<PAGE>
As filed with the Securities and Exchange Commission on June 24, 1996
Registration No. 333-___________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
MICROELECTRONIC PACKAGING, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-3142624
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
9350 TRADE PLACE, SAN DIEGO, CA 92126
(Address of principal executive offices) (Zip Code)
------------------------
MICROELECTRONIC PACKAGING, INC.
1993 STOCK OPTION/STOCK ISSUANCE PLAN
(Full title of the plan)
-----------------------
TIMOTHY DA SILVA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MICROELECTRONIC PACKAGING, INC.
9350 TRADE PLACE, SAN DIEGO, CA 92126
(Name and address of agent for service)
(619) 530-1660
(Telephone number, including area code, of agent for service)
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee
- ---------------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Options to Purchase 300,000 N/A N/A N/A
Common Stock
Common Stock, 300,000 $4.875 $1,462,500 $505
no par value
</TABLE>
================================================================================
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1993 Stock Option/Stock Issuance
Plan by reason of any stock dividend, stock split, recapitalization or other
similar transaction effected without the receipt of consideration which results
in an increase in the number of the Registrant's outstanding shares of Common
Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the high and
low selling prices per share of Common Stock of Microelectronic Packaging, Inc.
on June 18, 1996 as reported by the Nasdaq National Market.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
---------------------------------------
Microelectronic Packaging, Inc. (the "Registrant") hereby incorporates
by reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "Commission"):
a. The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as amended by Amendment No. 1 filed with the
Commission on May 23, 1996;
b. The Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1996; and
c. The Registrant's Registration Statement No. 0-23562 on Form 8-A filed
with the Commission on March 3, 1994, in which there is described the
terms, rights and provisions applicable to the Registrant's
outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act") after the date of this Registration Statement
and prior to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which deregisters all securities
then remaining unsold shall be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof from the date of filing of such
documents.
Item 4. Description of Securities
-------------------------
Not applicable.
Item 5. Interests of Named Experts and Counsel
--------------------------------------
Not applicable.
Item 6. Indemnification of Directors and Officers
-----------------------------------------
The California General Corporation Law provides that directors will
not be personally liable to the Registrant for monetary damages arising from a
breach of their fiduciary duty to the Registrant as directors, including such
conduct during a merger or tender offer, in certain circumstances. Such
limitation does not affect liability for any breach of a director's duty to the
Registrant or its shareholders (i) with respect to approval by the director of
any transaction from which he or she derives an improper personal benefit, (ii)
with respect to acts or omissions involving an absence of good faith, that he or
she believes to be contrary to the best interests of the Registrant, or its
shareholders, that involve intentional misconduct or a knowing and culpable
violation of law, that constitute an unexcused pattern of inattention that
amounts to an abdication of his or her duty to the Registrant or its
shareholders, or that show a reckless disregard for his or her duty to the
Registrant or its shareholders in circumstances in which he or she was, or
should have been aware, in the ordinary course of performing his or her duties,
or a risk of serious injury to the Registrant or its shareholders, or (iii)
based on transactions between the Registrant and its directors or another
corporation with interrelated directors or on improper distributions, loans, or
guarantees under applicable sections of the California Corporations Code. Such
limitations of liability also do not affect the availability of equitable
remedies such as injunctive relief or rescission, although in certain
circumstances equitable relief may not be available as a practical matter. The
limitation may relieve the directors of monetary liability to the Registrant for
grossly negligent conduct, including
II-1.
<PAGE>
conduct in situations involving attempted takeovers of the Registrant. No claim
or litigation is currently pending against the Registrant's directors that would
be affected by the limitation of liability.
Section 317 of the California Corporations Code authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "1933 Act").
Article IX of the Amended and Restated Articles of Incorporation of the
Registrant and Article VI, Section 4 of the Registrant's Bylaws provide for
indemnification of its directors and officers and other agents to the maximum
extent permitted by the California Corporations Code. The Second Amended and
Restated Registration Rights Agreement, Waiver Agreement and Conversion
Agreement also provides for indemnification by the Registrant in favor of the
shareholders against certain liabilities, including liabilities arising under
the securities laws. The Registrant will also maintain insurance for the
benefit of its directors and officers that insures such persons against certain
liabilities, including liabilities under the securities laws. The Registrant
has entered into an indemnification agreement with each of its directors and
officers whereby the Registrant will reimburse its directors against certain
liabilities, including liabilities arising under the securities laws.
