<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-------------
PAIRGAIN TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
-------------
<TABLE>
<S> <C>
DELAWARE 33-0282809
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
</TABLE>
14402 FRANKLIN AVENUE
TUSTIN, CALIFORNIA 92780
(Address of principal executive offices) (zip code)
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AVIDIA SYSTEMS, INC.
1996 STOCK PLAN
(Full title of the plan)
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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)
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<TABLE>
<CAPTION>
===============================================================================================================
Proposed maximum Proposed maximum
Amount to be offering price aggregate Amount of
Title of securities to be registered registered(1) per share(2) offering price(2) registration fee
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options to Purchase Common Stock 232,564 N/A N/A N/A
Common Stock, $.0005 par value 232,564 $1.78 $413,964 $126
===============================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of Common
Stock which become issuable under the Avidia Systems, Inc. 1996 Stock 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 weighted average
exercise price of the outstanding options.
<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/A 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 April 30,
1997;
(b) The Registrant's Current Report on Form 8-K filed with the SEC on
March 5, 1997;
(c) The Registrant's Current Report on Form 8-K/A filed with the SEC on
April 25, 1997; and
(d) 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 herein or 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 bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
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 the directors' 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
II-1
<PAGE> 3
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
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
4 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 0-22202 on Form 8-A, which
is incorporated herein by reference pursuant to Item 3(d) of this
Registration Statement.
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 Avidia Systems, Inc. (formerly ATM Products, Inc.) 1996 Stock Plan.
99.2 Form of Incentive Stock Option.
99.3 Form of Non-Qualified Stock Option Agreement.
99.4 Form of Stock Option Assumption Agreement.
</TABLE>
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 AVIDIA Systems, Inc. 1996 Stock 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 foregoing provisions, 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-2
<PAGE> 4
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 May 5, 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 Charles W. McBrayer, 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 May 5, 1997
Charles S. Strauch and Director (Principal Executive Officer)
/s/ Charles W. McBrayer Vice President, Finance and Administration, May 5, 1997
- ------------------------- Secretary and Chief Financial Officer
Charles W. McBrayer (Principal Financial Officer)
/s/ Robert R. Price Corporate Controller May 5, 1997
- ------------------------- (Principal Accounting Officer)
Robert R. Price
</TABLE>
II-3
<PAGE> 5
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Howard S. Flagg President and Director May 5, 1997
- --------------------------
Howard S. Flagg
/s/ Benedict A. Itri Executive Vice President, May 5, 1997
- -------------------------- Chief Technical Officer and Director
Benedict A. Itri
/s/ Robert A. Hoff Director May 5, 1997
- ---------------------------
Robert A. Hoff
/s/ Robert C. Hawk Director May 5, 1997
- ----------------------------
Robert C. Hawk
/s/ B. Allen Lay Director May 5, 1997
- ----------------------------
B. Allen Lay
</TABLE>
II-4
<PAGE> 6
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM S-8
UNDER SECURITIES ACT OF 1933
PAIRGAIN TECHNOLOGIES, INC.
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
4 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 0-22202 on Form 8-A, which
is incorporated herein by reference pursuant to Item 3(d) of this
Registration Statement.
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 AVIDIA Systems, Inc. (formerly ATM Products, Inc.) 1996 Stock Plan.
99.2 Form of Incentive Stock Option.
99.3 Form of Non-Qualified Stock Option Agreement.
99.4 Form of Stock Option Assumption Agreement.
</TABLE>
<PAGE> 1
EXHIBIT 5
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
May 7, 1997
PairGain Technologies, Inc.
14402 Franklin Avenue
Tustin, California 92780
Re: Registration Statement for Offering of
232,564 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 232,564 shares of
the Common Stock of PairGain Technologies, Inc. (the "Company") under the AVIDIA
Systems, Inc. 1996 Stock 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
May 7, 1997
<PAGE> 1
EXHIBIT 99.1
ATM PRODUCTS, INC.
1996 STOCK PLAN
SECTION 1. PURPOSE.
The purpose of the 1996 Stock Plan (the "Plan") is to secure for
ATM Products, Inc. (the "Company"), its parent (if any) and any subsidiaries of
the Company (collectively the "Related Corporations") the benefits arising from
capital stock ownership by those employees, directors, officers and consultants
of the Company and any Related Corporations who will be responsible for the
Company's future growth and continued success.
The Plan will provide a means whereby (a) employees of the
Company and any Related Corporations may purchase stock in the Company pursuant
to options which qualify as "incentive stock options" ("Incentive Stock
Options") under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"); (b) directors, employees, consultants, advisors and vendors of the
Company and any Related Corporations may purchase stock in the Company pursuant
to options granted hereunder which do not qualify as Incentive Stock Options
("Non-Qualified Option" or "Non-Qualified Options"); (c) directors, employees,
consultants, advisors and vendors of the Company and any Related Corporations
may be awarded stock in the Company ("Awards"); and (d) directors, employees,
consultants, advisors and vendors of the Company and any Related Corporations
may make direct purchases of stock in the Company ("Purchases"). Both Incentive
Stock Options and Non-Qualified Options are referred to hereafter individually
as an "Option" and collectively as "Options." As used herein, the terms "parent"
and "subsidiary" mean "parent corporation" and "subsidiary corporation" as those
terms are defined in Section 424 of the Code.
SECTION 2. ADMINISTRATION.
2.1 BOARD OF DIRECTORS AND THE COMMITTEE. The Plan will be
administered by the Board of Directors of the Company whose construction and
interpretation of the terms and provisions hereof shall be final and conclusive.
Any director to whom an option is awarded shall be ineligible to vote upon his
or her option, but options may be granted any such director by a vote of the
remainder of the directors, except as limited below. The Board of Directors may
in its sole discretion grant Options, issue shares upon exercise of such
Options, grant Awards and approve Purchases, all as provided in the Plan. The
Board of Directors shall have authority subject to the express provisions of the
Plan, to construe the Plan and its related agreements, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of the respective Option, Award and Purchase agreements, which need
not be identical, and to make all other determinations in the judgment of the
Board of Directors necessary or desirable for the administration of the Plan.
The Board of Directors may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any related agreement in the
manner and to the extent it shall deem expedient to carry the Plan into effect
and it shall be the sole and final judge of such expediency. No director shall
be liable for any action or determination made in good faith.
<PAGE> 2
The Board of Directors may delegate any or all of its powers under the Plan to a
Compensation Committee or other Committee (the "Committee") appointed by the
Board of Directors consisting of at least two members of the Board of Directors.
If the Committee is so appointed, all references to the Board of Directors
herein shall mean and relate to such Committee, unless the context otherwise
requires.
2.2 PARTICIPATION BY DIRECTORS. With respect to the
participation of any director in the Plan, his or her selection as a participant
and the number of Option, Award or Purchase shares to be allocated to such
director shall be determined either (i) by the Board of Directors, of which a
majority, as well as a majority of the directors acting in the matter, shall be
"disinterested persons" (as hereinafter defined) or (ii) by, or only in
accordance with, the recommendations of a committee of two or more persons
having full authority to act in the matter, of which all members of such
committee shall be disinterested persons. For the purposes of the Plan, a
director or member of such committee shall be deemed to be a "disinterested
person" only if such person qualifies as a "disinterested person" within the
meaning of paragraph (d)(3) of Rule 16b-3 (or any successor rule) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as such term
is interpreted from time to time.
SECTION 3. ELIGIBILITY.
