<PAGE> 1
As filed with the Securities and Exchange Commission on April 12, 2000
Registration No. 333-________
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
(Address of Principal Executive Offices)
PREMIA CORPORATION 1998 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENTS BETWEEN THE
REGISTRANT AND ITS EMPLOYEES AND CONSULTANTS
(Full title of the plans)
DOUGLAS S. NORMAN
4 HUTTON CENTRE DRIVE, SUITE 800
SANTA ANA, CA 92707-8713
(714) 445-4400
(Name, address and telephone number, including area code, of agent for service)
with a copy to:
Martin E. Weisberg, Esq.
Parker Chapin LLP
405 Lexington Avenue
New York, New York 10174
(212) 704-6000
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>
==============================================================================================================================
Amount to Proposed
be Registered Maximum Proposed
Title of each class of Securities Offering Price Aggregate Maximum Amount of
to be Registered Per Share Offering Price Fee Registration
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share 6,093,727(1) $5.075(2) $30,927,287.31 $8,164.80
==============================================================================================================================
</TABLE>
<PAGE> 2
(1) Pursuant to Rule 416(b), there shall also be deemed covered hereby all
additional securities resulting from antidilution adjustments under the
Premia Corporation 1998 Stock Option Plan, 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) 270,084
incentive stock options granted under the Premia Corporation 1998 Stock
Option Plan, (ii) 4,793,439 non-qualified stock options granted to
employees of the registrant under stock option contracts and (iii)
1,030,204 non-qualified stock options granted to consultants of the
registrant under stock option contracts.
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 Current Report on Form 8-K/A filed on April
7, 2000;
(b) The registrant's Current Report on Form 8-K filed on March
23, 2000;
(c) The registrant's Quarterly Report on Form 10-QSB for the
quarter ended December 31, 1999;
(d) The registrant's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1999;
(e) The registrant's Quarterly Report on Form 10-QSB for the
quarter ended June 30, 1999;
(f) The registrant's Annual Report on Form 10-KSB for the year
ended March 31, 1999; and
(g) 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.
<PAGE> 3
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.
<PAGE> 4
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not Applicable.
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.
<PAGE> 5
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
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 Premia Corporation 1998 Stock Option Plan.
99.2 Form of Premia Corporation Incentive Stock Option Letter Agreement.
99.3 Form of Premia Corporation Incentive Stock Option Conversion Information.
99.4 Form of Non-Qualified Stock Option Contract between registrant and its employees and consultants.
</TABLE>
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
<PAGE> 6
(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.
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> 7
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 10th day of April, 2000.
StarBase Corporation
By: /s/ Douglas S. Norman
------------------------------------
Douglas S. Norman
Chief Financial 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>
April 10, 2000
/s/ William R. Stow III President, Chief Executive
- ---------------------------------------- Officer
William R. Stow III and Chairman of the Board
/s/ Donald R. Farrow Executive V.P. Admin April 10, 2000
- ---------------------------------------- and Director
Donald R. Farrow
/s/ Frank R. Caccamo Director April 10, 2000
- ----------------------------------------
Frank R. Caccamo
/s/ John R. Snedegar Director April 10, 2000
- ----------------------------------------
John R. Snedegar
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C>
/s/ Phillip E. Pearce Director April 10, 2000
- ----------------------------------------
Phillip E. Pearce
/s/ Daniel P Ginns Director April 10, 2000
- ----------------------------------------
Daniel P. Ginns
/s/ Barry W. Sullivan Director April 10, 2000
- ----------------------------------------
Barry W. Sullivan
/s/ Douglas S. Norman Chief Financial Officer April 10, 2000
- ----------------------------------------
Douglas S. Norman
</TABLE>
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
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 Premia Corporation 1998 Stock Option Plan.
99.2 Form of Premia Corporation Incentive Stock Option Letter Agreement.
99.3 Form of Premia Corporation Incentive Stock Option Conversion Information.
99.4 Form of Non-Qualified Stock Option Contract between registrant and its employees and consultants.
</TABLE>
<PAGE> 1
Exhibit 5.1
April 7, 2000
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 6,093,727 shares of Common
Stock, par value $ .01 per share (the "Shares") issuable upon exercise of
options granted or to be granted pursuant to (a) incentive stock option
contracts pursuant to the Premia Corporation 1998 Stock Option Plan (the "Premia
Stock Options"), (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 Premia Stock Options and the
Employee Stock Option Contracts, the "Stock Option Documents").
In connection with the foregoing, we have examined, among other things,
the Premia Corporation 1998 Stock Option Plan, the Stock Option Documents,
agreements relating to 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 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
April 7, 2000
<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
April 7, 2000
<PAGE> 1
EXHIBIT 99.1
PREMIA CORPORATION
1998 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of the Premia Corporation 1998 Stock Option Plan (the
"Plan") is to enhance the long-term shareholder value of Premia Corporation, an
Oregon corporation (the "Company"), by offering opportunities to employees (and
persons offered employment), directors, officers, consultants, agents, advisors
and independent contractors of the Company and its Subsidiaries (as defined in
Section 2) to participate in the Company's growth and success, and to encourage
them to remain in the service of the Company and its Subsidiaries.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set
forth below:
2.1 BOARD
"Board" means the Board of Directors of the Company.
2.2 CAUSE
"Cause" means dishonesty, fraud, misconduct, unauthorized use or
disclosure of confidential information or trade secrets, or conviction or
confession of a crime punishable by law (except minor violations), in each case
as determined by the Plan Administrator, and its determination shall be
conclusive and binding.
2.3 CODE
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.4 COMMON STOCK
"Common Stock" means the Common Stock with no par value of the Company.