Item 7. Exemption from Registration Claimed
-----------------------------------
Not Applicable.
Item 8. Exhibits
--------
Exhibit Number Exhibit
- -------------- -------
5 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Accountants - BDO Seidman, LLP.
23.2 Consent of Independent Accountants - Price Waterhouse LLP.
23.3 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 1993 Stock Option/Stock Issuance Plan.
99.2* Form of Notice of Grant of Stock Option and Stock Option
Agreement.
99.3* Addendum to Stock Option Agreement (Special Tax Elections).
99.4* Addendum to Stock Option Agreement (Financial Assistance).
99.5* Form of Notice of Grant of Stock Option with Stock Option
Agreement (Non-Employee Director Automatic Grant).
99.6* Form of Stock Issuance Agreement.
* Exhibits 99.2 through 99.6 are incorporated herein by reference to Exhibits
99.2 through 99.6 of Registrant's Registration Statement No. 33-78452.
Item 9. Undertakings.
-------------
A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include any prospectus required
by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts
or events arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement, and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement; provided, however, that clauses (1)(i) and (1)(ii) shall not apply if
--------
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference
into the Registration Statement; (2) that for the purpose of determining any
liability under the 1933 Act, each such
II-2.
<PAGE>
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
Registrant's 1993 Stock Option/Stock Issuance Plan.
B. The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into the Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
1933 Act may be permitted to directors, officers or controlling persons of the
Registrant pursuant to the indemnification provisions summarized in Item 6
above, or otherwise, the Registrant has been informed that, in the opinion of
the Commission, such indemnification is against public policy as expressed in
the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act, and
will be governed by the final adjudication of such issue.
II-3.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, State of California, on this 17th day
of June 1996.
MICROELECTRONIC PACKAGING, INC.
By /s/ Timothy da Silva
----------------------------------
Timothy da Silva
President and Chief Executive Officer, Director
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned officers and directors of Microelectronic
Packaging, Inc., a California corporation, do hereby constitute and appoint
Timothy da Silva and Wilmer R. Bottoms, and each of them, the lawful attorneys
and agents, with full power and authority to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, and any one
of them, determine may be necessary or advisable or required to enable said
corporation to comply with the Securities Act of 1933, as amended, and any rules
or regulations or requirements of the Commission in connection with this
Registration Statement. Without limiting the generality of the foregoing power
and authority, the powers granted include the power and authority to sign the
names of the undersigned officers and directors in the capacities indicated
below to this Registration Statement, to any and all amendments, both pre-
effective and post-effective, and supplements to this Registration Statement,
and to any and all instruments or documents filed as part of or in conjunction
with this Registration Statement or amendments or supplements thereof, and each
of the undersigned hereby ratifies and confirms all that said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof. This
Power of Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ Timothy da Silva
____________________ President and
(Timothy da Silva) Chief Executive June 17, 1996
Officer, Director
(Principal Executive Officer)
/s/ Timothy da Silva
____________________ Acting Vice President, Finance June 17, 1996
(Timothy da Silva) and Administration, Chief
Financial Officer, Secretary
and Treasurer
(Principal Financial and
Accounting Officer)
II-4.
<PAGE>
Signatures Title Date
- ---------- ----- ----
/s/ Wilmer R. Bottoms
______________________ Chairman of the Board June 17, 1996
(Wilmer R. Bottoms) of Directors
/s/ Frank L. Howland
______________________ Director June 17, 1996
(Frank L. Howland)
/s/ William R. Thompson
_______________________ Director June 17, 1996
(William R. Thompson)
/s/ Cecil E. Smith, Jr.
______________________ Director June 10, 1996
(Cecil E. Smith, Jr.)
II-5.
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Number Exhibit
-------------- -------
5 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Accountants - BDO Seidman, LLP.
23.2 Consent of Independent Accountants - Price Waterhouse LLP.
23.3 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 1993 Stock Option/Stock Issuance Plan.
