<PAGE>
As filed with the Securities and Exchange Commission on May 20, 1997
Registration No. 333-_________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
CREDENCE SYSTEMS CORPORATION
(Exact name of issuer as specified in its charter)
Delaware 94-287-8499
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
215 FOURIER AVENUE, FREMONT, CALIFORNIA 94539
(Address of principal executive offices) (Zip Code)
------------------------
CREDENCE SYSTEMS CORPORATION
1993 Stock Option Plan
Employee Stock Purchase Plan
(Full title of the plans)
-----------------------
WILMER R. BOTTOMS
Chief Executive Officer and Chairman of the Board
CREDENCE SYSTEMS CORPORATION
215 FOURIER AVENUE, FREMONT, CALIFORNIA 94539
(Name and address of agent for service)
(510) 657-7400
(Telephone number, including area code, of agent for service)
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Securities to be Amount to be Offering Price Aggregate Amount of
Registered Registered(1) per Share(2) Offering Registration
Price(2) Fee
================================================================================================
<S> <C> <C> <C> <C>
1993 Stock Option Plan
- ----------------------
Options to Purchase
Common Stock 500,000 N/A N/A N/A
Common Stock, $0.001 par 500,000 $21.75 $10,875,000 $3,295.45
value
Employee Stock Purchase
- -----------------------
Plan
- ----
Common Stock, $0.001 par 200,000 $21.75 $ 4,350,000 $1,318.18
value
================================================================================================
Aggregate Filing Fee: $4,614
</TABLE>
(1) This Registration Statement shall also cover any additional shares of Common
Stock which become issuable under the Credence Systems Corporation 1993
Stock Option Plan or Employee Stock Purchase Plan by reason of any stock
dividend, stock split, recapitalization or other similar transaction
effected without the receipt of consideration which results in an increase
in the number of the Registrant's outstanding shares of Common Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the high
and low selling prices per share of Common Stock of Credence Systems
Corporation on May 15, 1997, as reported by the Nasdaq National Market.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference
-----------------------------------------------
Credence Systems Corporation (the "Registrant") hereby incorporates by
reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "Commission"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1996 filed with the Commission on January 29, 1997;
(b) The Registrant's Quarterly Report on Form 10-Q for the quarter ended
January 31, 1997 filed with the Commission on March 14, 1997; and
(c) The Registrant's Registration Statement No. 0-22366 on Form 8-A filed
with the Commission on September 10, 1993, as amended on October 21,
1993, in which there is described the terms, rights and provisions
applicable to the Registrant's outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 (the "1934 Act") after the date of this Registration Statement and prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then remaining
unsold shall be deemed to be incorporated by reference into this Registration
Statement and to be a part hereof from the date of filing of such documents.
Item 4. Description of Capital Stock
----------------------------
Inapplicable.
Item 5. Interests of Named Experts and Counsel
--------------------------------------
Inapplicable.
Item 6. Indemnification of Directors and Officers
-----------------------------------------
The Registrant's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except for
liability (i) for any breach of their duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit.
The Registrant's Bylaws provide that the Registrant shall indemnify
its directors and may indemnify its other officers and employees and other
agents to the fullest extent permitted by law. The Registrant believes that
indemnification under its Bylaws covers at least negligence and gross negligence
on the part of indemnified parties. The Registrant's Bylaws also permit it to
secure insurance on behalf of any officer, director, employee or other agent to
offset any liability arising out of his or her actions in such capacity,
regardless of whether the Bylaws would permit indemnification.
The Registrant has entered into agreements to indemnify its directors
and executive officers, in addition to indemnification provided for in the
Registrant's Bylaws. These agreements, among other things, indemnify the
Registrant's directors and executive officers for certain expenses (including
attorneys' fees), judgments, fines and settlement amounts incurred by any such
person in any action or proceeding, including any action by or in the right of
the Registrant, arising out of such person's services as a director or executive
officer of the Registrant, any subsidiary of the Registrant or any other company
or enterprise to which the person provides services at the request of the
Registrant.
<PAGE>
Item 7. Exemption from Registration Claimed
-----------------------------------
Inapplicable.
Item 8. Exhibits
--------
Exhibit Number Exhibit
-------------- -------
4.0 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 0-22366 on Form 8-A and
Amendment No. 1 thereto, which are incorporated herein by reference
pursuant to Item 3(C) of this Registration Statement.
5.0 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit
5.
24.0 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Credence Systems Corporation 1993 Stock Option Plan.
99.2* Form of Notice of Grant to be generally used in connection with the
1993 Stock Option Plan.
99.3* Form of Stock Option Agreement to be generally used in connection
with the 1993 Stock Option Plan.
99.4* Addendum to Stock Option Agreement (Special Tax Elections).
99.5* Addendum to Stock Option Agreement (Limited Stock Appreciation
Rights).
99.6* Addendum to Stock Option Agreement (Change in Control).
99.7* Addendum to Stock Option Agreement (Financial Assistance).
99.8** Form of Notice of Grant of Stock Option (Non-Employee Director) to
be generally used in connection with the automatic option grant
program of the 1993 Stock Option Plan.
99.9** Form of Stock Option Agreement (Non-Employee Director) to be
generally used in connection with the automatic option grant program
of the 1993 Stock Option Plan.
99.10 Employee Stock Purchase Plan.
99.11*** Form of Stock Purchase Agreement.
99.12*** Form of Enrollment/Change Form.
* Exhibits 99.2 through 99.7 are incorporated herein by reference to
Exhibits 99.2 through 99.7, respectively, of Registrant's Registration Statement
No. 33-71856 on Form S-8 which was filed with the SEC on November 17, 1993.
** Exhibits 99.8 and 99.9 are incorporated herein by reference to Exhibits
99.8 and 99.9, respectively, of Registrant's Registration Statement No. 33-3806
on Form S-8 which was filed with the SEC on April 22, 1996.
*** Exhibits 99.11 and 99.12 are incorporated herein by reference to Exhibits
99.2 and 99.3, respectively, of Registrant's Registration Statement No. 33-76542
on Form S-8 which was filed with the SEC on March 17, 1994.
II-2
<PAGE>
Item 9. Undertakings.
-------------
A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement; (i) to include any prospectus required
by Section 10(a)(3) of the Securities Act of 1933, as amended (the "1933 Act"),
(ii) to reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this Registration Statement,
and (iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement; provided,
--------
however, that clauses (1)(i) and (1)(ii) shall not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the 1934 Act that are incorporated by reference into the
registration statement; (2) that for the purpose of determining any liability
under the 1933 Act each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and (3) to remove from registration by means of a post-
effective amendment any of the securities being registered which remain unsold
upon the termination of the 1993 Stock Option Plan and/or Employee Stock
Purchase Plan.
B. The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into this Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
1933 Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the indemnification provisions summarized in Item 6
above, or otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Fremont, State of California, on this 19th day
of May, 1997.
CREDENCE SYSTEMS CORPORATION
By /s/ Wilmer R. Bottoms
-----------------------------------------
Wilmer R. Bottoms
Chief Executive Officer and Chairman of
the Board
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned officers and directors of CREDENCE SYSTEMS
CORPORATION, a Delaware corporation, do hereby constitute and appoint Wilmer R.
Bottoms and Richard Y. Okumoto and each of them, the lawful attorneys and
agents, with full power and authority to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, and any one of
them, determine may be necessary or advisable or required to enable said
corporation to comply with the Securities Act of 1933, as amended, and any rules
or regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
all that said attorneys and agents, or any of them, shall do or cause to be done
by virtue hereof. This Power of Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signatures Title Date
- ---------- ----- ----
/s/ Wilmer R. Bottoms Chief Executive Officer and May 19, 1997
- ----------------------------- Chairman of the Board of Directors
Wilmer R. Bottoms (Principal Executive Officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Richard Y. Okumoto Senior Vice President, Chief May 19, 1997
- --------------------------------- Financial Officer and Secretary
Richard Y. Okumoto (Principal Financial and Accounting
Officer)
/s/ Jos C. Henkens Director May 19, 1997
- ---------------------------------
Jos C. Henkens
/s/ Bernard V. Vonderschmitt Director May 19, 1997
- ---------------------------------
Bernard V. Vonderschmitt
Director May , 1997
- ---------------------------------
Henk J. Evenhuis
/s/ William G. Howard, Jr. Director May 19, 1997
- ---------------------------------
William G. Howard, Jr.
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Exhibit
- ------ -------
4.0 Instruments Defining Rights of Stockholders. Reference
is made to Registrant's Registration Statement No. 0-22366
on Form 8-A and Amendment No. 1 thereto, which are
incorporated herein by reference pursuant to Item 3(c)
of this Registration Statement.
5.0 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit
5.
24.0 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Credence Systems Corporation 1993 Stock Option Plan.
99.2* Form of Notice of Grant to be generally used in connection with the
1993 Stock Option Plan.
99.3* Form of Stock Option Agreement to be generally used in connection
with the 1993 Stock Option Plan.
99.4* Addendum to Stock Option Agreement (Special Tax Elections).
99.5* Addendum to Stock Option Agreement (Limited Stock Appreciation
Rights).
99.6* Addendum to Stock Option Agreement (Change in Control).
99.7* Addendum to Stock Option Agreement (Financial Assistance).
