<PAGE> 1
As filed with the Securities and Exchange Commission on December 13, 1999
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
STARBASE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-0567363
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4 HUTTON CENTRE DRIVE, SUITE 800
SANTA ANA, CA 92707-8713
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(Address of Principal Executive Offices)
NON-QUALIFIED STOCK OPTION AGREEMENTS BETWEEN THE REGISTRANT AND ITS DIRECTORS,
EMPLOYEES AND CONSULTANTS
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(Full title of the plans)
DOUGLAS S. NORMAN
4 HUTTON CENTRE DRIVE, SUITE 800
SANTA ANA, CA 92707-8713
(714) 445-4400
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(Name, address and telephone number, including area code, of agent for service)
with a copy to:
Martin E. Weisberg, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
(212) 704-6050
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=======================================================================================================
Proposed Proposed
Title of each class of Securities Amount to Maximum Maximum Amount of
to be Registered be Registered Offering Price Aggregate Registration
Per Share Offering Price Fee
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share 4,998,155(1) $3.579(2) $17,885,897.67 $4,972.28
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 416(b), there shall also be deemed covered hereby all
additional securities resulting from antidilution adjustments under the
Non-Qualified Stock Option Agreements between the registrant and
directors of StarBase Corporation, the Non-Qualified Stock Option
Agreements between the registrant and employees of StarBase
Corporation, and the Non-Qualified Stock Option Agreements between the
registrant and consultants of StarBase Corporation.
(2) Pursuant to Rule 457(h), estimated solely for the purpose of
calculating the registration fee on the basis of the exercise prices of
(i) 610,000 non-qualified stock options granted to directors of the
registrant under stock option contracts, (ii) 4,333,155 non-qualified
stock options granted to employees of the registrant under stock option
contracts and (iii) 55,000 non-qualified stock options granted to
consultants of the registrant under stock option contracts.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed by the registrant with the Securities and
Exchange Commission (Commission File No. 0-25612) pursuant to Section 13(a) of
the Securities Exchange Act of 1934 (the "Exchange Act") are incorporated herein
by reference:
(a) The registrant's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1999;
(b) The registrant's Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1999;
(c) The registrant's Annual Report on Form 10-KSB for the year ended
March 31, 1999; and
(d) The description of the registrant's common stock contained in the
registrant's registration statement on Form 10, as amended, filed
on February 23, 1995, including any amendment or report filed for
the purpose of updating such description.
All documents filed subsequent to the date of this registration
statement pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and
prior to the filing of a post-effective amendment which indicates that all
securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
registration statement and to be a part hereof from the date of the filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated herein by reference 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 other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not required, since the registrant's common stock is registered under
Section 12 of the Exchange Act.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not Applicable.
<PAGE> 3
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware ("DGCL")
provides that directors, officers, employees or agents of Delaware corporations
are entitled, under certain circumstances, to be indemnified against expenses
(including attorneys' fees) and other liabilities actually and reasonably
incurred by them in connection with any suit brought against them in their
capacity as a director, officer, employee or agent, if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, if they had no reasonable cause to believe their conduct was
unlawful. Section 145 of the DGCL also provides that directors, officers,
employees and agents may also be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by them in connection with a
derivative suit bought against them in their capacity as a director, if they
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
may be made without court approval if such person was adjudged liable to the
corporation.
Our certificate of incorporation provides that a director is not
personally liable for monetary damages to us or our stockholders for breach of
his or her fiduciary duties as a director. A director will be held liable for a
breach of his or her duty of loyalty to us or our stockholders, his or her
intentional misconduct or willful violation of law, actions or in actions not in
good faith, an unlawful stock purchase or payment of a dividend under Delaware
law, or transactions from which the director derives an improper personal
benefit. This limitation of liability does not affect the availability of
equitable remedies against the director including injunctive relief or
rescission. Our certificate of incorporation authorizes us to indemnify our
officers, directors and other agent to the fullest extent permitted under
Delaware law.
