<PAGE>
As filed with the Securities and Exchange Commission on November 30, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________________
INTERNATIONAL NETWORK SERVICES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
________________________
CALIFORNIA 77-0289509
- ------------ ----------------
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
1213 INNSBRUCK DRIVE
SUNNYVALE, CALIFORNIA 94089
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
________________________
VITALSIGNS SOFTWARE, INC. 1996 STOCK OPTION PLAN
VITALSIGNS SOFTWARE, INC. PRE-PLAN OPTIONS
(FULL TITLE OF THE PLAN)
________________________
KEVIN J. LAUGHLIN
CHIEF FINANCIAL OFFICER
INTERNATIONAL NETWORK SERVICES
1213 INNSBRUCK DRIVE
SUNNYVALE, CALIFORNIA 94089
(408) 542-0100
(NAME, ADDRESS, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
________________________
Copy to:
ELIZABETH R. FLINT, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650) 493-9300
<TABLE>
<CAPTION>
====================================================================================================================================
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM MAXIMUM
SECURITIES AMOUNT OFFERING AGGREGATE AMOUNT OF
TO BE TO BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED SHARE PRICE FEE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value
VitalSigns Software, Inc. 1996 Stock Option Plan... 259,393 shares $1.75 (1) $453,938 $ 127
VitalSigns Software, Inc. Pre-Plan Options......... 20,861 shares $0.29 (2) $ 6,050 $ 2
TOTAL 280,254 SHARES $459,988 $ 129
====================================================================================================================================
(1) Computed in accordance with Rule 457(h) under the Securities Act. Such computation is based on the weighted average exercise
price of outstanding options under the VitalSigns Software, Inc. 1996 Stock Option Plan.
(2) Computed in accordance with Rule 457(h) under the Securities Act. Such computation is based on the weighted average exercise
price of outstanding options under the VitalSigns Software, Inc. Pre-Plan Options.
</TABLE>
<PAGE>
INTERNATIONAL NETWORK SERVICES
REGISTRATION STATEMENT ON FORM S-8
PART II
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents and information previously filed by International
Network Services (the "Registrant) with the Securities and Exchange Commission
(the "SEC") are hereby incorporated by reference in this Registration Statement:
(a) The Registrant's Annual Report on Form 10-K for its fiscal year ended
June 30, 1998;
(b) The Registrant's Quarterly Report on Form 10-Q for its fiscal quarter
ended September 30, 1998;
(c) The Registrant's Current Report on Form 8-K dated November 20, 1998;
and
(d) The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A filed on August 2,
1996.
All documents filed by the Registrant pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act on or after the date of this Registration
Statement prior to the filing of a post-effective amendment which indicates that
all securities offered hereby have been sold or which deregisters all securities
then remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be part hereof from the date of the filing of such
documents.
Any statement contained in this Registration Statement or in a document
incorporated by reference in this Registration Statement shall be deemed to be
modified or superseded for purposes of this Registration Statement to the extent
that a statement contained in this Registration Statement or in any subsequently
filed document that is deemed to be incorporated by reference in this
Registration Statement modifies or supersedes such statement
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
1
<PAGE>
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Amended and Restated Articles of Incorporation limit the
liability of the Registrant's directors for monetary damages to the maximum
extent permitted by California law. Such limitation of liability has no effect
on the availability of equitable remedies, such as injunctive relief or
rescission.
The Registrant's Amended and Restated Bylaws provide that the Registrant
will indemnify its directors and officers and may indemnify its employees and
agents (other than officers and directors) against certain liabilities to the
maximum extent permitted by California law. The Registrant has entered into
indemnification agreements with each of its current directors and officers and
certain of its key employees that provide for indemnification of, and
advancement of expenses to, such persons to the maximum extent permitted by
California law, including by reason of action or inaction occurring in the past
and circumstances in which indemnification and advancement of expenses are
discretionary under California law.
At the present time, there is no pending litigation or proceeding involving
a director, officer, employee or other agent of the Registrant in which
indemnification would be required or permitted. The Registrant is not aware of
any threatened litigation or proceeding that may result in a claim for such
indemnification.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
Exhibit
Number Description
--------- --------------------------------------------
4.1* Amended and Restated Articles of Incorporation.
4.2* Amended and Restated Bylaws.
4.3 VitalSigns Software, Inc. 1996 Stock Option Plan
4.4 Form of VitalSigns Software, Inc. Consultant and Independent
Contractor Non-Qualified Stock Option Agreement
5.1 Opinion of Wilson Sonsini Goodrich & Rosati
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Wilson Sonsini Goodrich & Rosati (contained in
Exhibit 5.1).
24.1 Power of Attorney (see signature page).
__________________________
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1, as amended (No. 333-09287), which was declared effective on
September 18, 1996.
2
<PAGE>
ITEM 9. UNDERTAKINGS.
a. The Registrant hereby undertakes:
i. To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement
to include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
ii. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
iii. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
b. The Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Exchange Act that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
c. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to law, the Registrant's Articles
of Incorporation, Bylaws or indemnification agreements, the Registrant
has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in a successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered hereunder, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Sunnyvale, State of California, on November 30, 1998.
INTERNATIONAL NETWORK SERVICES
By: /s/ Kevin J. Laughlin
--------------------------------------
Kevin J. Laughlin
Vice President, Finance and Chief Financial
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Kevin J. Laughlin, his attorney-in-fact, with the
power of substitution, for him in any and all capacities, to sign any amendments
to this Registration Statement on Form S-8, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
- --------------------------- ------------------------------------------------- -------------------------
Chairman of the Board
- ---------------------------
Donald M. McKinney
/s/ John L. Drew President, Chief Executive Officer and Director November 30, 1998
- --------------------------- (Principal Executive Officer)
John L. Drew
/s/ Kevin J. Laughlin Vice President, Finance, Chief Financial November 30, 1998
- --------------------------- Officer and Secretary (Principal Accounting
Kevin J. Laughlin Officer and Principal Financial Officer)
/s/ Douglas C. Allred Director November 30, 1998
- ---------------------------
Douglas C. Allred
/s/ Vernon R. Anderson Director November 30, 1998
- ---------------------------
Vernon R. Anderson
/s/ David Carlick Director November 30, 1998
- ---------------------------
David Carlick
/s/ Lawrence G. Finch Director November 30, 1998
- ---------------------------
Lawrence G. Finch
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
--------- --------------------------------------------
4.1* Amended and Restated Articles of Incorporation.
4.2* Amended and Restated Bylaws.
4.3 VitalSigns Software, Inc. 1996 Stock Option Plan
4.4 Form of VitalSigns Software, Inc. Consultant and Independent
Contractor Non-Qualified Stock Option Agreement
5.1 Opinion of Wilson Sonsini Goodrich & Rosati
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Wilson Sonsini Goodrich & Rosati (contained in
Exhibit 5.1).
24.1 Power of Attorney (see signature page).
__________________________
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1, as amended (No. 333-09287), which was declared effective on
September 18, 1996.
<PAGE>
EXHIBIT 4.3
VITALSIGNS SOFTWARE, INC.
1996 STOCK OPTION PLAN
(AMENDED AND RESTATED AS OF AUGUST 6, 1998)
1. PURPOSE AND TYPES OF OPTIONS. This 1996 Stock Option Plan (the
----------------------------
"PLAN") is intended to increase the incentives of, and encourage stock ownership
----
by, employees, consultants and other independent contractors (including members
of the Company's Board of Directors who are not employees of the Company)
providing services to VitalSigns Software, Inc., a Delaware corporation (the
"COMPANY"), or to corporations which are or become subsidiary corporations of
- --------
the Company. The term "subsidiary corporation" as used in this Plan shall have
the meaning specified in Section 4.2 hereof. The Plan is intended to provide
such employees and consultants and other independent contractors with a
proprietary interest (or to increase their proprietary interest) in the Company,
and to encourage them to continue their employment or engagement by the Company
or its subsidiaries. Options granted pursuant to the Plan, at the discretion of
the Company's Board of Directors ("BOARD"), may be either incentive stock
-----
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended ("INTERNAL REVENUE CODE"), or options that do not so qualify as
---------------------
incentive stock options and which are referred to herein as non-qualified stock
options.
2. STOCK. The capital stock subject to the Plan shall be shares of the
-----
Company's authorized but unissued Common Stock ("COMMON STOCK") or treasury
------------
shares of Common Stock. The maximum aggregate number of shares of Common Stock
which may be issued under the Plan is Three Million Nine Hundred Forty-Eight
Thousand Five Hundred (3,948,500), subject to adjustments pursuant to Section 8
hereof. In the event that any outstanding option under the Plan shall expire by
its terms or is otherwise terminated for any reason (or if shares of Common
Stock of the Company which are issued upon exercise of an option granted
hereunder are subsequently reacquired by the Company pursuant to contractual
rights of the Company under the particular stock option agreement), the shares
of the Common Stock allocated to the unexercised portion of such option (or the
shares so reacquired by the Company pursuant to the terms of the stock option
agreement) shall again become available to be made subject to options granted
under the Plan. Notwithstanding any other provision of this Plan, the aggregate
number of shares of Common Stock subject to outstanding options granted under
this Plan at any given time, plus the aggregate number of shares which have been
issued upon exercise of all options granted under this Plan and which remain
outstanding, shall never be permitted to exceed the maximum number of shares
specified above in this Section 2 (subject to adjustments under Section 8).
3. ADMINISTRATION. The Plan shall be administered by the Board. The
--------------
interpretation and construction by the Board of any provision of this Plan, or
of any option granted pursuant hereto, shall be final, binding and conclusive.