3.1 INCENTIVE STOCK OPTIONS. Employees of the Company or of any
Related Corporation shall be eligible to receive Incentive Stock Options
pursuant to the Plan; provided that no person shall be granted any Incentive
Stock Option under the Plan who, at the time such Option is granted, owns,
directly or indirectly, Common Stock of the Company possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of its
Related Corporations, unless the requirements of Section 6.6(b) hereof are
satisfied. In determining whether this 10% threshold has been reached, the stock
attribution rules of Section 424(d) of the Code shall apply. Directors who are
not regular employees are not eligible to receive Incentive Stock Options.
3.2 NON-QUALIFIED OPTIONS, AWARDS, AND PURCHASES. Non-Qualified
Options, Awards and authorizations to make Purchases may be granted to any
director (whether or not an employee), employee, consultant, advisor or vendor
of the Company or any Related Corporation.
3.3 GENERALLY. The Board of Directors may take into
consideration a recipient's individual circumstances in determining whether to
grant an Incentive Stock Option, a Non-Qualified Option or an Award or to
approve a Purchase. Granting of any Option or Award or approval of any Purchase
for any individual or entity shall neither entitle that individual or entity to,
nor disqualify that individual or entity from, participation in any other grant
of Options or Awards or authorizations to make Purchases.
2
<PAGE> 3
SECTION 4. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Sections 9 and 10 hereof,
the stock to be offered under the Plan shall consist of shares of the Company's
Common Stock, no par value, and the number of shares of stock that may be issued
upon the exercise of all Options and Awards granted under the Plan shall not
exceed in the aggregate One Million Five Hundred Thousand (1,500,000) shares.
Such shares may be authorized and unissued shares or may be treasury shares. If
an Option granted hereunder shall expire or terminate for any reason without
having been exercised in full, or if the Company shall reacquire any unvested
shares issued pursuant to Awards or Purchases, the unpurchased shares subject
thereto and any unvested shares so reacquired shall again be available for
subsequent grants of Options and Awards and for Purchases under the Plan. Stock
issued pursuant to the Plan may be subject to such restrictions on transfer,
repurchase rights or other restrictions as shall be determined by the Board of
Directors.
SECTION 5. GRANTING OF OPTIONS AND AWARDS AND APPROVALS OF
PURCHASES.
Options and Awards may be granted and Purchases may be approved
under the Plan at any time after January 20, 1996 and prior to January 31, 2001.
The date of grant of an Option or Award or approval of a Purchase under the Plan
will be the date specified by the Board of Directors at the time such grants
such Option or Award or approves such Purchase; provided, however, that such
date shall not be prior to the date on which the Board of Directors takes such
action. The Board of Directors shall have the right, with the consent of an
optionee, to convert an Incentive Stock Option granted under the Plan to a
Non-Qualified Option pursuant to Section 6.7.
SECTION 6. SPECIAL PROVISIONS APPLICABLE TO OPTIONS.
6.1 PURCHASE PRICE.
(a) The purchase price per share of stock deliverable upon
the exercise of an Option shall be determined by the Board of Directors;
provided, however, that (i) in the case of an Incentive Stock Option,
the exercise price shall not be less than 100% of the fair market value
of such stock on the day the option is granted (except as modified in
Section 6.6(b) hereof), and (ii) in the case of a Non-Qualified Option,
the exercise price shall not be less than 50% of the fair market value
of such stock on the day such Option is granted.
(b) Options granted under the Plan may provide for the
payment of the exercise price by delivery of (i) cash or a check payable
to the order of the Company in an amount equal to the exercise price of
such Options; (ii) shares of Common Stock of the Company owned by the
optionee having a fair market value equal in amount to the exercise
price of the Options being exercised; or (iii) any combination of (i)
and (ii). The fair market value of any shares of the Company's Common
Stock which may be delivered upon exercise of an Option shall be
determined by the Board of Directors.
3
<PAGE> 4
(c) If, at the time an Option is granted under the Plan,
the Company's Common Stock is publicly traded, "fair market value" shall
be determined as of the last business day for which the prices or quotes
discussed in this sentence are available prior to the date such Option
is granted (the "Determination Date") and shall mean (i) the average (on
the Determination Date) of the high and low prices of the Common Stock
on the principal national securities exchange on which the Common Stock
is traded, if such Common Stock is then traded on a national securities
exchange; (ii) the last reported sale price (on the Determination Date)
of the Common Stock on the NASDAQ National Market List, if the Common
Stock is not then traded on a national securities exchange; or (iii) the
closing bid price (or average of bid prices) last quoted (on the
Determination Date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the
NASDAQ National Market List. However, if the Common Stock is not
publicly traded at the time an Option is granted under the Plan, "fair
market value" shall be deemed to be the fair value of the Common Stock
as determined by the Board of Directors after taking into consideration
all factors which it deems appropriate, including, without limitation,
recent sale and offer prices of the Common Stock in private transactions
negotiated at arm's length.
6.2 DURATION OF OPTIONS. Subject to Section 6.6(b) hereof, each
Option and all rights thereunder shall be expressed to expire on such date as
the Board of Directors may determine, but in no event later than ten years and
one month from the day on which the Option is granted and shall be subject to
earlier termination as provided herein, unless the Option was designated as an
Incentive Stock Option, in which case it shall expire no later than ten years
from the date on which the Option was granted.
6.3 EXERCISE OF OPTIONS.
(a) Subject to Section 6.6(b) hereof, each Option granted
under the Plan shall be exercisable at such time or times and during
such period as shall be set forth in the instrument evidencing such
Option. To the extent that an Option to purchase shares is not exercised
by an optionee when it becomes initially exercisable, it shall not
expire but shall be carried forward and shall be exercisable, on a
cumulative basis, until the expiration of the exercise period. No
partial exercise may be for less than ten (10) full shares of Common
Stock (or its equivalent).
(b) The Board of Directors shall have the right to
accelerate the date of exercise of any installments of any Option;
provided that the Board of Directors shall not accelerate the exercise
date of any installment of any Option granted to any employee as an
Incentive Stock Option (and not previously converted into a
Non-Qualified Option pursuant to Section 6.7) if such acceleration would
violate the annual vesting limitation contained in Section 422(d)(1) of
the Code, which provides generally that the aggregate fair market value
(determined at the time the Option is granted) of the stock with respect
to which Incentive Stock Options granted to any employee are exercisable
for the first time by such employee during any calendar year (under all
plans of the Company and any Related Corporations) shall not exceed
$100,000.
4
<PAGE> 5
6.4 NONTRANSFERABILITY OF OPTIONS. No Option granted under the
Plan shall be assignable or transferable by the optionee, either voluntarily or
by operation of law, except by will or the laws of descent and distribution.
During the life of the optionee, the Option shall be exercisable only by him or
her. If any optionee should attempt to dispose of or encumber his or her
Options, his or her interest in such Options shall terminate.
6.5 EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH.
(a) For options granted to employees, if an optionee
ceases to be employed by the Company or a Related Corporation for any
reason, including retirement but other than death, any Option granted to
such optionee under the Plan shall immediately terminate; provided,
however, that any portion of such Option which was otherwise exercisable
on the date of termination of the optionee's employment may be exercised
within the three-month period following the date on which the optionee
ceased to be so employed, but in no event after the expiration of the
exercise period. Any such exercise may be made only to the extent of the
number of shares subject to the Option which were purchasable on the
date of such termination of employment. If the optionee dies during such
three-month period, the Option shall be exercisable by the optionee's
personal representatives, heirs or legatees to the same extent and
during the same period that the optionee could have exercised the Option
on the date of his or her death.