We have entered into an indemnification agreement with each of our directors and
officers. In some cases, the provisions of the indemnification agreement may be
broader than the specific indemnification provisions contained in our
certificate of incorporation or otherwise permitted under Delaware law. Each
indemnification agreement may require us to indemnify an officer or director
against liabilities that may arise by reason of his status or service as an
officer or director, or against liabilities arising from the director's willful
misconduct of a culpable nature. The indemnification agreement may also require
us to obtain directors' and officers' liability insurance, if available on
reasonable terms. We maintain a directors and officers liability policy with
Lloyds of London and General Star Indemnity Corporation that contains an
aggregate limit of liability of $5,000,000 through 2001. Our bylaws authorize us
to indemnify our directors to the fullest extent permitted under Delaware law.
In addition, our board of directors, in its sole discretion, may indemnify any
present or former officers or employees of the corporation, including officers
or employees who are acting as "fiduciaries" of any employee benefit plan,
including an ERISA plan.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
<PAGE> 4
ITEM 8. EXHIBITS.
Exhibit
Number Description
- ------ -----------
5.1 Opinion of Parker Chapin Flattau & Klimpl, LLP, as to the legality
of the common stock being offered.
23.1 Consent of Parker Chapin Flattau & Klimpl, LLP (included in their
opinion filed as Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Deloitte & Touche LLP.
24.1 Power of attorney of certain officers and directors of the
registrant (contained in the signature page).
99.1 Form of Non-Qualified Stock Option Contract between registrant and
its directors.
ITEM 9. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in this registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Exchange Act that are incorporated by reference in
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities 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.
(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 offering.
<PAGE> 5
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this registration statement
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions described in Item 6 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities 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
Securities Act and will be governed by the final adjudication of such issue.
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Santa Ana,
State of California, on the 13th day of December, 1999.
StarBase Corporation
By: /s/ Douglas S. Norman
----------------------------------
Douglas S. Norman
Chief Accounting Officer
POWER OF ATTORNEY
The undersigned directors and officers of StarBase Corporation hereby
constitute and appoint, William R. Stow III and Douglas S. Norman and each of
them, with full power to act without the other and with full power of
substitution and resubstitution, our true and lawful attorneys-in-fact with full
power to execute in our name and behalf in the capacities indicated below any
and all amendments (including post-effective amendments and amendments thereto)
to this registration statement under the Securities Act of 1933 and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission and hereby ratify and confirm each
and every act and thing that such attorneys-in-fact, or any them, or their
substitutes, shall lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William R. Stow III President, Chief Executive Officer December 13, 1999
- ---------------------------------------- and Chairman of the Board
William R. Stow III
/s/ Donald R. Farrow Vice Chairman December 13, 1999
- ---------------------------------------- and Director
Donald R. Farrow
/s/ Frank R. Caccamo Director December 13, 1999
- ----------------------------------------
Frank R. Caccamo
/s/ John R. Snedegar Director December 13, 1999
- ----------------------------------------
John R. Snedegar
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Phillip E. Pearce Director December 13, 1999
- ----------------------------------------
Phillip E. Pearce
/s/ Daniel P. Ginns Director December 13, 1999
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Daniel P. Ginns
/s/ Barry W. Sullivan Director December 13, 1999
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Barry W. Sullivan
/s/ Douglas S. Norman Chief Accounting Officer December 13, 1999
- ----------------------------------------
Douglas S. Norman
</TABLE>
<PAGE> 8
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
5.1 Opinion of Parker Chapin Flattau & Klimpl, LLP, as to the legality
of the common stock being offered.
23.1 Consent of Parker Chapin Flattau & Klimpl, LLP (included in their
opinion filed as Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Deloitte & Touche LLP.
24.1 Power of attorney of certain officers and directors of the
registrant (contained in the signature page).
99.1 Form of Non-Qualified Stock Option Contract between registrant and
its directors.
