<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 15, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------------
PAIRGAIN TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
--------------------
DELAWARE 33-0282809
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
14402 FRANKLIN AVENUE
TUSTIN, CALIFORNIA 92780
(Address of principal executive offices) (zip code)
--------------------
PAIRGAIN TECHNOLOGIES, INC.
1993 STOCK OPTION/STOCK ISSUANCE PLAN, as amended
(Full title of the plan)
--------------------
Charles S. Strauch
Chairman and Chief Executive Officer
PAIRGAIN TECHNOLOGIES, INC.
14402 Franklin Avenue
Tustin, California 92780
(714) 832-9922
(Name, address and telephone number, including area code, of agent for service)
--------------------
<TABLE>
<CAPTION>
=========================================================================================================
Proposed Proposed
maximum maximum
Amount to be offering price aggregate Aggregate
Title of securities to be registered registered(1) per share(2) offering price(2) filing fee
- ------------------------------------ ------------- ------------- ----------------- ----------
<S> <C> <C> <C> <C>
1993 Stock Option/Stock Issuance
Plan
3,000,000 shares $21.4375 $64,312,500 $19,489
Common Stock
=========================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of Common
Stock which become issuable under the 1993 Stock Option/Stock Issuance 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 PairGain Technologies, Inc. on
August 13, 1997, as reported by the Nasdaq National Market.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
PairGain Technologies, Inc., a Delaware corporation (the
"Registrant"), hereby incorporates by reference into this Registration Statement
the following documents which were previously filed with the Securities and
Exchange Commission (the "SEC"):
(a) The Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996 filed pursuant to Section 13(a) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), on
March 31, 1997, as amended on Form 10-K/A filed on April 30,
1997;
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997, filed with the SEC on May 15, 1997;
(c) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1997, filed with the SEC on August 11,
1997;
(d) The Registrant's Current Report on Form 8-K filed with the
SEC on March 5, 1997, as amended on April 25, 1997; and
(e) The Registrant's Registration Statement No. 0-22202 on Form
8-A filed with the SEC on August 6, 1993 pursuant to Section 12
of the 1934 Act, 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
by the Registrant pursuant to Section 13(a), 13(c), 14 or 15(d) of 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 at the time
of such amendment will 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. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained in any subsequently filed document which also is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law, the
Registrant has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "1933 Act"). The Registrant's Bylaws
provide that the Registrant will indemnify its directors and officers to the
fullest extent permitted by law and require the Registrant to advance litigation
expenses upon receipt by the Registrant of an undertaking by the director or
officer to repay such advances if it is ultimately determined that the director
or officer is not entitled to indemnification. The Bylaws further provide that
rights conferred under such Bylaws shall not be deemed to be exclusive of any
other right such persons may have or acquire under any statute or any provision
of any Certificate of Incorporation, Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
II-1
<PAGE> 3
The Registrant's Restated Certificate of Incorporation provides
that, pursuant to Delaware Law, its directors shall not be liable for monetary
damages for breach of their fiduciary duty of care to the Registrant and its
stockholders. This provision in the Restated Certificate of Incorporation does
not eliminate the duty of care, and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of non-monetary relief will remain
available under Delaware Law. In addition, each director will continue to be
subject to liability for breach of the director's duty of loyalty to the
Registrant or its stockholders, for acts or omissions not in good faith or
involving intentional misconduct or knowing violations of law, for actions
leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware Law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities law or
state or federal environmental laws.
In addition, the Registrant has entered into agreements to
indemnify its directors and certain of its officers beyond the indemnification
provided for in the Restated Certificate of Incorporation and Bylaws. These
agreements will, among other things, indemnify the Registrant's directors and
certain of its officers for certain expenses (including attorneys' fees),
judgments, fines and settlement amounts incurred by such person in any action or
proceeding, including any action by or in the right of the Registrant, on
account of services as a director or officer of the Registrant, or as a director
or officer of any other company or enterprise to which the person provides
services at the request of the Registrant.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8. EXHIBITS
Exhibit Number Exhibit
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Independent Auditors' Consent - Deloitte & Touche LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 1993 Stock Option/Stock Issuance Plan, as amended.
99.2* Form of Notice of Grant to be generally used in conjunction with
the 1993 Stock Option/Stock Issuance Plan.