2.5 CORPORATE TRANSACTION
"Corporate Transaction" means any of the following events:
(a) Consummation of any merger or consolidation of the Company in
which the Company is not the continuing or surviving corporation, or
pursuant to which shares of the Common Stock are converted into cash,
securities or other property, if following such merger or consolidation
the holders of the Company's outstanding voting securities
-1-
<PAGE> 2
immediately prior to such merger or consolidation own less than 66-2/3%
of the outstanding voting securities of the surviving corporation;
(b) Consummation of any sale, lease, exchange or other transfer in
one transaction or a series of related transactions of all or
substantially all of the Company's assets other than a transfer of the
Company's assets to a majority-owned subsidiary corporation (as the term
"subsidiary corporation" is defined in Section 8.3) of the Company; or
(c) Approval by the holders of the Common Stock of any plan or
proposal for the liquidation or dissolution of the Company.
Ownership of voting securities shall take into account and shall include
ownership as determined by applying Rule 13d-3(d)(1)(i) (as in effect on the
date of adoption of the Plan) under the Exchange Act.
2.6 DISABILITY
"Disability" means "disability" as that term is defined for purposes of
Section 22(e)(3) of the Code.
2.7 EARLY RETIREMENT
"Early Retirement" means early retirement as that term is defined by the
Plan Administrator from time to time for purposes of the Plan.
2.8 EXCHANGE ACT
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.9 FAIR MARKET VALUE
The "Fair Market Value" shall be as established in good faith by the
Plan Administrator or (a) if the Common Stock is listed on the Nasdaq National
Market, the closing per share sales price for the Common Stock as reported by
the Nasdaq National Market for a single trading day or (b) if the Common Stock
is listed on the New York Stock Exchange or the American Stock Exchange, the
closing per share sales price for the Common Stock as such price is officially
quoted in the composite tape of transactions on such exchange for a single
trading day. If there is no such reported price for the Common Stock for the
date in question, then such price on the last preceding date for which such
price exists shall be determinative of the Fair Market Value.
2.10 GOOD REASON
"Good Reason" means the occurrence of any of the following events or
conditions and the failure of the Successor Corporation to cure such event or
condition within 30 days after receipt of written notice by the Optionee:
-2-
<PAGE> 3
(a) a change in the Optionee's status, title, position or
responsibilities (including reporting responsibilities) that, in the Optionee's
reasonable judgment, represents a substantial reduction in the status, title,
position or responsibilities as in effect immediately prior thereto; the
assignment to the Optionee of any duties or responsibilities that, in the
Optionee's reasonable judgment, are materially inconsistent with such status,
title, position or responsibilities; or any removal of the Optionee from or
failure to reappoint or reelect the Optionee to any of such positions, except in
connection with the termination of the Optionee's employment for Cause, for
Disability or as a result of his or her death, or by the Optionee other than for
Good Reason;
(b) a reduction in the Optionee's annual base salary;
(c) the Successor Corporation's requiring the Optionee (without
the Optionee's consent) to be based at any place outside a 35-mile radius of his
or her place of employment prior to a Corporate Transaction, except for
reasonably required travel on the Successor Corporation's business that is not
materially greater than such travel requirements prior to the Corporate
Transaction;
(d) the Successor Corporation's failure to (i) continue in effect
any material compensation or benefit plan (or the substantial equivalent
thereof) in which the Optionee was participating at the time of a Corporate
Transaction, including, but not limited to, the Plan, or (ii) provide the
Optionee with compensation and benefits substantially equivalent (in terms of
benefit levels and/or reward opportunities) to those provided for under each
material employee benefit plan, program and practice as in effect immediately
prior to the Corporate Transaction;
(e) any material breach by the Successor Corporation of its
obligations to the Optionee under the Plan or any substantially equivalent plan
of the Successor Corporation; or
(f) any purported termination of the Optionee's employment or
services for Cause by the Successor Corporation that does not comply with the
terms of the Plan or any substantially equivalent plan of the Successor
Corporation.
2.11 GRANT DATE
"Grant Date" means the date the Plan Administrator adopted the granting
resolution or a later date designated in a resolution of the Plan Administrator
as the date an Option is to be granted.
2.12 IPO
"IPO" means the Company's initial public offering described in Section
7.5.
-3-
<PAGE> 4
2.13 INCENTIVE STOCK OPTION
"Incentive Stock Option" means an Option to purchase Common Stock
granted under Section 7 with the intention that it qualify as an "incentive
stock option" as that term is defined in Section 422 of the Code.
2.14 NONQUALIFIED STOCK OPTION
"Nonqualified Stock Option" means an Option to purchase Common Stock
granted under Section 7 other than an Incentive Stock Option.
2.15 OPTION
"Option" means the right to purchase Common Stock granted under Section
7.
2.16 OPTIONEE
"Optionee" means (i) the person to whom an Option is granted; (ii) for
an Optionee who has died, the personal representative of the Optionee's estate,
the person(s) to whom the Optionee's rights under the Option have passed by will
or by the applicable laws of descent and distribution, or the beneficiary
designated in accordance with Section 9; or (iii) person(s) to whom an Option
has been transferred in accordance with Section 9.
2.17 PLAN ADMINISTRATOR
"Plan Administrator" means the Board or any committee of the Board
designated to administer the Plan under Section 3.1.
2.18 RETIREMENT
"Retirement" means retirement as of the individual's normal retirement
date as that term is defined by the Plan Administrator from time to time for
purposes of the Plan.
2.19 SECURITIES ACT
"Securities Act" means the Securities Act of 1933, as amended.
2.20 SUBSIDIARY
"Subsidiary," except as provided in Section 8.3 in connection with
Incentive Stock Options, means any entity that is directly or indirectly
controlled by the Company or in which the Company has a significant ownership
interest, as determined by the Plan Administrator, and any entity that may
become a direct or indirect parent of the Company.
