administrator and set forth in the Option
Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave
of absence. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in
accordance with the Option Agreement) from the person entitled to
exercise the Option, and (ii) full payment for the Shares with
respect to which the Option is exercised. Full payment may consist
of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan.
Shares issued upon exercise of an Option shall be issued in the
name of the Optionee or, if requested by the Optionee, in the name
of the Optionee and his or her spouse. Until the Shares are issued
(as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a shareholder
shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be
issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the
record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to
which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If
an Optionee ceases to be a Service Provider, other than upon the
Optionee's death or Disability, the Optionee may exercise his or
her Option within such period of time as is specified in the Option
Agreement to the extent that he or she is entitled to exercise it
on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of
termination, the Optionee is not entitled to exercise his or her
entire Option, the Shares covered by the unexercisable portion of
the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the
Optionee may exercise his or her Option at any time within twelve
(12) months from the date of termination, but only to the extent
that the Optionee is entitled to exercise it on the date of
termination (and in no event later than the expiration of the term
of the Option as set forth in the Option Agreement). If, on the
date of termination, the Optionee is not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option
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within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a
Service Provider, the Option may be exercised at any time within
twelve (12) months following the date of death (but in no event
later than the expiration of the term of such Option as set forth
in the Notice of Grant), by the Optionee's estate or by a person
who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Optionee would have
been entitled to exercise the Option on the date of death. If, at
the time of death, the Optionee is not entitled to exercise his or
her entire Option, the Shares covered by the unexercisable portion
of the Option shall immediately revert to the Plan. The Option may
be exercised by the executor or administrator of the Optionee's
estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or
distribution. If the Option is not so exercised within the time
specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an Option
previously granted based on such terms and conditions as the
Administrator shall establish and communicate to the Optionee at
the time that such offer is made.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be
issued either alone, in addition to, or in tandem with other awards
granted under the Plan and/or cash awards made outside of the Plan.
After the Administrator determines that it will offer Stock
Purchase Rights under the Plan, it shall advise the offeree in
writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including
the number of Shares that the offeree shall be entitled to
purchase, the price to be paid, and the time within which the
offeree must accept such offer. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator deter-
mines otherwise, the Restricted Stock Purchase Agreement shall
grant the Company a repurchase option exercisable upon the volun-
tary or involuntary termination of the purchaser's service with the
Company for any reason (including death or Disability). The pur-
chase price for Shares repurchased pursuant to the Restricted Stock
purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of
the purchaser to the Company. The repurchase option shall lapse at
a rate determined by the Administrator.
(c) OTHER PROVISIONS. The Restricted Stock Purchase
Agreement shall contain such other terms, provisions and conditions
not inconsistent with the Plan as may be determined by the Admin-
istrator in its sole discretion.
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(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase
Right is exercised, the purchaser shall have the rights equivalent
to those of a shareholder, and shall be a shareholder when his or
her purchase is entered upon the records of the duly authorized
transfer agent of the Company. No adjustment will be made for a
dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in
Section 13 of the Plan.
12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS.
Unless determined otherwise by the Administrator, an Option or
Stock Purchase Right may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than
by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the
Optionee. If the Administrator makes an Option or Stock Purchase
Right transferable, such Option or Stock Purchase Right shall
contain such additional terms and conditions as the Administrator
deems appropriate.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required
action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option and Stock Purchase
Right, and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options
or Stock Purchase Rights have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option
or Stock Purchase Right, as well as the price per share of Common
Stock covered by each such outstanding Option or Stock Purchase
Right, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt
of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by
the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option or
Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, the
Administrator shall notify each Optionee as soon as practicable
prior to the effective date of such proposed transaction. The
Administrator in its discretion may provide for an Optionee to have
the right to exercise his or her Option until ten (10) days prior
to such transaction as to all of the Optioned Stock covered
thereby, including Shares as to which the Option would not
otherwise be exercisable. In addition, the Administrator may
provide that any Company repurchase option applicable to any Shares
purchased upon exercise of an Option or Stock Purchase Right shall
lapse as to all such Shares, provided the proposed dissolution or
liquidation takes place at the time and in the manner contemplated.