(b) If the optionee dies before exercising all of his or
her Options, any Option which was otherwise exercisable on the date of
death granted to such optionee under the Plan shall be exercisable by
the optionee's personal representatives, heirs or legatees, for the
purchase of that number of shares and to the same extent that the
optionee could have exercised the option on the date of his or her
death. The Option or any unexercised portion thereof shall terminate
unless so exercised prior to the earlier of the expiration of six months
from the date of such death or the expiration of the exercise period.
6.6 DESIGNATION OF INCENTIVE STOCK OPTIONS; LIMITATIONS. Options
granted under the Plan which are intended to be Incentive Stock Options
qualifying under Section 422 of the Code shall be designated as Incentive Stock
Options and shall be subject to the following additional terms and conditions:
(a) Dollar Limitation. The aggregate fair market value
(determined at the time the option is granted) of the Common Stock for
which Incentive Stock Options are exercisable for the first time during
any calendar year by any person under the Plan (and all other incentive
stock option plans of the Company and any Related Corporations) shall
not exceed $100,000. In the event that Section 422(d)(1) of the Code is
amended to alter the limitation set forth therein so that following such
amendment such limitation shall differ from the limitation set forth in
this Section 6.6(a), the limitation of this Section 6.6(a) shall be
automatically adjusted accordingly.
(b) 10% Stockholder. If any employee to whom an Incentive
Stock Option is to be granted pursuant to the provisions of the Plan is
on the date of grant the
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<PAGE> 6
owner of stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any Related
Corporations, then the following special provisions shall be applicable
to the Incentive Stock Option granted to such individual:
(i) The option price per share of the Common Stock
subject to such Incentive Stock Option shall not be less than
110% of the fair market value of one share of Common Stock on
the date of grant; and
(ii) The option exercise period shall not exceed ten
years from the date of grant.
In determining whether the 10% threshold has been reached, the
stock attribution rules of Section 424(d) of the Code shall
apply.
(c) Except as modified by the preceding provisions of this
Section 6.6, all of the provisions of the Plan shall be applicable to
Incentive Stock Options granted hereunder.
6.7 CONVERSION OF INCENTIVE STOCK OPTIONS INTO NON-QUALIFIED
OPTIONS; TERMINATION OF ISOS. The Board of Directors, at the written request of
any optionee, may in its discretion take such actions as may be necessary to
convert such optionee's Incentive Stock Options (or any installments or portions
of installments thereof) that have not been exercised on the date of conversion
into Non-Qualified Options at any time prior to the expiration of such Incentive
Stock Options, regardless of whether the optionee is an employee of the Company
or a Related Corporation at the time of such conversion. Such actions may
include, but not be limited to, extending the exercise period or reducing the
exercise price of the appropriate installments of such Options. At the time of
such conversion, the Board of Directors (with the consent of the optionee) may
impose such conditions on the exercise of the resulting Non-Qualified Options as
the Board of Directors in its discretion may determine; provided that such
conditions shall not be inconsistent with the Plan. Nothing in the Plan shall be
deemed to give any optionee the right to have such optionee's Incentive Stock
Options converted into Non-Qualified Options, and no such conversion shall occur
until and unless the Board of Directors takes appropriate action. The Board of
Directors, with the consent of the optionee, may also terminate any portion of
any Incentive Stock Option that has not been exercised at the time of such
termination.
6.8 RIGHTS AS A STOCKHOLDER. The holder of an Option shall have
no rights as a stockholder with respect to any shares covered by the Option
until the date of issue of a stock certificate to him or her for such shares.
Except as otherwise expressly provided in the Plan, no adjustment shall be made
for dividends or other rights for which the record date is prior to the date
such stock certificate is issued.
SECTION 7. SPECIAL PROVISIONS APPLICABLE TO PURCHASES.
All approvals of Purchases which provide that the Company has a
right to the
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terms and conditions set forth in the related agreement (the "Stock
Restriction Agreement") approved by the Board of Directors, and shall be subject
to the other terms and conditions of this Section 7.
7.1 CONDITIONS. All approvals of Purchases shall be subject
to the following conditions:
(a) Prior to the issuance and transfer of Restricted
Shares, the purchaser shall pay to the Company the purchase price (the
"Purchase Price") of the Restricted Shares in cash or in such other
manner as shall be as approved by the Board of Directors.
(b) Restricted Shares issued and transferred to a
purchaser may, if required by the Board of Directors, be deposited with
the Treasurer or other officer of the Company designated by the Board of
Directors to be held until the lapse of the restrictions upon such
Restricted Shares, and each purchaser shall execute and deliver to the
Company stock powers enabling the Company to exercise its rights
hereunder.
(c) Certificates for Restricted Shares shall, if the
Company shall deem it advisable, bear a legend to the effect that they
are issued subject to specified restrictions.
(d) Certificates representing the Restricted Shares shall
be registered in the name of the purchaser and shall be owned by such
purchaser. Such purchaser shall be the holder of record of such
Restricted Shares for all purposes, including voting and receipt of
dividends paid with respect to such Restricted Shares.
7.2 NONTRANSFERABILITY. A purchaser's Restricted Shares may not
be sold, assigned, transferred, alienated, commuted, anticipated, or otherwise
disposed of except (subject to the provisions of such purchaser's Stock
Restriction Agreement) by will or the laws of descent and distribution, or
pledged or hypothecated as collateral for a loan or as security for the
performance of any obligation, or be otherwise encumbered, and are not subject
to attachment, garnishment, execution or other legal or equitable process, prior
to the lapse of restrictions on such Restricted Shares, and any attempt at
action in contravention of this Section shall be null and void. If any purchaser
should attempt to dispose of or encumber his or her Restricted Shares prior to
the lapse of the restrictions imposed on such Restricted Shares, his or her
interest in the Restricted Shares awarded to him or her shall terminate.
SECTION 8. GENERAL RESTRICTION.
No shares shall be issued and delivered upon exercise of any
Option or the making of any Award or Purchase unless and until, in the opinion
of counsel for the Company, any applicable registration requirements of the
Securities Act of 1933, any applicable listing requirements of any national
securities exchange on which stock of the same class is then listed, and any
other requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery, shall have been fully complied with. Each optionee,
grantee and purchaser
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may, by accepting an Option or Award or making a Purchase, be required to
represent and agree in writing, for himself or herself and for his or her
transferees by will or the laws of descent and distribution, that the stock
acquired by him, her or them is being acquired for investment. The requirement
for any such representation may be waived at any time by the Board of Directors.
SECTION 9. RECAPITALIZATION.
In the event that dividends are payable in Common Stock of the
Company or in the event there are splits, subdivisions or combinations of shares
of Common Stock of the Company, the number of shares available under the Plan
shall be increased or decreased proportionately, as the case may be, and the
number of shares deliverable upon the exercise thereafter of any Option
previously granted shall be increased or decreased proportionately, as the case
may be, without change in the aggregate purchase price.
SECTION 10. REORGANIZATION.