99.2* Form of Notice of Grant of Stock Option and Stock Option
Agreement.
99.3* Addendum to Stock Option Agreement (Special Tax Elections).
99.4* Addendum to Stock Option Agreement (Financial Assistance).
99.5* Form of Notice of Grant of Stock Option with Stock Option
Agreement (Non-Employee Director Automatic Grant).
99.6* Form of Stock Issuance Agreement.
* Exhibits 99.2 through 99.6 are incorporated herein by reference to Exhibits
99.2 through 99.6 of Registrant's Registration Statement No. 33-78452.
<PAGE>
EXHIBIT 5
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
June 20, 1996
Microelectronic Packaging, Inc.
9350 Trade Place
San Diego, CA 92126
Re: Microelectronic Packaging, Inc. Registration
Statement for Offering of 300,000 Shares of
Common Stock
--------------------------------------------------
Ladies and Gentlemen:
We refer to your registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of 300,000 shares of
the Common Stock of Microelectronic Packaging, Inc. (the "Company") under the
Company's 1993 Stock Option/Stock Issuance Plan. We advise you that, in our
opinion, when such shares have been issued and sold pursuant to the applicable
provisions of the 1993 Stock Option/Stock Issuance Plan and in accordance with
the Registration Statement, such shares will be validly issued, fully paid and
nonassessable shares of the Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
-------------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Microelectronic Packaging, Inc.
San Diego, California
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of our report dated March 12, 1996, except for Note 2
paragraph 3 and Note 17 paragraph 1, which are as of April 4, 1996, relating to
the consolidated financial statements of Microelectronic Packaging, Inc., and of
our report dated March 12, 1996 relating to the schedules, appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995. Our
report contains an explanatory paragraph regarding the Company's ability to
continue as a going concern.
/s/ BDO Seidman, LLP
BDO SEIDMAN, LLP
<PAGE>
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 April 11, 1995 appearing on page F-2
of Microelectronic Packaging Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1995.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Diego, California
June 19, 1996
<PAGE>
EXHIBIT 99.1
MICROELECTRONIC PACKAGING, INC.
1993 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
(AMENDED THROUGH FEBRUARY 29, 1996)
ARTICLE ONE
GENERAL
-------
I. PURPOSE OF THE PLAN
A. This 1993 Stock Option/Stock Issuance Plan (the "Plan") is intended
to promote the interests of Microelectronic Packaging, Inc., a California
corporation (the "Corporation"), by providing eligible individuals with the
opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in
the service of the Corporation (or its parent or subsidiary corporations).
B. The Discretionary Option Grant and Stock Issuance Programs under
this Plan shall become effective on the first date on which the shares of the
Corporation's Common Stock are registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"). Such date is hereby
designated as the Plan Effective Date. The Automatic Option Grant Program under
this Plan shall become effective immediately upon the execution and final
pricing of the Underwriting Agreement for the initial public offering of the
Corporation's Common Stock. The execution date of such Underwriting Agreement is
hereby designated as the Automatic Grant Program Effective Date.
C. This Plan shall serve as the successor to the Corporation's existing
1988 Stock Option Plan (the "Predecessor Plan"), and no further option grants or
share issuances shall be made under the Predecessor Plan from and after the Plan
Effective Date. All outstanding stock options and unvested share issuances
under the Predecessor Plan on such Plan Effective Date are hereby incorporated
into this Plan and shall accordingly be treated as outstanding stock options and
unvested share issuances under this Plan. However, each outstanding option
grant so incorporated shall continue to be governed solely by the express terms
and conditions of the instrument evidencing such grant, and no provision of this
Plan shall be deemed to affect or otherwise modify the rights or obligations of
the holders of such incorporated options with respect to their acquisition of
shares of the Corporation's Common Stock thereunder. All unvested shares of
Common Stock outstanding under the Predecessor Plan on the Plan Effective Date
shall continue to be governed solely by the express terms and conditions of the
instruments evidencing such issuances, and no provision of this Plan shall be
deemed to affect or modify the rights or obligations of the holders of such
unvested shares.
<PAGE>
II. DEFINITIONS
A. For purposes of the Plan, the following definitions shall be in
effect:
BOARD: the Corporation's Board of Directors.