2.21 SUCCESSOR CORPORATION
"Successor Corporation" has the meaning set forth in Section 10.2.
-4-
<PAGE> 5
SECTION 3. ADMINISTRATION
3.1 PLAN ADMINISTRATOR
The Plan shall be administered by the Board or a committee or committees
(which term includes subcommittees) appointed by, and consisting of two or more
members of, the Board. If and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, the Board shall consider in
selecting the Plan Administrator and the membership of any committee acting as
Plan Administrator, with respect to any persons subject or likely to become
subject to Section 16 of the Exchange Act, the provisions regarding (a) "outside
directors" as contemplated by Section 162(m) of the Code and (b) "nonemployee
directors" as contemplated by Rule 16b-3 under the Exchange Act. The Board may
delegate the responsibility for administering the Plan with respect to
designated classes of eligible persons to different committees consisting of two
or more members of the Board, subject to such limitations as the Board deems
appropriate. Committee members shall serve for such term as the Board may
determine, subject to removal by the Board at any time.
3.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR
Except for the terms and conditions explicitly set forth in the Plan,
the Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to Options under the Plan, including the
selection of individuals to be granted Options, the type of Options, the number
of shares of Common Stock subject to an Option, all terms, conditions,
restrictions and limitations, if any, of an Option and the terms of any
instrument that evidences the Option. The Plan Administrator shall also have
exclusive authority to interpret the Plan and may from time to time adopt, and
change, rules and regulations of general application for the Plan's
administration. The Plan Administrator's interpretation of the Plan and its
rules and regulations, and all actions taken and determinations made by the Plan
Administrator pursuant to the Plan, shall be conclusive and binding on all
parties involved or affected. The Plan Administrator may delegate administrative
duties to such of the Company's officers as it so determines.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 AUTHORIZED NUMBER OF SHARES
(a) Subject to the following provisions of this subsection 4.1, the
maximum number of shares of Stock that may be delivered to Participants and
their beneficiaries under the Plan shall be 250,000 shares of Common Stock.
(b) If the Exercise Price of any stock option granted under the Plan is
satisfied by tendering shares of Common Stock to the Company (by either actual
delivery or by attestation), only the number of shares of Common Stock issued
net of the shares of Common Stock tendered shall be deemed delivered for
purposes of determining the maximum number of shares of Common Stock available
for delivery under the Plan.
-5-
<PAGE> 6
(c) Shares of Common Stock delivered under the Plan in settlement,
assumption or substitution of outstanding awards (or obligations to grant future
awards) under the plans or arrangements of another entity shall not reduce the
maximum number of shares of Common Stock available for delivery under the Plan,
to the extent that such settlement, assumption or substitution is a result of
the Company or a Subsidiary acquiring another entity (or an interest in another
entity).
(d) Shares issued under the Plan shall be drawn from authorized and
unissued shares.
4.2 REUSE OF SHARES
Any shares of Common Stock that have been made subject to an Option that
cease to be subject to the Option (other than by reason of exercise of the
Option to the extent it is exercised for shares) shall again be available for
issuance in connection with future grants of Options under the Plan.
SECTION 5. ELIGIBILITY
Options may be granted under the Plan to those officers, directors and
employees of the Company and its Subsidiaries as the Plan Administrator from
time to time selects. Options may also be made to consultants, agents, advisors
and independent contractors who provide services to the Company and its
Subsidiaries.
SECTION 6. AWARDS
6.1 FORM AND GRANT OF OPTIONS
The Plan Administrator shall have the authority, in its sole discretion,
to determine the type or types of awards to be made under the Plan. Such awards
may consist of Incentive Stock Options and/or Nonqualified Stock Options.
Options may be granted singly or in combination.
6.2 ACQUIRED COMPANY OPTION AWARDS
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Options under the Plan in substitution for awards issued
under other plans, or assume under the Plan awards issued under other plans, if
the other plans are or were plans of other acquired entities ("Acquired
Entities") (or the parent of the Acquired Entity) and the new Option is
substituted, or the old award is assumed, by reason of a merger, consolidation,
acquisition of property or of stock, reorganization or liquidation (the
"Acquisition Transaction"). In the event that a written agreement pursuant to
which the Acquisition Transaction is completed is approved by the Board and said
agreement sets forth the terms and conditions of the substitution for or
assumption of outstanding awards of the Acquired Entity, said terms and
conditions shall be deemed to be the action of the Plan Administrator without
any further action by the Plan Administrator, except as may be required for
compliance with Rule 16b-3 under the Exchange Act, and the persons holding such
awards shall be deemed to be Optionees.
-6-
<PAGE> 7
SECTION 7. TERMS AND CONDITIONS OF OPTIONS
7.1 GRANT OF OPTIONS
The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock
Options, which shall be appropriately designated.
7.2 OPTION EXERCISE PRICE
The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options.
7.3 TERM OF OPTIONS
The term of each Option shall be as established by the Plan
Administrator or, if not so established, shall be 10 years from the Grant Date.