99.3* Form of Stock Option Agreement to be generally used in
conjunction with the 1993 Stock Option/Stock Issuance Plan.
99.4* Addendum to Stock Option Agreement - Change in Control.
99.5* Addendum to Stock Option Agreement - Financial Assistance.
99.6* Addendum to Stock Option Agreement - Special Tax Election.
99.7* Addendum to Stock Option Agreement - Limited Stock Appreciation
Rights.
99.8* Form of Stock Issuance Agreement to be generally used in
conjunction with the 1993 Stock Option/Stock Issuance Plan.
* Exhibits 99.2 through 99.8 are incorporated herein by reference to
Exhibits 99.2 through 99.8, respectively, to Registrant's Registration
Statement No. 33-96080 on Form S-8 filed with the SEC on August 21,
1995.
II-2
<PAGE> 4
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 1933 Act, (ii) to reflect in the prospectus any facts
or events arising after the effective date of the 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 the
Registration Statement, and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement; 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
clauses 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 at the termination of the Registrant's 1993 Stock Option/Stock
Issuance 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 the Registration Statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
1933 Act may be permitted to directors, officers or 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.
II-3
<PAGE> 5
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 Tustin, State of California, on August 15, 1997.
PAIRGAIN TECHNOLOGIES, INC.
By: /s/ Charles S. Strauch
-------------------------------------
Charles S. Strauch, Chairman,
Chief Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned officers and directors of PairGain
Technologies, Inc., a Delaware corporation, do hereby constitute and appoint
Charles S. Strauch and Howard S. Flagg, and each of them, the lawful
attorneys-in-fact 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 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 to amendments or supplements thereof, and each of
the undersigned hereby ratifies and confirms all that said attorneys and agents,
or any one 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>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Charles S. Strauch Chairman, Chief Executive Officer August 15, 1997
- -------------------------------- and Director (Principal Executive Officer)
Charles S. Strauch
/s/ Charles W. McBrayer Vice President, Finance and Administration, August 15, 1997
- -------------------------------- Secretary and Chief Financial Officer
Charles W. McBrayer (Principal Financial Officer)
</TABLE>
II-4
<PAGE> 6
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Robert R. Price Corporate Controller August 15, 1997
- ------------------------------- (Principal Accounting Officer)
Robert R. Price
/s/ Howard S. Flagg President and Director August 15, 1997
- ------------------------------
Howard S. Flagg
/s/ Benedict A. Itri Executive Vice President, August 15, 1997
- ------------------------------ Chief Technical Officer and Director
Benedict A. Itri
/s/ Robert A. Hoff Director August 15, 1997
- ------------------------------
Robert A. Hoff
/s/ Robert C. Hawk Director August 15, 1997
- --------------------------------
Robert C. Hawk
/s/ B. Allen Lay Director August 15, 1997
- ------------------------------
B. Allen Lay
</TABLE>
II-5
<PAGE> 7
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
PAIRGAIN TECHNOLOGIES, INC.
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------ -------
<S> <C>
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Independent Auditors' Consent - Deloitte & Touche LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 1993 Stock Option/Stock Issuance Plan, as amended.
99.2* Form of Notice of Grant to be generally used in conjunction with
the 1993 Stock Option/Stock Issuance Plan.
99.3* Form of Stock Option Agreement to be generally used in
conjunction with the 1993 Stock Option/Stock Issuance Plan.
99.4* Addendum to Stock Option Agreement - Change in Control.
99.5* Addendum to Stock Option Agreement - Financial Assistance.
99.6* Addendum to Stock Option Agreement - Special Tax Election.
99.7* Addendum to Stock Option Agreement - Limited Stock Appreciation
Rights.
99.8* Form of Stock Issuance Agreement to be generally used in
conjunction with the 1993 Stock Option/Stock Issuance Plan.
* Exhibits 99.2 through 99.8 are incorporated herein by
reference to Exhibits 99.2 through 99.8, respectively, to
Registrant's Registration Statement No. 33-96080 on Form S-8
filed with the SEC on August 21, 1995.
</TABLE>
<PAGE> 1
EXHIBIT 5
August 15, 1997
PairGain Technologies, Inc.