99.8** Form of Notice of Grant of Stock Option (Non-Employee Director)
to be generally used in connection with the automatic option grant
program of the 1993 Stock Option Plan.
99.9** Form of Stock Option Agreement (Non-Employee Director) to be
generally used in connection with the automatic option grant program
to the 1993 Stock Option Plan.
99.10 Employee Stock Purchase Plan.
99.11*** Form of Stock Purchase Agreement.
99.12*** Form of Enrollment/Change Form.
* Exhibits 99.2 through 99.7 are incorporated herein by reference to
Exhibits 99.2 through 99.7, respectively, of Registrant's Registration Statement
No. 33-71856 on Form S-8 which was filed with the SEC on November 17, 1993.
** Exhibits 99.8 and 99.9 are incorporated herein by reference to Exhibits
99.8 and 99.9, respectively, of Registrant's Registration Statement No. 33-3806
on Form S-8 which was filed with the SEC on April 22, 1996.
*** Exhibits 99.11 and 99.12 are incorporated herein by reference to Exhibits
99.2 and 99.3, respectively, of Registrant's Registration Statement No. 33-76542
on Form S-8 which was filed with the SEC on March 17, 1994.
<PAGE>
EXHIBIT 5.0
May 20, 1997
Credence Systems Corporation
215 Fourier Avenue
Fremont, California 94539
Re: Credence Systems Corporation Registration Statement
for Offering of an aggregate of 700,000 Shares of
Common Stock
Ladies and Gentlemen:
We refer to your registration on Form S-8 (the "Registration Statement") under
the Securities Act of 1933, as amended, of (i) 500,000 shares of the Company's
common stock ("Common Stock") authorized for issuance under the Company's 1993
Stock Option Plan and (ii) 200,000 shares of Common Stock under the Company's
Employee Stock Purchase Plan. We advise you that, in our opinion, when such
shares have been issued and sold pursuant to the applicable provisions of the
1993 Stock Option Plan and Employee Stock Purchase Plan, and in accordance with
the Registration Statement, such shares will be validly issued, fully paid and
nonassessable shares of the Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the 1993 Stock Option Plan and Employee Stock
Purchase Plan of Credence Systems Corporation of our report dated December 2,
1996 with respect to the consolidated financial statements and schedule of
Credence Systems Corporation included and incorporated by reference in its
Annual Report (Form 10-K) for the year ended October 31, 1996, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Jose, California
May 19, 1997
<PAGE>
EXHIBIT 99.1
CREDENCE SYSTEMS CORPORATION
1993 STOCK OPTION PLAN
----------------------
(AS AMENDED AND RESTATED THROUGH FEBRUARY 12, 1997)
ARTICLE ONE
GENERAL
-------
I. PURPOSE OF THE PLAN
A. This 1993 Stock Option Plan ("Plan") is intended to promote the
interests of Credence Systems Corporation, a Delaware corporation (the
"Corporation"), by providing (i) key employees (including officers) of the
Corporation (or its parent or subsidiary corporations) who are responsible for
the management, growth and financial success of the Corporation (or its parent
or subsidiary corporations), (ii) the non-employee members of the Corporation's
Board of Directors and (iii) consultants who provide valuable services to the
Corporation (or its parent or subsidiary corporations) with the opportunity to
acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Corporation as an incentive for them to remain in the service
of the Corporation (or its parent or subsidiary corporations).
B. The Discretionary Option Grant Program under this Plan shall
become effective on the first date on which the shares of the Corporation's
Common Stock are registered under Section 12(g) of the Securities Exchange Act
of 1934. Such date is hereby designated as the Effective Date for that program.
The Automatic Option Grant Program under this Plan shall become effective
immediately upon the execution and final pricing of the Underwriting Agreement
for the initial public offering of the Corporation's Common Stock. The
execution date of such Underwriting Agreement is hereby designated as the
Effective Date of the Automatic Option Grant Program.
C. This Plan shall serve as the successor to (i) the Corporation's
1984 Incentive Stock Option Plan (the "1984 Plan") and (ii) the ASIX Systems
Corporation 1989 Stock Option Plan (the "ASIX Plan") which the Corporation
assumed in connection with its acquisition of ASIX Systems Corporation by merger
effected October 27, 1989. The 1984 Plan and ASIX Plan shall be collectively
referred to in this document as the "Predecessor Plans", and no further option
grants or stock issuances shall be made under the Predecessor Plans from and
after the Effective Date of this Plan. All options outstanding under the
Predecessor Plans on the Effective Date of the Discretionary Option Grant
Program are hereby incorporated into this Plan and shall accordingly be treated
as outstanding options under this Plan. However, each outstanding option so
incorporated shall continue to be governed solely by the express terms and
conditions of the instrument evidencing such grant, and no provision of this
Plan shall be deemed to affect or otherwise modify the rights or obligations of
the holders of such incorporated options with respect to their acquisition of
shares of the Corporation's Common Stock thereunder.
<PAGE>
II. DEFINITIONS
A. For purposes of the Plan, the following definitions shall be in
effect:
BOARD: the Corporation's Board of Directors.
CODE: the Internal Revenue Code of 1986, as amended.
COMMITTEE: the committee of two (2) or more non-employee Board
members appointed by the Board to administer the Plan.
COMMON STOCK: shares of the Corporation's common stock.
CHANGE IN CONTROL: a change in ownership or control of the
Corporation effected through either of the following transactions:
a. any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled
by, or is under common control with, the Corporation) directly or
indirectly acquires beneficial ownership (within the meaning of Rule 13d-3
of the 1934 Act) of securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders; or
b. there is a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a majority
of the Board members (rounded up to the next whole number) ceases, by
reason of one or more proxy contests for the election of Board members, to
be comprised of individuals who either (A) have been Board members
continuously since the beginning of such period or (B) have been elected or
nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in
office at the time such election or nomination was approved by the Board.
CORPORATE TRANSACTION: any of the following stockholder-approved
transactions to which the Corporation is a party:
a. a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Corporation is incorporated,
2.
<PAGE>
b. the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete liquidation
or dissolution of the Corporation, or
c. any reverse merger in which the Corporation is the surviving
entity but in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation's outstanding securities
are transferred to a person or persons different from those who held such
securities immediately prior to such merger.
EMPLOYEE: an individual who performs services while in the employ of
the Corporation or one or more parent or subsidiary corporations, subject to the
control and direction of the employer entity not only as to the work to be
performed but also as to the manner and method of performance.
FAIR MARKET VALUE: the fair market value per share of Common Stock
determined in accordance with the following provisions:
a. If the Common Stock is not at the time listed or admitted to
trading on any national stock exchange but is traded on the Nasdaq National
Market, the Fair Market Value shall be the closing selling price per share
on the date in question, as such price is reported by the National
Association of Securities Dealers on the Nasdaq National Market or any
successor system. If there is no reported closing selling price for the
Common Stock on the date in question, then the closing selling price on the
last preceding date for which such quotation exists shall be determinative
of Fair Market Value.
b. If the Common Stock is at the time listed or admitted to
trading on any national stock exchange, then the Fair Market Value shall be
the closing selling price per share on the date in question on the exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of Common
Stock on such exchange on the date in question, then the Fair Market Value
shall be the closing selling price on the exchange on the last preceding
date for which such quotation exists.
HOSTILE TAKE-OVER: a change in ownership of the Corporation effected
through a transaction in which any person or related group of persons (other
than the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation) directly or
indirectly acquires beneficial ownership
3.
<PAGE>
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
1934 ACT: the Securities Exchange Act of 1934, as amended from time
to time.
OPTIONEE: any person to whom an option is granted under either the
Discretionary Option Grant or Automatic Option Grant Program in effect under the
Plan.
PLAN ADMINISTRATOR: the Committee in its capacity as the
administrator of the Plan.
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of the
Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) months or more.
SERVICE: the performance of services on a periodic basis to the
Corporation (or any parent or subsidiary corporation) in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
advisor, except to the extent otherwise specifically provided in the applicable
stock option agreement.
TAKE-OVER PRICE: the greater of (a) the Fair Market Value per share
-------
of Common Stock on the date the option is surrendered to the Corporation in
connection with a Hostile Take-Over or (b) the highest reported price per share
of Common Stock paid by the tender offeror in effecting such Hostile Take-Over.
However, if the surrendered option is an incentive stock option under the
Federal tax laws, the Take-Over Price shall not exceed the clause (a) price per
share.
B. The following provisions shall be applicable in determining the
parent and subsidiary corporations of the Corporation:
Any corporation (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation shall be considered to be a
PARENT of the Corporation, provided each such corporation in the unbroken
chain (other than the Corporation) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
Each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation shall be considered to
be a SUBSIDIARY of the Corporation, provided each such corporation (other
4.
<PAGE>
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
III. STRUCTURE OF THE PLAN
A. Stock Programs. The Plan shall be divided into two separate
--------------
components: the Discretionary Option Grant Program specified in Article Two and
the Automatic Option Grant Program specified in Article Three. Under the
Discretionary Option Grant Program, eligible individuals may, at the discretion
of the Plan Administrator, be granted options to purchase shares of Common Stock
in accordance with the provisions of Article Two. Under the Automatic Option
Grant Program, non-employee members of the Corporation's Board of Directors (the
"Board") will receive periodic option grants to purchase shares of Common Stock
in accordance with the provisions of Article Three.
