<PAGE> 1
As filed with the Securities and Exchange Commission on June 30, 1999
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 (IRS 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
(Full title of the plan)
----------
Michael Pascoe
President 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 maximum Proposed 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
Common Stock, $.0005 par value 2,000,000 shares $11.25 $22,500,000 $6,255.00
=========================================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of the
Registrant's Common Stock which become issuable under the Registrant's 1993
Stock Option/Stock Issuance Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the Registrant's
receipt of consideration which results in an increase in the number of
outstanding shares of Registrant's 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 Registrant's Common Stock on June 28, 1999, as
reported by the Nasdaq Stock Market(SM).
<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 fiscal year
ended December 31, 1998 filed pursuant to Section 13(a) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), on
March 31, 1999;
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1999, filed with the SEC on May 17, 1999;
and
(c) The Registrant's Registration Statements on Form 8-A filed with the
SEC on August 6, 1993 and December 15, 1998, respectively, 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
Pursuant to Section 145 of the Delaware General Corporation Law, the
Registrant has broad powers to indemnify its directors and officers against any
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 the Registrant's Certificate of Incorporation or Bylaws or under any
agreement or vote of the 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
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<C> <S>
4 Instruments Defining Rights of Stockholders. Reference is
made to Registrant's Registration Statements on Form 8-A,
including the exhibits thereto, which are incorporated
herein by reference pursuant to Item 3(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 (Amended and Restated
as of January 14, 1999).
99.2* Form of Notice of Grant.
99.3* Form of Stock Option Agreement.
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.
</TABLE>
- -----------------
* 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.
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
II-2
<PAGE> 4
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 June 30, 1999.
PAIRGAIN TECHNOLOGIES, INC.
By: /s/ MICHAEL PASCOE
-------------------------------------
Michael Pascoe
President and Chief Executive Officer
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 Michael Pascoe
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/ MICHAEL PASCOE President, Chief Executive Officer June 30, 1999
- ----------------------------------- and Director (Principal Executive
Michael Pascoe Officer)
/s/ CHARLES W. MCBRAYER Executive Vice President, Chief June 30, 1999
- ----------------------------------- Financial Officer and Secretary
Charles W. McBrayer (Principal Financial Officer)
/s/ ROBERT R. PRICE Vice President and Corporate June 30, 1999
- ----------------------------------- Controller (Principal Accounting
Robert R. Price Officer)
</TABLE>
II-4
<PAGE> 6
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ CHARLES S. STRAUCH Chairman of the Board June 30, 1999
- -----------------------------------
Charles S. Strauch
/s/ HOWARD S. FLAGG Executive Vice President, Business June 30, 1999
- ----------------------------------- Development and Director
Howard S. Flagg
/s/ BENEDICT A. ITRI Executive Vice President, Chief June 30, 1999
- ----------------------------------- Technical Officer and Director
Benedict A. Itri
/s/ HOWARD G. BUBB Director June 30, 1999
- -----------------------------------
Howard G. Bubb
/S/ ROBERT C. HAWK Director June 30, 1999
- -----------------------------------
Robert C. Hawk
/S/ ROBERT A. HOFF Director June 30, 1999
- -----------------------------------
Robert A. Hoff
/S/ B. ALLEN LAY Director June 30, 1999
- -----------------------------------
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
- -------------- -------
<C> <S>
4 Instruments Defining Rights of Stockholders. Reference is
made to Registrant's Registration Statements on Form 8-A,
including the exhibits thereto, which is incorporated herein
by reference pursuant to Item 3(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 (Amended and Restated
as of January 14, 1999).
99.2* Form of Notice of Grant.
99.3* Form of Stock Option Agreement.
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.
* 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
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
June 30, 1999
PairGain Technologies, Inc.
14402 Franklin Avenue
Tustin, California 92780
Re: Registration Statement for Offering of
2,000,000 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to PairGain Technologies, Inc., a Delaware
corporation (the "Company"), in connection with the registration on Form S-8
(the "Registration Statement") under the Securities Act of 1933, as amended, of
an additional 2,000,000 shares of common stock (the "Shares") for issuance under
the Company's 1993 Stock Option/Stock Issuance Plan (the "Plan").