In case the Company is merged or consolidated with another
corporation and the Company is not the surviving corporation, or, in case the
property or stock of the Company is acquired by any other corporation, or in
case of a reorganization or liquidation of the Company, the Board of Directors
of the Company, or the board of directors of any corporation assuming the
obligations of the Company hereunder, shall, as to outstanding Options, either
(i) make appropriate provision for the protection of any such outstanding
Options by the substitution on an equitable basis of appropriate stock of the
Company or of the merged, consolidated or otherwise reorganized corporation
which will be issuable in respect of the shares of Common Stock of the Company,
provided only that the excess of the aggregate fair market value of the shares
subject to the Options immediately after such substitution over the purchase
price thereof is not more than the excess of the aggregate fair market value of
the shares subject to such Options immediately before such substitution over the
purchase price thereof; (ii) upon written notice to the optionees, provide that
all unexercised Options must be exercised within a specified number of days of
the date of such notice or such Options will be terminated; or (iii) upon
written notice to the optionees, provide that the Company or the merged,
consolidated or otherwise reorganized corporation shall have the right, upon the
effective date of any such merger, consolidation, sale of assets or
reorganization, to purchase all Options held by each optionee and unexercised as
of that date at an amount equal to the aggregate fair market value on such date
of the shares subject to the Options held by such optionee over the aggregate
purchase price therefor, such amount to be paid in cash or, if stock of the
merged, consolidated or otherwise reorganized corporation is issuable in respect
of the shares of the Common Stock of the Company, then, in the discretion of the
Board of Directors, in stock of such merged, consolidated or otherwise
reorganized corporation equal in fair market value to the aforesaid amount. In
any such case the Board of Directors shall, in good faith, determine fair market
value and may, in its discretion, advance the lapse of any waiting or
installment periods and exercise dates.
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<PAGE> 9
SECTION 11. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any Option, Award or
Purchase documentation shall confer upon any optionee or recipient of an Award
or purchaser any right with respect to the continuation of his or her employment
by the Company (or any Related Corporation) or interfere in any way with the
right of the Company (or any Related Corporation), subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the optionee,
recipient or purchaser from the rate in existence at the time of the grant of an
Option or the making of an Award or Purchase. Whether an authorized leave of
absence, or absence in military or government service, shall constitute
termination of employment shall be determined by the Board of Directors.
SECTION 12. AMENDMENT OF THE PLAN.
The Board of Directors may at any time and from time to time
modify or amend the Plan in any respect, except that without the approval of the
stockholders of the Company, the Board of Directors may not (a) materially
increase the benefits accruing to individuals who participate in the Plan; (b)
materially increase the maximum number of shares of stock which may be issued
under the Plan (except for permissible adjustments provided in the Plan); or (c)
materially modify the requirements as to eligibility for participation in the
Plan. The termination or any modification or amendment of the Plan shall not,
without the consent of an optionee, recipient of an Award or purchaser, affect
his or her rights under an Option or Award previously granted to, or a Purchase
previously made by, him or her. With the consent of the affected optionee,
recipient of an Award or purchaser, the Board of Directors may amend outstanding
agreements relating to Options, Awards and Purchases, in a manner not
inconsistent with the Plan. The Board of Directors hereby reserves the right to
amend or modify the terms and provisions of the Plan and of any outstanding
Options to the extent necessary to qualify any or all Options under the Plan for
such favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422 of the
Code; provided, however, that the consent of an optionee is required if such
amendment or modification would cause unfavorable income tax treatment for such
optionee.
SECTION 13. WITHHOLDING.
The Company's obligation to deliver shares of stock upon the
exercise of any Non-Qualified Option or the granting of an Award or making of a
Purchase shall be subject to the satisfaction by the optionee, recipient of the
Award or purchaser of all applicable federal, state and local income and
employment tax withholding requirements.
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<PAGE> 10
SECTION 14. EFFECTIVE DATE AND DURATION OF THE PLAN.
14.1 EFFECTIVE DATE. The Plan shall become effective when
adopted by the Board of Directors. but no Incentive Stock Option granted under
the Plan shall become exercisable unless and until the Plan shall have been
approved by the Company's stockholders. If such stockholder approval is not
obtained within 12 months after the date of the Board's adoption of the Plan,
then any Incentive Stock Options previously granted under the Plan shall
terminate and no further Incentive Stock Options shall be granted. Subject to
such limitation, Options may be granted under the Plan at any time after the
effective date and before the date fixed herein for termination of the Plan.
14.2 DURATION. Unless sooner terminated in accordance with
Section 10 hereof, the Plan shall terminate upon the earlier of (i) the tenth
anniversary of the date of its adoption by the Board of Directors or (ii) the
date on which all shares available for issuance under the Plan shall have been
issued pursuant to the exercise or cancellation of Options granted hereunder. If
the date of termination is determined under (i) above, then Options outstanding
on such date shall continue to have force and effect in accordance with the
provisions of the instruments evidencing such Options.
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<PAGE> 1
EXHIBIT 99.2
ATM PRODUCTS, INC.
INCENTIVE STOCK OPTION AGREEMENT
1. GRANT OF OPTION. ATM PRODUCTS, INC., a Delaware corporation
(the "Company"), hereby grants to _____________ ("Optionee"), an option,
pursuant to the Company's 1996 Stock Plan (the "Plan"), to purchase an aggregate
of ______ shares of Common Stock, no par value per share ("Common Stock"), of
the Company at a price of $_____ per share, purchasable as set forth in and
subject to the terms and conditions of this option and the Plan. This option is
intended to qualify as an incentive stock option ("Incentive Stock Option")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). The date of grant of this option is hereinafter referred
to as the "date of grant," and the date ending twelve months thereafter and each
subsequent successive twelve-month period is hereinafter referred to as the
"first anniversary date," "second anniversary date," "third anniversary date,"
etc.
2. EXERCISE OF OPTION AND PROVISIONS FOR TERMINATION.
(a) Except as otherwise provided herein and subject to the
right of cumulation provided herein, this option may be exercised, prior
to the tenth anniversary date, as to not more than the following number
of shares covered by this option during the respective periods set forth
below:
No shares from and after the date of grant and prior to the first
anniversary date;
- shares from and after the first anniversary date and prior
to the second anniversary date;
- shares from and after the second anniversary date and
prior to the third anniversary date;
- shares from and after the third anniversary date and prior
to the fourth anniversary date;
- shares from and after the fourth anniversary date.
The right of exercise provided herein shall be cumulative so that
if the option is not exercised to the maximum extent permissible during
any such period it shall be exercisable, in whole or in part, with
respect to all shares not so purchased at any time during any subsequent
period prior until the expiration or termination of this option. This
option may not be exercised at any time after the tenth anniversary
date.
<PAGE> 2
(b) Subject to the conditions hereof, this option shall be
exercisable by the Optionee giving written notice of exercise to the
Company, specifying the number of shares to be purchased and the
purchase price to be paid therefor and accompanied by payment in
accordance with Section 3 hereof. Such exercise shall be effective upon
receipt by the Treasurer of the Company of the written notice together
with the required payment. The Optionee shall be entitled to purchase
less than the number of shares covered hereby; provided that no partial
exercise of this option shall be for less than 10 whole shares.
(c) If the Optionee ceases to be employed by the Company
or one of its subsidiaries for any reason, including retirement but
other than death, this option shall immediately terminate; provided,
however, that any portion of this option which was otherwise exercisable
on the date of termination of the Optionee's employment may be exercised
within the three-month period following the date on which the Optionee
ceased to be so employed, but in no event after the tenth anniversary
date. Any such exercise may be made only to the extent of the number of
shares subject to this option which are purchasable upon the date of
such termination of employment. If the Optionee dies during such
three-month period, this option shall be exercisable by the Optionee's
personal representatives, heirs or legatees to the same extent and
during the same period that the Optionee could have exercised this
option on the date of his or her death.