CHANGE IN CONTROL: a change in ownership or control of the Corporation
effected through either of the following transactions:
(i) the acquisition directly or indirectly by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
shareholders which the Board does not recommend such shareholders to
accept; or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members (rounded up to the next whole number) ceases, by reason of
one or more contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since the
beginning of such period or (B) have been elected or nominated for election
as Board members during such period by at least a majority of the Board
members described in clause (A) who were still in office at the time such
election or nomination was approved by the Board.
CODE: the Internal Revenue Code of 1986, as amended.
COMMITTEE: the committee of two (2) or more non-employee Board members
appointed by the Board to administer the Plan.
COMMON STOCK: shares of the Corporation's common stock.
CORPORATE TRANSACTION: any of the following shareholder-approved
transactions to which the Corporation is a party:
(i) a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which
is to change the state in which the Corporation is incorporated,
2
<PAGE>
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Corporation in complete liquidation or dissolution
of the Corporation, or
(iii) any reverse merger in which the Corporation is the surviving
entity but in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation's outstanding securities
are transferred to a person or persons different from those who held such
securities immediately prior to such merger.
EMPLOYEE: an individual who performs services while in the employ of
the Corporation or one or more parent or subsidiary corporations, subject to the
control and direction of the employer entity not only as to the work to be
performed but also as to the manner and method of performance.
FAIR MARKET VALUE: the Fair Market Value per share of Common Stock
determined in accordance with the following provisions:
- If the Common Stock is not at the time listed or admitted to trading
on any national stock exchange but is traded on the Nasdaq National Market,
the Fair Market Value shall be the closing selling price per share on the
date in question, as such price is reported by the National Association of
Securities Dealers through the Nasdaq National Market or any successor
system. If there is no reported closing selling price for the Common Stock
on the date in question, then the closing selling price on the last
preceding date for which such quotation exists shall be determinative of
Fair Market Value.
- If the Common Stock is at the time listed or admitted to trading on
any national stock exchange, then the Fair Market Value shall be the
closing selling price per share on the date in question on the exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of Common Stock
on such exchange on the date in question, then the Fair Market Value shall
be the closing selling price on the exchange on the last preceding date for
which such quotation exists.
OPTIONEE: a person to whom an option is granted under the Discretionary
Option Grant or Automatic Option Grant Program.
PARTICIPANT: a person who is issued Common Stock under the Stock
Issuance Program.
3
<PAGE>
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of the
Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
PLAN ADMINISTRATOR: the Committee in its capacity as the administrator
of the Plan.
SERVICE: the performance of services on a periodic basis for the
Corporation (or any parent or subsidiary corporation) in the capacity of an
Employee, a non-employee member of the board of directors or an independent
consultant or advisor, except to the extent otherwise specifically provided in
the applicable stock option or stock issuance agreement.
B. The following provisions shall be applicable in determining the
parent and subsidiary corporations of the Corporation:
Any corporation (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation shall be considered to be a
PARENT of the Corporation, provided each such corporation in the unbroken
chain (other than the Corporation) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
Each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation shall be considered to
be a SUBSIDIARY of the Corporation, provided each such corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
III. STRUCTURE OF THE PLAN
A. Stock Programs. The Plan shall be divided into three separate
--------------
components: the Discretionary Option Grant Program specified in Article Two, the
Automatic Option Grant Program specified in Article Three and the Stock Issuance
Program specified in Article Four. Under the Discretionary Option Grant
Program, eligible individuals may, at the discretion of the Plan Administrator,
be granted options to purchase shares of Common Stock in accordance with the
provisions of Article Two. Under the Automatic Option Grant Program, each
individual serving as a non-employee Board member on the Automatic Grant Program
Effective Date and each individual who first joins the Board as a non-employee
director after the Automatic Grant Program Effective Date will at periodic
intervals receive option grants to purchase shares of Common Stock in
4
<PAGE>
accordance with the provisions of Article Three, with the first such grants to
be made on the Automatic Grant Program Effective Date. Under the Stock Issuance
Program, eligible individuals may be issued shares of Common Stock directly,
either through the immediate purchase of such shares at a price not less than
eighty-five percent (85%) of the fair market value of the shares at the time of
issuance or as a bonus for past services rendered the Corporation.