B. General Provisions. Unless the context clearly indicates
------------------
otherwise, the provisions of Articles One and Four shall apply to the
Discretionary Option Grant Program and the Automatic Option Grant Program and
shall accordingly govern the interests of all individuals under the Plan.
IV. ADMINISTRATION OF THE PLAN
A. The Discretionary Option Grant Program shall be administered by
the Committee. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time.
B. The Committee as Plan Administrator shall have full power and
authority (subject to the express provisions of the Plan) to establish rules and
regulations for the proper administration of the Discretionary Option Grant
Program and to make such determinations under, and issue such interpretations
of, the provisions of such program and any outstanding option grants thereunder
as it may deem necessary or advisable. Decisions of the Plan Administrator
shall be final and binding on all parties who have an interest in the
Discretionary Option Grant Program or any outstanding option thereunder.
C. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the express terms and conditions of Article
Three, and the Committee as Plan Administrator shall exercise no discretionary
functions with respect to option grants made pursuant to that program.
5.
<PAGE>
V. OPTION GRANTS
A. The persons eligible to participate in the Discretionary Option
Grant Program under Article Two are as follows:
(i) officers and other key employees of the Corporation (or
its parent or subsidiary corporations) who render services which contribute
to the management, growth and financial success of the Corporation (or its
parent or subsidiary corporations);
(ii) non-employee Board members; and
(iii) those consultants who provide valuable services to the
Corporation (or its parent or subsidiary corporations).
B. The Plan Administrator shall have full authority to determine,
with respect to the option grants made under the Plan, which eligible
individuals are to receive option grants, the number of shares to be covered by
each such grant, the status of the granted option as either an incentive stock
option ("Incentive Option") which satisfies the requirements of Code Section 422
or a non-statutory option not intended to meet such requirements, the time or
times at which each granted option is to become exercisable and the maximum term
for which the option may remain outstanding.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under the
Plan and shall be drawn from either the Corporation's authorized but unissued
shares of Common Stock or from reacquired shares of Common Stock, including
shares repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock that may be issued over the term of the Plan shall not
exceed 4,125,001 shares, subject to adjustment from time to time in accordance
with the provisions of this Section VI. Such authorized share reserve reflects
the 3-for-2 split of the Corporation's outstanding Common Stock effected June 5,
1995 and the 1-for-3 reverse stock split of the Corporation's outstanding Common
Stock effected October 7, 1993, and is comprised of (i) the number of shares
which remained available, as of the Effective Date of the Discretionary Option
Grant Program, for issuance under the 1984 Plan as last approved by the
Corporation's stockholders, including the shares subject to the outstanding
options incorporated into this Plan and any other shares which would have been
available for future option grant under the 1984 Plan as last approved by the
stockholders (estimated to be 1,931,757 shares in the aggregate on a post-split
basis), (ii) 143,244 shares (on a post-split basis) subject to options
outstanding under the ASIX Plan as of the Effective Date and incorporated into
this Plan, (iii) an additional 300,000 shares (on a post-split basis) authorized
by the Board under this Plan and approved by the stockholders prior to the
Effective Date, (iv) 750,000 shares (on a post-split basis) authorized by the
Board on January 23, 1995 and approved by the
6.
<PAGE>
stockholders at the 1995 Annual Stockholders Meeting, (v) an additional 500,000
- - share increase authorized by the Board on January 26, 1996 and approved by the
Corporation's stockholders at the 1996 Annual Stockholders Meeting, and (vi) an
additional 500,000-share increase authorized by the Board on February 12, 1997,
subject to stockholder approval at the 1997 Annual Stockholders Meeting. To the
extent one or more outstanding options under the Predecessor Plans which have
been incorporated into this Plan are subsequently exercised, the number of
shares issued with respect to each such option shall reduce, on a share-for-
share basis, the number of shares available for issuance under this Plan.
B. No one person participating in the Plan may receive options and
separately exercisable stock appreciation rights for more than 750,000 shares
(on a post-split basis) of Common Stock in the aggregate over the remaining term
of the Plan, subject to adjustment from time to time in accordance with the
provisions of this Section VI. For purposes of such limitation, no stock
options or stock appreciation rights granted prior to January 1, 1995 shall be
taken into account.
C. Should one or more outstanding options under this Plan (including
outstanding options under the Predecessor Plans incorporated into this Plan)
expire or terminate for any reason prior to exercise in full (including any
option cancelled in accordance with the cancellation-regrant provisions of
Section IV of Article Two), then the shares subject to the portion of each
option not so exercised shall be available for subsequent option grants under
the Plan. In addition, unvested shares issued under the Plan and subsequently
cancelled or repurchased by the Corporation, at the original exercise price paid
per share, pursuant to the Corporation's repurchase rights under the Plan shall
be added back to the number of shares of Common Stock reserved for issuance
under the Plan and shall accordingly be available for reissuance through one or
more subsequent option grants under the Plan. However, shares subject to any
option or portion thereof surrendered in accordance with Section V of Article
Two or Section III of Article Three shall reduce on a share-for-share basis the
number of shares of Common Stock available for subsequent option grants under
the Plan. Additionally, should the option price of an outstanding option under
the Plan (including any option incorporated from the Predecessor Plans) be paid
with shares of Common Stock or should shares of Common Stock otherwise issuable
under the Plan be withheld by the Corporation in satisfaction of the withholding
taxes incurred in connection with the exercise of an outstanding stock option
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised or which vest under the stock issuance, and not by the net
number of shares of Common Stock actually issued.
D. Should any change be made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the number and/or class of securities
for which any one person may be granted options and
7.
<PAGE>
separately exercisable stock appreciation rights under the Plan from and after
January 1, 1995, (iii) the number and/or class of securities for which automatic
option grants are to be subsequently made per newly-elected or continuing non-
employee Board member under the Automatic Option Grant Program, (iv) the number
and/or class of securities and price per share in effect under each option
outstanding under either the Discretionary Option Grant or Automatic Option
Grant Program and (v) the number and/or class of securities and price per share
in effect under each outstanding option incorporated into this Plan from the
Predecessor Plans. Such adjustments to the outstanding options are to be
effected in a manner which shall preclude the enlargement or dilution of rights
and benefits under such options. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
8.
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Option Grant Program
shall be authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or non-statutory
options. Individuals who are not Employees of the Corporation or its parent or
subsidiary corporations may only be granted non-statutory options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; provided, however, that each such instrument shall comply
--------
with the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
A. Option Price.
------------
(1) The option price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the option grant date.
(2) The option price shall become immediately due upon exercise of the
option and, subject to the provisions of Section I of Article Four and the
instrument evidencing the grant, shall be payable in one of the following
alternative forms specified below:
- full payment in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date (as such term is defined below);
- full payment in cash or check drawn to the Corporation's
order;
- full payment in a combination of shares of Common Stock held
for the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market Value
on the Exercise Date and cash or check drawn to the Corporation's order; or
9.
<PAGE>
- full payment through a broker-dealer sale and remittance
procedure pursuant to which the Optionee (I) shall provide irrevocable
written instructions to a designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate option price payable for the purchased shares plus all applicable
Federal and State income and employment taxes required to be withheld by
the Corporation in connection with such purchase and (II) shall provide
written directives to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the
sale transaction.
For purposes of this subparagraph (2), the Exercise Date shall be the
date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent the sale and remittance procedure is utilized
in connection with the exercise of the option, payment of the option price for
the purchased shares must accompany such notice.
B. Term and Exercise of Options. Each option granted under this
----------------------------
Discretionary Option Grant Program shall be exercisable at such time or times
and during such period as is determined by the Plan Administrator and set forth
in the instrument evidencing the grant. No such option, however, shall have a
maximum term in excess of ten (10) years from the grant date.
C. Limited Transferability of Options. During the lifetime of the
----------------------------------
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory
Option may, in connection with the Optionee's estate plan, be assigned in whole
or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.
D. Termination of Service.
----------------------
(1) The following provisions shall govern the exercise period
applicable to any outstanding options held by the Optionee at the time of
cessation of Service or death.
- Should an Optionee cease Service for any reason (including
death or Permanent Disability) while holding one or more outstanding
options under this Article Two, then none of those options shall
10.
<PAGE>
(except to the extent otherwise provided pursuant to subparagraph C.(3)
below) remain exercisable for more than a thirty-six (36)-month period (or
such shorter period determined by the Plan Administrator and set forth in
the instrument evidencing the grant) measured from the date of such
cessation of Service.
- Any option held by the Optionee under this Article Two and
exercisable in whole or in part on the date of his or her death may be
subsequently exercised by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent
and distribution. Such exercise, however, must occur prior to the earlier
-------
of (i) the third anniversary of the date of the Optionee's death (or such
shorter period determined by the Plan Administrator and set forth in the
instrument evidencing the grant) or (ii) the specified expiration date of
the option term. Upon the occurrence of the earlier event, the option
shall terminate and cease to be outstanding.