7.4 VESTING OF OPTIONS
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which or the installments in which the
Option shall vest, which provisions may be waived or modified by the Plan
Administrator at any time. If not otherwise established in the instrument
evidencing the Option, the Option will vest in accordance with the schedule
below, which schedule may be waived or modified by the Plan Administrator at any
time:
<TABLE>
<CAPTION>
Period of Optionee's Continuous Employment or
Service With the Company or Its Subsidiaries Percent of Total Option
From the Date of Hire That Is Vested
--------------------- --------------
<S> <C> <C>
After 1 year 25%
After the 13th month
and for each complete month thereafter
2% per month
</TABLE>
7.5 EXERCISE OF OPTION
Each option will become exercisable, up to the portion of the Option
vested pursuant to Section 7.4 or otherwise, upon either (i) ten (10) years from
the Grant Date, (ii) upon the closing of an underwritten initial public offering
with an aggregate price to the public in excess of $10 million ("IPO"), or (iii)
immediately prior to the specified effective date of a Corporate Transaction. An
Option may be exercised from time to time by written notice to the Company, in
accordance with procedures established by the Plan Administrator, setting forth
the number of shares with respect to which the Option is being exercised and
accompanied by payment in full as described in Section 7.6. The Plan
Administrator may determine at any time that an Option
-7-
<PAGE> 8
may not be exercised as to less than 100 shares at any one time (or the lesser
number of remaining shares covered by the Option).
7.6 PAYMENT OF EXERCISE PRICE
The exercise price for shares purchased under an Option shall be paid in
full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
must be paid in cash or by check or, unless the Plan Administrator in its sole
discretion determines otherwise, either at the time the Option is granted or at
any time before it is exercised, a combination of cash and/or check (if any) and
one or both of the following alternative forms: (a) tendering Common Stock
already owned by the Optionee for at least six months (or any shorter period
necessary to avoid a charge to the Company's earnings for financial reporting
purposes) having a Fair Market Value on the day prior to the exercise date equal
to the aggregate Option exercise price or (b) if and so long as the Common Stock
is registered under Section 12(b) or 12(g) of the Exchange Act, delivery of a
properly executed exercise notice, together with irrevocable instructions, to
(i) a brokerage firm designated by the Company to deliver promptly to the
Company the aggregate amount of sale or loan proceeds to pay the Option exercise
price and any withholding tax obligations that may arise in connection with the
exercise and (ii) the Company to deliver the certificates for such purchased
shares directly to such brokerage firm, all in accordance with the regulations
of the Federal Reserve Board. In addition, the exercise price for shares
purchased under an Option may be paid, either singly or in combination with one
or more of the alternative forms of payment authorized by this Section 7.6, by
such other consideration as the Plan Administrator may permit.
7.7 POST-TERMINATION EXERCISES
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option whether the Option will continue to be exercisable, and
the terms and conditions of such exercise, if an Optionee ceases to be employed
by, or to provide services to, the Company or its Subsidiaries, which provisions
may be waived or modified by the Plan Administrator at any time. If not so
established in the instrument evidencing the Option, the Option will be
exercisable according to the following terms and conditions, which may be waived
or modified by the Plan Administrator at any time.
In case of termination of the Optionee's employment or services other
than by reason of death or Cause, the Option shall be exercisable, to the extent
of the number of shares purchasable by the Optionee at the date of such
termination, only (a) within one year if the termination of the Optionee's
employment or services is coincident with Retirement, Early Retirement at the
Company's request or Disability or (b) within three months after the date the
Optionee ceases to be an employee, director, officer, consultant, agent, advisor
or independent contractor of the Company or a Subsidiary if termination of the
Optionee's employment or services is for any reason other than Retirement, Early
Retirement at the Company's request or Disability, but in no event later than
the remaining term of the Option. Any Option exercisable at the time of the
Optionee's death may be exercised, to the extent of the number of shares
purchasable by the Optionee at the date of the Optionee's death, by the personal
representative of the Optionee's estate, the person(s) to whom the Optionee's
rights under the Option have passed by will or the
-8-
<PAGE> 9
applicable laws of descent and distribution or the beneficiary designated
pursuant to Section 9 at any time or from time to time within one year after the
date of death, but in no event later than the remaining term of the Option. Any
portion of an Option that is not exercisable on the date of termination of the
Optionee's employment or services shall terminate on such date, unless the Plan
Administrator determines otherwise. In case of termination of the Optionee's
employment or services for Cause, the Option shall automatically terminate upon
first notification to the Optionee of such termination, unless the Plan
Administrator determines otherwise. If an Optionee's employment or services with
the Company are suspended pending an investigation of whether the Optionee shall
be terminated for Cause, all the Optionee's rights under any Option likewise
shall be suspended during the period of investigation.
A transfer of employment or services between or among the Company and
its Subsidiaries shall not be considered a termination of employment or
services. The effect of a Company-approved leave of absence on the terms and
conditions of an Option shall be determined by the Plan Administrator, in its
sole discretion.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive Stock
Options shall be subject to the following additional terms and conditions:
8.1 DOLLAR LIMITATION
To the extent the aggregate Fair Market Value (determined as of the
Grant Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event
the Optionee holds two or more such Options that become exercisable for the
first time in the same calendar year, such limitation shall be applied on the
basis of the order in which such Options are granted.
8.2 10% SHAREHOLDERS
If an individual owns more than 10% of the total voting power of all
classes of the Company's stock, then the exercise price per share of an
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Common Stock on the Grant Date and the Option term shall not exceed five
years. The determination of 10% ownership shall be made in accordance with
Section 422 of the Code.
8.3 ELIGIBLE EMPLOYEES
Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.
-9-
<PAGE> 10
8.4 TERM
The term of an Incentive Stock Option shall not exceed 10 years.
8.5 EXERCISABILITY
To qualify for Incentive Stock Option tax treatment, an Option
designated as an Incentive Stock Option must be exercised within three months
after termination of employment for reasons other than death, except that, in
the case of termination of employment due to total disability, such Option must
be exercised within one year after such termination. Employment shall not be
deemed to continue beyond the first 90 days of a leave of absence unless the
Optionee's reemployment rights are guaranteed by statute or contract. For
purposes of this Section 8.5, "total disability" shall mean a mental or physical
impairment of the Optionee that is expected to result in death or that has
lasted or is expected to last for a continuous period of 12 months or more and
that causes the Optionee to be unable, in the opinion of the Company and two
independent physicians, to perform his or her duties for the Company and to be
engaged in any substantial gainful activity. Total disability shall be deemed to
have occurred on the first day after the Company and the two independent
physicians have furnished their opinion of total disability to the Plan
Administrator.