14402 Franklin Avenue
Tustin, California 92780
Re: Registration Statement for Offering of
3,000,000 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 an additional
3,000,000 shares of the Common Stock of PairGain Technologies, Inc. (the
"Company") under the Company's 1993 Stock Option/Stock Issuance Plan (the
"Plan"). We advise you that, in our opinion, when such shares have been issued
and sold pursuant to the applicable provisions of the Plan and in accordance
with the Registration Statement, such shares will be duly authorized, validly
issued, fully paid and non-assessable 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> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
PairGain Technologies, Inc. on Form S-8 of our report dated February 27, 1997,
appearing in the Annual Report on Form 10-K/A of PairGain Technologies, Inc. for
the year ended December 31, 1996.
/s/ Deloitte & Touche LLP
Costa Mesa, California
August 15, 1997
<PAGE> 1
EXHIBIT 99.1
PAIRGAIN TECHNOLOGIES, INC.
1993 STOCK OPTION/STOCK ISSUANCE PLAN
(AMENDED AND RESTATED AS OF JUNE 11, 1997)
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1993 Stock Option/Stock Issuance Plan ("Plan") is
intended to promote the interests of PairGain Technologies, Inc., 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 and other independent
contractors 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. This Plan shall serve as the successor to the Corporation's
existing 1990 Stock Option Plan (the "Predecessor Plan"), and no further option
grants or share issuances shall be made under the Predecessor Plan from and
after the Effective Date of this Plan. All outstanding stock options and
unvested share issuances under the Predecessor Plan on the Effective Date are
hereby incorporated into this Plan and shall accordingly be treated as
outstanding stock options and unvested share issuances under this Plan. However,
each outstanding option grant and unvested share issuance so incorporated shall
continue to be governed solely by the express terms and conditions of the
instrument evidencing such grant or issuance, 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. All unvested shares of Common
Stock outstanding under the Predecessor Plan on the Effective Date shall
continue to be governed solely by the express terms and conditions of the
instruments evidencing such issuances, and no provision of this Plan shall be
deemed to affect or modify the rights or obligations of the holders of such
unvested shares.
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.
<PAGE> 2
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 which the Board does not
recommend such stockholders to accept; 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.
EFFECTIVE DATE: the first date on which the shares of Common
Stock were registered under Section 12(g) of the 1934 Act.
EMPLOYEE: an individual who performs services while in the
employ of the
2.
<PAGE> 3
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 System, 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 through the
NASDAQ National Market System 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 the following transaction:
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 which the Board does not
recommend such stockholders to accept, and
b. more than fifty percent (50%) of the securities so
acquired in such tender or exchange offer are accepted from holders
other than the officers and directors of the Corporation subject to the
short-swing profit restrictions of Section 16 of the 1934 Act.
1934 ACT: the Securities Exchange Act of 1934, as amended from
time to time.
OPTIONEE: any person to whom an option is granted under the
Option Grant Program in effect under the Plan.
3.
<PAGE> 4
PARTICIPANT: any person who receives a direct issuance of Common
Stock under the Stock Issuance 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 or the Participant 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 an independent
consultant or advisor, except to the extent otherwise specifically provided in
the applicable stock option or stock issuance 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 Option, 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 Option Grant Program specified in Article Two and the Stock
Issuance Program specified in Article Three. Under the 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
4.
<PAGE> 5
provisions of Article Two. Under the Stock Issuance Program, eligible
individuals may be issued shares of Common Stock directly, either through the
immediate purchase of such shares at a price not less than eighty-five percent
(85%) of the Fair Market Value of the shares at the time of issuance or as a
bonus tied to the performance of services or the Corporation's attainment of
financial objectives, without any cash payment required of the recipient.
B. General Provisions. Unless the context clearly indicates
otherwise, the provisions of Articles One and Four shall apply to the Option
Grant Program and the Stock Issuance Program and shall accordingly govern the
interests of all individuals under the Plan.
IV. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Committee. No
non-employee Board member shall be eligible to serve on the Committee if such
individual has, within the relevant period designated below, received an option
grant or direct stock issuance under this Plan or any other stock plan of the
Corporation (or any parent or subsidiary corporation):
(1) for each of the initial members of the Committee, the
period commencing with the Effective Date of the Plan and ending with
the date of his or her appointment to the Committee, or
(2) for any successor or substitute member, the twelve
(12)-month period immediately preceding the date of his or her
appointment to the Committee or (if shorter) the period commencing with
the Effective Date of the Plan and ending with the date of his or her
appointment to 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 Plan and to make such
determinations under, and issue such interpretations of, the provisions of the
Plan and any outstanding option grants or stock issuances 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 Plan or any outstanding
option or share issuance thereunder.