B. General Provisions. Unless the context clearly indicates
------------------
otherwise, the provisions of Articles One and Five shall apply to the
Discretionary Option Grant Program, the Automatic Option Grant Program and the
Stock Issuance Program and shall accordingly govern the interests of all
individuals under the Plan.
IV. ADMINISTRATION OF THE PLAN
A. Both the Discretionary Option Grant Program and the Stock
Issuance Program shall be administered by the Committee. No non-employee Board
member shall be eligible to serve on the Committee if such individual has,
within the relevant period designated below, received an option grant or direct
stock issuance under this Plan or any other stock plan of the Corporation (or
any parent or subsidiary corporation), other than pursuant to the Automatic
Option Grant Program:
(i) for each of the initial members of the Committee, the period
commencing with the Plan Effective Date and ending with the date of his or
her appointment to the Committee, or
(ii) for any successor or substitute member, the twelve (12)-
month period immediately preceding the date of his or her appointment to
the Committee or (if shorter) the period commencing with the Plan Effective
Date and ending with the date of his or her appointment to the Committee.
Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time.
B. The Committee as Plan Administrator shall have full power and
authority (subject to the express provisions of the Plan) to establish rules and
regulations for the proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding option
grants or stock issuances thereunder as it may deem necessary or advisable.
Decisions of the Plan Administrator shall be final and binding on all parties
who have an interest in the Discretionary Option Grant or Stock Issuance Program
or any outstanding option or share issuance thereunder.
C. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the express terms and conditions of Article
Three, and the
5
<PAGE>
Plan Administrator shall exercise no discretionary functions with respect to
option grants made pursuant to that program.
V. OPTION GRANTS AND STOCK ISSUANCES
A. The persons eligible to participate in the Discretionary Option
Grant Program under Article Two and the Stock Issuance Program under Article
Four shall be limited to the following:
(i) officers and other key employees of the Corporation (or
its parent or subsidiary corporations) who render services which contribute to
the management, growth and financial success of the Corporation (or its parent
or subsidiary corporations); and
(ii) those consultants or other independent contractors who
provide valuable services to the Corporation (or its parent or subsidiary
corporations).
B. The non-employee members of the Board shall not be eligible to
---
participate in the Discretionary Option Grant and Stock Issuance Programs or in
any other stock option, stock purchase, stock bonus or other stock plan of the
Corporation (or its parent or subsidiary corporations). Non-employee members of
the Board shall, however, be eligible to receive automatic option grants
pursuant to the provisions of Article Three.
C. The Plan Administrator shall have full authority to determine,
(i) with respect to the option grants made under the Discretionary Option Grant
Program, which eligible individuals are to receive option grants, the number of
shares to be covered by each such grant, the status of the granted option as
either an incentive stock option ("Incentive Option") that satisfies the
requirements of Section 422 of the Code or a non-statutory option not intended
to meet such requirements, the time or times at which each granted option is to
become exercisable and the maximum term for which the option may remain
outstanding and (ii), with respect to stock issuances under the Stock Issuance
Program, the number of shares to be issued to each Participant, the vesting
schedule (if any) to be applicable to the issued shares, and the consideration
to be paid by the individual for such shares.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under the
Plan and shall be drawn from either the Corporation's authorized but unissued
shares of Common Stock or from reacquired shares of Common Stock, including
shares repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock which may be issued over the term of the Plan shall not
exceed 690,632 shares, subject to adjustment from time to time in accordance
with the provisions of this Section VI. Such authorized share reserve is
comprised of (i) the number of shares which remained for
6
<PAGE>
issuance, as of the Plan Effective Date, under the Predecessor Plan as last
approved by the Corporation's shareholders prior to such Plan Effective Date,
including the shares subject to the outstanding options incorporated into this
Plan and any other shares which would have been available for future option
grant under the Predecessor Plan as last approved by the shareholders, (ii) an
additional increase of 251,447 shares authorized by the Board under this Plan
and approved by the Corporation's shareholders prior to the Plan Effective Date
and (iii) additional increases of 110,000 shares and 190,000 shares authorized
by the Board on June 5, 1995 and February 29, 1996, respectively, and approved
by the Corporation's shareholders at the 1996 Annual Meeting. To the extent one
or more outstanding options under the Predecessor Plan which have been
incorporated into this Plan are subsequently exercised, the number of shares
issued with respect to each such option shall reduce, on a share-for-share
basis, the number of shares available for issuance under this Plan.