To the extent it has not been
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<PAGE>
previously exercised, an Option or Stock Purchase Right will
terminate immediately prior to the consummation of such
proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the
Company with or into another corporation, or the sale of
substantially all of the assets of the Company, each outstanding
Option and Stock Purchase Right shall be assumed or an equivalent
option or right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for
the Option or Stock Purchase Right, the Optionee shall fully vest
in and have the right to exercise the Option or Stock Purchase
Right as to all of the Optioned Stock, including Shares as to which
it would not otherwise be vested or exercisable. If an Option or
Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of
assets, the Administrator shall notify the Optionee in writing or
electronically that the Option or Stock Purchase Right shall be
fully vested and exercisable for a period of fifteen (15) days from
the date of such notice, and the Option or Stock Purchase Right
shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right
shall be considered assumed if, following the merger or sale of
assets, the option or right confers the right to purchase or
receive, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities
or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets is not
solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of
the Option or Stock Purchase Right, for each Share of Optioned
Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in
fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
14. DATE OF GRANT. The date of grant of an Option or Stock
Purchase Right shall be, for all purposes, the date on which the
Administrator makes the determination granting such Option or Stock
Purchase Right, or such other later date as is determined by the
Administrator. Notice of the determination shall be provided to
each Optionee within a reasonable time after the date of such
grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time
amend, alter, suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL. The Company shall obtain
shareholder approval of any Plan amendment to the extent necessary
and desirable to comply with Applicable Laws.
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<PAGE>
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment,
alteration, suspension or termination of the Plan shall impair the
rights of any Optionee, unless mutually agreed otherwise between
the Optionee and the Administrator, which agreement must be in
writing and signed by the Optionee and the Company.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant
to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance
and delivery of such Shares shall comply with Applicable Laws and
shall be further subject to the approval of counsel for the Company
with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the
exercise of an Option or Stock Purchase Right, the Company may
require the person exercising such Option or Stock Purchase Right
to represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is
required.
17. INABILITY TO OBTAIN AUTHORITY. The inability of the
Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
18. RESERVATION OF SHARES. The Company, during the term of
this Plan, will at all times reserve and keep available such number
of Shares as shall be sufficient to satisfy the requirements of the
Plan.
19. SHAREHOLDER APPROVAL. The Plan shall be subject to
approval by the shareholders of the Company within twelve (12)
months after the date the Plan is adopted. Such shareholder
approval shall be obtained in the manner and to the degree required
under Applicable Laws.
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<PAGE>
INTERNATIONAL NETWORK SERVICES
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan
shall have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $_________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
VESTING SCHEDULE:
This Option may be exercised, in whole or in part, in
accordance with the following schedule:
[24% of the Shares subject to the Option shall vest twelve
months after the Vesting Commencement Date, and 2% of the Shares
subject to the Option shall vest each month thereafter, subject to
the Optionee continuing to be a Service Provider on such dates].
<PAGE>
TERMINATION PERIOD:
This Option may be exercised for _____ [days/months] after
Optionee ceases to be a Service Provider. Upon the death or
Disability of the Optionee, this Option may be exercised for such
longer period as provided in the Plan. In no event shall this
Option be exercised later than the Term/Expiration Date as provided
above.
II. AGREEMENT
1. GRANT OF OPTION. The Plan Administrator of the Company
hereby grants to the Optionee named in the Notice of Grant attached
as Part I of this Agreement (the "Optionee") an option (the
"Option") to purchase the number of Shares, as set forth in the
Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference.
Subject to Section 15(c) of the Plan, in the event of a conflict
between the terms and conditions of the Plan and the terms and
conditions of this Option Agreement, the terms and conditions of
the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive
Stock Option under Section 422 of the Code. However, if this
Option is intended to be an Incentive Stock Option, to the extent
that it exceeds the $100,000 rule of Code Section 422(d) it shall
be treated as a Nonstatutory Stock Option ("NSO").
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable during
its term in accordance with the Vesting Schedule set out in the
Notice of Grant and the applicable provisions of the Plan and this
Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by
delivery of an exercise notice, in the form attached as Exhibit A
(the "Exercise Notice"), which shall state the election to exercise
the Option, the number of Shares in respect of which the Option is
being exercised (the "Exercised Shares"), and such other
representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall
be completed by the Optionee and delivered to the secretary of the
Company. The Exercise Notice shall be accompanied by payment of
the aggregate Exercise Price as to all Exercised Shares. This
Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such
aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with Applicable
Laws. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on
the date the Option is exercised with respect to such Exercised
Shares.