- During the applicable post-Service period, the option may not
be exercised in the aggregate for more than the number of shares (if any)
in which the Optionee is vested at the time of cessation of Service. Upon
the expiration of the limited post-Service exercise period or (if earlier)
upon the specified expiration date of the option term, each such option
shall terminate and cease to be outstanding with respect to any vested
shares for which it has not otherwise been exercised. However, each
outstanding option shall immediately terminate and cease to be outstanding,
at the time of the Optionee's cessation of Service, with respect to any
shares for which it is not otherwise at that time exercisable or in which
Optionee is not otherwise at that time vested.
- Under no circumstances, however, shall any such option be
exercisable after the specified expiration date of the option term.
- Should (i) the Optionee's Service be terminated for misconduct
(including, but not limited to, any act of dishonesty, willful misconduct,
fraud or embezzlement) or (ii) the Optionee make any unauthorized use or
disclosure of confidential information or trade secrets of the Corporation
or its parent or subsidiary corporations, then in any such event all
outstanding options held by the Optionee under this Article Two shall
terminate immediately and cease to be outstanding.
11.
<PAGE>
(2) The Plan Administrator shall have complete discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to permit one or more options held by the Optionee under this
Article Two to be exercised, during the limited post-Service exercise period
applicable under subparagraph (1) above, not only with respect to the number of
vested shares of Common Stock for which each such option is exercisable at the
time of the Optionee's cessation of Service but also with respect to one or more
subsequent installments of vested shares for which the option would otherwise
have become exercisable had such cessation of Service not occurred.
(3) The Plan Administrator shall also have full power and authority to
extend the period of time for which the option is to remain exercisable
following the Optionee's cessation of Service or death from the limited period
in effect under subparagraph (1) above to such greater period of time as the
Plan Administrator shall deem appropriate. In no event, however, shall such
option be exercisable after the specified expiration date of the option term.
E. Stockholder Rights. An Optionee shall have no stockholder rights
------------------
with respect to any shares covered by the option until such individual shall
have exercised the option and paid the option price for the purchased shares.
F. Repurchase Rights. The shares of Common Stock acquired upon the
-----------------
exercise of any Article Two option grant may be subject to repurchase by the
Corporation in accordance with the following provisions:
(a) The Plan Administrator shall have the discretion to authorize
the issuance of unvested shares of Common Stock under this Article Two.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase any or all of those unvested
shares at the option price paid per share. The terms and conditions upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan Administrator and set
forth in the instrument evidencing such repurchase right.
(b) All of the Corporation's outstanding repurchase rights under
this Article Two shall automatically terminate, and all shares subject to
such terminated rights shall immediately vest in full, upon the occurrence
of a Corporate Transaction, except to the extent: (i) any such repurchase
right is expressly assigned to the successor corporation (or parent
thereof) in connection with the Corporate Transaction or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
12.
<PAGE>
(c) The Plan Administrator shall have the discretionary
authority, exercisable either before or after the Optionee's cessation of
Service, to cancel the Corporation's outstanding repurchase rights with
respect to one or more shares purchased or purchasable by the Optionee
under this Discretionary Option Grant Program and thereby accelerate the
vesting of such shares in whole or in part at any time.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Article Two. Incentive Options may only be
granted to individuals who are Employees of the Corporation. Options which are
specifically designated as "non-statutory" options when issued under the Plan
shall not be subject to such terms and conditions.
---
A. Dollar Limitation. The aggregate Fair Market Value (determined as
-----------------
of the respective date or dates of grant) of the Common Stock for which one or
more options granted to any Employee after December 31, 1986 under this Plan (or
any other option plan of the Corporation or its parent or subsidiary
corporations) may for the first time become exercisable as incentive stock
options under the Federal tax laws during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee
holds two (2) or more such options which become exercisable for the first time
in the same calendar year, the foregoing limitation on the exercisability of
such options as incentive stock options under the Federal tax laws shall be
applied on the basis of the order in which such options are granted. Should the
number of shares of Common Stock for which any Incentive Option first becomes
exercisable in any calendar year exceed the applicable One Hundred Thousand
Dollar ($100,000) limitation, then that option may nevertheless be exercised in
that calendar year for the excess number of shares as a non-statutory option
under the Federal tax laws.
B. 10% Stockholder. If any individual to whom an Incentive Option is
---------------
granted is the owner of stock (as determined under Section 424(d) of the
Internal Revenue Code) possessing ten percent (10%) or more of the total
combined voting power of all classes of stock of the Corporation or any one of
its parent or subsidiary corporations, then the option price per share shall not
be less than one hundred and ten percent (110%) of the Fair Market Value per
share of Common Stock on the grant date, and the option term shall not exceed
five (5) years, measured from the grant date.
Except as modified by the preceding provisions of this Section II, the
provisions of Articles One, Two and Four of the Plan shall apply to all
Incentive Options granted hereunder.
13.
<PAGE>
III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL
A. In the event of any Corporate Transaction, each option which is at
the time outstanding under this Article Two shall automatically accelerate so
that each such option shall, immediately prior to the specified effective date
for the Corporate Transaction, become fully exercisable with respect to the
total number of shares of Common Stock at the time subject to such option and
may be exercised for all or any portion of such shares. However, an outstanding
option under this Article Two shall NOT so accelerate if and to the extent: (i)
such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation or parent thereof or to be replaced with a
comparable option to purchase shares of the capital stock of the successor
corporation or parent thereof, (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the option spread
existing at the time of the Corporate Transaction and provides for subsequent
payout in accordance with the same vesting schedule applicable to such option,
or (iii) the acceleration of such option is subject to other limitations imposed
by the Plan Administrator at the time of the option grant. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.
B. Upon the consummation of the Corporate Transaction, all
outstanding options under this Article Two shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation or its
parent company.
C. Each outstanding option under this Article Two which is assumed in
connection with the Corporate Transaction or is otherwise to continue in effect
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply and pertain to the number and class of securities which would have been
issued to the option holder, in consummation of such Corporate Transaction, had
such person exercised the option immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the option price
payable per share, provided the aggregate option price payable for such
--------
securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
D. The Plan Administrator shall have the discretion, exercisable
either in advance of any actually-anticipated Corporate Transaction or at the
time of an actual Corporate Transaction, to provide (upon such terms as it may
deem appropriate) for the automatic acceleration of one or more outstanding
options under this Article Two which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time, in the event the
Optionee's Service should subsequently terminate within a designated period
following the effective date of such Corporate Transaction.
14.
<PAGE>
E. The grant of options under this Article Two shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
F. The Plan Administrator shall have the discretionary authority,
exercisable either in advance of any actually-anticipated Change in Control or
at the time of an actual Change in Control, to provide for the automatic
acceleration of one or more outstanding options under this Article Two (and the
termination of one or more of the Corporation's outstanding repurchase rights
under this Article Two) upon the occurrence of the Change in Control. The Plan
Administrator shall also have full power and authority to condition any such
option acceleration (and the termination of any outstanding repurchase rights)
upon the subsequent termination of the Optionee's Service within a specified
period following the Change in Control.
G. Any options accelerated in connection with the Change in Control
shall remain fully exercisable until the expiration or sooner termination of the
option term.
H. Any Incentive Options accelerated under this Section III in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as incentive stock options under the Federal tax laws only to the
extent the applicable dollar limitation of Section II of this Article Two is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
option shall be exercisable as a non-statutory option under the Federal tax
laws.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under this Article Two (including
outstanding options under the Predecessor Plans incorporated into this Plan) and
to grant in substitution new options under the Plan covering the same or
different numbers of shares of Common Stock but with an option price per share
not less than one hundred percent (100%) of the Fair Market Value of the Common
Stock on the new grant.
V. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator determines in its
discretion to implement the stock appreciation right provisions of this Section
V, one or more Optionees may be granted the right, exercisable upon such terms
and conditions as the Plan Administrator may establish, to surrender all or part
of an unexercised option under this Article Two in exchange for a distribution
from the Corporation in an amount equal to the
15.
<PAGE>
excess of (i) the Fair Market Value (on the option surrender date) of the shares
of Common Stock in which the Optionee is at the time vested under the
surrendered option (or surrendered portion thereof) over (ii) the aggregate
option price payable for such vested shares.
B. No surrender of an option shall be effective hereunder unless it
is approved by the Plan Administrator. If the surrender is so approved, then
the distribution to which the Optionee shall accordingly become entitled under
this Section V may be made in shares of Common Stock valued at Fair Market Value
on the option surrender date, in cash, or partly in shares and partly in cash,
as the Plan Administrator deems appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of
-----
(i) five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised more than ten (10) years after the date of the option grant.
D. One or more officers of the Corporation subject to the short-swing
profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights in
tandem with their outstanding options under the Plan. Upon the occurrence of a
Hostile Take-Over, the officer will have a thirty (30)-day period in which he or
she may surrender any outstanding options with such a limited stock appreciation
right to the Corporation, to the extent such options are at the time exercisable
for fully-vested shares of Common Stock. The officer shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the vested shares of Common Stock at the
time subject to each surrendered option over (ii) the aggregate option price
payable for such vested shares. The cash distribution payable upon such option
surrender shall be made within five (5) days following the consummation of the
Hostile Take-Over. Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option surrender
and cash distribution. Any unsurrendered portion of the option shall continue
to remain outstanding and become exercisable in accordance with the terms of the
instrument evidencing such grant.
E. The shares of Common Stock subject to any option surrendered for
an appreciation distribution pursuant to this Section V shall NOT be available
for subsequent option grant under the Plan.