V. OPTION GRANTS AND STOCK ISSUANCES
A. The persons eligible to participate in the Plan shall be
limited to the following:
(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);
5.
<PAGE> 6
(ii) non-employee Board members; and
(iii) those consultants or other independent contractors who
provide valuable services to the Corporation (or its parent or
subsidiary corporations).
B. Non-employee Board members who serve as Plan Administrator
shall not, during their period of service as such, be eligible to participate in
the Option Grant and Stock Issuance Programs or in any other stock option, stock
purchase, stock bonus or other stock plan of the Corporation (or its parent or
subsidiary corporations).
C. The Plan Administrator shall have full authority to determine,
(i) with respect to the option grants made under the Option Grant Program, 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
Section 422 of the Code 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 and
(ii) with respect to stock issuances under the Stock Issuance Program, the
number of shares to be issued to each Participant, the vesting schedule (if any)
to be applicable to the issued shares and the consideration to be paid by the
individual for such shares.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of the Corporation's 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 which may be issued over
the term of the Plan shall not exceed 21,800,000 shares1/, subject to adjustment
from time to time in accordance with the provisions of this Section VI. Such
authorized share reserve is comprised of (i) the number of shares which remained
available in the aggregate for issuance, as of the Effective Date, under the
Predecessor 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 or
direct share issuance under the Predecessor Plan (estimated to be 2,100,166
shares in the aggregate on a post-split basis as of June 30, 1993 ), (ii) the
increase of 1,599,834 shares authorized by the Board under this Plan and
approved by the stockholders prior to the Effective Date, (iii) the additional
increase of 1,000,000 shares authorized by the Board on January 27, 1995, and
approved by the stockholders at the 1995 Annual Stockholders Meeting, and (iv)
the additional increase of 3,000,000 shares authorized by the Board on January
21, 1997, and approved by the stockholders at the 1997 Annual Stockholders
Meeting. To the extent one or more outstanding options under the Predecessor
Plan 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.
- --------
1/ Adjusted to reflect one or more splits of the Common Stock.
6.
<PAGE> 7
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 4,000,000 shares2/ of Common Stock over the term of the Plan. For
purposes of this limitation, option grants, stock appreciation rights and direct
stock issuances made prior to January 1, 1995 shall not be taken into account.
C. Should one or more outstanding options under this Plan
(including outstanding options under the Predecessor Plan incorporated into this
Plan) expire or terminate for any reason prior to exercise in full (including
any option canceled 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 issuance under the
Plan. Shares subject to any option or portion thereof surrendered or canceled in
accordance with Section V of Article Two and all share issuances under the Plan
(including unvested share issuances under the Predecessor Plan which have been
incorporated into this Plan), whether or not the shares are subsequently
repurchased by the Corporation pursuant to its repurchase rights under the Plan,
shall reduce on a share-for-share basis the number of shares of Common Stock
available for subsequent issuance under the Plan. In addition, should the option
price of an outstanding option under the Plan (including any option incorporated
from the Predecessor Plan) be paid with shares of Common Stock or should shares
of Common Stock otherwise issuable under the Plan be withheld by the Corporation
in satisfaction of the withholding taxes incurred in connection with the
exercise of an outstanding option under the Plan or the vesting of a direct
share issuance made 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 share issuance
and not by the net number of shares of Common Stock actually issued to the
holder of such option or share issuance.
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,
separately exercisable stock appreciation rights and direct stock issuances over
the remaining term of the Plan, (iii) the number and/or class of securities and
price per share in effect under each option outstanding under the Option Grant
Program and (iv) the number and/or class of securities and price per share in
effect under each outstanding option incorporated into this Plan from the
Predecessor Plan. 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.
- ------------------
7.
<PAGE> 8
ARTICLE TWO
OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the 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 in accordance with the following provisions:
(i) The option price per share of the Common Stock
subject to an Incentive Option shall in no event be less than one
hundred percent (100%) of the Fair Market Value of such Common Stock on
the grant date.