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<PAGE>
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price
shall be by any of the following, or a combination thereof, at the
election of the Optionee:
(a) cash;
(b) check;
(c) consideration received by the Company under a formal
cashless exercise program adopted by the Company in connection with
the Plan;
(d) surrender of other Shares which (i) in the case of
Shares acquired upon exercise of an option, have been owned by the
Optionee for more than six (6) months on the date of surrender, and
(ii) have a Fair Market Value on the date of surrender equal to the
aggregate Exercise Price of the Exercised Shares; or
(e) with the Administrator's consent, delivery of
Optionee's promissory note (the "Note") in the form attached hereto
as Exhibit C, in the amount of the aggregate Exercise Price of the
Exercised Shares together with the execution and delivery by the
Optionee of the Security Agreement attached hereto as Exhibit B.
The Note shall bear interest at the "applicable federal rate"
prescribed under the Code and its regulations at time of purchase,
and shall be secured by a pledge of the Shares purchased by the
Note pursuant to the Security Agreement.
4. NON-TRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner otherwise than by will or by the laws of
descent or distribution and may be exercised during the lifetime of
Optionee only by the Optionee. The terms of the Plan and this
Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. TERM OF OPTION. This Option may be exercised only within
the term set out in the Notice of Grant, and may be exercised
during such term only in accordance with the Plan and the terms of
this Option Agreement.
6. TAX CONSEQUENCES. Some of the federal tax consequences
relating to this Option, as of the date of this Option, are set
forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF
THE SHARES.
(a) EXERCISING THE OPTION.
(i) NONSTATUTORY STOCK OPTION. The Optionee may incur
regular federal income tax liability upon exercise of a NSO. The
Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any,
of the Fair Market Value of the Exercised Shares on the date of
exercise over their aggregate Exercise Price. If
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<PAGE>
the Optionee is an Employee or a former Employee, the Company will
be required to withhold from his or her compensation or collect from
Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise,
and may refuse to honor the exercise and refuse to deliver Shares
if such withholding amounts are not delivered at the time of
exercise.
(ii) INCENTIVE STOCK OPTION. If this Option
qualifies as an ISO, the Optionee will have no regular federal
income tax liability upon its exercise, although the excess, if
any, of the Fair Market Value of the Exercised Shares on the date
of exercise over their aggregate Exercise Price will be treated as
an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in
the year of exercise. In the event that the Optionee ceases to be
an Employee but remains a Service Provider, any Incentive Stock
Option of the Optionee that remains unexercised shall cease to
qualify as an Incentive Stock Option and will be treated for tax
purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
(b) DISPOSITION OF SHARES.
(i) NSO. If the Optionee holds NSO Shares for at
least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal income tax
purposes.
(ii) ISO. If the Optionee holds ISO Shares for
at least one year after exercise and two years after the grant
date, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes.
If the Optionee disposes of ISO Shares within one year after
exercise or two years after the grant date, any gain realized on
such disposition will be treated as compensation income (taxable at
ordinary income rates) to the extent of the excess, if any, of the
lesser of (A) the difference between the Fair Market Value of the
Shares acquired on the date of exercise and the aggregate Exercise
Price, or (B) the difference between the sale price of such Shares
and the aggregate Exercise Price. Any additional gain will be
taxed as capital gain, short-term or long-term depending on the
period that the ISO Shares were held.
(c) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If
the Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to an ISO on or before the later of (i) two years
after the grant date, or (ii) one year after the exercise date, the
Optionee shall immediately notify the Company in writing of such
disposition. The Optionee agrees that he or she may be subject to
income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in
cash or out of the current earnings paid to the Optionee.
7. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated
herein by reference. The Plan and this Option Agreement constitute
the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior
undertakings and agreements of the
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<PAGE>
Company and Optionee with respect to the subject matter hereof, and
may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement
is governed by the internal substantive laws, but not the choice of
law rules, of California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES
AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING
SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER
AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE
FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP
AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's
representative below, you and the Company agree that this Option is
granted under and governed by the terms and conditions of the Plan
and this Option Agreement. Optionee has reviewed the Plan and this
Option Agreement in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and
Option Agreement. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the
Administrator upon any questions relating to the Plan and Option
Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: INTERNATIONAL NETWORK SERVICES
___________________________________ ______________________________________
Signature By
____________________________________ ______________________________________
Print Name Title
____________________________________
Residence Address
____________________________________
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<PAGE>
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves
the terms and conditions of the Plan and this Option Agreement. In
consideration of the Company's granting his or her spouse the right
to purchase Shares as set forth in the Plan and this Option
Agreement, the undersigned hereby agrees to be irrevocably bound by
the terms and conditions of the Plan and this Option Agreement and
further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's
spouse as attorney-in-fact for the undersigned with respect to any
amendment or exercise of rights under the Plan or this Option
Agreement.