16.
<PAGE>
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. ELIGIBILITY
A. Eligible Directors. The individuals eligible to receive automatic
------------------
option grants pursuant to the provisions of this Article Three program shall be
limited to (i) those individuals who are first elected or appointed as non-
employee Board members on or after the Effective Date of this Automatic Option
Grant Program, whether through appointment by the Board or election by the
Corporation's stockholders, and (ii) those individuals who continue to serve as
non-employee Board members at one or more Annual Stockholders Meetings held
after such Effective Date, whether or not they commenced their Board service
prior to the Effective Date. Any non-employee Board member eligible to
participate in the Automatic Option Grant Program pursuant to the foregoing
criteria shall be designated an Eligible Director for purposes of this Plan.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Pursuant to the February 1996 Amendment to the Plan,
-----------
the following revised option grant schedule shall be in effect under this
Article Three, effective February 9, 1996:
(i) Each Eligible Director who is first elected or appointed as a
non-employee Board member after the Effective Date of the Automatic Option
Grant Program shall automatically be granted, at the time of such initial
election or appointment, a non-statutory stock option to purchase 10,000/1/
shares of Common Stock upon the terms and conditions of this Article Three.
(ii) On the date of each Annual Stockholders Meeting, beginning
with the 1996 Annual Meeting, each individual who is at the time serving as
an Eligible Director shall automatically be granted at that meeting,
whether or not such individual is standing for re-election as a Board
member at that meeting, a non-statutory stock option to purchase an
additional 3,500/2/ shares of Common Stock upon the terms and conditions of
this Article Three, provided he or she has served as a non-employee Board
- -----------------------
/1/ Reflects the 3-for-2 split of the Common Stock effected by the Corporation
- on June 5, 1995.
/2/ Reflects the 3-for-2 split of the Common Stock effected by the
- Corporation on June 5, 1995.
17.
<PAGE>
member for at least six (6) months. There shall be no limit on the number
of 3,500-share option grants any one Eligible Director may receive over his
or her period of Board service.
The number of shares for which the automatic grants are to be made to
each newly-elected or continuing Eligible Director shall be subject to periodic
adjustment pursuant to the applicable provisions of Section VI.D of Article One.
B. Option Price. For each option grant made under this Automatic
------------
Option Grant Program, the option price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the
automatic grant date.
C. Payment. The option price shall be payable in one of the
-------
alternative forms specified below:
(i) full payment in cash or check made payable to the
Corporation's order; or
(ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's reported
earnings and valued at Fair Market Value on the Exercise Date; or
(iii) full payment in a combination of shares of Common Stock
held for the requisite period necessary to avoid a charge to the
Corporation's reported earnings and valued at Fair Market Value on the
Exercise Date and cash or check payable to the Corporation's order; or
(iv) full payment through a sale and remittance procedure
pursuant to which the non-employee Board member (I) shall provide
irrevocable written instructions to a designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds available on the settlement date, sufficient funds
to cover the aggregate option price payable for the purchased shares and
shall (II) concurrently provide written directives to the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
The Exercise Date shall be the date on which written notice of the
option exercise is delivered to the Corporation. Except to the extent the sale
and remittance procedure is utilized for the exercise of the option, payment of
the option price for the purchased shares must accompany the exercise notice.
D. Option Term. Each automatic grant under this Article Three shall
-----------
have a maximum term of ten (10) years measured from the automatic grant date.
18.
<PAGE>
E. Exercisability. The initial 10,000-share automatic option grant
--------------
made to each newly-elected or appointed Board member shall become exercisable
for twelve and one-half percent (12.5%) of the option shares upon the Optionee's
completion of six (6) months of Board service measured from the automatic grant
date and shall become exercisable for the balance of the option shares in a
series of fourteen (14) equal and successive quarterly installments upon the
Optionee's completion of each additional three (3)-month period of Board service
thereafter. Each 3,500-share automatic option grant made to a continuing Board
member shall become exercisable in a series of four (4) equal and successive
annual installments over the Optionee's period of service on the Board, with the
first such installment to become exercisable one year after the automatic grant
date. The exercisability of each outstanding automatic grant shall be subject
to acceleration in accordance with the provisions of Section II.G and Section
III of this Article Three.
F. Limited Transferability of Options. Each automatic option grant
----------------------------------
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
G. Termination of Board Service.
----------------------------
(1) Should the Optionee cease service as a Board member for any
reason (other than death or Permanent Disability) while holding one or more
automatic option grants under this Article Three, then such individual shall
have a six (6)-month period following the date of such cessation of Board
service in which to exercise each such option for any or all of the shares of
Common Stock for which the option is exercisable at the time of such cessation
of Board service. Each such option shall immediately terminate and cease to be
outstanding, at the time of such cessation of Board service, with respect to any
shares for which the option is not otherwise at that time exercisable.
(2) Should the Optionee die within six (6) months after cessation
of Board service, then each outstanding automatic option grant held by the
Optionee at the time of death may subsequently be exercised, for any or all of
the shares of Common Stock for which such option is exercisable at the time of
the Optionee's cessation of Board service (less any option shares subsequently
purchased by the Optionee prior to death), by the personal representative of the
Optionee's estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent and
distribution. Any such exercise must occur within twelve (12) months after the
date of the Optionee's death.
19.
<PAGE>
(3) Should the Optionee die or become permanently disabled while
serving as a Board member, then each automatic option grant held by such
Optionee under this Article Three shall accelerate in full, and the Optionee (or
the representative of the Optionee's estate or the person or persons to whom the
option is transferred upon the Optionee's death) shall have a twelve (12)-month
period following the date of the Optionee's cessation of Board service in which
to exercise each such option for any or all of the shares of Common Stock
subject to that option at the time of such cessation of Board service.
(4) In no event shall any automatic grant under this Article Three
remain exercisable after the specified expiration date of the ten (10)-year
option term. Upon the expiration of the applicable post-service exercise period
under subparagraph 1, 2 or 3 above or (if earlier) upon the expiration of the
ten (10)-year option term, the automatic grant shall terminate and cease to be
outstanding for any unexercised shares for which the option was otherwise
exercisable at the time of the Optionee's cessation of Board service.
H. Stockholder Rights. The holder of an automatic option grant under
------------------
this Article Three shall have none of the rights of a stockholder with respect
to any shares subject to such option until such individual shall have exercised
the option and paid the option price for the purchased shares.
I. Remaining Terms. The remaining terms of each option granted under
---------------
the Automatic Option Grant Program shall be the same as the terms in effect for
option grants made under the Discretionary Option Grant Program.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE
TAKE-OVER
A. In the event of any Corporate Transaction, each automatic option
grant at the time outstanding under this Article Three shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for the Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of such shares. Upon
the consummation of the Corporate Transaction, all automatic option grants under
this Article Three shall terminate and cease to be outstanding.
B. In connection with any Change in Control of the Corporation, each
automatic option grant at the time outstanding under this Article Three shall
automatically accelerate so that each such option shall, immediately prior to
the specified effective date for the Change in Control, become fully exercisable
with respect to the total number of shares of Common Stock at the time subject
to such option and may be exercised for all or any portion of such shares.
20.
<PAGE>
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender each option held by him or
her under this Article Three to the Corporation, to the extent such option has
been outstanding for a period of at least six (6) months. The Optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the shares of Common Stock at
the time subject to the surrendered option (whether or not the option is
otherwise at the time exercisable for such shares) over (ii) the aggregate
option price payable for such shares. Such cash distribution shall be paid
within five (5) days following the consummation of the Hostile Take-Over.
Stockholder approval of the Plan, as amended and restated on February 12, 1997,
shall constitute pre-approval of the exercise of such right in accordance with
the terms and provisions of this Section III.C. No additional approval of any
Plan Administrator or the consent of the Board shall be required in connection
with such option surrender and cash distribution.
D. The shares of Common Stock subject to each option surrendered in
connection with the Hostile Take-Over shall NOT be available for subsequent
option grant under this Plan.
E. The automatic option grants outstanding under this Article Three
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
A. Limited Amendments. The provisions of this Automatic Option Grant
------------------
Program, together with the automatic option grants outstanding under this
Article Three, may not be amended at intervals more frequently than once every
six (6) months, other than to the extent necessary to comply with applicable
Federal income tax laws and regulations.
21.
<PAGE>
ARTICLE FOUR
MISCELLANEOUS
-------------
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any Optionee
(including an Optionee who is an officer of the Corporation) in the exercise of
one or more options granted to such Optionee under the Discretionary Option
Grant Program, including the satisfaction of any Federal and State income and
employment tax obligations arising therefrom, by (i) authorizing the extension
of a loan from the Corporation to such Optionee or (ii) permitting the Optionee
to pay the option price for the purchased Common Stock in installments over a
period of years. The terms of any loan or installment method of payment
(including the interest rate and terms of repayment) shall be upon such terms as
the Plan Administrator specifies in the applicable option agreement or otherwise
deems appropriate under the circumstances. Loans or installment payments may be
authorized with or without security or collateral. However, the maximum credit
available to the Optionee may not exceed the option price of the acquired shares
plus any Federal and State income and employment tax liability incurred by the
Optionee in connection with the acquisition of such shares.
B. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Plan Administrator may deem appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to amend
or modify the Plan (or any component thereof) in any or all respects whatsoever.
However, (i) no such amendment or modification shall adversely affect rights and
obligations with respect to options at the time outstanding under the Plan,
unless the Optionee consents to such amendment, and (ii) any amendment made to
the Automatic Option Grant Program (or any options outstanding thereunder) shall
be in compliance with the limitation of Section IV of Article Three. In
addition, certain amendments may require stockholder approval pursuant to
applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant Program which are in excess of the number of
shares then available for issuance under the Plan, provided any excess shares
actually issued under such program are held in escrow until stockholder approval
is obtained for a sufficient increase in the number of shares available for
issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess option grants
22.
<PAGE>
are made, then (I) any unexercised excess options shall terminate and cease to
be exercisable and (II) the Corporation shall promptly refund the purchase price
paid for any excess shares actually issued under the Plan and held in escrow,
together with interest (at the applicable Short Term Federal Rate) for the
period the shares were held in escrow.
III. TAX WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock upon
the exercise of stock options for such shares or the vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
State and local income and employment tax withholding requirements.
The Plan Administrator may, in its discretion and in accordance with
the provisions of this Section III of Article Four and such supplemental rules
as the Plan Administrator may from time to time adopt (including the applicable
safe-harbor provisions of SEC Rule 16b-3), provide any or all holders of non-
statutory options (other than the automatic grants made pursuant to Article
Three of the Plan) or unvested shares under the Plan with the right to use
shares of the Corporation's Common Stock in satisfaction of all or part of the
Federal, State and local income and employment tax liabilities incurred by such
holders in connection with the exercise of their options or the vesting of their
shares (the "Taxes"). Such right may be provided to any such holder in either
or both of the following formats:
(a) Stock Withholding: The holder of the non-statutory option or
-----------------
unvested shares may be provided with the election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the
exercise of such non-statutory option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value equal to the
percentage of the applicable Taxes (not to exceed one hundred percent
(100%)) designated by the holder.
(b) Stock Delivery: The Plan Administrator may, in its discretion,
--------------
provide the holder of the non-statutory option or unvested shares purchased
thereunder with the election to deliver to the Corporation, at the time the
non-statutory option is exercised or the shares vest, one or more shares of
Common Stock previously acquired by such individual (other than in
connection with the option exercise or share vesting triggering the Taxes)
with an aggregate Fair Market Value equal to the percentage of the Taxes
incurred in connection with such option exercise or share vesting (not to
exceed one hundred percent (100%)) designated by the holder.
23.
<PAGE>
IV. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan was initially adopted by the Board on August 31, 1993 and
approved by the stockholders in October 1993. As of the applicable Effective
Date for each of the equity incentive programs in effect hereunder, this Plan,
as successor to the Predecessor Plans, became effective for each such program,
and no further option grants or stock issuances shall be made under the
Predecessor Plans from and after such Effective Date. The Plan was subsequently
amended by the Board on January 23, 1995 to (i) increase by 750,000/2/ the
number of shares of Common Stock issuable under the Plan, (ii) limit the number
of shares of Common Stock for which any one participant may be granted stock
options and separately exercisable stock appreciation rights under the Plan to
750,000/2/ shares, exclusive of any stock options or stock appreciation
-
rights granted prior to January 1, 1995 and (iii) provide that the option price
per share for all non-statutory stock options granted from and after January 1,
1995 shall not be less than one hundred percent (100%) of the Fair Market Value
of the Common Stock on the grant date. The January 23, 1995 amendment was
approved by the stockholders at the 1995 Annual Meeting held on March 27, 1995.
On January 26, 1996, the Board authorized an additional 500,000-share increase
in the number of shares of Common Stock available for issuance under the Plan
and in February 1996, the Board adopted an amendment to the Plan (the "February
1996 Amendment") which increased the number of shares of Common Stock for which
option grants are to be made annually under the Automatic Option Grant Program
to continuing non-employee Board members from 2,500 shares to 3,500 shares per
individual. Both the January 26, 1996 and February 1996 Amendments were
approved by the Corporation's stockholders at the 1996 Annual Meeting. The Plan
was subsequently amended on February 12, 1997 (the "February 1997 Amendment") to
effect the following changes: (i) increase the number of shares of Common Stock
authorized for issuance over the term of the Plan by an additional 500,000
shares, (ii) allow unvested shares issued under the Plan and subsequently
repurchased by the Corporation at the option exercise price paid per share to be
reissued under the Plan and (ii) effect a series of technical changes to the
provisions of the Plan (including stockholder approval requirements) in order to
take advantage of the recent amendments to Rule 16b-3 of the Securities Exchange
Act of 1934 which exempts certain officer and director transactions under the
Plan from the short-swing liability provisions of the federal securities laws.
The February 1997 Amendment is subject to stockholder approval at the 1997
Annual Meeting, and no option grants made on the basis of the February 1997
share increase shall become exercisable in whole or in part unless and until the
February 1997 Amendment is approved by the stockholders. Should such
stockholder approval not be obtained at the 1997 Annual Meeting, then each
option grant made pursuant to the February 1997 share increase shall terminate
and cease to remain outstanding, and no further option grants shall be made on
the basis of that share increase. However, the provisions of the Plan as in
effect immediately prior to the February 1997
- -----------------------
/3/ Reflects the 3-for-2 split of the Common Stock effected by the Corporation
- on June 5, 1995.
24.
<PAGE>
Amendment shall automatically be reinstated, and option grants may thereafter
continue to be made pursuant to the reinstated provisions of the Plan. All
option grants made prior to the February 1997 Amendment shall remain outstanding
in accordance with the terms and conditions of the respective instruments
evidencing those options or issuances, and nothing in the February 1997
Amendment shall be deemed to modify or in any way affect those outstanding
options or issuances. Subject to the foregoing limitations, the Plan
Administrator may make option grants under the Plan at any time before the date
fixed herein for the termination of the Plan.
B. Each option issued and outstanding under the Predecessor Plans
immediately prior to the Effective Date of the Discretionary Option Grant
Program was incorporated into this Plan and treated as an outstanding option
under this Plan, but each such option shall continue to be governed solely by
the terms and conditions of the instrument evidencing such grant, and nothing in
this Plan shall be deemed to affect or otherwise modify the rights or
obligations of the holders of such options with respect to their acquisition of
shares of Common Stock thereunder.
C. The option/vesting acceleration provisions of Section III of
Article Two relating to Corporate Transactions and Changes in Control may, in
the Plan Administrator's discretion, be extended to one or more stock options
which are outstanding under the Predecessor Plans on the Effective Date of the
Discretionary Option Grant Program but which do not otherwise provide for such
acceleration.
D. The Plan shall terminate upon the earlier of (i) August 30, 2003
-------
or (ii) the date on which all shares available for issuance under the Plan shall
have been issued or cancelled pursuant to the exercise, surrender or cash-out of
the options granted under the Plan. Upon such plan termination, all outstanding
option grants shall continue to have force and effect in accordance with the
provisions of the instruments evidencing such grants.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
or stock appreciation right under the Plan and the issuance of Common Stock upon
the exercise of the stock options or stock appreciation rights granted hereunder
shall be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the stock
options and stock appreciation rights granted under it, and the Common Stock
issued pursuant to it.
25.
<PAGE>
B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal and State securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which stock of the same class is then listed.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan, nor
any action taken by the Plan Administrator hereunder, nor any provision of the
Plan shall be construed so as to grant any individual the right to remain in the
employ or service of the Corporation (or any parent or subsidiary corporation)
for any period of specific duration, and the Corporation (or any parent or
subsidiary corporation retaining the services of such individual) may terminate
such individual's employment or service at any time and for any reason, with or
without cause.
VIII. MISCELLANEOUS PROVISIONS
A. Except to the extent otherwise expressly provided in the Plan, the
right to acquire Common Stock or other assets under the Plan may not be
assigned, encumbered or otherwise transferred by any Optionee.
B. The provisions of the Plan relating to the exercise of options and
the vesting of shares shall be governed by the laws of the State of California
without resort to that State conflict-of-laws rules.
C. The provisions of the Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Optionees, the legal representatives
of their respective estates, their respective heirs or legatees and their
permitted assignees.
26.
<PAGE>
EXHIBIT 99.10
CREDENCE SYSTEMS CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
(As Amended and Restated Through February 12, 1997)
1. Purpose Of the Plan
-------------------
The Credence Systems Corporation 1994 Employee Stock Purchase Plan (the
"Plan") is intended to provide a suitable means by which eligible employees of
the Credence Systems Corporation (the "Company") may accumulate, through
voluntary, systematic payroll deductions, amounts regularly credited to their
account to be applied to the purchase of shares of the common stock, par value
$0.001, of the Company (the "Common Stock") pursuant to the exercise of options
granted from time to time hereunder. The Plan provides employees with the
opportunities to acquire proprietary interests in the Company, and will also
provide them with additional incentives to continue their employment and promote
the best interests of the Company. Options granted under the Plan are intended
to qualify under Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code").