(ii) The option price per share of the Common Stock
subject to a non-statutory stock option shall in no event be less than
eighty-five percent (85%) of the Fair Market Value of such Common Stock
on the 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 cash or check drawn to the Corporation's
order;
- 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 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
8.
<PAGE> 9
- full payment through a broker-dealer sale and remittance
procedure pursuant to which the Optionee (I) shall provide irrevocable
written instructions to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate option price payable for the
purchased shares plus all applicable Federal and State income and
employment taxes required to be withheld by the Corporation in
connection with 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
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. During the lifetime of the
Optionee, the option, together with any stock appreciation rights pertaining to
such option, shall be exercisable only by the Optionee and shall not be
assignable or transferable by the Optionee except for a transfer of the option
effected by will or by the laws of descent and distribution following the
Optionee's death.
C. 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.
9.
<PAGE> 10
- Under no circumstances shall any such option be
exercisable after the specified expiration date of the option term.
- During the applicable post-Service exercise 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 his or
her 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 the
option 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 the option is not otherwise at that time exercisable or in
which the Optionee is not otherwise at that time vested.
- 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.
D. 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.
E. 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
10.
<PAGE> 11
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.
(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 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
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
11.
<PAGE> 12
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 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 granted under the Plan 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.
12.
<PAGE> 13
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 Plan 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 (i) eighty five percent (85%) of the Fair Market Value of the
Common Stock on the new grant date or (ii) one hundred percent (100%) of such
Fair Market Value in the case of an Incentive Option.
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 number of shares 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.
13.
<PAGE> 14
B. No surrender of an option shall be effective hereunder unless
it is approved by the Plan Administrator. If the surrender is so approved, then
the distribution to which the Optionee shall accordingly become entitled under
this Section V may be made in shares of Common Stock valued at Fair Market Value
on the option surrender date, in cash, or partly in shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the 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 effected at any time when the Corporation's outstanding Common
Stock is registered under Section 12(g) of the 1934 Act, the officer shall have
a thirty (30)-day period in which he or she may surrender any outstanding
options with such a limited stock appreciation right in effect for at least six
(6) months 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 (or surrendered portion of such
option) over (ii) the aggregate option price payable for such 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 issuance under the Plan.
14.
<PAGE> 15
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares may be issued under the Stock Issuance Program through
direct and immediate purchases without any intervening stock option grants. The
issued shares shall be evidenced by a Stock Issuance Agreement ("Issuance
Agreement") that complies with the terms and conditions of this Article Three.
A. Consideration.
(1) Shares of Common Stock drawn from the Corporation's
authorized but unissued shares of Common Stock ("Newly Issued Shares") shall be
issued under the Stock Issuance Program for one or more of the following items
of consideration which the Plan Administrator may deem appropriate in each
individual instance:
(i) cash or cash equivalents (such as a personal
check or bank draft) paid to the Corporation;
(ii) a promissory note payable to the
Corporation's order in one or more installments, which may be
subject to cancellation in whole or in part upon the terms and
conditions established by the Plan Administrator; or
(iii) past services rendered to the Corporation or
any parent or subsidiary corporation.
(2) Newly Issued Shares may, in the absolute discretion of
the Plan Administrator, be issued for consideration with a value less than
one-hundred percent (100%) of the Fair Market Value of such shares at the time
of issuance, but in no event less than eighty-five percent (85%) of such Fair
Market Value.
(3) Shares of Common Stock reacquired by the Corporation and
held as treasury shares ("Treasury Shares") may be issued under the Stock
Issuance Program for such consideration (including one or more of the items of
consideration specified in subparagraph 1. above) as the Plan Administrator may
deem appropriate, whether such consideration is in an amount less than, equal
to, or greater than the Fair Market Value of the Treasury Shares at the time of
issuance. Treasury Shares may, in lieu of any cash consideration, be issued
subject to such vesting requirements tied to the Participant's period of future
Service or the Corporation's attainment of specified performance objectives as
the Plan Administrator may establish at the time of issuance.
B. Vesting Provisions.
15.
<PAGE> 16
(1) Shares of Common Stock issued under the Stock Issuance
Program may, in the absolute discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service. The elements of the vesting schedule
applicable to any unvested shares of Common Stock issued under the Stock
Issuance Program, namely:
(i) the Service period to be completed by the
Participant or the performance objectives to be achieved by the
Corporation,
(ii) the number of installments in which the
shares are to vest,
(iii) the interval or intervals (if any) which are
to lapse between installments, and
(iv) the effect which death, Permanent Disability
or other event designated by the Plan Administrator is to have
upon the vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Issuance
Agreement executed by the Corporation and the Participant at the time such
unvested shares are issued.