_______________________________________
Spouse of Optionee
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<PAGE>
EXHIBIT A
1996 STOCK PLAN
EXERCISE NOTICE
International Network Services
650 Castro Street, Suite 260
Mountain View, CA 94041
Attention: Corporate Secretary
1. EXERCISE OF OPTION. Effective as of today,
________________, 199__, the undersigned ("Purchaser") hereby
elects to purchase ______________ shares (the "Shares") of the
Common Stock of International Network Services (the "Company")
under and pursuant to the 1996 Stock Plan (the "Plan") and the
Stock Option Agreement dated , 19___ (the "Option
Agreement"). The purchase price for the Shares shall be $
, as required by the Option Agreement.
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the
Company the full purchase price for the Shares.
3. REPRESENTATIONS OF PURCHASER. Purchaser acknowledges that
Purchaser has received, read and understood the Plan and the Option
Agreement and agrees to abide by and be bound by their terms and
conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the Shares, no right
to vote or receive dividends or any other rights as a shareholder
shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Shares so acquired shall be issued to
the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which
the record date is prior to the date of issuance, except as pro-
vided in Section 13 of the Plan.
5. TAX CONSULTATION. Purchaser understands that Purchaser may
suffer adverse tax consequences as a result of Purchaser's purchase
or disposition of the Shares. Purchaser represents that Purchaser
has consulted with any tax consultants Purchaser deems advisable in
connection with the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
6. ENTIRE AGREEMENT; GOVERNING LAW. The Plan and Option
Agreement are incorporated herein by reference. This Agreement,
the Plan and the Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements
of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's
interest except by means of a writing
<PAGE>
signed by the Company and Purchaser. This agreement is governed by the
internal substantive laws, but not the choice of law rules, of California.
Submitted by: Accepted by:
PURCHASER: INTERNATIONAL NETWORK SERVICES
__________________________________ _____________________________________
Signature By
__________________________________ _____________________________________
Print Name Its
ADDRESS: ADDRESS:
_________________________________ 650 Castro Street, Suite 260
Mountain View, CA 94041
_________________________________
_____________________________________
Date Received
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<PAGE>
INTERNATIONAL NETWORK SERVICES
1996 EMPLOYEE STOCK PURCHASE PLAN
(AMENDED AND RESTATED April 3, 1998)
The following constitute the provisions of the 1996 Employee Stock
Purchase Plan of International Network Services.
1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is
the intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended. The provisions of the Plan, accordingly, shall be construed so as
to extend and limit participation in a manner consistent with the
requirements of that section of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean International Network Services and any
Designated Subsidiary of the Company.
(e) "COMPENSATION" shall mean all base straight-time gross
earnings, payments for overtime, shift premiums, commissions, and performance
bonuses (other than referral and "spot" bonuses).
(f) "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries which
have been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "EMPLOYEE" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than five (5) months in any
calendar year. For purposes of the Plan, the employment relationship shall
be treated as continuing intact while the individual is on sick leave or
other leave of absence approved by the Company. Where the period of leave
exceeds 90 days and the individual's right to reemployment is not guaranteed
either by statute or by contract, the employment relationship shall be deemed
to have terminated on the 91st day of such leave.
(h) "ENROLLMENT DATE" shall mean the first day of each Offering
Period or Special Offering Period.
<PAGE>
(i) "EXERCISE DATE" shall mean the last day of each Purchase
Period.
(j) "FAIR MARKET VALUE" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system
for the day of determination, as reported in THE WALL STREET JOURNAL or such
other source as the Administrator deems reliable;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock
for the day of determination, as reported in THE WALL STREET JOURNAL or such
other source as the Board deems reliable;
(3) For the purposes of the Enrollment Date under the first
Offering Period under the Plan, the Fair Market Value of the Common Stock
shall be the price to public as set forth in the final prospectus included
within the Registration Statement on form S-1 filed with the Securities and
Exchange Commission for the initial public offering of the Common Stock; or
(4) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(k) "OFFERING PERIOD" shall mean a period of approximately
twenty-four (24) months during which an option granted pursuant to the Plan
may be exercised, commencing on the first Trading Day on or after May 1 or
November 1 of each year and terminating on the last Trading Day in the period
ending twenty-four months later. The first Offering Period shall commence on
the date on which the Company's registration statement on Form S-1 is
declared effective by the Securities and Exchange Commission and shall
terminate on the last Trading Day on or before October 31, 1998. The
duration and timing of Offering Periods may be changed pursuant to Section 4
of this Plan. As used herein, "Offering Period" shall also mean "Special
Offering Period," where applicable.