No member of the Board shall be liable to the Company or to any subsidiary or
parent corporation, or to the holder of any option granted hereunder, for any
action, inaction, determination or interpretation made in good faith with
respect to the Plan or any transaction hereunder. Notwithstanding the
foregoing, the Board shall have the authority to delegate some or all of its
duties to administer this Plan and to exercise its powers hereunder to a
committee ("COMMITTEE") appointed by the Board. For purposes of this Plan, all
---------
references herein to "Board" shall be deemed to also refer to any such
Committee. Any Committee charged with administration of the Plan shall have all
the powers and protections provided to the Board under this Plan until the Board
shall revoke or restrict such powers or protections. More specifically, the
Board, subject to compliance with the remaining provisions of this Plan, shall
have the following powers and authority (which listing is provided by way of
example and is not intended to be comprehensive or limiting to the extent of
powers not included):
<PAGE>
1996 Stock Option Plan
VitalSigns Software, Inc.
Page 2
3.1 SELECTION OF OPTIONEES. To determine the persons providing
----------------------
services to the Company to whom, and the time or times at which, options to
purchase Common Stock of the Company shall be granted;
3.2 NUMBER OF OPTION SHARES. To determine the number of shares of
-----------------------
Common Stock to be subject to options granted to each such person;
3.3 EXERCISE PRICE. To determine the price to be paid for the shares
--------------
of Common Stock upon the exercise of each option;
3.4 TERM AND EXERCISE SCHEDULE. To determine the term and the
--------------------------
exercise schedule of each option;
3.5 OTHER TERMS OF OPTIONS. To determine the terms and conditions of
----------------------
each stock option agreement (which need not be identical) entered into between
the Company and any person to whom the Board determines to grant an option;
3.6 INTERPRETATION OF PLAN. To interpret the Plan and to prescribe,
----------------------
amend and rescind rules and regulations relating to the Plan;
3.7 AMENDMENT OF OPTIONS. With the consent of the holder thereof, to
--------------------
modify or amend any option granted under the Plan; and
3.8 GENERAL AUTHORITY. To take such actions and make such
-----------------
determinations deemed necessary or advisable by the Board for the administration
of the Plan, subject to complying with the Plan and with applicable legal
requirements.
4. ELIGIBILITY AND AWARD OF OPTIONS.
--------------------------------
4.1 AUTHORITY TO GRANT AND ELIGIBILITY. The Board shall have full
----------------------------------
and final authority, in its discretion and at any time and from time to time
during the term of this Plan, to grant or authorize the granting of options to
such officers, directors and employees of, and consultants and other independent
contractors retained by, the Company or its subsidiary corporations as it may
select, and to determine the number of shares of Common Stock to be subject to
each option. Any individual who is eligible to receive a stock option under
this Plan shall be eligible to hold more than one option at any given time, in
the discretion of the Board. The Board shall have full and final authority in
its discretion to determine, in the case of employees (including employees that
are officers or directors), whether such options shall be incentive stock
options or non-qualified stock options; however, no incentive stock option may
be granted to any person who is not a bona fide employee of the Company or of a
subsidiary corporation of the Company. Persons selected by the Board who are
prospective employees of, or consultants or other independent contractors to be
retained by, the Company or its subsidiaries, including members of the Board,
shall be eligible to receive non-qualified stock options; provided, however,
that in the case of such prospective employment or other engagement, the
exercisability of such options shall be
<PAGE>
1996 Stock Option Plan
VitalSigns Software, Inc.
Page 3
subject in each case to such person in fact becoming an employee or consultant
or other independent contractor, as applicable, of the Company or its
subsidiaries.
4.2 CERTAIN RESTRICTIONS APPLICABLE TO STOCK OPTIONS. No incentive
------------------------------------------------
stock option shall be granted to any employee who, at the time such incentive
stock option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of outstanding capital stock of
the Company, or of any parent corporation or subsidiary corporation of the
Company, unless the exercise price (as provided in Section 5.1 hereof) is not
less than one hundred ten percent (110%) of the fair market value of the Common
Stock on the date the incentive stock option is granted and the period within
which the incentive stock option may be exercised (as provided in Section 5.2
hereof) does not exceed five (5) years from the date the incentive stock option
is granted. As used in this Plan, the terms "PARENT CORPORATION" and
------------------
"SUBSIDIARY CORPORATION" shall have the meanings set forth in Sections 424(e)
- -----------------------
and (f), respectively, of the Internal Revenue Code. For purposes of this
Section 4.2, in determining stock ownership, an employee shall be considered as
owning the voting capital stock owned, directly or indirectly, by or for his or
her brothers and sisters, spouse, ancestors and lineal descendants. Voting
capital stock owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be considered as being owned proportionately
by or for its stockholders, partners or beneficiaries, as applicable.
Additionally, for purposes of this Section 4.2, outstanding capital stock shall
include all capital stock actually issued and outstanding immediately after the
grant of the option to the employee. Outstanding capital stock shall not
include capital stock authorized for issue under outstanding options held by the
employee or by any other person. Additionally, the aggregate fair market value
(determined as of the date an option is granted) of the Common Stock with
respect to which incentive stock options granted are exercisable for the first
time by an employee during any one calendar year (under this Plan and under all
other incentive stock option plans of the Company and of any parent or
subsidiary corporation) shall not exceed One Hundred Thousand Dollars
($100,000). If the aggregate fair market value (determined as of the date an
option is granted) of the Common Stock with respect to which incentive stock
options granted are exercisable for the first time by an employee during any
calendar year exceeds One Hundred Thousand Dollars ($100,000), the options for
the first One Hundred Thousand Dollars ($100,000) worth of shares of Common
Stock to become exercisable in such calendar year shall be incentive stock
options and the options for the amount in excess of One Hundred Thousand Dollars
($100,000) that become exercisable in that calendar year shall be non-qualified
stock options. In the event that the Internal Revenue Code or the regulations
promulgated thereunder are amended after the effective date of the Plan to
provide for a different limit on the fair market value of shares of Common Stock
permitted to be subject to incentive stock options, such different limit shall
be automatically incorporated herein and shall apply to options granted after
the effective date of such amendment.
4.3 DATE OF GRANT. The date on which an option shall be granted
-------------
shall be stated in each option agreement and shall be the date of the Board's
authorization of such grant or such later date as may be set by the Board at the
time such grant is authorized.
5. TERMS AND PROVISIONS OF OPTION AGREEMENTS. Each option granted under
-----------------------------------------
the Plan shall be evidenced by a stock option agreement between the person to
whom the option is granted and the Company. Each such agreement shall be
subject to the following terms and conditions, and to such other terms and
conditions not inconsistent herewith as the Board may deem appropriate in each
case:
<PAGE>
1996 Stock Option Plan
VitalSigns Software, Inc.
Page 4
5.1 EXERCISE PRICE. The price to be paid for each share of Common
--------------
Stock upon the exercise of an option shall be determined by the Board at the
time the option is granted; provided however that (1) no non-qualified stock
option shall have an exercise price less than eighty-five percent (85%) of the
fair market value of the Common Stock on the date the option is granted; (2) no
incentive stock option shall have an exercise price less than one hundred
percent (100%) of the fair market value of the Common Stock on the date the
option is granted; and (3) all incentive stock options granted to the ten
percent (10%) stockholders shall have the exercise price set at not less than
one hundred ten percent (110%) of fair market value at the date of the grant, as
provided in Section 4.2 hereof. For all purposes of this Plan, the fair market
value of the Common Stock on any particular date shall be the closing price on
the trading day immediately preceding that date on the principal securities
exchange on which the Company's Common Stock is listed, or, if such Common Stock
is not then listed on any securities exchange, the fair market value of the
Common Stock on such date shall be the mean of the closing bid and asked prices
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") on the trading day immediately preceding such date.
------
In the event that the Company's Common Stock is neither listed on a securities
exchange nor quoted by NASDAQ, then the Board shall in good faith determine the
fair market value of the Company's Common Stock on such date, with such
determination being based upon factors considered relevant in determining the
Company's fair value; provided, however, that any individual form of option
agreement may provide for alternative means of valuation for the purpose of
repurchase at fair market value of shares acquired.
5.2 TERM OF OPTIONS. The period or periods within which an option
---------------
may be exercised shall be determined by the Board at the time the option is
granted, but no exercise period shall exceed ten (10) years from the date the
option is granted (or five (5) years in the case of any stock option granted to
a ten percent (10%) stockholder as described in Section 4.2 hereof).
5.3 EXERCISABILITY. Stock options granted under this Plan shall be
--------------
exercisable at such future time or times (or may be fully exercisable upon
grant), whether or not in installments, as shall be determined by the Board and
provided in the form of stock option agreement, subject, however, to the
requirement that all options granted under this Plan shall provide a right to
exercise that accrues at a rate of at least twenty percent (20%) of the number
of shares subject to the option for each year after the date of grant (i.e., at
a rate so as to become fully exercisable at the end of five (5) years).
Likewise, to the extent that options are immediately exercisable and shares
purchased thereunder have vesting schedules such that the Company is entitled to
repurchase at original exercise price a portion of the shares so acquired, all
such option agreements shall provide for the lapsing of such purchase rights at
a rate of at least twenty percent (20%) of the number of shares subject to the
option for each year after the date of grant. Notwithstanding any other
provisions of this Plan, no option may be exercised after the expiration of ten
(10) years from the date of grant.
5.4 METHOD OF PAYMENT FOR COMMON STOCK UPON EXERCISE. Except as
------------------------------------------------
otherwise provided in the applicable stock option agreement (subject to the
limitations of this Plan), the exercise price for each share of Common Stock
purchased under an option shall be paid in full in cash at the time of purchase
(or by check acceptable to the Board). At the discretion of the Board, the
stock option agreement may provide for (or the Board may permit) the exercise
price to be paid by one or more of the following additional alternative methods:
(i) the surrender of shares of the Company's Common Stock, in
<PAGE>
1996 Stock Option Plan
VitalSigns Software, Inc.