(2) The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to him or her under the Plan,
whether or not his or her interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends paid on such shares. Any new, additional or different shares of
stock or other property (including money paid other than as a regular cash
dividend) which the Participant may have the right to receive with respect to
his or her unvested shares by reason of any stock dividend, stock split,
reclassification of Common Stock or other similar change in the Corporation's
capital structure or by reason of any Corporate Transaction shall be issued,
subject to (i) the same vesting requirements applicable to his or her unvested
shares and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
(3) Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock under the Plan, then those
shares shall be immediately surrendered to the Corporation for cancellation, and
the Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money promissory note), the Corporation shall repay to
the Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to such surrendered shares. The surrendered shares
may, at the Plan Administrator's discretion, be retained by the Corporation as
Treasury Shares or may be retired to authorized but unissued share status.
(4) The Plan Administrator may in its discretion elect to
waive the surrender and cancellation of one or more unvested shares of Common
Stock (or other assets attributable thereto) which would otherwise occur upon
the non-completion of the vesting schedule
16.
<PAGE> 17
applicable to such shares. Such waiver shall result in the immediate vesting of
the Participant's interest in the shares of Common Stock as to which the waiver
applies. Such waiver may be effected at any time, whether before or after the
Participant's cessation of Service or the attainment or non-attainment of the
applicable performance objectives.
II. CORPORATE TRANSACTIONS/CHANGE IN CONTROL
A. Upon the occurrence of any Corporate Transaction, all unvested
shares of Common Stock at the time outstanding under the Stock Issuance Program
shall immediately vest in full, except to the extent the Plan Administrator
imposes limitations in the Issuance Agreement which preclude such accelerated
vesting in whole or in part.
B. 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 immediate and
automatic vesting of one or more unvested shares outstanding under the Stock
Issuance Program at the time of such Change in Control. The Plan Administrator
shall also have full power and authority to condition any such accelerated
vesting upon the subsequent termination of the Participant's Service within a
specified period following the Change in Control.
III. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Unvested shares may, in the Plan Administrator's discretion,
be held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing such unvested shares. To the extent an
escrow arrangement is utilized, the unvested shares and any securities or other
assets issued with respect to such shares (other than regular cash dividends)
shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such shares (or other securities or assets) vests.
Alternatively, if the unvested shares are issued directly to the Participant,
the restrictive legend on the certificates for such shares shall read
substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE
ACCORDINGLY SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND (II)
CANCELLATION OR REPURCHASE IN THE EVENT THE REGISTERED HOLDER (OR
HIS/HER PREDECESSOR IN INTEREST) CEASES TO REMAIN IN THE
CORPORATION'S SERVICE. SUCH TRANSFER RESTRICTIONS AND THE TERMS
AND CONDITIONS OF SUCH CANCELLATION OR REPURCHASE ARE SET FORTH
IN A STOCK ISSUANCE AGREEMENT BETWEEN THE CORPORATION AND THE
REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) DATED____
________, 199___, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE CORPORATION."
B. The Participant shall have no right to transfer any unvested
shares of Common Stock issued to him or her under the Stock Issuance Program.
For purposes of this
17.
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restriction, the term "transfer" shall include (without limitation) any sale,
pledge, assignment, encumbrance, gift or other disposition of such shares,
whether voluntary or involuntary. Upon any such attempted transfer, the unvested
shares shall immediately be canceled, and neither the Participant nor the
proposed transferee shall have any rights with respect to those shares. However,
the Participant shall have the right to make a gift of unvested shares acquired
under the Stock Issuance Program to his or her spouse or issue, including
adopted children, or to a trust established for such spouse or issue, provided
the donee of such shares delivers to the Corporation a written agreement to be
bound by all the provisions of the Stock Issuance Program and the Issuance
Agreement applicable to the gifted shares.