(d) If the Optionee dies while an employee of the Company
or any subsidiary of the Company, this option shall be exercisable, by
the Optionee's personal representatives, heirs or legatees, to the same
extent that the Optionee could have exercised this option on the date of
his or her death. This option or any unexercised portion hereof shall
terminate unless so exercised prior to the earlier of the expiration of
six months from the date of such death or the tenth anniversary date.
(e) Notwithstanding any other provision hereof, this
option may not be exercised to the extent such an exercise would violate
Section 422(d)(1) of the Code, which provides that the aggregate fair
market value (determined at the time the option is granted) of the
Common Stock with respect to which incentive stock options are
exercisable for the first time by the Optionee during any calendar year
(under all of the plans of the Company, its parent, if any, or its
subsidiaries, if any) shall not exceed $100,000.
3. PAYMENT OF PURCHASE PRICE.
(a) Payment of the purchase price for shares purchased
upon exercise of this option shall be made by delivery to the Company of
cash or check payable to the order of the Company in an amount equal to
the purchase price of such shares, or, if the Optionee elects and the
Company permits, by delivery of shares of Common Stock of the Company
having a fair market value equal in amount to the purchase price of such
shares.
(b) For the purposes hereof, the fair market value of any
share of the
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<PAGE> 3
Company's Common Stock to be delivered to the Company in exercise of
this option shall be determined in good faith by the Board of Directors
of the Company, in accordance with the terms of the Plan.
(c) If the Optionee elects to exercise options by delivery
of shares of Common Stock of the Company, the certificate or
certificates representing the shares of Common Stock of the Company to
be delivered shall be duly executed in blank by the Optionee or shall be
accompanied by a stock power duly executed in blank suitable for
purposes of transferring such shares to the Company. Fractional shares
of Common Stock of the Company will not be accepted in payment of the
purchase price of shares acquired upon exercise of this option.
4. DELIVERY OF SHARES. The Company shall, upon payment of the
purchase price for the number of shares purchased and paid for, make prompt
delivery of such shares to the Optionee; provided that if any law or regulation
requires the Company to take any action with respect to such shares before the
issuance thereof, then the date of delivery of such shares shall be extended for
the period necessary to complete such action. No shares shall be issued and
delivered upon exercise of any option unless and until, in the opinion of
counsel for the Company, any applicable registration requirements of the
Securities Act of 1933, any applicable listing requirements of any national
securities exchange on which stock of the same class is then listed, and any
other requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery, shall have been fully complied with.
5. NON-TRANSFERABILITY OF OPTION. Except as provided in Section
2(c) and 2(d) hereof, this option is personal and no rights granted hereunder
shall be transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise) nor shall any such rights be subject to
execution, attachment or similar process. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of this option or of such rights
contrary to the provisions hereof, or upon the levy of any attachment or similar
process upon this option or such rights, this option and such rights shall
become null and void.
6. NO SPECIAL EMPLOYMENT RIGHTS. Nothing contained in the Plan or
this Agreement shall be construed or deemed by any person under any
circumstances to bind the Company or any of its subsidiaries to continue the
employment of the Optionee for the period within which this option may be
exercised. However, during the period of the Optionee's employment, the Optionee
shall render diligently and faithfully the services which are assigned to the
Optionee from time to time by the Board of Directors or by the executive
officers of the Company and its subsidiaries and shall at no time take any
action which directly or indirectly would be inconsistent with the best
interests of the Company or of its subsidiaries.
7. RIGHTS AS A STOCKHOLDER. The Optionee shall have no rights as
a stockholder
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<PAGE> 4
with respect to any shares which may be purchased by exercise of this option
unless and until a certificate or certificates representing such shares are duly
issued and delivered to the Optionee. Except as otherwise expressly provided in
the Plan, no adjustment shall be made for dividends or other rights for which
the record date is prior to the date such stock certificate is issued.
8. RECAPITALIZATION. In the event that dividends are payable in
shares of Common Stock or in the event there are splits, sub-divisions or
combinations of shares of Common Stock subsequent to the date of grant, the
number of shares subject to this option shall be increased or decreased
proportionately, as the case may be, and the number of shares deliverable upon
the exercise thereafter of this option shall be increased or decreased
proportionately, as the case may be, without change in the aggregate purchase
price.
9. REORGANIZATION. In case the Company is merged or consolidated
with another corporation and the Company is not the surviving corporation, or in
case the property or stock of the Company is acquired by any other corporation,
or in case of a reorganization or liquidation of the Company, prior to the
termination or expiration of this option, the Optionee shall, with respect to
this option or any unexercised portion thereof, be entitled to the rights and
benefits, and be subject to the limitations, set forth in Section 10 of the
Plan.
10. WITHHOLDING TAXES. Whenever shares are to be issued upon
exercise of this option, the Company shall have the right to require the
Optionee to remit to the Company an amount sufficient to satisfy any federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such shares.
11. QUALIFICATION UNDER SECTION 422. It is understood and
intended that the option granted hereunder shall qualify as an "incentive stock
option" as defined in Section 422 of the Code. Accordingly, the Optionee
understands that in order to obtain the benefits of an incentive stock option
under Section 421 of the Code, no sale or other disposition may be made of any
shares acquired upon exercise of the option within the one-year period beginning
on the day after the day of the transfer of such shares to him or her, nor
within the two-year period beginning on the day after the grant of the option.
If the Optionee intends to dispose or does dispose (whether by sale, exchange,
gift, transfer or otherwise) of any such shares within said periods, he or she
will notify the Company within 30 days after such disposition.
12. COMPANY'S RIGHTS OF FIRST REFUSAL. All shares purchased upon
exercise of this option shall be subject to the following rights of first
refusal until immediately prior to the consummation of the first public offering
by the Company of its Common Stock pursuant to an offering registered under the
Securities Act of 1933.
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<PAGE> 5
The Optionee, including his or her heirs, assigns, executors, or
administrators, or recipient of shares by other than a sale subject to this
right of first refusal and his or her heirs, assigns, executors, or
administrators (collectively, the "Seller"), desiring to sell any shares shall
first offer such shares to the Company in the following manner: the Seller shall
notify the President of the Company in writing of the Seller's desire to sell
the shares, which notice shall contain the price and terms at which the Seller
is willing to sell and the name of the proposed purchaser. All such offers must
require payment in cash, and must allow the Company at least forty-five (45)
days from the receipt of such notification in which to consummate the purchase.
The Company shall have thirty (30) days after receipt of such notification by
the President either to accept or to reject the offer. The Company shall have
the right to purchase all, but not less than all, of the offered shares on the
terms offered. Failure of the Company either to accept or to reject the offer in
writing within the 30-day period shall constitute a rejection of the offer. An
acceptance by the Company shall be timely given if mailed by registered mail
within the 30-day period to the most recent address of the record holder of the
shares in the stock records of the Company.
In the event the Company rejects the offer, the Seller may, at
any time during the period of sixty (60) days following such rejection, dispose
of the offered shares upon the terms and conditions set forth in the notice to
the President, but may not otherwise or thereafter do so without again complying
with the foregoing rights of first refusal. In the event the Company accepts the
offer, but fails to perform according to the terms of the offer, the Seller's
sole remedy shall be that the offered shares shall no longer be subject to the
foregoing rights of first refusal.
No shares shall be transferred on the books of the Company unless
the foregoing provisions have been complied with, but the Company, with the
approval of the Board of Directors of the Company, may in any particular
instance or instances waive these provisions with respect to any present or
future sale, provided such waiver is in writing.