Page 5
proper form for transfer, owned by the person exercising the option and having
a fair market value on the date of exercise equal to the exercise price,
provided that such shares (a) have been outstanding for more than six (6)
months and have been paid for within the meaning of Rule 144 under the
Securities Act of 1933, as amended (the "SECURITIES ACT") (and, if such shares
--------------
were purchased from the Company by use of a promissory note, such note has
been fully paid with respect to such shares) or (b) were obtained by the
optionee in the public market, (ii) to the extent permitted under the
applicable provisions of the Delaware General Corporation Law, the delivery by
the person exercising the option of a full recourse promissory note executed
by such person, bearing interest at a per annum rate which is not less than
the "test rate" as set by the regulations promulgated under Sections 483 or
1274, as applicable, of the Internal Revenue Code and as in effect on the date
of exercise, or (iii) any combination of cash, shares of Common Stock or
promissory notes, so long as the sum of the cash so paid, plus the fair market
value of the shares of Common Stock so surrendered and the principal amounts
of the promissory notes so delivered, is equal to the aggregate exercise
price. Without limiting the generality of the foregoing, the form of option
agreement may provide (or the Board may otherwise permit, in its discretion)
that the option be exercised through a "net issue" exercise procedure (cash-
less exercise), whereby the optionee may elect to receive shares of the
Company's Common Stock having an aggregate fair market value at the date of
exercise equal to the net value of the portion of the option so exercised as
of the exercise date. For purposes of the foregoing, the net value of any
option (or portion thereof) as of such exercise date shall be equal to the
aggregate fair market value of the shares subject to the option (or portion
thereof being exercised) less the aggregate exercise price of the option (or
portion thereof). In such event the Company shall issue to the optionee a
number of shares of the Company's Common Stock having a fair market value as
of the date of exercise equal to the net value of the option (or portion
thereof being exercised). No share of Common Stock shall be issued under any
option until full payment therefor has been made in accordance with the terms
of the stock option agreement (and in compliance with the Plan).
Notwithstanding the foregoing, an Option may not be exercised by surrender to
the Company of shares of the Company's Common Stock to the extent such
surrender of stock would constitute a violation of the provisions of any law,
regulation and/or agreement restricting the redemption of the Company's Common
Stock. Additionally, if permitted by the form of stock option agreement, or at
the Board's discretion, any promissory note may permit the payment of
principal and interest accruing thereunder by surrender of shares of the
Company's Common Stock, in proper form for transfer, and having a fair market
value on the date of payment and surrender equal to the dollar amount to be
applied to principal and accrued interest thereunder.
5.5 NON-ASSIGNABILITY. No stock option granted under the Plan shall
-----------------
be assignable or transferable by an optionee except by will or the laws of
descent and distribution, unless such assignment or transfer is approved by the
Board of Directors at the time of the grant of the option, and each stock option
granted under the Plan shall be exercisable only by the optionee (or any
approved assignee) during his or her lifetime.
5.6 TERMINATION OF EMPLOYMENT PROVISIONS APPLICABLE TO STOCK OPTIONS.
----------------------------------------------------------------
Each stock option agreement shall comply with the following provisions relating
to early termination of the option based upon termination of the employee's
employment with the Company:
<PAGE>
1996 Stock Option Plan
VitalSigns Software, Inc.
Page 6
5.6.1 DEATH. Upon the death of an employee of the Company, any
-----
stock option which such employee holds may be exercised, to the extent it was
vested and exercisable as of the date of death, within such period after the
date of death as the Board shall prescribe in the stock option agreement (but
not less than six (6) months nor more than twelve (12) months after death), by
the employee's representative or by the person entitled thereto under the
employee's will or the laws of intestate succession. If the option is not so
exercised in accordance with the foregoing, it shall terminate upon the
expiration of such prescribed period.
5.6.2 DISABILITY. If the employee's employment with the Company
----------
is terminated because of the disability of the employee, any stock option which
the employee holds may be exercised by the employee or the employee's estate
within such period after the date of termination of employment resulting from
such disability (but not less than six (6) months nor more than twelve (12)
months after termination by reason of disability) as the Board shall prescribe
in the stock option agreement, to the extent such option would otherwise be
vested and exercisable on the date of such termination. If the option is not so
exercised in accordance with the foregoing, it shall terminate upon the
expiration of such prescribed period, unless the employee dies prior thereto, in
which event the employee shall be treated as though his or her death occurred on
the date of termination resulting from such disability and the provisions of
Section 5.6.1 hereof shall apply.
5.6.3 TRANSFER TO RELATED CORPORATION. In the event that an
-------------------------------
employee of the Company leaves the employ of the Company to become an employee
of any parent or subsidiary corporation of the Company, or if the employee
leaves the employ of any such parent or subsidiary corporation to become an
employee of the Company or of another parent or subsidiary corporation, such
employee shall be deemed to continue as an employee of the Company for all
purposes of this Plan, and any reference to employment by the Company shall also
be deemed to refer to employment by any parent or subsidiary of the Company.
5.6.4 OTHER SEVERANCE. In the event an employee of the Company
---------------
leaves the employ of the Company for any reason other than as set forth above in
this Section 5.6, any stock option which such employee holds must be exercised,
to the extent it was vested and exercisable at the date such employee left the
employ of the Company, not later than three (3) months after the date on which
the employee's employment terminates (or such shorter period as may be
prescribed in the option agreement, the minimum specified period being thirty
(30) days). The stock option shall terminate upon the expiration of such
prescribed period. In the event that an employee of the Company leaves the
employ of the Company for any reason other than as set forth above in this
Section 5.6, any non-qualified stock option which such employee holds shall
terminate in accordance with such provisions as the Board deems appropriate with
respect to termination prior to normal expiration upon termination of
employment.
5.6.5 EFFECT OF TERMINATION OF ENGAGEMENT OF NON-EMPLOYEES ON
-------------------------------------------------------
NON-QUALIFIED STOCK OPTIONS. The Board, in its discretion, may provide in each
- ---------------------------
non-qualified stock option agreement issued to a consultant, non-employee
Director or other independent contractor retained by the Company such
provisions as the Board deems appropriate with respect to whether, and if so
when, the option (or any portion thereof) shall be terminated prior to normal
expiration (or otherwise affected) upon any termination of the optionee's
engagement as a consultant or other independent contractor
<PAGE>
1996 Stock Option Plan
VitalSigns Software, Inc.
Page 7
providing services to the Company. Any reference in this Plan to services of a
consultant or other independent contractor to the Company shall be deemed (for
all purposes of this Plan) to mean and include the existence of a consulting
or other independent contractor relationship with any parent corporation or
subsidiary corporation of the Company.
5.7 ALL OPTIONS SUBJECT TO TERMS OF THIS PLAN. In addition to the
-----------------------------------------
provisions contained in any option agreement granted under this Plan, each such
stock option agreement shall provide that the same is subject to the terms and
conditions of this Plan and each optionee shall be given a copy of this Plan.
Further, any terms or conditions contained in any such stock option agreement
granted hereunder which are inconsistent in any respect with the provisions of
this Plan shall be disregarded and void, or shall be deemed amended to the
extent necessary to comply with the provisions of this Plan and the intent of
the Board.
5.8 OTHER PROVISIONS. Option agreements under the Plan shall contain
----------------
such other provisions, including, without limitation: (i) restrictions and
conditions upon the exercise of the option, (ii) rights of first refusal in
favor of the Company (or its assignees) applicable to shares of Common Stock
acquired upon exercise of an option which are subsequently proposed to be
transferred by the optionee, (iii) lock-up agreements (applicable in the event
of the public offering of the Common Stock of the Company) restricting an
optionee from any sales or other transfers of option stock for a designated
period of time following the effective date of a registration statement under
the Securities Act, (iv) other restrictions on the transferability or right to
retain shares of the Common Stock received upon the exercise of the option,
including repurchase rights at original cost based on a vesting schedule, (v)
commitments to pay cash bonuses, make loans or transfer other property to an
optionee upon exercise of any option, and (vi) restrictions required by federal
and applicable state securities laws, all as the Board shall deem necessary or
advisable; provided that no such additional provision shall be inconsistent with
any other term or condition of this Plan and no such additional provision shall
cause any incentive stock option granted pursuant to this Plan to fail to
qualify as an incentive stock option under Section 422 of the Internal Revenue
Code. Without limiting the generality of the foregoing, the Board may provide
in the form of stock option agreement that, in lieu of an exercise schedule, the
option may immediately be exercisable in full and provide a "vesting schedule"
with respect to the stock so purchased, giving the Company (or its assignees)
the right to repurchase the shares of Common Stock at cost (or some other
specified amount) to the extent such shares have not become vested upon any
termination of the optionee's employment or other engagement with the Company,
which vesting may depend upon or be related to the attainment of performance
goals or other conditions (such as the passage of stated time periods) pursuant
to which the obligation to resell such shares to the Company shall lapse.
6. SECURITIES LAW REQUIREMENTS. The Board shall require any potential
---------------------------
optionee, as a condition of the exercise of an option, to represent and
establish to the satisfaction of the Board that all shares of Common Stock to be
acquired upon the exercise of such option will be acquired for investment and
not for resale. No shares of Common Stock shall be issued upon the exercise of
any option unless and until: (i) the Company and the optionee have satisfied all
applicable requirements under the Securities Act of 1933 and the Securities
Exchange Act of 1934, as amended, (ii) any applicable listing requirement of any
stock exchange on which the Company's Common Stock is listed has been satisfied,
and (iii) all other applicable provisions of state and federal law have been
satisfied. The Board shall cause such
<PAGE>
1996 Stock Option Plan
VitalSigns Software, Inc.
Page 8
legends to be placed on certificates evidencing shares of Common Stock issued
upon exercise of an option as, in the opinion of the Company's counsel, may be
required by federal and applicable state securities laws.