2. Shares of Stock Subject to the Plan
-----------------------------------
Subject to the provisions of Section 12, the maximum number of Common Stock
which may be issued on the exercise of options granted under the Plan is 500,000
shares of the Company's Common Stock. Any shares subject to an option under the
Plan, which option for any reason expires or is terminated unexercised as to
such shares, shall again be available for issuance on the exercise of other
options granted under the Plan. Shares delivered on the exercise of options
may, at the election of the Board of Directors of the Company, be authorized but
previously unissued Common Stock or Common Stock reacquired by the Company, or
both.
3. Administration
--------------
The Plan shall be administered by the Compensation Committee of the Board
of Directors of the company (the "Committee"), which shall be composed of not
less than two members of the Board of Directors of the Company, all of whom
shall be ineligible to participate in this Plan and shall otherwise qualify as
disinterested persons for purposes of Rule 16b-3 (c) (2) (i) promulgated by the
Securities and Exchange Commission. Subject to the provisions of the Plan, the
Committee shall have full discretion and exercise power (i) to determine the
terms and conditions under which the shares shall be offered and corresponding
options shall be granted under the Plan for the Purchase Period (as defined in
Section 6) consistent with the provisions of the Plan, and (ii) to resolve all
questions relating to the administration of the Plan.
The interpretation and application by the Committee of any provision of the
Plan shall be final and conclusive on all employees and other persons having, or
claiming to have, an interest
<PAGE>
under the Plan. The Committee may, in its discretion, establish such rules and
guidelines relating to the Plan as it may deem desirable.
The Committee may employ such legal counsel, consultant and agents as it
may deem desirable for the administration of the Plan and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such counsel or consultant or agent. The Committee shall keep
minutes of its actions under the Plan.
No member of the Board of Directors or the Committee shall be liable for
any action or determination made in good faith with respect to the Plan or any
options granted hereunder.
4. Eligibility to Participate
--------------------------
The persons eligible to participate in this Plan shall be all employees
(including officers) of the Company, or any participating affiliate, who have
been actively employed by the Company, or such affiliate, for thirty (30)
consecutive days as of the first day of any Purchase Period, but excluding
employees whose customary employment is for not more than five (5) months in any
calendar year or twenty (20) hours or less per week. An employee who is
eligible to participate in this Plan pursuant to the foregoing sentence is
hereinafter referred to as an "Employee". A participating affiliate, for
purposes of the Plan, shall include any now existing or hereafter established
parent or subsidiary corporation of the Company, as determined in accordance
with Code Sections 424(e) and 424(f), which elects, with the consent of the
Company's Board of Directors, to extend the benefits of the Plan to its eligible
employees.
Nothing contained in the Plan shall confer upon any Employee any right to
continue in the employ of the Company or any of its affiliates, or interfere in
any way with the right of the Company or any of its affiliates to terminate his
employment at any time.
5. Participation in the Plan
-------------------------
An Employee may participate in the Plan only as of the beginning of the
Purchase Period. If an employee becomes eligible to participate in the Plan
after the commencement of a Purchase Period, that Employee may not participate
in the Plan until the beginning of the next Purchase Period. A copy of the Plan
will be furnished to each Employee prior to the beginning of the first Purchase
Period during which he may participate in the Plan. To participate in the Plan,
an employee must deliver (or cause to be delivered) to the Company, within seven
(7) days prior to the commencement of the first Purchase Period during which
participation in the Plan is desired, a contingent subscription for Common Stock
and authorization for payroll deductions to effect the purchase of Common Stock
(hereinafter called a "Participation Election"). In the Participation Election
an Employee must:
<PAGE>
(i) authorize payroll deductions within the limits prescribed in
Sections 8 and 9 and specify the percentage to be deducted
regularly from his Compensation (as defined in Section 8);
(ii) elect and authorize the purchase by him for each Purchase Period
of a specific number of shares of Common Stock on the Exercise
Date (as defined in Section 7) with respect to the applicable
Purchase Period, provided that such specific number of shares
shall not exceed a total of five hundred shares in any Purchase
Period;
(iii) furnish the exact name or names and address or addresses in which
the stock certificates for Common Stock purchased by him under the
Plan are to be issued; and
(iv) agree to notify the company if he should dispose of Common Stock
purchased through the Plan within two (2) years of the
commencement of the Purchase Period in which he purchased the
Common Stock.
Stock certificates for shares of Common Stock purchased under the Plan may
be issued in the Employee's name or, if so designated by the Employee, in his
name and the name of another person who is a member of his family, with right of
survivorship; for this purpose the "family" of an Employee shall include only
his spouse, his ancestors and lineal descendants and his brothers and sisters.
An Employee need not, and may not, make a down payment in order to
participate in the Plan.
Participation in the Plan is entirely voluntary, and a participating
Employee may withdraw from participation, as provided in Section 15, during any
Purchase Period at any time prior to the Exercise Date for such Purchase Period.
6. Purchase Period: Grant of Options
---------------------------------
Each Purchase Period under the Plan shall commence on the first day of a
calendar half (or, for the first Purchase Period, such date established by the
Committee following the effective date specified in Section 20) and end on the
last day of such calendar half, and shall include all pay periods ending within
it. For this purpose, calendar halves begin on January 1 and July 1. During
each Purchase Period, participating employees shall accumulate credits to a
bookkeeping account maintained by the Company (hereinafter referred to As a
"Stock Purchase Account") through payroll deductions to be made at the close of
each pay period for the purchase of shares of Common stock under the Plan. For
each Purchase Period, the Company shall grant options to participating Employees
with respect to the number of shares of Common Stock (subject to the provisions
of sections 2,5,11 and-12) which shall be purchasable through the application of
the amounts credited to such Employee's Stock Purchase Account at the purchase
price per share
<PAGE>
determined on the Exercise Date for the Purchase Period (such number of shares
to be subject to reduction in the event of a pro rata apportionment provided
for in Section 17).
7. Exercise Dates, and Purchase Prices
-----------------------------------
The last business day of each Purchase Period shall constitute the
"Exercise Date" for such Purchase Period. Subject to the provisions of Section
12, the purchase price per share of Common Stock to be purchased on an Exercise
Date pursuant to the exercise of options granted for the Purchase Period,
through the application of amounts credited during such Purchase Period to the
Stock Purchase Accounts of participating Employees, shall be the lesser of:
(A) an amount equal to 85% of the Fair Market Value of the Common Stock at
the time such option is granted (i.e., the first day of the Purchase
Period), or
(B) an amount equal to 85% of the Fair Market Value of the Common Stock at
the time each option is exercised (i.e., the Exercise Date).
For purposes of the Plan, the Fair Market Value of a share of Common Stock
on any date shall be (i) if the Common Stock is traded on an established
securities market, the mean between the high and low prices of such Common Stock
for such date, and (ii) if the Common Stock is not so traded, an amount
determined by the committee in good faith and based upon such factors as it
deems relevant to such determination.
8. Payroll Deductions - Authorization and Amount
---------------------------------------------
Employees shall authorize in their Participation Elections from 1% to 10%
(in whole percentage increments) of their Compensation to which such election
relates (subject to the limitations of Section 9). For purposes of the Plan,
the "Compensation" of an Employee for any Purchase Period shall mean the gross
amount of his base pay on the basis of his regular, straight-time hourly, weekly
or monthly rate for the number of hours normally worked, exclusive of overtime,
sales commissions, bonuses, shift premiums and other forms of compensation.
By delivering to the Company within seven (7) days prior to the
commencement of the next Purchase Period a revised Participation Election, a
participating Employee may change the amount to be deducted from his
Compensation during the next Purchase Period, subject to the limitations of
Sections 8 and 9.
A participating Employee's authorization for payroll deductions will remain
in effect for the duration of the Plan, subject to the provisions of Sections 11
and 14, unless his election to purchase Common Stock shall have been terminated
pursuant to the provisions of section 13, the amount of the deduction is
changed, as provided in this Section 8, or the Employee withdraws or is
considered to have withdrawn from the Plan under Section 15 or 16.
<PAGE>
All amounts credited to the Stock Purchase Accounts of participating
Employees shall be held in the general funds of the Company but shall be used
from time to time in accordance with the provisions of the Plan.
9. Limitations on the Granting of Options
--------------------------------------
Anything in the Plan to the contrary notwithstanding, no participating
employee may be granted an option which permits his rights to purchase Common
Stock under all employee stock purchase plans of the Company and its parent and
subsidiary companies (if any) to accrue at a rate which exceeds $25,000. of the
Fair Market Value of such Common Stock (determined at the time such option is
granted) f or each calendar year in which such option is outstanding at any
time. For purposes of this Section 9:
(i) the right to purchase stock under an option accrues when the
option (or any portion thereof) first becomes exercisable during
the calendar year;
(ii) the right to purchase stock under an o option accrues at the rate
provided in the option, but in no case may such rate exceed
$25,000 of the Fair Market Value of such stock (determined at the
time such option is granted) for any one calendar year; and
(iii) a right to purchase stock which has accrued under one option
granted pursuant to the Plan may not be carried over to any other
option.
No participating Employee may be granted an option hereunder if such
Employee, immediately after the option is granted, owns (within the meaning of
Section 423 (b) (3) of the Code) stock possessing five (5) percent or more of
the total combined voting power or value of all classes of stock of the Company
or of its parent or subsidiary corporations. For purposes of the Plan, the
terms "parent corporation" and "subsidiary corporation" shall have the
respective meanings set forth in section 424 of the Code.