13. INVESTMENT REPRESENTATION, ETC.
(a) The Optionee represents that any shares purchased upon
exercise of this option shall be acquired by the Optionee for his or her
own account for investment and not with a view to, or for sale in
connection with, any distribution of such shares, nor with any present
intention of distributing or selling such shares. The Optionee further
represents that he or she has made detailed inquiry concerning the
Company, that the officers of the Company have made available to the
Optionee any and all written information which the Optionee has
requested, that the officers of the Company have answered to the
Optionee's satisfaction all inquiries made by the Optionee and that the
Optionee has such knowledge and experience in financial and business
matters that the Optionee is capable of evaluating the merits and risks
of an investment in the Company and able to bear the economic risk of
that investment. By making payment upon exercise of this option, the
Optionee shall be deemed to have reaffirmed, as of the date of such
payment, the representations made in this Section 13.
(b) Without limiting the Company's rights under Section 12
hereof, upon
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<PAGE> 6
exercise of this option, the Company may, at its election, require the
Optionee to execute a stock restriction agreement, restricting the
Optionee from selling or transferring the shares so acquired without
first offering to sell such shares to the Company and the other
stockholders. Upon execution of such stock restriction agreement by the
Optionee, the Company shall have affixed to all stock certificates
representing shares of Common Stock issued to the Optionee upon exercise
of this option a legend evidencing such agreement.
(c) All stock certificates representing shares of Common
Stock issued to the Optionee upon exercise of this option shall, at the
election of the Company, have affixed thereto a legend substantially in
the following form:
"The shares of stock represented by this certificate (i) are
subject to the restrictions on transfer contained in an Incentive
Stock Option Agreement dated , 19 , between the Company and the
holder of this certificate (a copy of which is available without
charge from the Company), and (ii) have not been registered under
the Securities Act of 1933 and may not be transferred, sold or
otherwise disposed of in the absence of an effective registration
statement with respect to the shares evidenced by this
certificate, filed and made effective under the Securities Act of
1933, or an opinion of counsel satisfactory to the Company to the
effect that registration under such Act is not required."
14. MISCELLANEOUS.
(a) Except as provided herein, this Agreement may not be
amended or otherwise modified unless evidenced in writing and signed by
the Company and the Optionee.
(b) All notices under this Agreement shall be mailed or
delivered by hand to the parties at their respective addresses set forth
beneath their names below or at such other address as may be designated
in writing by either of the parties to one another.
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<PAGE> 7
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
Date of Grant: ATM PRODUCTS, INC.
By:
- ----------------------- -----------------------------
Title: President
Address: 135 N. Plains Industrial Rd.
Wallingford, CT 06492
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<PAGE> 8
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the
terms and conditions thereof.
OPTIONEE
------------------------------------
Signature
Address:
------------------------------------
------------------------------------
<PAGE> 1
EXHIBIT 99.3
ATM PRODUCTS, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
1. GRANT OF OPTION.
ATM PRODUCTS, INC., a Delaware corporation (the "Company"),
hereby grants to ______________ (the "Optionee"), an option, pursuant to the
Company's 1996 Stock Plan (the "Plan"), to purchase an aggregate of _____ shares
of Common Stock, no par value per share ("Common Stock"), of the Company at a
price of $_____ per share, purchasable as set forth in and subject to the terms
and conditions of this option and the Plan. The date of grant of this option is
hereinafter referred to as the "date of grant," and the date ending twelve
months thereafter as the "anniversary date."
2. EXERCISE OF OPTION AND PROVISIONS FOR TERMINATION.
(a) Except as otherwise provided herein and subject to the
right of cumulation provided herein, this option may be exercised, prior
to ten years from the date of grant, as set forth below:
No shares prior to the anniversary date;
________ shares from and after the anniversary date;
The right of exercise provided herein shall be cumulative so that if the
option is not exercised in full at the time it is exercised it shall
remain exercisable, in whole or in part, with respect to all remaining
shares which were not previously purchased prior to the expiration or
termination of this option. This option may not be exercised at any time
after the tenth anniversary date.
(b) Subject to the conditions hereof, this option shall be
exercisable by the Optionee giving written notice of exercise to the
Company, specifying the number of shares to be purchased and the
purchase price to be paid therefor and accompanied by payment in
accordance with Section 3 hereof. Such exercise shall be effective upon
receipt by the Treasurer of the Company of the written notice together
with the required payment. The Optionee shall be entitled to purchase
less than the number of shares covered hereby; provided that no partial
exercise of this option shall be for less than 10 whole shares.
(c) If the Optionee dies before exercising all of his or
her unexercised options, this option shall be exercisable, by the
Optionee's personal representatives, heirs or legatees, to the same
extent that the Optionee could have exercised this option on the date of
his or her death. This option or any unexercised portion hereof shall
terminate unless so exercised prior to the earlier of the expiration of
six months from the date of such death or ten years and one month from
the date of its grant.
<PAGE> 2
3. PAYMENT OF PURCHASE PRICE.
(a) Payment of the purchase price for shares purchased
upon exercise of this option shall be made by delivery to the Company of
cash or check payable to the order of the Company in an amount equal to
the purchase price of such shares, or, if the Optionee elects and the
Company permits, by delivery of shares of Common Stock of the Company
having a fair market value equal in amount to the purchase price of such
shares.
(b) For the purposes hereof, the fair market value of any
share of the Company's Common Stock to be delivered to the Company in
exercise of this option shall be determined in good faith by the Board
of Directors of the Company, in accordance with the terms of the Plan.
(c) If the Optionee elects to exercise options by delivery
of shares of Common Stock of the Company, the certificate or
certificates representing the shares of Common Stock of the Company to
be delivered shall be duly executed in blank by the Optionee or shall be
accompanied by a stock power duly executed in blank suitable for
purposes of transferring such shares to the Company. Fractional shares
of Common Stock of the Company will not be accepted in payment of the
purchase price of shares acquired upon exercise of this option.
4. DELIVERY OF SHARES.
The Company shall, upon payment of the purchase price for the
number of shares purchased and paid for, make prompt delivery of such shares to
the Optionee; provided that if any law or regulation requires the Company to
take any action with respect to such shares before the issuance thereof, then
the date of delivery of such shares shall be extended for the period necessary
to complete such action. No shares shall be issued and delivered upon exercise
of any option unless and until, in the opinion of counsel for the Company, any
applicable registration requirements of the Securities Act of 1933, any
applicable listing requirements of any national securities exchange on which
stock of the same class is then listed, and any other requirements of law or of
any regulatory bodies having jurisdiction over such issuance and delivery, shall
have been fully complied with.
5. NON-TRANSFERABILITY OF OPTION.
Except as provided in Section 2(c) and 2(d) hereof, this option
is personal and no rights granted hereunder shall be transferred, assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise)
nor shall any such rights be subject to execution, attachment or similar
process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of this option or of such rights contrary to the provisions hereof, or
upon the levy of any attachment or similar process upon this option or such
rights, this option and such rights shall become null and void.
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<PAGE> 3
6. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or this Agreement shall be
construed or deemed by any person under any circumstances to bind the Company or
any of its subsidiaries to continue the employment of the Optionee for the
period within which this option may be exercised. However, during the period of
the Optionee's employment, the Optionee shall render diligently and faithfully
the services which are assigned to the Optionee from time to time by the Board
of Directors or by the executive officers of the Company and its subsidiaries
and shall at no time take any action which directly or indirectly would be
inconsistent with the best interests of the Company or of its subsidiaries.
7. RIGHTS AS A STOCKHOLDER.
The Optionee shall have no rights as a stockholder with respect
to any shares which may be purchased by exercise of this option unless and until
a certificate or certificates representing such shares are duly issued and
delivered to the Optionee. Except as otherwise expressly provided in the Plan,
no adjustment shall be made for dividends or other rights for which the record
date is prior to the date such stock certificate is issued.