<PAGE> 1
EXHIBIT 5.1
December 10, 1999
StarBase Corporation
4 Hutton Centre Drive, Suite 800
Santa Ana, CA 92707-8713
Gentlemen:
We have acted as counsel for StarBase Corporation, a Delaware
corporation (the "Company") in connection with its Registration Statement on
Form S-8 (the "Registration Statement") to be filed with the Securities and
Exchange Commission relating to the registration of 4,998,155 shares of Common
Stock, par value $ .01 per share (the "shares") issuable upon exercise of
options granted or to be granted pursuant to (a) non-qualified stock option
contacts between the Company and its directors (the "Director Stock Option
Contracts"), (b) non-qualified stock option contracts between the Company and
its employees (the "Employee Stock Option Contracts"), and (c) non-qualified
stock option contracts between the Company and its consultants (the "Consultant
Stock Option Contracts" and, together with the Director Stock Option Contracts
and the Employee Stock Option Contracts the "Stock Option Documents").
In connection with the foregoing, we have examined, among other things,
the agreements relating to the Stock Option Documents, the Stock Option
Documents, the Registration Statement and originals or copies, satisfactory to
us, of all such corporate records and of all such agreements, certificates and
other documents as we have deemed relevant and necessary as a basis for the
opinion hereinafter expressed. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the original documents of documents
submitted to us as copies. As to any facts material to such opinion, we have, to
the extent that relevant facts were not independently established by us, relied
on certificates of public officials and certificates, oaths and declarations of
officers or other representatives of the registrant.
Based upon and subject to the foregoing, we are of the opinion that the
Shares to be issued pursuant to the exercise of options granted or to be granted
under the Stock Option Documents will be, when issued pursuant to the Stock
Option Documents, validly issued, fully paid and non-assessable.
We hereby consent to the filing of a copy of this opinion as an exhibit
to the Registration Statement.
Very truly yours,
Parker Chapin Flattau & Klimpl, LLP
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated June 26, 1998 relating to the
financial statements, which appears in StarBase Corporation's Annual Report on
Form 10-KSB for the year ended March 31, 1999.
PricewaterhouseCoopers LLP
Costa Mesa, California
December 10, 1999
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Starbase Corporation on Form S-8 of our report dated June 18, 1999 (which report
expresses an unqualified opinion and includes an explanatory paragraph related
to substantial doubt about the Company's ability to continue as a going concern)
appearing in the Form 10-KSB of Starbase Corporation for the year ended March
31, 1999.
DELOITTE & TOUCHE LLP
Costa Mesa, California
December 10, 1999
<PAGE> 1
STARBASE CORPORATION
NONSTATUTORY STOCK OPTION AGREEMENT
THIS NONSTATUTORY STOCK OPTION AGREEMENT (the "OPTION AGREEMENT") is
made and entered into as of _______ by and between StarBase Corporation and
___________("OPTIONEE").
STARBASE CORPORATION
By: ____________________________________
Title: Assistant Secretary
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement (Sections I and II) and hereby accepts the
Option subject to all of the terms and provisions thereof, including any changes
in the terms and conditions of the Option Agreement. The Optionee hereby agrees
to accept as binding, conclusive and final all decisions or interpretations of
the Board of Directors upon any questions arising under this Option Agreement.
Optionee: ___________________________
Date: _______________________________
- --------------------------------------------------------------------------------
I. NOTICE OF STOCK OPTION GRANT
The Optionee has been granted an Option to purchase Common Stock of the
Company, subject to the terms and conditions of this Option Agreement, as
follows:
DATE OF OPTION GRANT:
INITIAL VESTING DATE:
EXERCISE PRICE PER SHARE: $
NUMBER OF OPTION SHARES:
OPTION EXPIRATION DATE*:
VESTING SCHEDULE:
This option shall be exercisable, in whole or in part, according to the
following vesting schedule:
The right to exercise the Option with respect to ___ % of the Option
Shares shall vest on the Initial Vesting Date as stated above, and ______ of the
Option Shares shall vest each month thereafter until the Option is exercisable
with respect to all of the Option Shares, provided the Optionee's Service is
continuous from the Date of the Option Grant until the relevant vesting date.