This opinion is being furnished in accordance with the requirements of
Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the establishment and
amendment of the Plan. Based on such review, we are of the opinion that, if, as
and when the Shares are issued and sold (and the consideration therefor
received) pursuant to (a) the provisions of the option agreements duly
authorized under the Plan and in accordance with the Registration Statement, or
(b) direct stock issuances duly authorized under the Plan and in accordance with
the Registration Statement, such shares will be duly authorized, legally issued,
fully paid and nonassessable.
We consent to the filing of this opinion letter as Exhibit 5 to the
Registration Statement.
This opinion letter is rendered as of the date first written above, and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above, and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Plan, or the Shares.
Very truly yours,
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 January 26, 1999
appearing in the Annual Report on Form 10-K of PairGain Technologies, Inc. for
the year ended December 31, 1998.
DELOITTE & TOUCHE LLP
Costa Mesa, California
June 29, 1999
<PAGE> 1
EXHIBIT 99.1
1993 STOCK OPTION/STOCK ISSUANCE PLAN
(AMENDED AND RESTATED AS OF JANUARY 14, 1999)
<PAGE> 2
EXHIBIT 99.1
PAIRGAIN TECHNOLOGIES, INC.
1993 STOCK OPTION/STOCK ISSUANCE PLAN
(AMENDED AND RESTATED AS OF JANUARY 14, 1999)
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> 3
COMMON STOCK: shares of the Corporation's common stock.
CHANGE IN CONTROL: a change in ownership or control of the Corporation
effected through either of the following transactions:
a. any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders; or
b. there is a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members 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 Corporation or one or more parent or subsidiary corporations, subject to the
control and direction of the employer entity not only as to the work to be
performed but also as to the manner and method of performance.
2
<PAGE> 4
FAIR MARKET VALUE: the fair market value per share of Common Stock
determined in accordance with the following provisions:
a. If the Common Stock is not at the time listed or admitted
to trading on any national stock exchange but is traded on the Nasdaq
National Market, the Fair Market Value shall be the closing selling
price per share on the date in question, as such price is reported by
the National Association of Securities Dealers on the Nasdaq National
Market or any successor system. If there is no reported closing selling
price for the Common Stock on the date in question, then the closing
selling price on the last preceding date for which such quotation
exists shall be determinative of Fair Market Value.
b. If the Common Stock is at the time listed or admitted to
trading on any national stock exchange, then the Fair Market Value
shall be the closing selling price per share on the date in question on
the exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
reported sale of Common Stock on such exchange on the date in question,
then the Fair Market Value shall be the closing selling price on the
exchange on the last preceding date for which such quotation exists.
HOSTILE TAKE-OVER: a change in ownership of the Corporation pursuant to
which any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept.
INCENTIVE OPTION: an option which satisfies the requirements of Code
section 422.
1934 ACT: the Securities Exchange Act of 1934, as amended from time to
time.
NON-STATUTORY OPTION: an option not intended to satisfy the
requirements of Code section 422.
OPTIONEE: any person to whom an option is granted under the Option
Grant Program in effect under the Plan.
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.
3
<PAGE> 5
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
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 one hundred percent
(100%) 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.
4
<PAGE> 6
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. 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);
(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 time or times when the
options are to be granted, the number of shares to be covered by each such
grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times when 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.
5
<PAGE> 7
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 24,046,400 shares(1), 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, (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, (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, (v) the
21,400 shares added to the reserve pursuant to the automatic share increase
provisions of Section VI.B of this Article One during the 1998 fiscal year, (vi)
the 225,000 shares added to the reserve pursuant to the automatic share increase
provisions of Section VI.B of this Article One in April 1999 and (vii) the
additional increase of 2,000,000 shares authorized by the Board on January 14,
1999 and approved by the stockholders at the 1999 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.
B. The maximum number of shares of Common Stock authorized for issuance
over the term of the Plan shall automatically increase at periodic intervals
each year by the number of shares of Common Stock repurchased by the Corporation
on the open market with the cash proceeds received by the Corporation on or
after the date of the 1998 Annual Stockholders Meeting from the following
sources: (i) the exercise of outstanding options under the Plan or (ii) the
direct issuance of shares of Common Stock under the Plan. In no event, however
shall such automatic share increase exceed 500,000 shares of Common Stock in any
one calendar year.
C. 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 shares(1) 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.
- ----------------
(1) Adjusted to reflect one or more splits of the Common Stock.
6
<PAGE> 8
D. 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, 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 cancelled in accordance with Section IV 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.