8. RECAPITALIZATION.
In the event that dividends are payable in shares of Common Stock
or in the event there are splits, sub-divisions or combinations of shares of
Common Stock subsequent to the date of grant, the number of shares subject to
this option shall be increased or decreased proportionately, as the case may be,
and the number of shares deliverable upon the exercise thereafter of this option
shall be increased or decreased proportionately, as the case may be, without
change in the aggregate purchase price.
9. REORGANIZATION.
In case the Company is merged or consolidated with another
corporation and the Company is not the surviving corporation, or in case the
property or stock of the Company is acquired by any other corporation, or in
case of a reorganization or liquidation of the Company, prior to the termination
or expiration of this option, the Optionee shall, with respect to this option or
any unexercised portion thereof, be entitled to the rights and benefits, and be
subject to the limitations, set forth in Section 10 of the Plan.
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<PAGE> 4
10. WITHHOLDING TAXES.
Whenever shares are to be issued upon exercise of this option,
the Company shall have the right to require the Optionee to remit to the Company
an amount sufficient to satisfy any federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for such
shares.
11. COMPANY'S RIGHTS OF FIRST REFUSAL.
All shares purchased upon exercise of this option shall be
subject to the following rights of first refusal until immediately prior to the
consummation of the first public offering by the Company of its Common Stock
pursuant to an offering registered under the Securities Act of 1933.
The Optionee, including his or her heirs, assigns, executors, or
administrators, or recipient of shares by other than a sale subject to this
right of first refusal and his or her heirs, assigns, executors, or
administrators (collectively, the "Seller"), desiring to sell any shares shall
first offer such shares to the Company in the following manner: the Seller shall
notify the President of the Company in writing of the Seller's desire to sell
the shares, which notice shall contain the price and terms at which the Seller
is willing to sell and the name of the proposed purchaser. All such offers must
require payment in cash, and must allow the Company at least forty-five (45)
days from the receipt of such notification in which to consummate the purchase.
The Company shall have thirty (30) days after receipt of such notification by
the President either to accept or to reject the offer. The Company shall have
the right to purchase all, but not less than all, of the offered shares on the
terms offered. Failure of the Company either to accept or to reject the offer in
writing within the 30-day period shall constitute a rejection of the offer. An
acceptance by the Company shall be timely given if mailed by registered mail
within the 30-day period to the most recent address of the record holder of the
shares in the stock records of the Company.
In the event the Company rejects the offer, the Seller may, at
any time during the period of sixty (60) days following such rejection, dispose
of the offered shares upon the terms and conditions set forth in the notice to
the President, but may not otherwise or thereafter do so without again complying
with the foregoing rights of first refusal. In the event the Company accepts the
offer, but fails to perform according to the terms of the offer, the Seller's
sole remedy shall be that the offered shares shall no longer be subject to the
foregoing rights of first refusal.
No shares shall be transferred on the books of the Company unless
the foregoing provisions have been complied with, but the Company, with the
approval of the Board of Directors of the Company, may in any particular
instance or instances waive these provisions with respect to any present or
future sale, provided such waiver is in writing.
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<PAGE> 5
12. COMPANY'S REPURCHASE OPTION.
(a) If Optionee ceases to be employed by the Company or
one of its subsidiaries for any reason, the Company shall have the
right, at any time within seven (7) months after the date of Optionee's
death, in the event Optionee dies while an employee of Company or a
subsidiary of Company, or at any time within four (4) months after the
date Optionee ceases to be employed for any other reason, to repurchase
from Optionee or his personal representatives, as the case may be, all
or any part of the shares purchased by Optionee pursuant to this option
at the fair market value of such shares on the date of repurchase (the
"Repurchase Option").
(b) If the Common Stock is not publicly traded at the time
of repurchase under this Paragraph 12, "fair market value" shall be
deemed to be the fair value of the Common Stock as determined by the
Board of Directors, in good faith after taking into consideration all
factors which it deems appropriate, including, without limitation,
recent sale and offer prices of the Common Stock in private transactions
negotiated at arm's length. If, the Company's Common Stock is publicly
traded, "fair market value" shall be determined as of the last business
day for which the prices or quotes discussed in this sentence are
available prior to the date of repurchase (the "Determination Date") and
shall mean (i) the average (on the Determination Date) of the high and
low prices of the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if such Common Stock is
then traded on a national securities exchange; (ii) the last reported
sale price (on the Determination Date) of the Common Stock on the NASDAQ
National Market List, if the Common Stock is not then traded on a
national securities exchange; or (iii) the closing bid price (or average
of bid prices) last quoted (on the Determination Date) by an established
quotation service for over-the-counter securities, if the Common Stock
is not reported on the NASDAQ National Market List.
(c) A Repurchase Option shall be exercised by written
notice signed by an officer of the Company. The purchase price shall be
payable, at the option of the Company, in cancellation of all or a
portion of any outstanding indebtedness of Optionee to the Company or in
cash (by check) or both.
(d) The Company may assign its rights under this
Paragraph 2(e).
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<PAGE> 6
13. INVESTMENT REPRESENTATION, ETC.
(a) The Optionee represents that any shares purchased upon
exercise of this option shall be acquired by the Optionee for his or her
own account for investment and not with a view to, or for sale in
connection with, any distribution of such shares, nor with any present
intention of distributing or selling such shares. The Optionee further
represents that he or she has made detailed inquiry concerning the
Company, that the officers of the Company have made available to the
Optionee any and all written information which the Optionee has
requested, that the officers of the Company have answered to the
Optionee's satisfaction all inquiries made by the Optionee and that the
employee has such knowledge and experience in financial and business
matters that the Optionee is capable of evaluating the merits and risks
of an investment in the Company and able to bear the economic risk of
that investment. By making payment upon exercise of this option, the
Optionee shall be deemed to have reaffirmed, as of the date of such
payment, the representations made in this Section 13.
(b) Without limiting the Company's rights under Section 11
hereof, upon exercise of this option, the Company may, at its election,
require the Optionee to execute a stock restriction agreement,
restricting the Optionee from selling or transferring the shares so
acquired without first offering to sell such shares to the Company and
the other stockholders. Upon execution of such stock restriction
agreement by the Optionee, the Company shall have affixed to all stock
certificates representing shares of Common Stock issued to the Optionee
upon exercise of this option a legend evidencing such agreement.
(c) All stock certificates representing shares of Common
Stock issued to the Optionee upon exercise of this option shall, at the
election of the Company, have affixed thereto a legend substantially in
the following form:
"The shares of stock represented by this certificate (i) are
subject to the restrictions on transfer contained in a
Non-Qualified Stock Option Agreement dated , 19__, between
the Company and the holder of this certificate (a copy of which
is available without charge from the Company), and (ii) have not
been registered under the Securities Act of 1933 and may not be
transferred, sold or otherwise disposed of in the absence of an
effective registration statement with respect to the shares
evidenced by this certificate, filed and made effective under the
Securities Act of 1933, or an opinion of counsel satisfactory to
the Company to the effect that registration under such Act is not
required."
14. MISCELLANEOUS.
(a) Except as provided herein, this Agreement may not be
amended or otherwise modified unless evidenced in writing and signed by
the Company and the Optionee.
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<PAGE> 7
(b) All notices under this Agreement shall be mailed or
delivered by hand to the parties at their respective addresses set forth
beneath their names below or at such other address as may be designated
in writing by either of the parties to one another.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
Date of Grant: ATM PRODUCTS, INC.