TERMINATION PERIOD:
*Options may terminate earlier pursuant to Section 7.
<PAGE> 2
II. NONSTATUTORY STOCK OPTION AGREEMENT
The Company has granted to the Optionee an option to purchase certain
shares of Stock upon the terms and conditions set forth in this Option Agreement
(the "OPTION").
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Whenever used herein, the following terms shall
have their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company. If one
or more committees have been appointed by the Board to administer the Option
Agreement, "Board" also means such committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.
(c) "COMPANY" means StarBase Corporation, a Delaware
corporation, or any successor corporation thereto.
(d) "DATE OF OPTION GRANT" is stated on the Notice of Stock
Option Grant.
(e) "DISABILITY" means the inability of the Optionee, in the
opinion of a qualified physician acceptable to the Company, to perform the major
duties of the Optionee's position with the Participating Company Group because
of the sickness or injury of the Optionee.
(f) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(g) "EXERCISE PRICE" means the Exercise Price per Share of Stock
stated on the Notice of Stock Option Grant, as adjusted from time to time
pursuant to Section 9.
(h) "FAIR MARKET VALUE" means, as of any date, the value of a
share of stock or other property as determined by the Board, in its sole
discretion, or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein.
(i) "INITIAL EXERCISE DATE" means the Initial Vesting Date.
(j) "INITIAL VESTING DATE" means the date stated on the Notice
of Stock Option Grant.
(k) "NUMBER OF OPTION SHARES" means the number of shares of
Stock stated on the Notice of Stock Option Grant, as adjusted from time to time
pursuant to Section 9.
(l) "OPTION EXPIRATION DATE" means the date ten (10) years after
the Date of Option Grant.
(m) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
<PAGE> 3
(n) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation.
(o) "PARTICIPATING COMPANY GROUP" means, at any point in time,
all corporations collectively, which are then Participating Companies.
(p) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(q) "SERVICE" means the Optionee's employment or service with
the Participating Company Group, whether in the capacity of an employee, a
director, independent contractor, consultant or otherwise. The Optionee's
Service shall not be deemed to have terminated merely because of a change in the
capacity in which the Optionee renders Service to the Participating Company
Group or a change in the Participating Company for which the Optionee renders
such Service, provided that there is no interruption or termination of the
Optionee's Service. The Optionee's Service shall be deemed to have terminated
either upon an actual termination of Service or upon the corporation for which
the Optionee performs Service ceasing to be a Participating Company. Subject to
the foregoing, the Company, in its sole discretion, shall determine whether the
Optionee's Service has terminated and the effective date of such termination.
(r) "STOCK" means the common stock, $0.01 par value, of the
Company, as adjusted from time to time in accordance with Section 4.2.
(s) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
(t) "VESTING SCHEDULE" specifies the timing and amount of option
shares that become exercisable. No option shares are exercisable prior to the
Initial Vesting Date. The schedule is stated on the Notice of Stock Option
Grant.
1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include the
singular, and the term "or" shall include the conjunctive as well as the
disjunctive.
2. TAX CONSEQUENCES. TAX STATUS OF OPTION. This Option is intended to
be a Nonstatutory Stock Option and shall not be treated as an Incentive Stock
Option within the meaning of Section 422(b) of the Code. The Optionee
acknowledges that the Optionee has been advised to consult with a tax advisor
prior to the exercise of the Option regarding the tax consequences to the
Optionee of the exercise of the Option.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board. All determinations by the
Board shall be final and binding upon all persons having an interest in the
Option. Any officer of a Participating Company shall have the authority to act
on behalf of the Company with respect to any matter, right, obligation, or
election which is the responsibility of or which is allocated to the Company
herein, provided the officer has apparent authority with respect to such matter,
right, obligation, or election.