7. WITHHOLDING TAXES. The exercise of any option granted under this Plan
-----------------
shall be conditioned upon the optionee's payment to the Company of all amounts
(in addition to the exercise price) required to meet federal, state, local or
foreign taxes of any kind required by law to be withheld with respect to shares
to be issued on exercise of such option. The Board, in its discretion, may
declare cash bonuses to an optionee to satisfy any such withholding requirements
or may incorporate provisions in the form of stock option agreement allowing (or
after grant of the option may permit, in its discretion) an optionee to satisfy
any such withholding obligations, in whole or in part, by delivery of shares of
the Company's Common Stock already owned by the optionee and which are not
subject to repurchase, forfeiture, vesting or other similar requirements or
restrictions. The fair market value of any such shares used to satisfy such
withholding obligations shall be determined as of the date the amount of tax to
be withheld is to be determined. The Company shall have the right to deduct
from payments of any kind otherwise due to the optionee (whether regular salary,
commissions, or otherwise) any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options granted under the Plan.
8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
----------------------------------------------------
8.1 STOCK SPLITS AND SIMILAR EVENTS. Subject to any required action
-------------------------------
by the Board and stockholders, the number of shares of Common Stock covered by
outstanding options granted under this Plan and the exercise price thereof shall
be proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from a subdivision or
combination of such shares or the payment of a stock dividend (but only on the
Common Stock) or any other increase or decrease in the number of such
outstanding shares of Common Stock effected without the receipt of consideration
by the Company; provided, however, that the conversion of any convertible
securities of the Company shall not be deemed to have been "effected without
receipt of consideration."
8.2 MERGERS AND ACQUISITIONS. Subject to any required action by the
------------------------
Board and stockholders, if the Company shall be the surviving corporation in any
merger or consolidation which results in the holders of the outstanding voting
securities of the Company (determined immediately prior to such merger or
consolidation) owning, directly or indirectly, at least a majority of the
beneficial interest in the outstanding voting securities of the surviving
corporation or its parent corporation (determined immediately after such merger
or consolidation), the options granted under this Plan shall pertain and apply
to the securities or other property to which a holder of the number of shares
subject to the unexercised portion of such options would have been entitled. A
dissolution or liquidation of the Company or a sale of all or substantially all
its business and assets or a merger or consolidation which results in the
holders of the outstanding voting securities of the Company (determined
immediately prior to such merger or consolidation) owning, directly or
indirectly, less than a majority of the beneficial interest in the outstanding
voting securities of the surviving corporation or its parent corporation
(determined immediately after such merger or consolidation) will cause the
options granted hereunder to
<PAGE>
1996 Stock Option Plan
VitalSigns Software, Inc.
Page 9
terminate, unless the agreement of such sale, merger, consolidation or other
acquisition otherwise provides.
8.3 BOARD'S DETERMINATION FINAL AND BINDING UPON OPTIONEES. The
------------------------------------------------------
foregoing determinations and adjustments in this Section 8 relating to stock or
securities of the Company shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. The Company shall give
notice of any such adjustment or action to each optionee; provided, however,
that any such adjustment or action shall be effective and binding for all
purposes, whether or not such notice is given or received.
8.4 NO FRACTIONS OF SHARES. Fractions of shares shall not be issued
----------------------
by the Company. Instead, such fractions of shares shall either be paid in cash
at fair market value or shall be rounded up or down to the nearest share, as
determined by the Board.
8.5 NO RIGHTS EXCEPT AS EXPRESSLY STATED. Except as hereinabove
------------------------------------
expressly provided in this Section 8, no additional rights shall accrue to any
optionee by reason of any subdivision or combination of shares of the capital
stock of any class or the payment of any stock dividend or any other increase or
decrease in the number of shares of any class or by reason of any dissolution,
liquidation, merger or consolidation or spin-off of assets or of stock of
another corporation, and any issue by the Company of shares of stock of any
class or of securities convertible into shares of stock of any class shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or exercise price of shares subject to options granted hereunder.
8.6 NO LIMITATIONS ON COMPANY'S DISCRETION. The grant of options
--------------------------------------
under this Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure or to merge or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
9. NO ADDITIONAL EMPLOYMENT RELATED RIGHTS OR BENEFITS.
---------------------------------------------------
9.1 NO SPECIAL EMPLOYMENT RIGHTS. Nothing contained in this Plan or
----------------------------
in any option granted hereunder shall confer upon any optionee any right with
respect to the continuation of his or her employment or other engagement by the
Company or interfere in any way with the right of the Company, subject to the
terms of any separate employment or consulting agreement to the contrary, at any
time to terminate such employment or consulting or other relationship or to
increase or decrease the compensation of any optionee. Whether an authorized
leave of absence, or absence in military or government service, shall constitute
termination of an optionee's employment or other engagement shall be determined
by the Board.
9.2 OTHER EMPLOYEE BENEFITS. The amount of any compensation deemed
-----------------------
to be received by any employee or consultant as a result of the exercise of an
option or the sale of shares received upon such exercise will not constitute
compensation with respect to which any other employment (or other engagement)
related benefits of such optionee are determined, including, without limitation,
benefits under any bonus, pension, profit-sharing, life insurance or salary
continuation plan,
<PAGE>
1996 Stock Option Plan
VitalSigns Software, Inc.
Page 10
except as otherwise specifically determined by the Board or as expressly
provided for in the option agreement. The granting of an option shall impose
no obligation upon the optionee to exercise such option.
10. RIGHTS AS A STOCKHOLDER AND ACCESS TO INFORMATION. No optionee and no
-------------------------------------------------
person claiming under or through any such optionee shall be, or have any of the
rights or privileges of, a stockholder of the Company in respect of any of the
shares issuable upon the exercise of any option granted under this Plan, unless
and until the option is properly and lawfully exercised and a certificate
representing the shares so purchased is duly issued to the optionee or to his or
her estate. No adjustment shall be made for dividends or any other rights if
the record date relating to such dividend or other right is before the date the
optionee became a stockholder. Holders of options granted under this Plan shall
be provided annual financial statements. Upon written request to the Secretary
of the Company, any optionee shall be entitled to inspect, at the executive
offices of the Company, the information made available to stockholders of the
Company pursuant to Section 220 or any other applicable provision of the
Delaware General Corporation Law. The Company shall deliver to each optionee
during the period for which he or she has one or more options outstanding,
copies of all annual reports and other information which are provided to all
stockholders of the Company, except the Company shall not be required to deliver
such information to key employees whose duties in connection with the Company
assure their access to equivalent information.
11. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the
----------------------------------------------
limitations of this Plan, the Board may modify, extend or renew outstanding
options granted under the Plan. Furthermore, the Board may, subject to the other
provisions of this Plan, upon the cancellation of previously granted options
having higher per share exercise prices, regrant options at a lower price;
provided, however, that no such modification or cancellation and regrant of an
option shall, without the written consent of the optionee, alter or impair any
rights of the optionee under any option previously granted under the Plan.
12. USE OF PROCEEDS. The proceeds received from the sale of shares of the
---------------
Common Stock upon exercise of options granted under the Plan shall be used for
general corporate purposes.
13. RESERVATION OF SHARES. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of shares of its Common
Stock as shall be sufficient to satisfy the requirements of the Plan and all
options issued hereunder.
14. TERM OF PLAN.
------------
14.1 EFFECTIVE DATES. The Plan became effective when adopted by the
---------------
Board on December 17, 1996, but no stock option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's stockholders by the vote of the holders of a majority of the
outstanding shares of the Company present and entitled to vote at a duly held
meeting of the Company's stockholders (or by consent of the holders of the
outstanding shares of the Company entitled to vote) in accordance with the
requirements of the Company's Bylaws and the Delaware General Corporation Law.
If such stockholder approval is not obtained within twelve (12) months after the
date of the Board's adoption of the Plan, any incentive stock options previously
granted under the Plan shall
<PAGE>
1996 Stock Option Plan
VitalSigns Software, Inc.
Page 11
become non-qualified options and no further incentive stock options shall be
granted. Subject to the foregoing limitation, options may be granted under the
Plan at any time after the effective date and before the date fixed for
termination of the Plan.
14.2 TERMINATION. Unless sooner terminated in accordance with Section
-----------
15, the Plan shall terminate upon the earlier of: (i) the close of business on
the last business day preceding the tenth (10th) anniversary of the date of the
Plan's adoption by the Board, or (ii) the date on which all shares available for
issuance under the Plan shall have been issued pursuant to options granted under
the Plan and none of such shares shall remain subject to contractual repurchase
rights of the Company pursuant to "vesting" or other similar provisions. If the
date of termination is determined under clause (i) above, then any options
outstanding on such date shall continue to have force and effect in accordance
with the provisions of the option agreements evidencing such options.
15. EARLY TERMINATION AND AMENDMENT OF THE PLAN. The Board may from time
-------------------------------------------
to time suspend or terminate the Plan or revise or amend it; provided, however,
that, without the approval of the Company's stockholders (except as to 15.1
below, which also requires the consent of the affected optionees) at a duly held
meeting of the Company's stockholders by the vote of a majority of the shares
present and entitled to vote (or by written consent of the holders entitled to
vote) in compliance with the requirements of the Company's Bylaws and the
Delaware General Corporation Law, no such action of the Board shall:
15.1 MODIFICATIONS OF OUTSTANDING OPTIONS. Without the consent of
------------------------------------
each affected optionee, alter or impair any rights of an optionee under any
option previously granted under the Plan;
15.2 INCREASES IN NUMBER OF SHARES SUBJECT TO THE PLAN. Increase the
-------------------------------------------------
aggregate number of shares of the Common Stock which may be issued upon exercise
of options granted under the Plan (except for adjustments made pursuant to
Section 8 hereof);
15.3 CHANGES IN ELIGIBILITY. Change the designation of employees
----------------------
eligible to receive incentive stock options under the Plan;
15.4 PLAN DURATION. Extend the termination date beyond that provided
-------------
in Section 14.2;
15.5 CHANGES NOT APPROVED BY LEGAL COUNSEL. Otherwise amend or modify
-------------------------------------
the Plan (or outstanding options) under circumstances where stockholder approval
is considered necessary in the opinion of legal counsel to the Company; or
15.6 CHANGES TO THIS SECTION. Amend this Section 15 to defeat its
-----------------------
purposes.