SECTION 9. ASSIGNABILITY
No Option granted under the Plan may be assigned, pledged or transferred
by the Optionee other than by will or by the applicable laws of descent and
distribution, and, during the Optionee's lifetime, such Option may be exercised
only by the Optionee or a permitted assignee or transferee of the Optionee (as
provided below). Notwithstanding the foregoing, and to the extent permitted by
Section 422 of the Code, the Plan Administrator, in its sole discretion, may
permit such assignment, transfer and exercisability and may permit an Optionee
to designate a beneficiary who may exercise the Option after the Optionee's
death; provided, however, that any Option so assigned or transferred shall be
subject to all the same terms and conditions contained in the instrument
evidencing the Option.
SECTION 10. ADJUSTMENTS
10.1 ADJUSTMENT OF SHARES
In the event that, at any time or from time to time, a stock dividend,
stock split, spin-off, combination or exchange of shares, recapitalization,
merger, consolidation, distribution to shareholders other than a normal cash
dividend, or other change in the Company's corporate or capital structure
results in (a) the outstanding shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of
securities of the Company or of any other corporation or (b) new, different or
additional securities of the Company or of any other corporation being received
by the holders of shares of Common Stock of the Company, then the Plan
Administrator shall make proportional adjustments in (i) the maximum number and
kind of securities subject to the Plan as set forth in Section 4.1, and (ii) the
number and kind of securities that are subject to any outstanding Option and the
per share
-10-
<PAGE> 11
price of such securities, without any change in the aggregate price to be paid
therefor. The determination by the Plan Administrator as to the terms of any of
the foregoing adjustments shall be conclusive and binding. Notwithstanding the
foregoing, a Corporate Transaction shall not be governed by this Section 10.1
but shall be governed by Section 10.2.
10.2 CORPORATE TRANSACTION
(a) Any Option granted to an "executive officer" (as that term is
defined for purposes of Section 16 of the Exchange Act) of the Company that is
assumed or replaced in a Corporate Transaction, the vesting of which does not
otherwise accelerate at the time of the Corporate Transaction, shall be
accelerated and become immediately exercisable in the event that the Optionee's
employment should subsequently terminate within two years following such
Corporate Transaction, unless such employment is terminated by the successor
corporation or parent thereof ("Successor Corporation") for Cause or by the
Optionee voluntarily without Good Reason.
(b) All Options shall terminate and cease to remain outstanding
immediately following the consummation of a Corporate Transaction, except to the
extent assumed by the Successor Corporation.
(c) Acceleration of options provided for in Section 10.2(a) will not
occur if, in the opinion of the Company's outside accountants, it would render
unavailable "pooling of interest" accounting for a Corporate Transaction that
would otherwise qualify for such accounting treatment.
10.3 FURTHER ADJUSTMENT OF OPTIONS
Subject to Section 10.2, the Plan Administrator shall have the
discretion, exercisable at any time before a sale, merger, consolidation,
reorganization, liquidation or change in control of the Company, as defined by
the Plan Administrator, to take such further action as it determines to be
necessary or advisable, and fair and equitable to Optionees, with respect to
Options. Such authorized action may include (but shall not be limited to)
establishing, amending or waiving the type, terms, conditions or duration of, or
restrictions on, Options so as to provide for earlier, later, extended or
additional time for exercise and other modifications, and the Plan Administrator
may take such actions with respect to all Optionees, to certain categories of
Optionees or only to individual Optionees. The Plan Administrator may take such
action before or after granting Options to which the action relates and before
or after any public announcement with respect to such sale, merger,
consolidation, reorganization, liquidation or change in control that is the
reason for such action.
10.4 LIMITATIONS
The grant of Options will in no way affect the Company's right 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.
-11-
<PAGE> 12
SECTION 11. WITHHOLDING
The Company may require the Optionee to pay to the Company the amount of
any withholding taxes that the Company is required to withhold with respect to
the grant or exercise of any Option. Subject to the Plan and applicable law, the
Plan Administrator may, in its sole discretion, permit the Optionee to satisfy
withholding obligations, in whole or in part, by paying cash, by electing to
have the Company withhold shares of Common Stock or by transferring shares of
Common Stock to the Company, in such amounts as are equivalent to the Fair
Market Value of the withholding obligation. The Company shall have the right to
withhold from any shares of Common Stock issuable pursuant to an Option or from
any cash amounts otherwise due or to become due from the Company to the Optionee
an amount equal to such taxes. The Company may also deduct from any Option any
other amounts due from the Optionee to the Company or a Subsidiary.
SECTION 12. RESTRICTIONS ON SALE OF COMMON STOCK;
REPURCHASE AND FIRST REFUSAL RIGHTS
12.1 RESTRICTIONS ON SALE OF COMMON STOCK
Notwithstanding any provision to the contrary, whether contained in this
Plan or any instrument evidencing an Option, in no event may shares of Common
Stock issued pursuant to an Option be sold or otherwise disposed of, whether to
the Company, its Subsidiaries or any third-party, for a period of six (6)
calendar months from the date the shares were issued to the Optionee (the
"Waiting Period"), unless such shares are transferred pursuant to Section 12.2
below. After the Waiting Period, the Optionee may sell or otherwise dispose of
the shares of Common Stock only in accordance with the provisions of Section
12.3 below; provided, however, that the shares of Common Stock may not be sold
to any person or entity which would prohibit the Company from being organized as
an S corporation under the provisions of Section 1361 of the Code. The Plan
Administrator shall have the authority to waive or modify the restrictions of
this Section 12.1.