E. 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 maximum number and/or class of
securities by which the share reserve under the Plan may automatically increase
in any calendar year, (iii) 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, (iv) the
number and/or class of securities and price per share in effect under each
option outstanding under the Option Grant Program and (v) the number and/or
class of securities and price per share in effect under each outstanding option
incorporated into this Plan from the Predecessor 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> 9
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 exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the option grant date.
2. The option price shall become immediately due upon exercise of
the option and 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
- full payment through a broker-dealer sale and remittance
procedure pursuant to which the Optionee (I) shall provide irrevocable
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
8
<PAGE> 10
connection with such purchase and (II) shall provide directives to the
Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale
transaction.
For purposes of this subparagraph (2), the Exercise Date shall be the
date on which 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.
C. Limited Transferability of Options. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. Non-Statutory Options may, to
the extent permitted by the Plan Administrator, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.
D. Termination of Service.
1. The following provisions shall govern the exercise period
applicable to any outstanding options held by the Optionee at the time of
cessation of Service or death.
- Should an Optionee cease Service for any reason (including
death or Permanent Disability) while holding one or more outstanding
options under this Article Two, then none of those options shall
(except to the extent otherwise provided pursuant to subparagraph C.3
below) remain exercisable for more than a thirty-six (36)-month period
(or such shorter period determined by the Plan Administrator and set
forth in the instrument evidencing the grant) measured from the date of
such cessation of Service.
- Any option held by the Optionee under this Article Two and
exercisable in whole or in part on the date of his or her death may be
subsequently exercised by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of
descent and distribution. Such exercise, however, must occur prior to
the earlier of (i) the third anniversary of the date of the Optionee's
death (or such shorter period determined by the Plan Administrator and
set forth in the instrument evidencing the grant) or (ii) the specified
expiration date of the option term. Upon the occurrence of the earlier
event, the option shall terminate.
9
<PAGE> 11
- 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 for which the option would
otherwise have become exercisable had such cessation of Service not occurred.
3. The Plan Administrator shall also have full power and authority
to extend the period of time for which the option is to remain exercisable
following the Optionee's cessation of Service or death from the limited period
in effect under subparagraph (1) above to such greater period of time as the
Plan Administrator shall deem appropriate. In no event, however, shall such
option be exercisable after the specified expiration date of the option term.
E. Stockholder Rights. An Optionee shall have no stockholder rights
with respect to any shares covered by the option until such individual shall
have exercised the option and paid the option price for the purchased shares.
F. Repurchase Rights. The shares of Common Stock acquired upon the
exercise of any Article Two option grant may be subject to repurchase by the
Corporation in accordance with the following provisions:
10
<PAGE> 12
(a) The Plan Administrator shall have the discretion to
authorize the issuance of unvested shares of Common Stock under this
Article Two. Should the Optionee cease Service while holding such
unvested shares, the Corporation shall have the right to repurchase any
or all of those unvested shares at the option price paid per share. The
terms and conditions upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the instrument
evidencing such repurchase right.
(b) All of the Corporation's outstanding repurchase rights
under this Article Two shall automatically terminate, and all shares
subject to such terminated rights shall immediately vest in full, upon
the occurrence of a Corporate Transaction, except to the extent: (i)
any such repurchase right is expressly assigned to the successor
corporation (or parent thereof) in connection with the Corporate
Transaction or (ii) such accelerated vesting is precluded by other
limitations imposed by the Plan Administrator at the time the
repurchase right is issued.
(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 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.
11
<PAGE> 13
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 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.
12
<PAGE> 14
D. The Plan Administrator shall have the discretion, exercisable either
at the time the option is granted or at any time while the option remains
outstanding, to provide (upon such terms as it may deem appropriate) for the
automatic acceleration of one or more outstanding options 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.
E. The grant of options under this Article Two shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
F. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under this Article Two (and the termination of one or
more of the Corporation's outstanding repurchase rights under this Article Two)
upon the occurrence of a 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. 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
IV, 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.
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 IV 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.
13
<PAGE> 15
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. The Plan Administrator
shall pre-approve, at the time the limited right is granted, the subsequent
exercise of that right in accordance with the terms of the grant and the
provisions of this Section IV.D. No additional approval of the Plan
Administrator or the Board shall be required at the time of the actual option
surrender and cash distribution. Any unsurrendered portion of the option shall
continue to remain outstanding and become exercisable in accordance with the
terms of the instrument evidencing such grant.
