As filed with the Securities and Exchange Commission on July 14, 1998
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
(Full title of the plans)
DR. 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 Price(2) Registration Fee
========================= ============= ============== ================ ================
<S> <C> <C> <C> <C>
Common Stock, 500,000 $20.125 $10,062,500 $2,968.44
$0.001 par value
=============================================================================================
</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 by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the
Registrant's 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 the Registrant's Common Stock on July
10, 1998, 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 "SEC"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1997 filed with the SEC on January 29, 1998;
(b) The Registrant's Quarterly Reports on Forms 10-Q for the quarters
ended January 31, 1998 and April 30, 1998, filed with the SEC on
March 17, 1998 and June 11, 1998, respectively;
(c) The Registrant's current reports on Forms 8-K filed with the SEC on
February 23, 1998, May 20, 1998, June 3, 1998 and July 9, 1998
respectively; and
(d) The Registrant's Registration Statement No. 0-22366 on Form 8-A filed
with the SEC 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.
<PAGE>
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.
Item 7. Exemption from Registration Claimed
Inapplicable.
Item 8. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------- -------
<S> <C>
4.0 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 0-22366 on Form 8-A, and the
exhibits thereto, and Amendment No. 1 thereto, which are incorporated
herein by reference pursuant to Item 3(d) of this Registration
Statement.
5.1 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 (as amended and
restated through February 13, 1998).
99.2* Form of Notice of Grant.
99.3* Form of Stock Option Agreement.
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).
99.9** Form of Stock Option Agreement (Non-Employee Director).
</TABLE>
* 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.
<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.
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
SEC such indemnification is against public policy as expressed in the 1933 Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
<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 13th day
of July, 1998.
CREDENCE SYSTEMS CORPORATION
By /s/ Wilmer R. Bottoms
-------------------------
Wilmer R. Bottoms
Chief Executive Officer and
Chairman of the Board
<PAGE>
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, the lawful attorney and agent, 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>
Signatures Title Date
<S> <C> <C>
/s/ Wilmer R. Bottoms Chief Executive Officer and July 13, 1998
- --------------------- --------------------------- -------------
Wilmer R. Bottoms Chairman of the Board of Directors
(Principal Executive Officer)
/s/ Dennis P. Wolf Chief Financial Officer and Secretary July 13, 1998
- ------------------ ------------------------------------- -------------
Dennis P. Wolf (Principal Financial and Accounting Officer)
/s/ Jerry Bruce Vice President, and Controller July 13, 1998
- --------------- ------------------------------ -------------
Jerry Bruce
/s/ Jos C. Henkens Director July 13, 1998
- ------------------ -------- -------------
Jos C. Henkens
/s/ Bernard V. Vonderschmitt Director July 13, 1998
- ---------------------------- -------- -------------
Bernard V. Vonderschmitt
/s/ Henk J. Evenhuis Director July 13, 1998
- -------------------- -------- -------------
Henk J. Evenhuis
/s/ William G. Howard, Jr. Director July 13, 1998
- -------------------------- -------- -------------
William G. Howard, Jr.
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
CREDENCE SYSTEMS CORPORATION
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
4.0 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 0-22366 on Form 8-A, and the
exhibits thereto, and Amendment No.1 thereto, which are incorporated
herein by reference pursuant to Item 3(d) of this Registration
Statement.
5.1 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-6 of this Registration
Statement.
99.1 Credence Systems Corporation 1993 Stock Option Plan (as amended and
restated through February 13, 1998).
99.2* Form of Notice of Grant.
99.3* Form of Stock Option Agreement.
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).
99.9** Form of Stock Option Agreement (Non-Employee Director).
</TABLE>
* 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.
EXHIBIT 5.1
OPINION OF BROBECK, PHLEGER & HARRISON LLP
July 13, 1998
Credence Systems Corporation
215 Fourier Avenue
Fremont, CA 94539
Re: Credence Systems Corporation Registration Statement on Form S-8
for 500,000 Shares of Common Stock and Related Stock Options
Ladies and Gentlemen:
We have acted as counsel to Credence Systems Corporation, a Delaware
corporation (the "Company"), in connection with the registration on Form S-8
(the "Registration Statement") under the Securities Act of 1933, as amended, of
an additional 500,000 shares of common stock and related stock options for
issuance under the Company's 1993 Stock Option Plan (the "Plan").