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 500,000 shares of Common Stock in the aggregate per calendar year,
beginning with the 1996 calendar year.
C. Should one or more outstanding options under this Plan (including
outstanding options under the Predecessor Plan incorporated into this Plan)
expire or terminate for any reason prior to exercise in full (including any
option cancelled in accordance with the cancellation-regrant provisions of
Section IV of Article Two of the Plan), then the shares subject to the portion
of each option not so exercised shall be available for subsequent option grants
under the Plan. All share issuances under the Plan (including unvested share
issuances under the Predecessor Plan which have been incorporated into this
Plan), whether or not the shares are subsequently repurchased by the Corporation
pursuant to its repurchase rights under the Plan, shall reduce on a share-for-
share basis the number of shares of Common Stock available for subsequent option
grants under the Plan. In addition, should the exercise price of an outstanding
option under the Plan (including any option incorporated from the Predecessor
Plan) be paid with shares of Common Stock or should shares of Common Stock
otherwise issuable under the Plan be withheld by the Corporation in satisfaction
of the withholding taxes incurred in connection with the exercise of an
outstanding option under the Plan or the vesting of a direct share issuance made
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised or which vest under the share issuance, and not by the net
number of shares of Common Stock actually issued to the holder of such option or
share issuance.
D. Should any change be made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the number and/or class of securities
for which any one person may be granted options, separately exercisable stock
appreciation rights and direct stock issuances per calendar year,
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<PAGE>
(iii) the number and/or class of securities for which automatic option grants
are to be subsequently made per eligible non-employee Board member under the
Automatic Option Grant Program, (iv) the number and/or class of securities and
price per share in effect under each option outstanding under either the
Discretionary Option Grant or Automatic Option Grant Program and (v) the number
and/or class of securities and price per share in effect under each outstanding
option incorporated into this Plan from the Predecessor Plan. Such adjustments
to the outstanding options are to be effected in a manner which shall preclude
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Option Grant Program
shall be authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or non-statutory
options. Individuals who are not Employees of the Corporation or its parent or
subsidiary corporations may only be granted non-statutory options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; provided, however, that each such instrument shall comply
--------
with the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
A. Option Price.
------------
1. The option price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The option price per share of Common Stock subject to
an Incentive Option shall in no event be less than one hundred percent
(100%) of the Fair Market Value of such Common Stock on the grant date.
(ii) The option price per share of Common Stock subject to
a non-statutory stock option shall in no event be less than eighty-five
percent (85%) of the Fair Market Value of such Common Stock on the grant
date.
2. The option price shall become immediately due upon exercise
of the option and, subject to the provisions of Section I of Article Five and
the instrument evidencing the grant, shall be payable in one of the following
alternative forms specified below:
(i) full payment in cash or check drawn to the
Corporation's order;
(ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value on the
Exercise Date (as such term is defined below);
9
<PAGE>
(iii) full payment in a combination of shares of Common
Stock held for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date and cash or check drawn to the
Corporation's order; or
(iv) full payment through a broker-dealer sale and
remittance procedure pursuant to which the Optionee shall provide
irrevocable written instructions to (I) a Corporation-designated brokerage
firm to effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate option price payable for the
purchased shares plus all applicable Federal and state income and
employment taxes required to be withheld by the Corporation in connection
with such purchase and (II) the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to complete
the sale transaction.
For purposes of this subparagraph 2, the Exercise Date shall be the
date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent the sale and remittance procedure is used in
connection with the exercise of the option, payment of the option price for the
purchased shares must accompany such notice.
B. Term and Exercise of Options. Each option granted under this
----------------------------
Discretionary Option Grant Program shall be exercisable at such time or times
and during such period as is determined by the Plan Administrator and set forth
in the instrument evidencing the grant. No such option, however, shall have a
maximum term in excess of ten (10) years from the grant date. During the
lifetime of the Optionee, the option shall be exercisable only by the Optionee
and shall not be assignable or transferable by the Optionee other than by will
or by the laws of descent and distribution following the Optionee's death.