<PAGE>
Exhibit 4.4
THE SECURITY REPRESENTED BY THIS AGREEMENT HAS BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
FORM OF
VITALSIGNS SOFTWARE, INC.
CONSULTANT AND INDEPENDENT CONTRACTOR
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
THIS CONSULTANT AND INDEPENDENT CONTRACTOR NON-QUALIFIED STOCK OPTION
AGREEMENT ("AGREEMENT"), by and between VitalSigns Software, Inc., a Delaware
---------
corporation (the "COMPANY"), and _____________ (the "CONSULTANT"), is made as of
------- ----------
the ____th day of 199__ (such date being sometimes referred to herein as the
date of "GRANT").
-----
R E C I T A L S
A. The Company, from time to time, grants stock options to consultants
and other independent contractors of the Company which are intended to be non-
qualified stock options in that they do not qualify as incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "INTERNAL REVENUE CODE"), to purchase shares of the authorized but
---------------------
unissued Common Stock or treasury shares of the Company ("COMMON STOCK").
------------
B. The Board of Directors (or a duly authorized Committee thereof) of the
Company (in either case, referred to herein as the "BOARD") has authorized the
-----
granting of a non-qualified stock option to Consultant, thereby allowing
Consultant to acquire or increase his or her ownership interest in the Company.
A G R E E M E N T
NOW, THEREFORE, in reliance on the foregoing Recitals and in consideration
of the mutual covenants hereinafter set forth, the parties hereby agree as
follows:
1. GRANT OF STOCK OPTION. The Company hereby grants to Consultant a non-
---------------------
transferable and non-assignable option to purchase an aggregate of up to
________ (____) shares of the Company's Common Stock, par value $.001, at the
exercise price of _________ (____) per share, upon the terms and conditions set
forth herein (such purchase right being sometimes referred to herein as "THE
OPTION" or "THIS OPTION").
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
VitalSigns Software, Inc.
Page 2
2. TERM AND TYPE OF OPTION. Unless earlier terminated in accordance with
-----------------------
Section 7 or 8.2 hereof, the Option and all rights of the Consultant to purchase
Common Stock hereunder shall expire with respect to all of the shares then
subject hereto at 5:00 p.m. Pacific time on November 15, 2006. This Option is a
non-qualified stock option in that it is not intended to qualify as an incentive
stock option within the meaning of Section 422 of the Internal Revenue Code.
Accordingly, the Consultant understands that under current federal tax law, he
or she will recognize ordinary income for federal income tax purposes upon
exercise of this Option in an amount equal to the excess (if any) of the fair
market value of the shares of Common Stock so purchased (determined (i) as of
the date of such exercise to the extent (a) the shares are then "VESTED SHARES"
-------------
as defined in Section 4.2.1 below or (b) the Employee has made a timely election
under Section 83(b) of the Internal Revenue Code, or (ii) as of each date
following such exercise as and when shares first become Vested Shares) over the
exercise price paid for such shares. Consultant further understands that
Consultant must satisfy all applicable federal, state, local and foreign income
and employment tax withholding requirements at the date of exercise.
3. OPTION IMMEDIATELY EXERCISABLE; OVERRIDING LIMITATION ON TIME FOR
-----------------------------------------------------------------
EXERCISE. Subject to the remaining provisions of this Agreement, the Option
- --------
shall be exercisable in full or in part at any time after the date hereof and
prior to the expiration date stated in Section 2 (or any earlier termination of
this Option as provided in this Agreement). Except as provided in Section 7,
the Consultant must be and remain in a consulting relationship with the Company
(as defined in Section 4.2.3) during the entire period commencing with the date
of grant of this Option and ending on the date of any exercise hereunder.
Notwithstanding any other provisions of this Agreement, the Option may not be
exercised after the expiration of ten (10) years from the date of grant.
4. RESTRICTIONS ON "NON-VESTED SHARES".
-----------------------------------
4.1 OBLIGATION TO RESELL NON-VESTED SHARES.
--------------------------------------
4.1.1 REPURCHASE RIGHT ACCRUES UPON CONSULTANT'S TERMINATION OF
---------------------------------------------------------
SERVICES. On the termination of the Consultant's "consulting relationship with
- --------
the Company" (as defined in Section 4.2.3 below), whether by reason of
Consultant's voluntary resignation or involuntary termination (with or without
cause), or under any other circumstances, the Company (and its assignees as
provided in Section 4.2.5 below) shall have the option to repurchase from the
Consultant, and the Consultant shall be obligated to sell to the Company (and to
its assignees pursuant to Section 4.2.5 below) all or any portion of the shares
of the Common Stock which at the date of the termination of the Consultant's
consulting relationship with the Company are "Non-Vested Shares" (as defined in
Section 4.2.1 below) at the price stated in Section 4.2.4 below.
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
VitalSigns Software, Inc.
Page 3
4.1.2 REPURCHASE PROCEDURE. The Company shall within thirty
--------------------
(30) days after the later of (1) the termination or expiration of
exercisability of this Option or (2) the date of any termination of the
Consultant's consulting relationship with the Company, give written notice to
the Consultant or to the Consultant's representative, as the case may be,
specifying the number of Non-Vested Shares which the Company (or its
assignees) is electing to purchase hereunder, and the place and time (which in
no event shall be later than thirty (30) days from the date of such notice) of
the closing of such repurchase, and the Consultant shall deliver any
certificates in the Consultant's possession representing Non-Vested Shares to
the Company prior to such time.
4.2 VESTING SCHEDULE.
----------------
4.2.1 DEFINITION OF "NON-VESTED SHARES". The percentage of the
---------------------------------
shares covered by this Agreement which shall be "NON-VESTED SHARES" shall be
-----------------
determined solely on the basis of the length of time from the date of this
Agreement that the Consultant remains in a consulting relationship with the
Company. Until _________,_____ all of the shares covered by this Agreement
shall be Non-Vested Shares. Effective upon the aforementioned date, fifty
percent (50%) of the shares covered by this Agreement (rounded up or down to the
nearest whole number of shares) shall cease to be Non-Vested Shares.
Thereafter, the number of shares constituting Non-Vested Shares at any given
time shall be further reduced in equal daily installments (each installment to
be rounded up or down to the nearest whole number of shares) over the one year
period ending on ________, ____ and all shares shall be Vested Shares on and
after such date. For purposes of this Agreement, any reference to "VESTED
------
SHARES" shall mean those shares subject to this Agreement which are no longer
- ------
"Non-Vested Shares". Notwithstanding the foregoing, all of the Consultant's
shares subject to this Agreement shall become Vested Shares and none of the
shares covered hereby shall remain Non-Vested Shares at such time after the
Consultant's consulting relationship with the Company has ceased and the
repurchase rights of the Company under this Section 4 have expired.
4.2.2 AGREEMENT BINDS ALL SECURITIES THAT MAY BE ISSUED. If
-------------------------------------------------
after the date of issuance of the Common Stock to the Consultant upon exercise
of the Option granted pursuant to the terms hereof, the Company shall issue
any additional shares of its Common Stock upon such Common Stock, by way of
dividend or stock split or other distribution, or if any shares of capital
stock or other securities of the Company or of any other corporation are
issued in exchange for, or with respect to, the Common Stock issued hereunder
pursuant to any recapitalization, merger, sale of assets, liquidation or other
reorganization (collectively, "REORGANIZATION"), regardless of whether the
--------------
Company shall survive such Reorganization, all of such shares of Common Stock,
capital stock and other securities shall be considered to be additional shares
acquired by the Consultant under this
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
VitalSigns Software, Inc.
Page 4
Agreement and shall be ratably subject to all provisions of this Agreement
(including, without limitation, this Section 4) as if they had been issued to
the Consultant hereunder.
4.2.3 CONSULTING RELATIONSHIP. For purposes of this Agreement,
-----------------------
the Consultant shall be considered to be in a "consulting relationship with the
Company" during the period in which the Consultant is continuously engaged by
any one or more of the following entities: the Company, any corporation owning
directly or indirectly at least 50% of the outstanding voting securities of the
Company (a "PARENT CORPORATION"), any corporation with at least 50% of its
------------------
outstanding voting securities being owned, directly or indirectly, by the
Company or any parent corporation of the Company (a "SUBSIDIARY CORPORATION"),
----------------------
or any successor in interest of any of the foregoing pursuant to any
Reorganization.
4.2.4 REPURCHASE PRICE. The repurchase price under this
----------------
Section 4 shall be equal to twelve cents ($0.12) for each Non-Vested Share being
repurchased by the Company (or its assignees), reasonably and ratably adjusted
for any stock split, stock dividend or Reorganization. Payment for all shares of
Non-Vested Shares repurchased under this Section 4 shall be made by cancellation
of the Consultant's indebtedness to the Company (if any) or by cash or Company
check.
4.2.5 ASSIGNABILITY OF COMPANY'S RIGHTS. The Company may at any
---------------------------------
time transfer and assign its rights and delegate its obligations under this
Section 4 to any other person, corporation, firm or entity, including its
officers, directors or stockholders; provided, however, that any assignment of
repurchase rights shall be subject to the requirement that the assignee make
payment to the Company (unless the assignee is a wholly-owned subsidiary of the
Company or the Company is wholly-owned by the assignee) of cash in an amount
equal to the then fair-market value of such shares, less the repurchase price
specified above (to the extent that the then fair-market value is in excess of
such repurchase price).
4.2.6 PROHIBITION ON TRANSFERS OF NON-VESTED SHARES. In
---------------------------------------------
addition to the restrictions on transfer set forth elsewhere in this Agreement
and in the Notice of Exercise and Investment Representation Statement attached
hereto as Exhibit A, the Consultant agrees that neither Consultant nor
---------
Consultant's heirs, successors and assigns will have any right or power under
any circumstances to sell, transfer (with or without consideration), pledge,
assign, hypothecate or dispose of (collectively, "DISPOSITION") any Non-Vested
-----------
Shares or any interest therein, except to the Company (or its assigns as
designated in writing to Consultant). Any attempted Disposition in breach of
this Section 4.2.6 shall be null and void and of no force or effect
whatsoever.