4. EXERCISE OF THE OPTION.
4.1 RIGHT TO EXERCISE. Except as otherwise provided herein, the
Option shall be exercisable on and after the Initial Exercise Date and prior to
the termination of the Option (as provided in Section 6) in an amount
(determined as of the date on which the Option is to be exercised pursuant to
the terms set forth in Section
<PAGE> 4
4.2), not to exceed the Number of Option Shares exercisable determined by the
Vesting Schedule set forth on the Notice of Stock Option Grant less the number
of shares previously acquired upon exercise of the Option.
4.2 METHOD OF EXERCISE. Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and such
other representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in Section 6, accompanied by (i) full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased (as
determined under Section 4.3), (ii) an executed copy, if required herein, of the
then current forms of escrow and security agreement referenced below and iii)
the payment of any taxes attributable to the exercise of the Option (or evidence
of such other arrangement satisfactory to the Company). The Option shall be
deemed to be exercised upon receipt by the Company of such written notice, the
aggregate Exercise Price, and, if required by the Company, such executed
agreements.
4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of whole shares of
Stock owned by the Optionee having a Fair Market Value (as determined by the
Company without regard to any restrictions on transferability applicable to such
stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the aggregate Exercise Price, (iii)
by means of a Cashless Exercise, as defined in Section 4.3(c), (iv) in the
Company's sole discretion at the time the Option is exercised, by cash for a
portion of the aggregate Exercise Price not less than the par value of the
shares being acquired and the Optionee's promissory note for the balance of the
aggregate Exercise Price, or (v) by any combination of the foregoing.
(b) TENDER OF STOCK. Notwithstanding the foregoing, the Option
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock. The
Option may not be exercised by tender to the Company of shares of Stock unless
such shares either have been owned by the Optionee for more than six (6) months
or were not acquired, directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. A "Cashless Exercise" means the
assignment in a form acceptable to the Company of the proceeds of a sale or loan
with respect to some or all of the shares of Stock acquired upon the exercise of
the Option pursuant to a program or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
(d) PAYMENT BY PROMISSORY NOTE. No promissory note shall be
permitted if an exercise of the Option using a promissory note would be a
violation of any law. Unless otherwise specified by the Board at the time the
Option is granted, the promissory note permitted in clause (iv) of Section
4.3(a) shall be a full recourse note in a form satisfactory to the Company, with
principal payable not more than four (4) years after the date the Option is
exercised. Interest on the principal balance of the promissory note shall be
payable in monthly installments at the minimum interest rate necessary to avoid
imputed interest pursuant to all applicable sections of the Code. Such recourse
promissory note shall be secured by the shares of Stock acquired pursuant to the
then current form of security agreement as approved by the Company. At any time
the Company is subject to the regulations promulgated by the Board of Governors
of the Federal Reserve System or any other governmental entity
<PAGE> 5
affecting the extension of credit in connection with the Company's Securities,
any promissory note shall comply with such applicable regulations, and the
Optionee shall pay the unpaid principal and accrued interest, if any, to the
extent necessary to comply with such applicable regulations. Except as the
Company in its sole discretion shall determine, the Optionee shall pay the
unpaid principal balance of the promissory note and any accrued interest thereon
upon termination of the Optionee's Service with the Participating Company Group
for any reason, with or without cause.
4.4 TAX WITHHOLDING. At the time of, and as a condition to, any
exercise of the Option , in whole or in part, or at any time thereafter as
requested by the Company, the Optionee hereby authorizes withholding from wages
and any other amounts payable to the Optionee, and, at the direction of the
Company, otherwise agrees to make adequate provision for (including by means of
a Cashless Exercise to the extent permitted by the Company), any sums required
to satisfy the federal, state, local and foreign tax withholding obligations of
the Participating Company Group, if any, which arise in connection with the
Option, including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in
part, of any shares acquired upon exercise of the Option, (iii) the operation of
any law or regulation providing for the imputation of interest or (iv) the
lapsing of any restriction with respect to any shares acquired upon exercise of
the Option.