This opinion is being furnished in accordance with the requirements of Item
8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the establishment and
amendment of the Plan. Based on such review, we are of the opinion that if, as
and when the shares of common stock are issued and sold (and the consideration
therefor received) pursuant to the provisions of option agreements duly
authorized under the Plan and in accordance with the Registration Statement,
such shares will be duly authorized, legally issued, fully paid and
non-assessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement.
This opinion letter is rendered as of the date first written above and we
disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Option Plan or the shares of common stock issuable under such plans.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to incorporation by reference in the Registration Statement on Form
S-8 pertaining to the 1993 Stock Option Plan of Credence Systems Corporation, of
our report dated November 26, 1997 with respect to the consolidated financial
statements and schedule of Credence Systems Corporation included in its Annual
Report on Form 10-K for the year ended October 31, 1997, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
San Jose, California
July 10, 1998
EXHIBIT 99.1
CREDENCE SYSTEMS CORPORATION
1993 STOCK OPTION PLAN
(As Amended and Restated through February 13, 1998)
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.
II. DEFINITIONS
A. For purposes of the Plan, the following definitions
shall be in effect:
Board: the Corporation's Board of Directors.
1
<PAGE>
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,
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.
2
<PAGE>
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.
First Trading Day: the first trading day of each fiscal year.
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 (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.
3
<PAGE>
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 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.
4
<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
stockholders at the 1995 Annual Stockholders Meeting, (v) an additional
500,000-share increase authorized by the Board on January 26, 1996 and approved
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by the Corporation's stockholders at the 1996 Annual Stockholders Meeting, (vi)
an additional 500,000-share increase authorized by the Board on February 12,
1997, and approved by the stockholders at the 1997 Annual Stockholders Meeting,
and (vii) an additional 500,000-share increase authorized by the Board on
February 13, 1998, and approved by the stockholders at the 1998 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. In addition, the number of shares of Common Stock reserved for
issuance under this Plan will automatically be increased on each First Trading
Day, beginning with the 1999 First Trading Day and continuing through the fiscal
year 2003, by an amount equal to two percent (2%) of the total number of shares
outstanding on the last trading day of the immediately preceding fiscal year;
provided, however, that each such two percent (2%) increase shall be limited, to
the extent necessary, such that following each increase the sum of the options
outstanding under the Company's stock option plans plus the shares available for
issuance under all of the Company's stock option plans (together, the "Option
Shares") does not exceed fifteen percent (15%) of the sum of the outstanding
voting shares of the capital stock of the Company plus the Option Shares.
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. Unvested shares issued under the Plan and subsequently
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.
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 separately exercisable stock appreciation rights under the Plan from
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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.
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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
- full payment through a broker-dealer sale
and remittance procedure pursuant to which the Optionee (I) shall provide
irrevocable 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 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 the notice of the option exercise is delivered to the
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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 (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
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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.
(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
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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.
(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 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.
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
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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 at the time the option is granted or at any time while the
option remains outstanding, 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.
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 at the time the option is granted or at any time
while the option is outstanding, 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
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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 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. The Plan Administrator shall, at the
time the limited stock appreciation right is granted, pre-approve the subsequent
exercise of that right in accordance with the terms and conditions of this
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Section V.D.. Accordingly, no additional approval of the Plan Administrator or
the Board shall be required at the time of the actual 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.
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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
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
- ----------
/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.
15
<PAGE>
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 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 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 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.
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
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<PAGE>
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.
(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.
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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.
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.
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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, 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. 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 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
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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.
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
750,000/3/ 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
- ----------
/3/ Reflects the 3-for-2 split of the Common Stock effected by the Corporation
on June 5, 1995
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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 (iii) 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 was approved by the
stockholders at the 1997 Annual Meeting. 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. The Plan was
subsequently amended on February 13, 1998 (the "February 1998 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) implement an automatic share increase feature, pursuant to which
the number of shares available for issuance over the term of the Plan shall
automatically increase on the first trading day of each fiscal year, beginning
with the 1999 fiscal year and continuing through the fiscal year 2003, by an
amount equal to two percent (2%) of the total number of shares of Common Stock
outstanding on the last trading day of the immediately preceding fiscal year.
The February 1998 Amendment was approved by the stockholders at the 1998 Annual
Meeting. 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
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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.
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.
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