12.2 REPURCHASE RIGHTS
The Plan Administrator shall have the discretion to authorize the
issuance of shares of Common Stock pursuant to the exercise of an Option which
has not vested. If an Optionee ceases to be employed by, or to provide services
to, the Company or its Subsidiaries, any shares of stock in the Company held by
such Optionee pursuant to the exercise of Options previously granted to such
Optionee under the Plan which shall not have vested at the time of the
termination of such Optionee's employment or provision of services to the
Company shall be sold by such Optionee to the Company at the exercise price paid
for such shares. The terms and conditions upon which such repurchase right shall
be exercisable (including the period and procedure for such exercise) shall be
established by the Plan Administrator and set forth in the agreement evidencing
such right.
All of the Company's outstanding repurchase rights under this Section
12.1 are assignable by the Company at any time.
-12-
<PAGE> 13
The Plan Administrator shall have the discretionary authority,
exercisable either before or after the Optionee's cessation of employment or
services, to cancel the Company's outstanding repurchase rights with respect to
one or more shares purchased or purchasable by the Optionee under an Option and
thereby accelerate the vesting of such shares in whole or in part at any time.
12.3 FIRST REFUSAL RIGHTS
Until the date on which the initial registration of the Common Stock
under Section 12(b) or 12(g) of the Exchange Act first becomes effective, the
Company shall have the right of first refusal with respect to any proposed sale
or other disposition by the holder of any shares of Common Stock issued pursuant
to an Option granted under the Plan. Prior to any sale of shares of Common Stock
to a third-party purchaser, the Optionee shall (i) determine and fix the price
for the shares of Common Stock to be sold, and (ii) offer the shares of Common
Stock to the Company at such price. The Company shall have the right to purchase
the shares of Common Stock at the named price for a period of thirty (30)
calendar days, and if the Company chooses not to purchase the shares of Common
Stock, the Optionee shall have the right to sell such shares to a third-party
for the same price such shares were offered to the Company for a period of
ninety (90) calendar days commencing on the date the Company declined to
purchase such shares. Such right of first refusal shall be exercisable in
accordance with the terms and conditions established by the Plan Administrator
and set forth in the agreement evidencing such right.
SECTION 13. MARKET STANDOFF
In connection with any underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed
under the Securities Act, including the Company's initial public offering, a
person shall not sell, or make any short sale of, loan, hypothecate, pledge,
grant any option for the purchase of, or otherwise dispose or transfer for value
or otherwise agree to engage in any of the foregoing transactions with respect
to, any shares issued pursuant to an Option granted under the Plan without the
prior written consent of the Company or its underwriters. Such limitations shall
be in effect for such period of time as may be requested by the Company or such
underwriters and agreed to by the Company's officers and directors with respect
to their shares; provided, however, that in no event shall such period exceed
180 days. The limitations of this paragraph shall in all events terminate two
years after the effective date of the Company's IPO. Holders of shares issued
pursuant to an Option granted under the Plan shall be subject to the market
standoff provisions of this paragraph only if the officers and directors of the
Company are also subject to similar arrangements.
In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock effected as a class without the Company's
receipt of consideration, then any new, substituted or additional securities
distributed with respect to the purchased shares shall be immediately subject to
the provisions of this Section 13, to the same extent the purchased shares are
at such time covered by such provisions.
-13-
<PAGE> 14
In order to enforce the limitations of this Section 13, the Company may
impose stop-transfer instructions with respect to the purchased shares until the
end of the applicable standoff period.
SECTION 14. AMENDMENT AND TERMINATION OF PLAN
14.1 AMENDMENT OF PLAN
The Plan may be amended only by the Board in such respects as it shall
deem advisable; however, to the extent required for compliance with Section 422
of the Code or any applicable law or regulation, shareholder approval will be
required for any amendment that will (a) increase the total number of shares as
to which Options may be granted under the Plan, (b) modify the class of persons
eligible to receive Options, or (c) otherwise require shareholder approval under
any applicable law or regulation.
14.2 TERMINATION OF PLAN
The Board may suspend or terminate the Plan at any time. The Plan will
have no fixed expiration date; provided, however, that no Incentive Stock
Options may be granted more than 10 years after the earlier of the Plan's
adoption by the Board and approval by the shareholders.
14.3 CONSENT OF OPTIONEE
The amendment or termination of the Plan shall not, without the consent
of the Optionee, impair or diminish any rights or obligations under any Option
theretofore granted under the Plan.
Any change or adjustment to an outstanding Incentive Stock Option shall
not, without the consent of the Optionee, be made in a manner so as to
constitute a "modification" that would cause such Incentive Stock Option to fail
to continue to qualify as an Incentive Stock Option.
SECTION 15. GENERAL
15.1 OPTION AGREEMENTS
Options granted under the Plan shall be evidenced by a written agreement
that shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and that are not inconsistent with the
Plan.
15.2 CONTINUED EMPLOYMENT OR SERVICES; RIGHTS IN OPTIONS
None of the Plan, participation in the Plan or any action of the Plan
Administrator taken under the Plan shall be construed as giving any person any
right to be retained in the employ of the Company or limit the Company's right
to terminate the employment or services of any person with or without cause.
-14-
<PAGE> 15
15.3 REGISTRATION
The Company shall be under no obligation to any Optionee to register for
offering or resale or to qualify for exemption under the Securities Act, or to
register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or qualifications if made.
The Company may issue certificates for shares with such legends and subject to
such restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with federal
and state securities laws.