(l) "PLAN" shall mean this Employee Stock Purchase Plan.
(m) "PURCHASE PRICE" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the last Trading Day prior to the
Enrollment Date or such Fair Market Value on the Exercise Date, whichever is
lower. With respect to the first Offering Period and the Special Offering
Periods, the Purchase Price shall be 85% of the Fair Market Value of a share
of Common Stock on the Enrollment Date or on the Exercise Date, whichever is
lower.
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<PAGE>
(n) "PURCHASE PERIOD" shall mean the approximately six-month
period commencing after one Exercise Date and ending with the next Exercise
Date. The first Purchase Period of any Offering Period shall commence on the
Enrollment Date and end on the next Exercise Date. The first Purchase Period
of the first Offering Period shall commence on the Enrollment Date and shall
end on the last trading day on or before April 30, 1997.
(o) "RESERVES" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and
the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.
(p) "SPECIAL OFFERING PERIOD" shall mean one of two Offering
Periods that commence on November 29, 1996 and February 14, 1997. The
Special Offering Periods shall be coterminous with the First Offering Period
and shall end on the last Trading Day on or before October 31, 1998. The
first Purchase Period of each Special Offering Period shall commence on the
applicable Enrollment Date and shall end on the last Trading Day on or before
April 30, 1997.
(q) "SUBSIDIARY" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(r) "TRADING DAY" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. ELIGIBILITY.
(a) Any Employee (as defined in Section 2(g)), who shall be
employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding,
no Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock representing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of the shares
at the time such option is granted) for each calendar year in which such
option is outstanding at any time.
4. OFFERING PERIODS. Generally, the Plan shall be implemented by
consecutive, overlapping Offering Periods with a new Offering Period
commencing on the first Trading Day on
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<PAGE>
or after May 1 and November 1 each year, or on such other date as the Board
shall determine, and continuing thereafter until terminated in accordance
with Section 19 hereof. The first Offering Period shall commence on the
effective date of the initial public offering of the Company's Common Stock
that is filed with the Securities and Exchange Commission and shall end on
the last Trading Day on or before October 31, 1998. The Special Offering
Periods shall commence on the first Trading Day on or after November 29, 1996
and February 14, 1997, and shall end on the last Trading Day on or before
October 31, 1998. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement provided by the Company authorizing
payroll deductions and filing it with the Company's payroll office prior to
the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll
in the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay
day during the Offering Period in an amount not exceeding fifteen percent
(15%) of the Compensation which he or she receives on each pay day during the
Offering Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into
such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may decrease the rate of his or her
payroll deductions one time during a Purchase Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. In addition, a participant may increase or decrease his or
her deduction rate upon the commencement of a Purchase Period. The change in
rate shall be effective with the first full payroll period following five (5)
business days after the Company's receipt of the new subscription agreement
unless the Company elects to process a given change in participation more
quickly. A participant's subscription agreement shall remain in effect for
successive Offering Periods unless terminated as provided in Section 10
hereof.
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<PAGE>
(d) Notwithstanding the foregoing, a participant's payroll
deductions may be decreased to zero percent (0%) at any time during an
Purchase Period to the extent necessary to comply with Section 423(b)(8) of
the Code and Section 3(b) hereof. Payroll deductions shall recommence at the
rate provided in such participant's subscription agreement at the beginning
of the first Purchase Period during which an employee's participation shall
so comply, unless terminated by the participant as provided in Section 10
hereof.
(e) At the time the option is exercised, in whole or in part, or
at the time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock.
At any time, the Company may, but shall not be obligated to, withhold from
the participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to
make available to the Company any tax deductions or benefits attributable to
sale or early disposition of Common Stock by the Employee.
7. GRANT OF OPTION. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted
an option to purchase on each Exercise Date during such Offering Period (at
the applicable Purchase Price) up to a number of shares of the Company's
Common Stock determined by dividing such Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price. During a
six-month Purchase Period an Employee shall in no event be permitted to
purchase more than the lesser of 2,000 shares or such number of shares as may
be determined by the Plan administrator; provided, however, that such limit
shall be adjusted proportionately in the case of a Purchase Period longer
than six months. The number of shares that may be purchased shall also be
subject to the limitations set forth in Sections 3(b) and 12 hereof.