E. The shares of Common Stock subject to any option surrendered for an
appreciation distribution pursuant to this Section IV shall not be available for
subsequent issuance under the Plan.
14
<PAGE> 16
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:
(a) cash or cash equivalents (such as a personal check or bank
draft) paid to the Corporation;
(b) 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
(c) past services rendered to the Corporation or any parent or
subsidiary corporation.
2. The purchase price per Newly Issued Share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the issuance date.
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.
15
<PAGE> 17
B. Vesting Provisions.
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:
(a) the Service period to be completed by the Participant or the
performance objectives to be achieved by the Corporation,
(b) the number of installments in which the shares are to vest,
(c) the interval or intervals (if any) which are to lapse between
installments, and
(d) 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.
16
<PAGE> 18
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 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 at the time the unvested shares are issued under the Stock
Issuance Program or at any time while those shares remain outstanding, to
provide for the immediate and automatic vesting of those unvested shares at the
time of a 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
17
<PAGE> 19
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 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 cancelled, 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.
18
<PAGE> 20
ARTICLE FOUR
MISCELLANEOUS
I. 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, certain amendments may require
stockholder approval pursuant to applicable laws or regulations.
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 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.
II. 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 II 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 withholding taxes to which such holders may become subject in
connection with the exercise of their options or the vesting of their shares
(the "Withholding Taxes"). Such right may be provided to any such holder in
either or both of the following formats:
19
<PAGE> 21
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 Withholding 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 Withholding Taxes) with an aggregate Fair Market
Value equal to the percentage of the Withholding Taxes incurred in connection
with such option exercise or share vesting (not to exceed one hundred percent
(100%)) designated by the holder.
III. 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.
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.
E. On April 14, 1998 the Board again amended the Plan to effect the
following changes (the "1998 Amendment"): (i) implement an automatic share
increase feature pursuant to which the maximum number of shares of Common Stock
authorized for issuance under the Plan will automatically increase at periodic
intervals by the number of shares of Common Stock repurchased by the Corporation
on the open market with the cash proceeds received by the Corporation on or
after the date of the 1998 Annual Stockholders Meeting from the following
sources: the exercise of outstanding options under the Plan or the direct
issuance of shares of Common Stock under the Plan, provided such automatic share
increase shall not exceed 500,000 shares of Common Stock in any one calendar
year and (ii) effect a series of technical changes to the provisions of the Plan
(including the stockholder approval requirements and the transferability of
Non-Statutory Options) in order to take advantage of the most recent
20
<PAGE> 22
amendments to Rule 16b-3 of the 1934 Act. The 1998 Amendment became effective
immediately upon adoption by the Board when it was subsequently approved by the
Corporation's stockholders at the 1998 Annual Meeting held on June 24, 1998.
F. On January 14, 1999, the Board again amended the Plan to effect the
following changes (the "1999 Amendment"): (i) increase the number of shares
reserved for issuance under the Plan by 2,000,000 shares of Common Stock, (ii)
require all options and direct stock issuances under the Plan to have an
exercise or purchase price per share not less than one hundred percent (100%) of
the Fair Market Value per share of the Common Stock on the grant or issue date,
(iii) delete the cancellation/regrant provisions which allow the cancellation of
outstanding options with exercise prices in excess of the then current Fair
Market Value per share of Common Stock and the grant of replacement options with
an exercise price based on the Fair Market Value per share of Common Stock at
the time of the new grant, and (iv) remove the provision in the Plan which
authorize the Plan Administrator to extend a loan to Optionees or Participants
in connection with their exercise of options or their purchase of shares under
the Plan. The 1999 Amendment was approved by the Corporation's stockholders at
the 1999 Annual Meeting held on June 16, 1999, and no options granted on the
basis of the 2,000,000-share increase authorized by the Board on January 14,
1999 were exercised prior to such stockholder approval. All option grants made
prior to the 1999 Amendment shall remain outstanding in accordance with the
terms and conditions of the respective instruments evidencing those options or
issuances, and nothing in the 1999 Amendment shall be deemed to modify or in any
way affect those outstanding options or issuances. Subject to the foregoing
limitations, the Plan Administrator may make option grants under the Plan at any
time before the date fixed herein for the termination of the Plan.
G. 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.
H. 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.
21
<PAGE> 23
I. 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.
J. 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 cancelled 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.
IV. 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.
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.
VI. 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.
22
<PAGE> 24
VII. 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.
23