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
VitalSigns Software, Inc.
Page 5
4.2.7 RETENTION BY COMPANY OF CERTIFICATES EVIDENCING NON-VESTED
----------------------------------------------------------
SHARES. Each stock certificate evidencing, in whole or in part, Non-Vested
- ------
Shares issued to Consultant hereunder shall be immediately redelivered by
Consultant to the Company, together with collateral instruments of transfer
executed in blank and escrow instructions in form provided by the Company, to be
held by the Company until such time as: (1) such shares are no longer Non-Vested
Shares hereunder; and (2) any indebtedness of Consultant to the Company with
respect to the purchase of the shares under any promissory note issued by
Consultant (if applicable) has been paid in full. After any and all such
indebtedness has been paid in full and the shares have become Vested Shares
hereunder, the Company shall, from time to time within sixty (60) days from the
date of receipt of Consultant's written request therefor, deliver or cause to be
delivered to Consultant stock certificates evidencing these shares covered by
this Agreement which are at that time Vested Shares hereunder. In lieu of
formal documentation, as contemplated by the foregoing, the stock certificate
may be retained by or on behalf of the Company, subject to a simple letter and
executed stock power referencing this Stock Option Agreement and including a
statement that the stock certificate will be delivered to the Consultant when or
as the shares become Vested Shares.
5. RIGHT OF FIRST REFUSAL APPLICABLE TO VESTED SHARES. The Consultant
--------------------------------------------------
and successors in interest to Consultant shall not sell, assign, pledge or in
any manner transfer any of the Vested Shares of the Common Stock purchased
hereunder (Non-Vested Shares being subject to the absolute prohibition on
transfers under Section 4.2.6 above), or any right or interest therein, whether
voluntarily or by operation of law, or by gift or otherwise, except for a
transfer which meets the requirements hereinafter set forth.
5.1 NOTICE OF PROPOSED SALE. If the Consultant desires to sell or
-----------------------
otherwise transfer any of his or her Vested Shares of Common Stock, the
Consultant shall first give written notice thereof to the Company. The notice
shall name the proposed transferee and state the number of Vested Shares to be
transferred, the proposed consideration and all other material terms and
conditions of the proposed transfer.
5.2 OPTION OF COMPANY TO REPURCHASE. For thirty (30) days
-------------------------------
following receipt of such notice, the Company (and its assignees as provided in
Section 5.3 below) shall have the option to elect to purchase all of the shares
specified in the notice at the price and upon the terms set forth in such
notice; provided that if the terms of payment set forth in the Consultant's
notice were other than cash against delivery, the Company (or its assignees)
shall pay in cash or by check for said shares equal to the fair market value
thereof as determined in good faith by the Board, except that to the extent such
consideration is composed, in whole or in part, of promissory notes, the Company
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
VitalSigns Software, Inc.
Page 6
(and its assignees) shall have the option of similarly issuing promissory notes
of like form, tenor and effect.
Notwithstanding the foregoing, in the event that the Consultant disagrees with
the determination of fair market value made by the Board, the Consultant shall
have the right to have such fair market value determined by arbitration in
accordance with the rules of the American Arbitration Association. The
arbitration shall be held in the county in which the Company has its executive
offices. The cost of the arbitration shall be borne in equal shares by the
Company and the Consultant. In the event the Company (or its assignees) elects
to purchase all of such shares, it shall give written notice to the Consultant
of its election and settlement for such purchase of shares shall be made as
provided below in Section 5.4.
5.3 ASSIGNABILITY OF COMPANY'S RIGHTS HEREUNDER. Subject to the
-------------------------------------------
provisions of this Agreement, the Company may at any time transfer and assign
its rights and delegate its obligations under this Section 5 to any other
person, corporation, firm or entity, including its officers, directors or
stockholders, with or without consideration.
5.4 CLOSING OF COMPANY REPURCHASE. In the event the Company (or its
-----------------------------
assignees) elects to acquire all Vested Shares of the Consultant as specified in
the Consultant's notice, the Secretary of the Company shall so notify the
Consultant within thirty (30) days after receipt of the Consultant's notice, and
settlement thereof shall be made by cash or as otherwise set forth above within
thirty (30) days after the date the Secretary of the Company gives the
Consultant notice of the Company's election.
5.5 TRANSFERRED SHARES REMAIN SUBJECT TO RESTRICTIONS. In the event
-------------------------------------------------
the Company (or its assignees) do not elect to acquire all of the Vested Shares
specified in the Consultant's notice, the Consultant may, within the thirty (30)
day period following the expiration of the thirty (30) day period for electing
to exercise the purchase rights granted to the Company (and its assignees) in
Section 5.2, transfer the number of Vested Shares in the manner specified in his
or her notice. In that event, the transferee, assignee or other recipient
shall, as a condition of the transfer of ownership, receive and hold such shares
subject to the provisions of this Section 5 (and also subject to other
applicable provisions hereof) and shall execute such documentation as may be
requested by the Company, including, but not limited to, an investment
representation letter containing provisions similar to those set forth in the
Notice of Exercise and Investment Representation Statement attached as Exhibit A
---------
hereto.
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
VitalSigns Software, Inc.
Page 7
5.6 EXCEPTIONS TO FIRST REFUSAL RIGHTS. Anything to the contrary
----------------------------------
contained herein notwithstanding, the following transactions shall be exempt
from the provisions of this Section 5 (provided that the transferee shall first
agree in writing, satisfactory to the Company, to be bound by the terms and
provisions of Sections 5, 6, 11 and 13-19 hereof):
5.6.1 TRANSFER TO FAMILY MEMBER. The Consultant's transfer of
-------------------------
any or all Vested Shares held subject to this Agreement (either during the
Consultant's lifetime or on death by will or the laws of intestate succession)
to such Consultant's immediate family or to any custodian or trustee for the
account of the Consultant or his or her immediate family. "IMMEDIATE FAMILY" as
----------------
used herein shall mean spouse, lineal descendants, father, mother, or brother or
sister of the Consultant.
5.6.2 AS SECURITY FOR CERTAIN LOANS. The Consultant's bona fide
-----------------------------
pledge or mortgage of any Vested Shares with a commercial lending institution.
5.7 WAIVERS BY THE COMPANY. The provisions of this Section 5 may be
----------------------
waived by the Company with respect to any transfer proposed by the Consultant by
duly authorized action of the Board.
5.8 UNAUTHORIZED TRANSFERS VOID. Any sale or transfer, or purported sale
---------------------------
or transfer, of the Vested Shares of Common Stock subject to this Agreement
shall be null and void unless the terms, conditions and provisions of this
Section 5 are strictly complied with.
5.9 TERMINATION OF FIRST REFUSAL RIGHT. The foregoing right of first
----------------------------------
refusal shall terminate upon the earlier of:
5.9.1 PUBLIC OFFERING. The date shares of voting Common Stock of the
---------------
Company are first offered and sold in an underwritten offering to the public
generally pursuant to a registration statement filed with, and declared
effective by, the United States Securities and Exchange Commission (the "SEC")
---
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), (or the
--------------
corresponding provisions of any future United States securities laws other than
on Form S-8 or other forms relating to employee benefit plans);
5.9.2 ACQUISITION OF THE COMPANY. Immediately prior to a Change of
--------------------------
Control of the Company (as defined in Section 8.2 below); or
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
VitalSigns Software, Inc.
Page 8
5.9.3 OTHER TERMINATION. Immediately prior to the bankruptcy or
-----------------
dissolution of the Company.
6. AGREEMENT TO LOCK-UP IN THE EVENT OF PUBLIC OFFERING. In the event of
----------------------------------------------------
a public offering of the Company's Common Stock pursuant to a registration
statement declared effective with the SEC, if requested by the Company or by its
underwriters, the Consultant agrees not to sell, sell short, grant any option to
buy or otherwise dispose of the shares of Common Stock purchased pursuant to
this Agreement (except for any such shares which may be included in the
registration) for a period of up to one hundred eighty (180) days following the
effective date of such registration statement. The Company may impose stop-
transfer instructions with respect to the shares of the Common Stock subject to
the foregoing restriction until the end of said period. The Consultant shall be
subject to this Section 6 provided and only if the executive officers and
directors of the Company are also subject to similar arrangements.
7. RIGHTS IN OPTION ON TERMINATION OF CONSULTING SERVICES. Upon the
------------------------------------------------------
termination of the Consultant's consulting relationship with the Company (and
with any parent or subsidiary corporation of the Company), the Consultant's
right to exercise this Option shall be limited in the manner set forth in this
Section 7 (and this Option shall terminate in the event not so exercised).
7.1 DEATH. If the Consultant's consulting relationship with the
-----
Company is terminated by death, the Consultant's estate may, for a period of
twelve (12) months following the date of the Consultant's death, exercise the
Option to the extent that shares under the Option are Vested Shares on the date
of such termination. The Consultant's estate shall mean the Consultant's legal
representative upon death or any person who acquires the right to exercise the
Option by reason of such death in accordance with Section 9.2.
7.2 DISABILITY. If the Consultant's consulting relationship with the
----------
Company is terminated because of a disability, the Consultant may, within twelve
(12) months following the date of such termination, exercise the Option to the
extent that shares under the Option are Vested Shares on the date of such
termination unless the Consultant dies prior to the expiration of such period,
in which event the Consultant shall be treated as though his or her death
occurred on the date of termination due to such disability and the provisions of
Section 7.1 shall apply.
7.3 OTHER TERMINATION. If the Consultant's consulting relationship
-----------------
is terminated for any reason other than provided in Sections 7.1 and 7.2 above,
the Consultant or the Consultant's estate may, within three (3) months after the
date of Consultant's termination exercise the Option to the extent that shares
under the Option are Vested Shares on the date of such termination.
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
VitalSigns Software, Inc.