Exercise of the option shall occur as provided in Section 8 hereof, unless
the participant has withdrawn pursuant to Section 10 hereof. The option
shall expire on the last day of the Offering Period.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan
as provided in Section 10 hereof, his or her option for the purchase of
shares shall be exercised automatically on the Exercise Date, and the maximum
number of full shares subject to option shall be purchased for such
participant at the applicable Purchase Price with the accumulated payroll
deductions in his or her account. No fractional shares shall be purchased;
any payroll deductions accumulated in a participant's account which are not
sufficient to purchase a full share shall be retained in the participant's
account for the subsequent Purchase Period or Offering Period, subject to
earlier withdrawal by the participant as provided in Section 10 hereof. Any
other monies left over in a participant's account after the Exercise Date
shall be returned to the participant. During a participant's lifetime, a
participant's option to purchase shares hereunder is exercisable only by him
or her.
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9. DELIVERY. As promptly as practicable after each Exercise Date, the
shares purchased upon exercise of an option shall be credited to an account
in the participant's name with a brokerage firm selected by the Company to
hold the shares in its street name.
10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to
exercise his or her option under the Plan at any time by completing a notice
of withdrawal provided by the Company and filing it with the Company's
payroll office. All of the participant's payroll deductions credited to his
or her account shall be paid to such participant promptly after receipt of
notice of withdrawal and such participant's option for the Offering Period
shall be automatically terminated, and no further payroll deductions for the
purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers
to the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof), for any reason, he or she shall be deemed to have
elected to withdraw from the Plan and the payroll deductions credited to such
participant's account during the Offering Period but not yet used to exercise
the option shall be returned to such participant or, in the case of his or
her death, to the person or persons entitled thereto under Section 14 hereof,
and such participant's option shall be automatically terminated.
(c) A participant's withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from
which the participant withdraws.
11. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. STOCK.
(a) Subject to Section 18, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 1,200,000 shares, plus an annual increase to be added on November 1
of each year equal to the lesser of (i) 2.0 percent of the Shares of Common
Stock outstanding on the last day of each preceding fiscal year, (ii)
3,000,000 Shares or (iii) a lesser amount determined by the Board. If, on a
given Exercise Date, the number of shares with respect to which options are
to be exercised exceeds the number of shares then available under the Plan,
the Company shall make a pro rata allocation of the shares
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remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall
be registered in the name of the participant or in the name of the
participant and his or her spouse.
13. ADMINISTRATION.
(a) ADMINISTRATIVE BODY. The Plan shall be administered by the
Board or a committee of members of the Board appointed by the Board. The
Board or its committee shall have full and exclusive discretionary authority
to construe, interpret and apply the terms of the Plan, to determine
eligibility and to adjudicate all disputed claims filed under the Plan.
Every finding, decision and determination made by the Board or its committee
shall, to the full extent permitted by law, be final and binding upon all
parties.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required
for such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company
shall deliver such shares and/or cash to the executor or administrator of the
estate of the participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its discretion,
may deliver such shares and/or cash to the spouse or to any one or more
dependents or relatives of the participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company
may designate.
15. TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any
such attempt
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at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds
from an Offering Period in accordance with Section 10 hereof.
16. USE OF FUNDS. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose,
and the Company shall not be obligated to segregate such payroll deductions.
17. REPORTS. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to
participating Employees at least annually, which statements shall set forth
the amounts of payroll deductions, the Purchase Price, the number of shares
purchased and the remaining cash balance, if any.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
LIQUIDATION, MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the Reserves, as well as the price per share
and the number of shares of Common Stock covered by each option under the
Plan which has not yet been exercised, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase
or decrease in the number of shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration". Such adjustment shall be made
by the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock
subject to an option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Offering Periods shall
terminate immediately prior to the consummation of such proposed action,
unless otherwise provided by the Board.
(c) MERGER OR ASSET SALE. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, any Purchase Periods then in
progress shall be shortened by setting a new Exercise Date (the "New Exercise
Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the
Company's proposed sale or merger. The Board shall notify each participant
in writing, at least ten (10) business days prior to the New Exercise Date,
that the Exercise Date for the participant's option has been changed to the
New Exercise Date and that the participant's option shall be exercised
automatically on the New
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Exercise Date, unless prior to such date the participant has withdrawn from
the Offering Period as provided in Section 10 hereof.
19. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 18
hereof, no such termination can affect options previously granted, provided
that an Offering Period may be terminated by the Board of Directors on any
Exercise Date if the Board determines that the termination of the Plan is in
the best interests of the Company and its shareholders. Except as provided
in Section 18 hereof, no amendment may make any change in any option
theretofore granted which adversely affects the rights of any participant.