Inability of the Company to obtain, from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder or the unavailability of an
exemption from registration for the issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the nonissuance or sale
of such shares as to which such requisite authority shall not have been
obtained.
As a condition to the exercise of an Option, the Company may require the
Optionee to represent and warrant at the time of any such exercise or receipt
that such shares are being purchased or received only for the Optionee's own
account and without any present intention to sell or distribute such shares if,
in the opinion of counsel for the Company, such a representation is required by
any relevant provision of the aforementioned laws. At the option of the Company,
a stop-transfer order against any such shares may be placed on the official
stock books and records of the Company, and a legend indicating that such shares
may not be pledged, sold or otherwise transferred, unless an opinion of counsel
is provided (concurred in by counsel for the Company) stating that such transfer
is not in violation of any applicable law or regulation, may be stamped on stock
certificates to ensure exemption from registration. The Plan Administrator may
also require such other action or agreement by the Optionee as may from time to
time be necessary to comply with the federal and state securities laws.
15.4 NO RIGHTS AS A SHAREHOLDER
No Option shall entitle the Optionee to any dividend, voting or other
right of a shareholder unless and until the date of issuance under the Plan of
the shares that are the subject of such Option, free of all applicable
restrictions.
15.5 COMPLIANCE WITH LAWS AND REGULATIONS
Notwithstanding anything in the Plan to the contrary, the Board, in its
sole discretion, may bifurcate the Plan so as to restrict, limit or condition
the use of any provision of the Plan to Optionees who are officers or directors
subject to Section 16 of the Exchange Act without so restricting, limiting or
conditioning the Plan with respect to other Optionees. Additionally, in
interpreting and applying the provisions of the Plan, any Option granted as an
Incentive Stock Option pursuant to the Plan shall, to the extent permitted by
law, be construed as an "incentive stock option" within the meaning of Section
422 of the Code.
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<PAGE> 16
15.6 NO TRUST OR FUND
The Plan is intended to constitute an "unfunded" plan. Nothing contained
herein shall require the Company to segregate any monies or other property, or
shares of Common Stock, or to create any trusts, or to make any special deposits
for any immediate or deferred amounts payable to any Optionee, and no Optionee
shall have any rights that are greater than those of a general unsecured
creditor of the Company.
15.7 SEVERABILITY
If any provision of the Plan or any Option is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Option under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Plan Administrator's determination, materially altering the intent of the
Plan or the Option, such provision shall be stricken as to such jurisdiction,
person or Option, and the remainder of the Plan and any such Option shall remain
in full force and effect.
SECTION 16. EFFECTIVE DATE
The Plan's effective date is the date on which it is adopted by the
Board, so long as it is approved by the Company's shareholders at any time
within 12 months of such adoption.
Adopted by the Board on October 28, 1998 and approved by the Company's
shareholders on October 28, 1998.
-16-
<PAGE> 17
PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS
<TABLE>
<CAPTION>
Date of
Adoption/
Amendment/ Date of Shareholder
Adjustment Section Effect of Amendment Approval
---------- ------- ------------------- --------
<S> <C> <C> <C>
</TABLE>
-1-
<PAGE> 1
EXHIBIT 99.2
PREMIA CORPORATION
INCENTIVE STOCK OPTION LETTER AGREEMENT
TO: Date of Grant: February 1, 2000
We are pleased to inform you that you have been selected by the Plan
Administrator of Premia Corporation's (the "Company") 1998 Stock Option Plan
(the "Plan") to receive an incentive stock option for the purchase of 1,000
shares of the Company's Common Stock at an exercise price of $ 2.75 per share.
The Plan is incorporated into this Agreement by reference.
The terms of this option are as set forth in the Plan and in this Agreement.
This Agreement is subject to and in accordance with the express terms and
conditions of the Plan and is in all respects limited by and subject to the
express terms and provisions of the Plan. Capitalized terms used without
definition have the meanings ascribed to them in the Plan. The most important of
the terms set forth in the Plan are summarized as follows:
TERM: The term of this option is ten years from date of grant, unless sooner
terminated.
VESTING: This option shall vest based on your hire date and the following
schedule:
<TABLE>
<CAPTION>
DATE ON AND AFTER WHICH OPTION IS PORTION OF TOTAL OPTION WHICH IS
EXERCISABLE EXERCISABLE
- --------------------------------- --------------------------------
<S> <C>
After 1 year of employment 25%
After 1 year and 1 month of employment 2% per month
and for each complete month thereafter
</TABLE>
Each option will become exercisable, up to the portion of the Option vested,
upon the earlier to occur of (i) ten (10) years from the Grant Date, (ii) upon
the closing of an underwritten initial public offering with an aggregate price
to the public in excess of $10 million ("IPO"), or (iii) immediately prior to
the specified effective date of a Corporate Transaction such as the sale of the
Company or its stock to a third party. An Option may be exercised from time to
time by written notice to the Company, in accordance with procedures established
by the Plan Administrator, setting forth the number of shares with respect to
which the Option is being exercised and accompanied by payment in full. The Plan
Administrator may determine at any time that an Option may not be exercised as
to less than 100 shares at any one time (or the lesser number of remaining
shares covered by the Option).
ISO QUALIFICATION: To the extent that the aggregate fair market value of the
shares with respect to which this option is exercisable for the first time by
you during any calendar year (under this option and all other incentive stock
options you hold) exceeds $100,000, the excess portion will be treated as a
nonqualified stock option, unless the Internal Revenue Service changes the rules
and regulations governing the $100,000 limit for incentive stock options.