C. Termination of Service.
----------------------
1. The following provisions shall govern the exercise period
applicable to any outstanding options held by the Optionee at the time of
cessation of Service or death.
(i) Should an Optionee cease Service for any reason
(other than death) while holding one or more outstanding options under this
Article Two, then none of those options shall remain exercisable for more
than a ninety (90)-day period (or such shorter period determined by the
Plan Administrator and set forth in the instrument evidencing the grant)
measured from the date of such cessation of Service.
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<PAGE>
(ii) Any option held by the Optionee under this Article
Two and exercisable in whole or in part on the date of his or her death may
be subsequently exercised by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent
and distribution. Such exercise, however, must occur prior to the earlier
-------
of (A) six (6) months measured from the date of the Optionee's death or (B)
the specified expiration date of the option term. Upon the occurrence of
the earlier event, the option shall terminate.
(iii) Under no circumstances shall any such option be
exercisable after the specified expiration date of the option term.
(iv) During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than the number
of shares (if any) in which the Optionee is vested at the time of his or
her cessation of Service. Upon the expiration of the limited post-Service
exercise period or (if earlier) upon the specified expiration date of the
option term, each such option shall terminate and cease to be outstanding
with respect to any vested shares for which the option has not otherwise
been exercised. However, each outstanding option shall immediately
terminate and cease to be outstanding, at the time of the Optionee's
cessation of Service, with respect to any shares for which the option is
not otherwise at that time exercisable or in which the Optionee is not
otherwise vested.
(v) Should (A) the Optionee's Service be terminated for
misconduct (including, but not limited to, any act of dishonesty, willful
misconduct, fraud or embezzlement) or (B) the Optionee make any
unauthorized use or disclosure of confidential information or trade secrets
of the Corporation or its parent or subsidiary corporations, then in any
such event all outstanding options held by the Optionee under this Article
Two shall terminate immediately and cease to be outstanding.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to permit one or more options held by the Optionee
under this Article Two to be exercised, during the limited post-Service exercise
period applicable under subparagraph 1 above, not only with respect to the
number of vested shares of Common Stock for which each such option is
exercisable at the time of the Optionee's cessation of Service but also with
respect to one or more subsequent installments of vested shares for which the
option would otherwise have become exercisable had such cessation of Service not
occurred.
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<PAGE>
D. Shareholder Rights.
------------------
An Optionee shall have no shareholder rights with respect to any
shares covered by the option until such individual shall have exercised the
option and paid the option price for the purchased shares.
E. Repurchase Rights.
-----------------
The shares of Common Stock acquired upon the exercise of any Article
Two option grant may be subject to repurchase by the Corporation in accordance
with the following provisions:
(i) The Plan Administrator shall have the discretion to
authorize the issuance of unvested shares of Common Stock under this
Article Two. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase any or all of
those unvested shares at the option price paid per share. The terms and
conditions upon which such repurchase right shall be exercisable (including
the period and procedure for exercise and the appropriate vesting schedule
for the purchased shares) shall be established by the Plan Administrator
and set forth in the instrument evidencing such repurchase right.
(ii) All of the Corporation's outstanding repurchase rights
under this Article Two shall automatically terminate, and all shares
subject to such terminated rights shall immediately vest in full, upon the
occurrence of a Corporate Transaction, except to the extent: (A) any such
repurchase right is expressly assigned to the successor corporation (or
parent thereof) in connection with the Corporate Transaction or (B) such
termination is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
(iii) The Plan Administrator shall have the discretionary
authority, exercisable either before or after the Optionee's cessation of
Service, to cancel the Corporation's outstanding repurchase rights with
respect to one or more shares purchased or purchasable by the Optionee
under this Article Two and thereby accelerate the vesting of such shares in
whole or in part at any time.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Article Two. Incentive Options may only be
granted to individuals who are Employees. Options which are specifically
designated as "non-statutory" options when issued under the Plan shall not be
---
subject to such terms and conditions.