To the extent necessary to comply under Section 423 of the Code (or any
successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval in such a
manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods,
limit the frequency and/or number of changes in the amount withheld during an
Offering Period, establish the exchange ratio applicable to amounts withheld
in a currency other than U.S. dollars, permit payroll withholding in excess
of the amount designated by a participant in order to adjust for delays or
mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or
accounting and crediting procedures to ensure that amounts applied toward the
purchase of Common Stock for each participant properly correspond with
amounts withheld from the participant's Compensation, and establish such
other limitations or procedures as the Board (or its committee) determines in
its sole discretion advisable which are consistent with the Plan.
20. NOTICES. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the
location, or by the person, designated by the Company for the receipt
thereof.
21. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
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<PAGE>
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the
time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such
shares if, in the opinion of counsel for the Company, such a representation
is required by any of the aforementioned applicable provisions of law.
22. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 19 hereof.
23. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. To the extent
permitted by any applicable laws, regulations or stock exchange rules, if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering
Period is lower than the Fair Market Value of the Common Stock on the
Enrollment Date of such Offering Period, then all participants in such
Offering Period shall be automatically withdrawn from such Offering Period
immediately after the exercise of their option on such Exercise Date and
automatically re-enrolled in the immediately following Offering Period as of
the first day thereof.
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INTERNATIONAL NETWORK SERVICES
1998 DIRECTOR OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1998 Director Option
Plan are to attract and retain the best available personnel for service as
Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and
to encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" means the common stock of the Company.
(d) "COMPANY" means International Network Services, a California
corporation.
(e) "DIRECTOR" means a member of the Board.
(f) "DISABILITY" means total and permanent disability as defined
in section 22(e)(3) of the Code.
(g) "EMPLOYEE" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(i) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system
for the last market trading day prior to the time of determination as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value
of a Share of Common Stock shall be the mean between the high bid and low
asked prices for the Common Stock for the last market trading day prior
<PAGE>
to the time of determination, as reported in THE WALL STREET JOURNAL or such
other source as the Board deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith
by the Board.
(j) "INSIDE DIRECTOR" means a Director who is an Employee.
(k) "OPTION" means a stock option granted pursuant to the Plan.
(l) "OPTIONED STOCK" means the Common Stock subject to an Option.
(m) "OPTIONEE" means a Director who holds an Option.
(n) "OUTSIDE DIRECTOR" means a Director who is not an Employee.
(o) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(p) "PLAN" means this 1998 Director Option Plan.
(q) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(r) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code
of 1986.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 10
of the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan is 300,000 Shares (the "Pool"). The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares that were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not
be returned to the Plan and shall not become available for future
distribution under the Plan.
4. ADMINISTRATION AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) PROCEDURE FOR GRANTS. All grants of Options to Outside
Directors under this Plan shall be automatic and nondiscretionary and shall
be made strictly in accordance with the following provisions:
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(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or, subject to Section 10, to
determine the number of Shares to be covered by Options.
(ii) Each person who first becomes an Outside Director on or
after the effective date of this Plan, whether through election by the
shareholders of the Company or appointment by the Board to fill a vacancy,
shall be automatically granted an Option to purchase 30,000 Shares on the
date on which such person first becomes an Outside Director and on each third
anniversary thereof during the term of this Plan so long as he or she
continues to serve as an Outside Director. In addition, those individuals who
are Outside Directors as of the effective date of this Plan shall be granted
an Option to purchase 30,000 Shares on the date of the Company's annual
meeting of shareholders in the year 2000 and on each third anniversary
thereof during the term of this Plan so long as he or she continues to serve
as an Outside Director.
(iii) Notwithstanding the provisions of subsection (ii)
hereof, any exercise of an Option granted before the Company has obtained
shareholder approval of the Plan in accordance with Section 16 hereof shall
be conditioned upon obtaining such shareholder approval of the Plan in
accordance with Section 16 hereof.
(iv) The terms of an Option granted hereunder shall be as
follows:
(A) The Option term shall be ten (10) years from the
date of grant (subject to Section 8).
(B) The Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
(C) The exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the Option.
(D) Subject to Sections 8 and 10 hereof, the Option
shall become exercisable as to one-thirty-sixth (1/36) of the Shares subject
to the Option at the end of each month following its date of grant.