Page 1 of 3
<PAGE> 2
TERMINATION: Unless otherwise determined at any time by the Plan Administrator,
this option will terminate immediately upon termination for cause, as defined in
the Plan, or one year after termination of service as a result of retirement,
early retirement at the Company's request, disability, or death or three months
after all other terminations, but in each case not later than the remaining term
of this option. This option must be exercised within three months after
termination of employment for reasons other than death or disability and one
year after termination of employment due to disability to qualify for the
beneficial tax treatment afforded to incentive stock options.
EXERCISE: During your lifetime only you can exercise this option. The Plan also
provides for exercise of this option by the personal representative of your
estate or the beneficiary thereof following your death. You may use the Notice
of Exercise of Incentive Stock Option in the form attached to this Agreement
when you exercise this option.
The Plan Administrator may, in its sole discretion at the time of exercise,
determine that the exercise of this option is subject to your execution of an
agreement, in the form in use at the time of exercise, whereby under certain
circumstances, you grant to the Company a right of first offer to purchase the
shares acquired by you upon exercise of this option.
PAYMENT FOR SHARES: Unless the Plan Administrator at any time determines
otherwise, this option may be exercised by the delivery of a Notice of Exercise
of Stock Option in the form attached together with a check in the aggregate
exercise price of the shares.
WITHHOLDING TAXES: As a condition to the exercise of any portion of this option
which is treated as a nonqualified stock option, you shall make such
arrangements as the Company may require for the satisfaction of any federal,
state or local withholding tax obligations that may arise in connection with
such exercise. The Company shall have the right to retain without notice
sufficient shares of stock to satisfy the withholding obligation. Unless the
Plan Administrator determines otherwise, you may satisfy the withholding
obligation by electing to have the Company or related corporation withhold from
the shares to be issued upon exercise that number of shares having a fair market
value equal to the amount required to be withheld.
TRANSFER OF OPTION: This option is not transferable except by will or by the
applicable laws of descent and distribution.
HOLDING PERIODS:
A. SECURITIES EXCHANGE ACT SECTION 16
If an individual subject to Section 16 of the Exchange Act sells shares of
Common Stock obtained upon the exercise of a stock option within six months
after the date this option was granted, such sale may result in short-swing
profit recovery under Section 16(b) of the Exchange Act.
B. TAXATION OF STOCK OPTIONS
In order to obtain certain tax benefits afforded to incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as amended, you must
hold the shares issued upon the exercise of an incentive stock option for two
years after the date of grant of this option and one year from the date of
exercise. You may be subject to the alternative minimum tax at the time of
exercise.
You should obtain tax advice when exercising any option and prior to the
disposition of the shares issued upon the exercise of any option.
Page 2 of 3
<PAGE> 3
REGISTRATION: YOUR PARTICULAR ATTENTION IS DIRECTED TO SECTION 15.3 OF THE PLAN,
WHICH DESCRIBES CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL AND STATE
SECURITIES LAWS THAT MUST BE SATISFIED BEFORE THIS OPTION CAN BE EXERCISED AND
BEFORE THE COMPANY CAN ISSUE ANY SHARES TO YOU. THE COMPANY HAS NO OBLIGATION TO
REGISTER THE SHARES THAT WOULD BE ISSUED UPON THE EXERCISE OF YOUR OPTION, AND
IF IT NEVER REGISTERS THE SHARES, YOU WILL NOT BE ABLE TO EXERCISE THIS OPTION
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. AT THE PRESENT TIME,
EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS ARE VERY
LIMITED AND MIGHT BE UNAVAILABLE TO YOU PRIOR TO THE EXPIRATION OF THIS OPTION.
CONSEQUENTLY, YOU MIGHT HAVE NO OPPORTUNITY TO EXERCISE THIS OPTION AND TO
RECEIVE SHARES UPON SUCH EXERCISE.
Please execute the Acceptance and Acknowledgment set forth below on the enclosed
copy of this Agreement and return it to the undersigned.
Very truly yours,
PREMIA CORPORATION
By:
------------------------------------
President
Page 3 of 3
<PAGE> 1
EXHIBIT 99.3
STARBASE CORPORATION
PREMIA INCENTIVE STOCK OPTION CONVERSION INFORMATION
THIS SUPPLEMENT TO YOUR PREMIA INCENTIVE STOCK OPTION LETTER AGREEMENT
(the "OPTION AGREEMENT") is made and entered into as of March 8, 2000 by and
between StarBase Corporation and ______________ (the "OPTIONEE").
STARBASE CORPORATION
By:
______________________________________
Title: Assistant Secretary
- --------------------------------------------------------------------------------
CONVERSION TERMS OF PREMIA STOCK OPTION GRANT
StarBase Corporation has assumed an Option to purchase Common Stock of
the Company, subject to the terms and conditions of the Premia Corporation
Incentive Stock Option Letter Agreement, with the number of shares and exercise
price converted as follows:
DATE OF OPTION GRANT:
<TABLE>
<CAPTION>
PREMIA STARBASE CONVERSION
------ -------------------
<S> <C> <C>
NUMBER OF OPTION SHARES:
EXERCISE PRICE PER SHARE: $ $
</TABLE>
VESTING SCHEDULE:
This option shall be exercisable, in whole or in part, according to the
vesting schedule stated in the Premia Corporation Incentive Stock Option Letter
Agreement.
File this with your Premia Corporation Incentive Stock Option Letter Agreement.
PREMIA INCENTIVE STOCK OPTION -1-
<PAGE> 1
EXHIBIT 99.4
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
<PAGE> 4
amount (determined as of the date on which the Option is to be exercised
pursuant to the terms set forth in Section 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
<PAGE> 5
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 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
<PAGE> 6
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.
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,
<PAGE> 7
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 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
<PAGE> 8
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.
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
<PAGE> 9
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.
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.