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ARTICLE FOUR
MISCELLANEOUS
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any
Optionee or Participant (including an Optionee or Participant who is an officer
of the Corporation) in the exercise of one or more options granted to such
Optionee under the Option Grant Program or the purchase of one or more shares
issued to such Participant under the Stock Issuance 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 Participant or (ii) permitting the Optionee or
Participant to pay the option price or purchase 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 or issuance 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 or
Participant may not exceed the option or purchase price of the acquired shares
(less the par value of such shares) plus any Federal and State income and
employment tax liability incurred by the Optionee or Participant 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, nor the rights of any Participant with respect to Common Stock issued
under the Stock Issuance Program prior to such action, unless the Optionee or
Participant consents to such amendment. In addition, the Board may not, without
the approval of the Corporation's stockholders, amend the Plan to (i) materially
increase the maximum number of shares issuable under the Plan or the maximum
number of shares for which any one person may be granted options, separately
exercisable stock appreciation rights and direct stock issuances in the
aggregate over the term of the Plan, except for permissible adjustments under
Section VI.C. of Article One, (ii) materially modify the eligibility
requirements for Plan participation or (iii) materially increase the benefits
accruing to Plan participants.
B. (i) Options to purchase shares of Common Stock may be granted
under the Option Grant Program and (ii) shares of Common Stock may be issued
under the Stock Issuance Program, which are in both instances in excess of the
number of shares then available for
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issuance under the Plan, provided any excess shares actually issued under
the Option Grant Program or the Stock Issuance 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 or excess share issuances 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 tax 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 Securities and Exchange Commission Rule
16b-3), provide any or all holders of non-statutory options 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 the unvested shares 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 became effective on the Effective Date for the Plan.
B. On January 27, 1995, the Board amended the Plan to increase
the number of shares available for issuance pursuant to the Plan by 1,000,000
shares, and the stockholders approved such increase at the 1995 Annual
Stockholders Meeting.
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C. On April 28, 1995, the Board amended the Plan to impose a
limitation on the maximum number of shares of Common Stock for which any one
participant in the Plan may be granted stock options and separately exercisable
stock appreciation rights after December 31, 1994. The amendment was approved by
the stockholders at the 1995 Annual Stockholders Meeting.
D. On January 21, 1997, the Board amended the Plan to increase
the number of shares available for issuance pursuant to the Plan by an
additional 3,000,000 shares, and the stockholders approved such increase at the
1997 Annual Stockholders Meeting.
D. Each stock option grant outstanding under the Predecessor Plan
immediately prior to the Effective Date shall be 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. Each unvested
share of Common Stock outstanding under the Predecessor Plan on the Effective
Date shall continue to be governed solely by the terms and conditions of the
instrument evidencing such share issuance, and nothing in this Plan shall be
deemed to affect or otherwise modify the rights or obligations of the holder of
such unvested shares.
E. The option/vesting acceleration provisions of Section III of
Article Two and Section II of Article Three relating to Corporate Transactions
and Changes in Control may, in the Plan Administrator's discretion, be extended
to one or more stock options or unvested share issuances which are outstanding
under the Predecessor Plan on the Effective Date but which do not otherwise
provide for such acceleration.
F. The sale and remittance procedure authorized for the exercise
of outstanding options under this Plan shall be available for all options
granted under this Plan on or after the Effective Date and for all non-statutory
options outstanding under the Predecessor Plan and incorporated into this Plan.
The Plan Administrator may also allow such procedure to be utilized in
connection with one or more disqualifying dispositions of Incentive Option
shares effected after the Effective Date, whether such Incentive Options were
granted under this Plan or the Predecessor Plan.
G. The Plan shall terminate upon the earlier of (i) June 30, 2003
or (ii) the date on which all shares available for issuance under the Plan shall
have been issued or canceled pursuant to the exercise, surrender or cash-out of
the options granted under the Plan or the issuance of shares (whether vested or
unvested) under the Stock Issuance Program. Upon such plan termination, all
outstanding option grants and unvested share issuances shall continue to have
force and effect in accordance with the provisions of the instruments evidencing
such grants or issuances.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to option grants or share issuances under the Plan shall be used
for general corporate purposes.
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VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
under the Plan, the issuance of any shares under the Stock Issuance Program and
the issuance of Common Stock upon the exercise or surrender of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options 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. The right to acquire Common Stock or other assets under the
Plan may not be assigned, encumbered or otherwise transferred by any Optionee or
Participant.
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, as such laws are applied to contracts entered into and performed in
such State.
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 Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
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