4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares as
to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.
The grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares subject to the Option shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of the
Option, the Company may require the Optionee to satisfy any qualifications that
may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.
4.7 FRACTIONAL SHARES. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution. Following the death of the
Optionee, the Option, to the extent provided in Section 7, may be exercised by
the Optionee's legal representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable laws of descent and
distribution.
<PAGE> 6
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Service as described in Section 7.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABLE.
(a) DISABILITY. If the Optionee's Service with the Participating
Company Group is terminated because of the Disability of the Optionee, the
Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee (or the
Optionee's guardian or legal representative) at any time prior to the expiration
of one (1) year after the date on which the Optionee's Service terminated, but
in any event no later than the Option Expiration Date.
(b) DEATH. If the Optionee's Service with the Participating
Company Group is terminated because of the death of the Optionee, the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee (or the Optionee's guardian
or legal representative, or other person who acquired the right to exercise the
Option by reason of the Optionee's death) at any time prior to the expiration of
one (1) year after the date on which the Optionee's Service terminated, but in
any event no later than the Option Expiration Date. The Optionee's Service shall
be deemed to have terminated on account of death if the Optionee dies within
three (3) months after the Optionee's termination of Service.
(c) OTHER TERMINATION OF SERVICE. If the Optionee's Service with
the Participating Company Group terminates for any reason, except Disability or
death, the Option, to the extent unexercised and exercisable by the Optionee on
the date on which the Optionee's Service terminated, may be exercised by the
Optionee within thirty (30) days (or such other longer period of time as
determined by the Board, in its sole discretion) after the date on which the
Optionee's Service terminated, but in any event no later than the Option
Expiration Date.
7.2 ADDITIONAL LIMITATIONS ON OPTION EXERCISE. Except as the Company
and the Optionee otherwise agree, exercise of the Option pursuant to Section 7.1
following termination of the Optionee's Service may not be made by delivery of a
promissory note as provided in Section 4.3(d).
7.3 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.
7.4 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b). Notwithstanding the
foregoing, if a sale within the applicable time periods set forth in Section 7.1
of shares acquired upon the exercise of the Option would subject the Optionee to
suit under Section 16(b) of the Exchange Act, the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day following
the date on which a sale of such shares by the Optionee would no longer be
subject to such suit, (ii) the one hundred and ninetieth (190th) day after the
Optionee's termination of Service, or (iii) the Option Expiration Date.
7.5 LEAVE OF ABSENCE. For purposes of Section 7.1, the Optionee's
Service with the Participating Company Group shall not be deemed to terminate if
the Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave of absence in excess of ninety (90) days, the Optionee's Service shall be
deemed to terminate on the ninety-first (91st) day of such leave unless the
Optionee's right to reemployment with the Participating Company Group remains
guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company (or
<PAGE> 7
required by law), a leave of absence shall not be treated as Service for
purposes of determining the Optionee's Vesting Schedule.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred
if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Company of more than
fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a
party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or Multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTION. In the event of a
Transfer of Control, all Options granted under the Plan shall become immediately
exercisable in full, effective as of the date of the Transfer of Control.
Notwithstanding the foregoing, shares acquired upon exercise of the Option prior
to the date of the Transfer of Control and any consideration received pursuant
to the Transfer of Control with respect to such shares shall continue to be
subject to all applicable provisions of this Option Agreement except as
otherwise provided herein.
9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of
shares of stock subject to the Option. If a majority of the shares which are of
the same class as the shares that are subject to the Option are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event) shares of another corporation (the "NEW SHARES"), the Board may
unilaterally amend the Option to provide that the Option is exercisable for New
Shares. In the event of any such amendment, the Number of Option Shares and the
Exercise Price shall be adjusted in a fair and equitable manner, as determined
by the Board, in its sole discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 9 shall
be rounded up or down to the nearest whole number, as determined by the Board,
and in no event may the Exercise Price be decreased to an amount less than the
par value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 9 shall be final, binding, and
conclusive.