Page 9
7.4 TRANSFER OF ENGAGEMENT TO RELATED CORPORATION. In the event the
---------------------------------------------
Consultant severs his or her consulting relationship with the Company to become
a consultant or independent contractor to any parent or subsidiary corporation
of the Company or if the Consultant terminates his or her consulting
relationship with any such parent or subsidiary corporation to become a
consultant or independent contractor to the Company or of another parent or
subsidiary corporation, the Consultant shall be deemed to continue his or her
consulting relationship with the Company for all purposes of this Agreement.
8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
----------------------------------------------------
8.1 STOCK SPLITS AND SIMILAR EVENTS. Subject to any required action
-------------------------------
by the Board and stockholders, the number of shares of Common Stock covered by
the Option and the exercise price thereof shall be proportionately adjusted for
any increase or decrease in the number of issued and outstanding shares of
Common Stock resulting from a subdivision or combination of such shares or the
payment of a stock dividend (but only on the Common Stock) or any other increase
or decrease in the number of such outstanding shares of Common Stock effected
without the receipt of consideration by the Company; provided, however, that the
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." In the event that the
shares of Common Stock covered by this Option are reclassified by the Company,
other than pursuant to a transaction described in Section 8.2, then this Option
shall apply to the appropriate number of shares of newly classified Common Stock
designated by the Board.
8.2 MERGERS AND ACQUISITIONS. If the Company shall be a constituent
------------------------
corporation in any merger or consolidation which results in the holders of the
outstanding voting securities of the Company (determined immediately prior to
such merger or consolidation) owning, directly or indirectly, at least a
majority of the beneficial interest in the outstanding voting securities of the
surviving corporation or its parent corporation (determined immediately after
such merger or consolidation), the Option shall pertain and apply to the
securities or other property to which a holder of the number of shares subject
to the unexercised portion of this Option would have been entitled. Any of (i) a
dissolution or liquidation of the Company, (ii) a sale of substantially all its
business and assets or (iii) a merger or consolidation (in which the Company is
a constituent corporation) or a sale of securities which results in the holders
of the outstanding voting securities of the Company (determined immediately
prior to such merger, consolidation or sale) owning, directly or indirectly,
less than a majority of the beneficial interest in the outstanding voting
securities of the surviving corporation or its parent corporation (determined
immediately after such merger or consolidation or other transaction)
(collectively, "CHANGE OF CONTROL") will cause one hundred percent (100%) of the
-----------------
Option not then vested under the terms of the Vesting Schedule set forth in
Section 4.2.1 to be
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
VitalSigns Software, Inc.
Page 10
immediately vested as of the earlier of (i) the date thirty (30) days prior to
the Change of Control and (ii) the date of any involuntary termination of
Consultant's consulting relationship with the Company directly or indirectly
relating to such Change of Control. NOTWITHSTANDING THE FOREGOING, THE
DEFINITION OF CHANGE OF CONTROL SHALL NOT INCLUDE A SALE OF STOCK OFFERED AND
SOLD IN AN INITIAL PUBLIC OFFERING PURSUANT TO A REGISTRATION STATEMENT FILED
WITH AND DECLARED EFFECTIVE BY THE SEC UNDER THE SECURITIES ACT. The vesting
that occurs solely by reason of clause (i) above shall be conditioned upon the
consummation of the Change of Control. Any Options which are neither assumed
nor exchanged for new options by the surviving corporation or its parent
corporation in connection with the Change of Control and Options that are
Vested but unexercised prior to or in connection with the consummation of the
Change of Control shall terminate and cease to be outstanding as of the
effective date of the Change of Control.
8.3 BOARD'S DETERMINATION FINAL AND BINDING UPON CONSULTANT. To the
-------------------------------------------------------
extent that the foregoing adjustments in this Section 8 relate to stock or
securities of the Company, such adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. The
Company agrees to give notice of any such adjustment to the Consultant;
provided, however, that any such adjustment shall be effective and binding for
all purposes hereof whether or not such notice is given or received.
8.4 NO RIGHTS EXCEPT AS EXPRESSLY STATED. Except as hereinabove
------------------------------------
expressly provided in this Section 8, no additional rights shall accrue to the
Consultant by reason of any subdivision or combination of shares of the capital
stock of any class or the payment of any stock dividend or any other increase or
decrease in the number of shares of any class or by reason of any dissolution,
liquidation, merger or consolidation or spin-off of assets or of stock of
another corporation, and any issue by the Company of shares of stock of any
class or of securities convertible into shares of stock of any class shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or exercise price of shares subject to the Option. Neither the
Consultant nor any person claiming under or through the Consultant shall be, or
have any of the rights or privileges of, a stockholder of the Company in respect
of any of the shares issuable upon the exercise of this Option, unless and until
this Option is properly and lawfully exercised and a certificate representing
the shares so purchased is duly issued and delivered to the Consultant or to his
or her estate.
8.5 NO LIMITATIONS ON COMPANY'S DISCRETION. The grant of the Option
--------------------------------------
hereby shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
VitalSigns Software, Inc.
Page 11
9. MANNER OF EXERCISE.
------------------
9.1 GENERAL INSTRUCTIONS FOR EXERCISE. The Option shall be exercised
---------------------------------
by the Consultant by completing, executing and delivering to the Company the
Notice of Exercise and Investment Representation Statement ("NOTICE OF
---------
EXERCISE"), in substantially the form attached hereto as Exhibit A, which Notice
---------
of Exercise shall specify the number of shares of Common Stock which the
Consultant elects to purchase. The Company's obligation to deliver shares upon
the exercise of this Option shall be subject to the Consultant's satisfaction of
all applicable federal, state, local and foreign income and employment tax
withholding requirements, if any. Upon receipt of such Notice of Exercise and
of payment of the purchase price (and payment of applicable taxes as provided
above), the Company shall, as soon as reasonably possible and subject to all
other provisions hereof, deliver certificates for the shares of Common Stock so
purchased, registered in the Consultant's name or in the name of his or her
legal representative (if applicable). Payment of the purchase price upon any
exercise of the Option shall be made by check acceptable to the Company or in
cash; provided, however, that the Board may, in its sole and absolute
discretion, accept any other legal consideration to the extent permitted under
applicable laws.
9.2 EXERCISE PROCEDURE AFTER DEATH. To the extent exercisable after
------------------------------
Consultant's death, this Option shall be exercised only by Consultant's
executor(s) or administrator(s) or the person or persons duly authorized or to
whom this Option is transferred under Consultant's will or, if Consultant shall
fail to make testamentary disposition of this Option, under the applicable laws
of descent and distribution. Any such transferee exercising this Option must
furnish the Company with (i) written Notice of Exercise and relevant information
as to his or her status, (ii) evidence satisfactory to the Company to establish
the validity of the transfer of this Option and compliance with any laws or
regulations pertaining to said transfer, and (iii) written acceptance of the
terms and conditions of this Option as contained in this Agreement.
10. NON-TRANSFERABLE. The Option shall, during the lifetime of the
----------------
Consultant, be exercisable only by the Consultant and shall not be transferable
or assignable by the Consultant in whole or in part other than by will or the
laws of descent and distribution. If the Consultant shall make any purported
transfer or assignment of the Option, such assignment shall be null and void and
of no force or effect whatsoever.
11. COMPLIANCE WITH SECURITIES AND OTHER LAWS. The Option may not be
-----------------------------------------
exercised and the Company shall not be obligated to deliver any certificates
evidencing shares of Common Stock hereunder if the issuance of shares upon
exercise would constitute a violation of any applicable requirements of: (i) the
Securities Act, (ii) the Securities Exchange Act of 1934, as
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
VitalSigns Software, Inc.
Page 12
amended (iii) applicable state securities laws, (iv) any applicable listing
requirement of any stock exchange on which the Company's Common Stock is then
listed, and (v) any other law or regulation applicable to the issuance of such
shares. Nothing herein shall be construed to require the Company to register
or qualify any securities under applicable federal and state securities laws,
or take any action to secure an exemption from such registration and
qualification for the issuance of any securities upon the exercise of this
Option. Shares of Common Stock issued upon exercise of this Option shall
include the following legends and such other legends as in the opinion of the
Company's counsel may be required by applicable federal, state and foreign
securities laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON TRANSFER AND OTHER AGREEMENTS CONTAINED IN A STOCK OPTION AGREEMENT,
DATED ___________, ____, A COPY OF WHICH IS ON FILE WITH THE COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT
OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT. SUCH TRANSFER MUST ALSO COMPLY WITH APPLICABLE
STATE SECURITIES LAWS.
12. NO RIGHT TO CONTINUED ENGAGEMENT. Nothing contained in this Agreement
--------------------------------
shall: (i) confer upon the Consultant any right with respect to the continuance
of his or her consulting relationship with the Company, or by any parent or
subsidiary corporation of the Company, or (ii) limit in any way the right of the
Company, or of any parent or subsidiary corporation, to terminate the
Consultant's consulting relationship with the Company at any time. Except to
the extent the Company and Consultant shall have otherwise agreed in writing,
Consultant's consulting relationship with the Company shall be terminable by the
Company (or by a parent or subsidiary, if applicable) at will. The Board in its
sole discretion shall determine whether any leave of absence or interruption in
service (including an interruption during military service) shall be deemed a
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
VitalSigns Software, Inc.
Page 12
termination of Consultant's consulting relationship with the Company for the
purposes of this Agreement.
13. NOTICES. All notices and other communications of any kind which
-------
either party to this Agreement may be required or may desire to serve on the
other party hereto in connection with this Agreement shall be in writing and may
be delivered by personal service or by registered or certified mail, return
receipt requested, deposited in the United States mail with postage thereon
fully prepaid, addressed to the other party at the addresses indicated on the
signature page hereof. Service of any such notice or other communication so
made by mail shall be deemed complete on the date of actual delivery as shown by
the addressee's registry or certification receipt or at the expiration of the
third (3rd) business day after the date of mailing, whichever is earlier in
time. Either party may from time to time, by notice in writing served upon the
other as aforesaid, designate a different mailing address or a different person
to which such notices or other communications are thereafter to be addressed or
delivered.