(v) In the event that any Option granted under the Plan
would cause the number of Shares subject to outstanding Options plus the
number of Shares previously purchased under Options to exceed the Pool, then
the remaining Shares available for Option grant shall be granted under
Options to the Outside Directors on a pro rata basis. No further grants shall
be made until such time, if any, as additional Shares become available for
grant under the Plan through action of the Board or the shareholders to
increase the number of Shares that may be issued under the Plan or through
cancellation or expiration of Options previously granted hereunder.
5. ELIGIBILITY. Options may be granted only to Outside Directors.
All Options shall be automatically granted in accordance with the terms set
forth in Section 4 hereof.
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<PAGE>
The Plan shall not confer upon any Optionee any right with respect
to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights that the Director
or the Company may have to terminate the Director's relationship with the
Company at any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 11 of the
Plan.
7. FORM OF CONSIDERATION. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment,
shall consist of (i) cash, (ii) check, (iii) other shares that (x) in the
case of Shares acquired upon exercise of an option, have been owned by the
Optionee for more than six (6) months on the date of surrender, and (y) have
a Fair Market Value on the date of surrender equal to the aggregate exercise
price of the Shares as to which said Option shall be exercised, (iv)
consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan, or (v) any
combination of the foregoing methods of payment.
8. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however, that no Options shall be exercisable
until shareholder approval of the Plan in accordance with Section 16 hereof
has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may consist of any consideration and method of
payment allowable under Section 7 of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. A share certificate for the number of Shares so
acquired shall be issued to the Optionee as soon as practicable after
exercise of the Option. No adjustment shall be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares that thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.
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<PAGE>
(b) TERMINATION OF CONTINUOUS STATUS AS A DIRECTOR. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or Disability), the Optionee may
exercise his or her Option, but only within three (3) months following the
date of such termination, and only to the extent that the Optionee was
entitled to exercise it on the date of such termination (but in no event
later than the expiration of its ten (10) year term). To the extent that the
Optionee was not entitled to exercise an Option on the date of such
termination, and to the extent that the Optionee does not exercise such
Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(c) DISABILITY OF OPTIONEE. In the event Optionee's status as a
Director terminates as a result of Disability, the Optionee may exercise his
or her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to
exercise it on the date of such termina-tion (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was
not entitled to exercise an Option on the date of termination, or if he or
she does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option, but only within twelve
(12) months following the date of death, and only to the extent that the
Optionee was entitled to exercise it on the date of death (but in no event
later than the expiration of its ten (10)-year term). To the extent that the
Optionee was not entitled to exercise an Option on the date of death, and to
the extent that the Optionee's estate or a person who acquired the right to
exercise such Option does not exercise such Option (to the extent otherwise
so entitled) within the time specified herein, the Option shall terminate.
9. NON-TRANSFERABILITY OF OPTIONS. Except as may otherwise be
specified by the Board or a committee of the Board, the Option may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or dis-tribution and may
be exercised, during the lifetime of the Optionee, only by the Optionee.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares that have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
that have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding
Option, and the number of Shares issuable pursuant to the automatic grant
provisions of Section 4 hereof shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification
of the Common Stock, or any other increase or decrease in the number of
issued Shares effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Except as expressly provided herein, no issuance by the
Company of
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shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of Shares subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has
not been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the Company
with or into another corporation or the sale of substantially all of the
assets of the Company, outstanding Options may be assumed or equivalent
options may be substituted by the successor corporation or a Parent or
Subsidiary thereof (the "Successor Corporation"). If an Option is assumed or
substituted for, the Option or equivalent option shall continue to be
exercisable as provided in Section 4 hereof for so long as the Optionee
serves as a Director or a director of the Successor Corporation.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested
and exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the
Option shall be fully exercisable for a period of thirty (30) days from the
date of such notice, and upon the expiration of such period the Option shall
terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger
or sale of assets by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority
of the outstanding Shares). If such consideration received in the merger or
sale of assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option,
for each Share of Optioned Stock subject to the Option, to be solely common
stock of the successor corporation or its Parent equal in fair market value
to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
11. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made that would impair the rights of
any Optionee under any grant theretofore made, without his or her consent.
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In addition, to the extent necessary and desirable to comply with any
applicable law, regulation or stock exchange rule, the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to such a
degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date determined in accordance with Section 4 hereof.
13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, state securities laws, and the requirements of any
stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such
Shares, if, in the opinion of counsel for the Company, such a representation
is required by any of the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel
to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue
or sell such Shares as to which such requisite authority shall not have been
obtained.
14. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan.
15. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan
is adopted. Such shareholder approval shall be obtained in the degree and
manner required under applicable state and federal law and any stock exchange
rules.
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