By:
- -------------------- -----------------------------------
Title: President
Address: 135 N. Plains Industrial Rd.
Wallingford, CT 06492
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the
terms and conditions thereof.
OPTIONEE
-----------------------------------
Signature
Address:
---------------------------
---------------------------
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<PAGE> 1
EXHIBIT 99.4
PAIRGAIN TECHNOLOGIES, INC.
STOCK OPTION ASSUMPTION AGREEMENT
OPTIONEE:
STOCK OPTION ASSUMPTION AGREEMENT issued as of the __ day of
_____, 1997 by PairGain Technologies, Inc., a Delaware corporation ("PairGain").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding options to purchase shares of the common stock of Avidia
Systems, Inc., a Delaware corporation ("Avidia"), which were granted to Optionee
under the Avidia, Systems, Inc. 1996 Stock Plan (the "Plan") and are evidenced
by a Stock Option Agreement (the "Option Agreement") between Avidia and
Optionee.
WHEREAS, Avidia has this day been acquired by PairGain through
merger of a wholly-owned PairGain subsidiary ("Acquisition Corporation") with
and into Avidia (the "Merger") pursuant to the Agreement and Plan of Merger
dated February 19, 1997 by and among PairGain, Avidia and Acquisition
Corporation (the "Merger Agreement").
WHEREAS, the provisions of the Merger Agreement require PairGain
to assume all obligations of Avidia under all options outstanding under the Plan
at the consummation of the Merger and to issue to the holder of each outstanding
option an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Merger Agreement, the
exchange ratio in effect for the Merger is 0.397478397 of a share of PairGain
common stock ("PairGain Stock") for each outstanding share of Avidia Stock (the
"Exchange Ratio").
WHEREAS, this Agreement is to become effective immediately upon
the consummation of the Merger (the "Effective Time") in order to reflect
certain adjustments to Optionee's outstanding options under the Plan which have
become necessary by reason of the assumption of those options by PairGain in
connection with the Merger.
<PAGE> 2
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Avidia common stock ("Avidia Stock")
subject to the stock options held by Optionee under the Plan immediately prior
to the Effective Time (the "Avidia Options") and the exercise price payable per
share are set forth in Exhibit A hereto. PairGain hereby assumes, as of the
Effective Time, all the duties and obligations of Avidia under each of the
Avidia Options. In connection with such assumption, the number of shares of
PairGain Stock purchasable under each Avidia Option hereby assumed and the
exercise price payable thereunder have been adjusted to reflect the Exchange
Ratio at which shares of Avidia Stock were converted into shares of PairGain
Stock in consummation of the Merger. Accordingly, the number of shares of
PairGain Stock subject to each Avidia Option hereby assumed shall be as
specified for that option in attached Exhibit B, and the adjusted exercise price
payable per share of PairGain Stock under the assumed Avidia Option shall be as
indicated for that option in attached Exhibit B.
2. The intent of the foregoing adjustments to each assumed Avidia
Option is to assure that the spread between the aggregate fair market value of
the shares of PairGain Stock purchasable under each such option and the
aggregate exercise price as adjusted pursuant to this agreement will,
immediately after the consummation of the Merger, equal the spread which
existed, immediately prior to the Merger, between the then aggregate fair market
value of the Avidia Stock subject to the Avidia Option and the aggregate
exercise price in effect at such time under the Option Agreement. Such
adjustments are also designed to preserve, immediately after the Merger, on a
per share basis, the same ratio of exercise price per option share to fair
market value per share which existed under the Avidia Option immediately prior
to the Merger.
3. The following provisions shall govern each Avidia Option
hereby assumed by PairGain:
(a) Unless the context otherwise requires, all
references to the "Company" in each Option Agreement and in the
Plan (as incorporated into such Option Agreement) shall mean
PairGain, all references to "Common Stock" shall mean shares of
PairGain Stock, and all references to the "Board of Directors"
shall mean the Compensation Committee of the PairGain Board of
Directors.
(b) The grant date and the expiration date of each
assumed Avidia Option and all other provisions which govern
either the exercisability or the termination of the assumed
Avidia Option shall remain the same as set forth in the Option
Agreement applicable to that option and shall accordingly govern
and control Optionee's rights under this Agreement to purchase
PairGain Stock.
(c) Each assumed Avidia Option shall remain
exercisable in accordance with the same installment exercise
schedule in effect under the applicable Option Agreement
immediately prior to the Effective Time, with the number of
shares of PairGain Stock subject to each such installment
adjusted to reflect the Exchange Ratio. Accordingly, no
accelerated vesting of the Avidia
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<PAGE> 3
Options shall be deemed to automatically occur by reason of the
Merger, and the grant date for each assumed Avidia Option shall
accordingly remain the same as in effect under the applicable
Option Agreement immediately prior to the Merger.
(d) For purposes of applying any and all provisions
of the Option Agreement relating to Optionee's status as an
employee with the Company, Optionee shall be deemed to continue
in such employee status for so long as Optionee renders services
as an employee to PairGain or any present or future PairGain
subsidiary, including (without limitation) Avidia. Accordingly,
the provisions of the Option Agreement governing the termination
of the assumed Avidia Option upon Optionee's cessation of
employee status with Avidia shall hereafter be applied on the
basis of Optionee's cessation of employee status with PairGain
and its subsidiaries, and each assumed Avidia Option shall
accordingly terminate, within the designated time period in
effect under the Option Agreement for that option, following such
cessation of employment with PairGain and its subsidiaries.
(e) The adjusted exercise price payable for the
PairGain Stock subject to each assumed Avidia Option shall be
payable in any of the forms authorized under the Option Agreement
applicable to that option. For purposes of determining the
holding period of any shares of PairGain Stock delivered in
payment of such adjusted exercise price, the period for which
such shares were held as Avidia Stock prior to the Merger shall
be taken into account.
(f) In order to exercise each assumed Avidia
Option, Optionee must deliver to PairGain a written notice of
exercise in which the number of shares of PairGain Stock to be
purchased thereunder must be indicated. The exercise notice must
be accompanied by payment of the adjusted exercise price payable
for the purchased shares of PairGain Stock and should be
delivered to PairGain at the following address:
PairGain Technologies, Inc.
14402 Franklin Avenue
Tustin, California 92680
Attention: ________________
4. Except to the extent specifically modified by this Option
Assumption Agreement, all of the terms and conditions of each Option Agreement
as in effect immediately prior to the Merger shall continue in full force and
effect and shall not in any way be amended, revised or otherwise affected by
this Stock Option Assumption Agreement.
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<PAGE> 4
IN WITNESS WHEREOF, PairGain Corporation has caused this Stock
Option Assumption Agreement to be executed on its behalf by its duly-authorized
officer as of the ___ day of _____, 1997.
PAIRGAIN TECHNOLOGIES, INC.
By:_______________________________
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock
Option Assumption Agreement and understands that all rights and liabilities with
respect to each of his or her Avidia Options hereby assumed by PairGain
Technologies, Inc. are as set forth in the Option Agreement, the Plan and such
Stock Option Assumption Agreement.
______________________________
OPTIONEE
DATED: __________________, 199_
4
<PAGE> 5
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares of Avidia Systems, Inc.
Common Stock (Pre-Merger)
<PAGE> 6
EXHIBIT B
Optionee's Outstanding Options to Purchase Shares of PairGain
Technologies, Inc.
Common Stock (Post-Merger)