14. FURTHER ASSURANCES. The Consultant shall, upon request of the
------------------
Company, take all actions and execute all documents requested by the Company
which the Company deems to be reasonably necessary to effectuate the terms and
intent of this Agreement and, when required by any provision of this Agreement
to transfer all or any portion of the Common Stock purchased hereunder to the
Company (or its assignees), the Consultant shall deliver such Common Stock
endorsed in blank or accompanied by Stock Assignments Separate from Certificate
endorsed in blank, so that title thereto will pass by delivery alone. Any sale
or transfer by the Consultant of the Common Stock to the Company (or its
assignees) shall be made free of any and all claims, encumbrances, liens and
restrictions of every kind, other than those imposed by this Agreement.
15. SUCCESSORS. Except to the extent the same is specifically limited by
----------
the terms and provisions of this Agreement, this Agreement is binding upon the
Consultant and the Consultant's successors, heirs and personal representatives,
and upon the Company, its successors and assigns.
16. TERMINATION OR AMENDMENT. The Board may terminate or amend the Option
------------------------
at any time; provided, however, that no such termination or amendment may
adversely affect the Option or any unexercised portion hereof without the
consent of the Consultant.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
----------------
and agreement of the Consultant and the Company with respect to the subject
matter contained herein, and there are no agreements, understandings,
restrictions, representations, or warranties between the Consultant and the
Company other than those set forth or provided herein. To the extent
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
VitalSigns Software, Inc.
Page 14
contemplated herein, the provisions of this Agreement shall survive any exercise
of the Option and shall remain in full force and effect.
18. OTHER MISCELLANEOUS TERMS. Titles and captions contained in this
-------------------------
Agreement are inserted only as a matter of convenience and for reference, and in
no way define, limit, extend or describe the scope of this Agreement or the
intent of any provision hereof. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, irrespective
of its choice of law principles.
19. INDEPENDENT TAX ADVICE. The Consultant agrees that he or she has or
----------------------
will obtain the advice of independent tax counsel (or has determined not to
obtain such advice, having had adequate opportunity to do so) regarding the
federal and state income tax consequences of the receipt and exercise of the
Option and of the disposition of Common Stock acquired upon exercise hereof.
The Consultant acknowledges that he or she has not relied and will not rely upon
any advice or representation by the Company or by its employees or
representatives with respect to the tax treatment of the Option.
20. INDEPENDENT CONTRACTOR; INDEMNITY BY CONSULTANT. Consultant agrees
-----------------------------------------------
that in performing services to the Company, Consultant is acting as an
independent contractor. As such, Consultant waives any claim of rights to
payment by the Company of Social Security Taxes, Income Tax Withholding,
Worker's Compensation, Unemployment Compensation, or like benefits normally
afforded employees of the company and agrees it alone shall be responsible for
paying said obligations. Consultant further agrees to indemnify and hold the
Company harmless for any claims by third parties on these obligations.
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
VitalSigns Software, Inc.
Page 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
COMPANY: CONSULTANT:
VITALSIGNS SOFTWARE, INC. ___________________________________
a Delaware corporation (Signature)
By:_____________________________ Name Printed:______________________
Chief Executive Officer
Address: VitalSigns Software, Inc. Address:___________________________
2933 Bunker Hill Lane, #202 ___________________________
Santa Clara, CA 95054 ___________________________
<PAGE>
SCHEDULE OF EXHIBITS
--------------------
EXHIBIT A: Form of Notice of Exercise and Investment Representation Statement
- --------- for VitalSigns Software, Inc. Consultant and Independent Contractor
Non-Qualified Stock Option Agreement.
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EXERCISE
AND INVESTMENT REPRESENTATION STATEMENT
FOR VITALSIGNS SOFTWARE, INC.
CONSULTANT AND INDEPENDENT CONTRACTOR
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
VitalSigns Software, Inc.
2933 Bunker Hill Lane, Suite 202
Santa Clara, California 95054
Attention: Corporate Secretary
Re: Notice of Exercise of Stock Option
----------------------------------
Ladies and Gentlemen:
I hereby exercise, as of _______________, _____, my stock option (granted
____________, ______) to purchase ___________ shares (the "OPTION SHARES") of
-------------
the Common Stock of VitalSigns Software, Inc., a Delaware corporation (the
"COMPANY"). Payment of the option price of $__________ is attached to this
- --------
notice.
As a condition to this notice of exercise, I hereby make the following
representations and agreements:
INVESTMENT REPRESENTATION STATEMENT.
-----------------------------------
1. I am purchasing the Option Shares for investment for my own account
only and not with a view to, or for resale in connection with, any
"distribution" thereof. I am aware of the Company's business affairs and
financial condition and have had access to such information about the Company as
I have deemed necessary or desirable to reach an informed and knowledgeable
decision to acquire the Option Shares. Without limiting the generality of the
foregoing, I have been provided the financial statements described in Section
220 or any other applicable provision of the Delaware General Corporation Law.
2. I understand that the Option Shares have not been registered under the
Securities Act of 1933, as amended, (the "ACT"), or qualified under the
California Corporate Securities Law of 1968, as amended, or other state
securities laws (collectively, the "LAW"), by reason of specific exemptions
therefrom, which exemptions depend upon, among other things, the bona fide
nature of my investment intent as expressed herein. In this connection, I
understand that, in the view of the Securities and Exchange Commission (the
"COMMISSION"), the statutory basis for one such exemption may not exist if my
representation means that my present intention is to hold the Option Shares for
a minimum capital gains period under the tax laws, for a deferred sale, for a
market rise, for a sale if the market does not rise, or for a year or any other
fixed period in the future.
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
Exhibit A
Page 2
3. I acknowledge and agree that the Option Shares are restricted
securities which must be held indefinitely unless they are subsequently
registered under the Act and the Law or an exemption from such registration is
available. I further acknowledge and understand that the Company is under no
obligation to register the Option Shares.
4. I am aware of the adoption of Rule 144 by the Commission, which
permits limited public resale of securities acquired in a non-public offering,
subject to the satisfaction of certain conditions, including, among other
things, the availability of certain current public information about the issuer,
the passage of not less than two (2) years after the holder has purchased and
paid for the securities to be sold, effectuation of the sale on the public
market through a broker in an unsolicited "brokers' transaction" or to a "market
maker," and compliance with specified limitations on the amount of securities to
be sold (generally, one percent (1%) of the total amount of common stock
outstanding) during any three (3)-month period, except that such conditions need
not be met by a person who is not an affiliate of the Company at the time of
sale and has not been an affiliate for the preceding three (3) months if the
securities to be sold have been beneficially owned by such person for at least
three (3) years prior to their sale.
5. I understand that the Company currently does not, and at the time I
wish to sell the Option Shares may not, satisfy the current public information
requirement of Rule 144 and, consequently, I may be precluded from selling the
Option Shares under Rule 144 even if the two (2)-year minimum holding period has
been satisfied.
6. I further understand that if all of the requirements of Rule 144 are
not met, compliance with Regulation A or some other exemption from registration
will be required; and that, although Rule 144 is not exclusive, the Staff of the
Commission has expressed its opinion that persons proposing to sell restricted
securities other than in a registered offering and other than pursuant to Rule
144 will have a substantial burden of proof in establishing that an exemption
from registration is available for such offers or sales and that such persons
and the brokers who participate in such transactions do so at their own risk.
7. I further understand that the certificate(s) representing the Option
Shares, whether upon initial issuance or any transfer thereof, shall bear on
their face legends, prominently stamped or printed thereon in capital letters,
reading as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON TRANSFER AND OTHER AGREEMENTS CONTAINED IN A STOCK OPTION AGREEMENT,
DATED _______________, A COPY OF WHICH IS ON FILE WITH THE COMPANY.
<PAGE>
Consultant and Independent Contractor
Non-Qualified Stock Option Agreement
Exhibit A
Page 3
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT
OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT. ANY SUCH TRANSFER MUST ALSO COMPLY WITH
APPLICABLE STATE SECURITIES LAWS.
8. I further understand that I may suffer adverse tax consequences as a
result of my purchase or disposition of the Option Shares. I represent that I
have consulted with any tax consultant(s) I deem advisable in connection with
the purchase or disposition of the Option Shares and that I am not relying on
the Company for any tax advice.
IN WITNESS WHEREOF, the undersigned has executed this Notice of Exercise as
of the date set forth below.
Signed:_______________________________
Dated:_______________________________
<PAGE>
EXHIBIT 5.1
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[LETTERHEAD OF WILSON SONSINI GOODRICH & ROSATI]
November 30, 1998
International Network Services
1213 Innsbruck Drive
Sunnyvale, California 94089
RE: REGISTRATION STATEMENT ON FORM S-8
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 to be filed by you
with the Securities and Exchange Commission on or about November 30, 1998 (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of an aggregate of 280,254 shares of Common
Stock, no par value (the "Shares"), reserved for issuance pursuant to the
VitalSigns Software , Inc. 1996 Stock Option Plan and pursuant to grants of
certain pre-plan options of VitalSigns Software, Inc. (together, the "Plans").
As your legal counsel, we have examined the proceedings taken and are familiar
with the proceedings proposed to be taken by you in connection with the sale and
issuance of the Shares under the Plans.
It is our opinion that the Shares will be, when issued and sold in the
manner referred to in the Plans, legally and validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement and any subsequent amendment thereto.
Very truly yours,
/s/ WILSON SONSINI GOODRICH & ROSATI
-----------------------------------------
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-8 of our report dated July 24, 1998 (except
for Note 9 which is as of August 25, 1998) which appears on page 56 of the
1998 Annual Report to Shareholders of International Network Services, which is
incorporated by reference in International Network Services' Annual Report on
Form 10-K for the year ended June 30, 1998. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page 24 of such Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
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PricewaterhouseCoopers LLP
San Jose, California
November 30, 1998