10. Stock Purchase Amounts
----------------------
The amount deducted from the Compensation of each participating Employee
shall be credited to his individual Stock Purchase Account. Employees
participating in the Plan may not make direct cash payments to their Stock
Purchase Accounts.
Following the close of each Purchase Period, the Company will furnish to
each participating Employee a statement of that Employee's individual Stock
Purchase account. This statement shall show (i) the total amount of payroll
deductions for the Purchase Period just closed, (ii) the number of full shares
(and the purchase price per share) of Common Stock purchased, pursuant to the
provisions of Section 11, by the participating Employee for the Purchase Period,
and (iii) any remaining balance of payroll deductions which are to be refunded
<PAGE>
to the Employee following the close of the Purchase Period (or carried forward
to the next Purchase Period in the case of amounts representing fractional
shares).
11. Issuance and Purchase of Common Stock
-------------------------------------
Shares of Common Stock may be purchased by a participating Employee only on
the Exercise Date for each Purchase Period; and the options which the Company
grants to participating Employees for the purchase of Common Stock for a
Purchase Period may be exercised only on the Exercise Date. No fractional
shares of Common Stock may be purchased hereunder. The purchase price per share
shall be determined as set forth in Section 7.
A participating Employee who purchases Common Stock, pursuant to the
exercise of options granted under the Plan, shall purchase as many full shares
as shall be stated in the Participation Election that the Employee has
completed, subject to the limitations set forth in Sections 5, 8, 9, 12 and 17;
provided that in no event may shares be purchased other than by application of
the balance in the Stock Purchase Account on the Exercise Date and that in no
event may a participating Employee purchase a greater number of shares than
would be purchasable at the purchase price determined in accordance with Section
7 through the application of the balance in his Stock Purchase Account on the
Exercise Date for the Purchase Period to which the option relates. Any balance
remaining in such a participating Employee's Stock Purchase Account following an
Exercise Date shall be refunded to the Employee as soon as practicable
thereafter; provided, however, that the participating Employee may elect to
carry over any such balance representing a fractional share to the next
succeeding Purchase Period.
Certificates for Common Stock so purchased shall be delivered to the
employee as soon as practicable.
All rights as an owner of shares of the Common Stock purchased under the
Plan shall accrue to the participating Employee who purchased the shares
effective as of the Exercise Date on which the amounts credited to his Stock
Purchase Account were applied to the purchase of the shares; and such Employee
shall not have any rights as a shareholder prior to such Exercise Date .by
reason of his having elected to purchase such shares.
12. Dilution or Other Adjustment
----------------------------
If the Company is a party to any merger or consolidation, or undergoes any
separation, reorganization (other than a reincorporation in another state), or
liquidation, then the options outstanding under the Plan shall be exercised
immediately prior to the effective-date of such transaction, and such date shall
accordingly qualify as an Exercise Date under Section 7. In addition, in the
event of a reclassification, stock split, combination of shares, separation
(including a spin-off), dividend on shares of the Common Stock payable in stock,
or other similar change in capitalization or in the corporate structure of the
shares of the Common Stock of the Company, the Committee shall conclusively
determine the appropriate adjustment in the
<PAGE>
purchase price and other terms of purchase for shares subject to outstanding
Participation Elections for the Purchase Period occurring at such time, in the
number and kind of shares or other securities which may by purchased for such
Purchase Period, in the aggregate number of shares which may be purchased
under the Plan, and in the maximum number and kind of shares which may be
purchased per Employee in any Purchase Period. Any such adjustment in the
shares or other securities subject to the outstanding options granted to such
Employee (including any adjustments in the option price) shall be made in such
manner as not to constitute a modification as defined by Section 424(h)(3) of
the Code and only to the extent permitted by Sections 423 and 424 of the Code.
13. No Assignment of Plan Rights or of Purchased Stock
--------------------------------------------------
An Employee must promptly advise the Company if a disposition shall be made
of any shares of Common Stock purchased by him under the Plan if such
disposition shall have occurred within two years of the commencement of the
Purchase Period in which he purchased such shares.
A participating Employee's privilege to purchase Common Stock under the
Plan can be exercised only by him; and he cannot purchase Common Stock for
someone else, although he may designate (in accordance with the provisions of
Section 5) that stock certificates of Common Stock purchased by the Employee be
issued in the joint names of the Employee and a family member.
An Employee participating in the Plan may not sell, transfer, pledge, or
assign to any other person any interest, privilege or right under the Plan or in
any amounts credited to his Stock Purchase Account; and if this provision shall
be violated, his election to purchase Common Stock shall terminate, and the only
right remaining thereunder will be to have paid to the person entitled thereto
the amount then credited to the Employee's Stock Purchase Account.
14. Suspension of Deductions
------------------------
A participating Employee's payroll deductions under the Plan shall be
suspended if on account of a leave of absence, layoff or other reason a
participating Employee does not have sufficient Compensation in any payroll
period to permit payroll deductions authorized under the Plan to be made in
full. The suspension will last until the participating Employee again has
sufficient Compensation to permit such payroll deductions to be made in full;
but if the suspension shall not have been removed by the Exercise Date for the
Purchase Period in which it began, shares will be purchased to the extent that
the employee contributed funds prior to the suspension of deductions. In the
event of voluntary withdrawal or termination of employment, funds will be
returned to the employee as provided in Section 15.
<PAGE>
15. Withdrawal from, and Reparticipation in the Plan
------------------------------------------------
During any Purchase Period a participating Employee may withdraw from the
Plan at any time prior to the Exercise Date for the Purchase Period; and,
subject to, and in accordance with the provisions of Sections 5 and 8, he may
again participate in the Plan at the beginning of any Purchase Period subsequent
to the Purchase Period in which he withdrew. Withdrawal of a participating
Employee shall be effected by written notification prior to such Exercise Date
to the Company on a form which the Company shall provide for this purpose
("Notice of Withdrawal"). In the event a participating Employee shall withdraw
from the Plan, all amounts then credited to his Stock Purchase Account shall be
returned as soon as practicable after his Notice of Withdrawal shall have been
received.
If an Employee's payroll deductions shall be interrupted by any legal
process, a Notice of Withdrawal will be considered as having been received on
the day the interruption shall occur.
16. Termination of Participation
----------------------------
A participating Employee's right to continue participation in the Plan will
terminate upon the earliest to occur of (i) the Company's termination of the
Plan, (ii) the Employee's transfer to ineligible employment status, or (iii)
retirement, disability, death or other termination of employment with the
Company. Upon the termination of an Employee's right to continue participation
in the Plan on account of the occurrence of any of the foregoing events, all
amounts then credited to the individuals Stock Purchase Account not already used
for the purchase of Common Stock will be repaid as soon as practicable. Such
repayments shall be made to the participating Employee unless the termination of
participation occurred by reason of such Employee's death, in which event such
repayment shall be made to such Employee's beneficiary. For this purpose, an
Employee's beneficiary shall be the person, persons or entity designated by the
Employee on a form prescribed by and delivered to the Company or, in the absence
of an effective beneficiary designation, the Employee's estate; provided,
however, that the determination of the Employee's beneficiary hereunder shall be
subject to any applicable community property or other laws.
17. Apportionment of Stock
----------------------
If at any time shares of Common Stock authorized for purposes of the Plan
shall not be available in sufficient number to meet the purchase requirements
under all outstanding Participation elections, the Committee shall apportion the
remaining available shares among the participating Employees on a pro rata
basis. In no case shall any apportionment of shares be made with respect to a
participating Employee's election to purchase unless such election is then in
effect (subject only to any suspension provided for in the Plan). The Committee
shall give notice of such apportionment and of the method of apportionment used
to each participating Employee to whom shares shall have been apportioned.
<PAGE>
l8. Government Regulations
----------------------
The Plan, and the obligation of the Company to issue, sell and deliver
Common Stock under the Plan are subject to all applicable laws and to all
applicable rules, regulations and approvals of government agencies.
19. Amendment or Termination
------------------------
The Board of Directors of the Company may at any time amend, suspend or
terminate the Plan; provided, however, that no amendment (other than an
amendment authorized by Section 12) may be made increasing the aggregate number
of shares of Common Stock which may be issued pursuant to the Plan, reducing the
minimum purchase price at which shares may be purchase, hereunder, extending the
maximum period during which shares may be purchased hereunder or changing the
class of employees eligible to participate hereunder; without the approved of
the holders of a majority of the outstanding voting shares of the Company.
20. Effective Date
--------------
The Plan shall become effective on the later of the IPO date (as hereafter
defined) or (ii) the date of its adoption by the Board of Directors of the
Company, subject to approval of the Plan by the Company's shareholders within 12
months after the date of the Plan's adoption by said Board of Directors. In the
event of the failure to obtain such shareholder approval, the Plan shall be null
and void and the Company shall have no liability thereunder. No shares of the
Common Stock may be issued under the Plan until such shareholder approval has
been obtained. For purposes of this Section 20, the "IPO Date" shall mean the
date on which shares of Common Stock of the Company are first sold to the
public.
21. Termination
-----------
The Plan shall terminate on December 31, 2003. Any unexpired Purchase
Period that commenced prior to such termination date shall forthwith expire on
such termination date, which shall be deemed the Exercise Date for such Purchase
Period.