<PAGE> 8
10. RIGHTS AS A STOCKHOLDER, EMPLOYEE OR CONSULTANT. The Optionee shall
have no rights as a stockholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 9. Nothing in this Option Agreement shall confer upon the
Optionee any right to continue in the Service of a Participating Company or
interfere in any way with any right of the Participating Company Group to
terminate the Optionee's Service as an employee, consultant, or otherwise as the
case may be, at any time.
11. ESCROW.
11.1 ESTABLISHMENT OF ESCROW. If the Optionee pays for the shares
with a promissory note, the Company may require the Optionee to deposit the
certificate evidencing the shares which the Optionee purchases upon exercise of
the Option with an agent designated by the Company under the terms and
conditions of escrow and security agreements approved by the Company. If the
Company does not require such deposit as a condition of exercise of the Option,
the Company reserves the right at any time to require the Optionee to so deposit
the certificate in escrow. Upon the occurrence of an Ownership Change Event or a
change, as described in Section 9, in the character or amount of any of the
outstanding stock of the Company the stock of which is subject to the provisions
of this Option Agreement, any and all new, substituted or additional securities
or other property to which the Optionee is entitled by reason of the Optionee's
ownership of shares of Stock acquired upon exercise of the Option that remain,
following such Ownership Change Event or change described in Section 9, subject
to any security interest held by the Company shall be immediately subject to the
escrow to the same extent as such shares of Stock immediately before such event.
The Company shall bear the expenses of the escrow.
11.2 DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after
full repayment of any promissory note secured by the shares or other property in
escrow, but not more frequently than twice each calendar year, the escrow agent
shall deliver to the Optionee the shares and any other property no longer
subject to such restrictions and no longer securing any promissory note.
11.3 NOTICES AND PAYMENTS. In the event the shares and any other
property are held in escrow, the notices required to be given to the Optionee
shall be given to the escrow agent, and any payment required to be given to the
Optionee shall be given to the escrow agent. Within thirty (30) days after
payment by the Company, the escrow agent shall deliver the shares and any other
property which the Company has purchased to the Company and shall deliver the
payment received from the Company to the Optionee.
12. LEGENDS. The Company may at any time place legends referencing any
applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section.
13. PUBLIC OFFERING. The Optionee hereby agrees that in the event of
any underwritten public offering of stock, including an initial public offering
of stock, made by the Company pursuant to an effective registration statement
filed under the Securities Act, the Optionee shall not offer, sell, contract to
sell, pledge, hypothecate, grant any option to purchase or make any short sale
of, or otherwise dispose of any shares of stock of the Company or any rights to
acquire stock of the Company for such period of time from and after the
effective date of such registration statement as may be established by the
underwriter for such initial public offering; provided, however, that such
period of time shall not exceed one hundred eighty (180) days from the effective
date of the registration statement to be filed in connection with such public
offering. The foregoing limitation shall not apply to shares registered in the
public offering under the Securities Act. The Optionee shall be subject to this
Section provided and only if the officers and directors of the Company are also
subject to similar arrangements.
<PAGE> 9
14. BINDING EFFECT. Subject to the restrictions on transfer set forth
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
15. TERMINATION OR AMENDMENT. The Board may terminate or amend the Plan
or the Option at any time; provided, however, that except as provided in Section
8.2 in connection with a Transfer of Control, no such termination or amendment
may adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee unless such termination or amendment is necessary to
comply with any applicable law or government regulation. No amendment or
addition to this Option Agreement shall be effective unless in writing.
16. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein and there are no agreements,
understandings, restrictions, representations, or warranties among the Optionee
and the Participating Company Group with respect to such subject matter other
than those as set forth or provided for herein. To the extent contemplated
herein, the provisions of this Option Agreement shall survive any exercise of
the Option and shall remain in full force and effect.
17. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