12
<PAGE>
A. Dollar Limitation. The aggregate Fair Market Value (determined
-----------------
as of the respective date or dates of grant) of the Common Stock for which one
or more options granted to any Employee after December 31, 1986 under this Plan
(or any other option plan of the Corporation or its parent or subsidiary
corporations) may for the first time become exercisable as incentive stock
options under the Federal tax laws during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee
holds two (2) or more such options which become exercisable for the first time
in the same calendar year, the foregoing limitation on the exercisability of
such options as incentive stock options under the Federal tax laws shall be
applied on the basis of the order in which such options are granted. Should the
number of shares of Common Stock for which any Incentive Option first becomes
exercisable in any calendar year exceed the applicable One Hundred Thousand
Dollar ($100,000) limitation, then that option may nevertheless be exercised in
that calendar year for the excess number of shares as a non-statutory option
under the Federal tax laws.
B. 10% Shareholder. If any individual to whom an Incentive Option
---------------
is granted is the owner of stock (as determined under Section 424(d) of the
Code) possessing ten percent (10%) or more of the total combined voting power of
all classes of stock of the Corporation or any one of its parent or subsidiary
corporations, then the option price per share shall not be less than one hundred
ten percent (110%) of the Fair Market Value per share of Common Stock on the
grant date, and the option term shall not exceed five (5) years, measured from
the grant date.
Except as modified by the preceding provisions of this Section II, the
provisions of Articles One, Two and Five of the Plan shall apply to all
Incentive Options granted hereunder.
III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL
A. In the event of any Corporate Transaction, each option which is
at the time outstanding under this Article Two shall automatically accelerate so
that each such option shall, immediately prior to the specified effective date
for the Corporate Transaction, become fully exercisable with respect to the
total number of shares of Common Stock at the time subject to such option and
may be exercised for all or any portion of such shares. However, an outstanding
option under this Article Two shall NOT so accelerate if and to the extent: (i)
such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation or parent thereof or to be replaced with a
comparable option to purchase shares of the capital stock of the successor
corporation or parent thereof, (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the option spread
existing at the time of the Corporate Transaction and provides for subsequent
payout in accordance with the same vesting schedule applicable to such option,
or (iii) the acceleration of such option is subject to other limitations imposed
by the Plan Administrator at the time of the option grant. The determination of
option
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<PAGE>
comparability under clause (i) above shall be made by the Plan Administrator,
and its determination shall be final, binding and conclusive.
B. Immediately following the consummation of the Corporate
Transaction, all outstanding options under this Article Two shall terminate and
cease to be outstanding, except to the extent assumed by the successor
corporation or its parent company.
C. Each outstanding option under this Article Two which is assumed
in connection with the Corporate Transaction or is otherwise to continue in
effect shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issued to the option holder, in consummation of such Corporate
Transaction, had such person exercised the option immediately prior to such
Corporate Transaction. Appropriate adjustments shall also be made to the option
price payable per share, provided the aggregate option price payable for such
--------
securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
D. The Plan Administrator shall have the discretion, exercisable
either in advance of any actually-anticipated Corporate Transaction or at the
time of an actual Corporate Transaction, to provide (upon such terms as it may
deem appropriate) for the automatic acceleration of one or more outstanding
options granted under the Plan that are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time, in the event the
Optionee's Service should subsequently terminate within a designated period
following the effective date of such Corporate Transaction.
E. The grant of options under this Article Two shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
F. The Plan Administrator shall have the discretionary authority,
exercisable either in advance of any actually-anticipated Change in Control or
at the time of an actual Change in Control, to provide for the automatic
acceleration of one or more outstanding options under this Article Two (and the
termination of one or more of the Corporation's outstanding repurchase rights
under this Article Two) upon the occurrence of the Change in Control. The Plan
Administrator shall also have full power and authority to condition any such
option acceleration (and the termination of any outstanding repurchase rights)
upon the subsequent termination of the Optionee's Service within a specified
period following the Change in Control.
G. Any options accelerated in connection with the Change in Control
shall remain fully exercisable until the expiration or sooner termination of the
option term.
14
<PAGE>
H. The exercisability as incentive stock options under the Federal
tax laws of any options accelerated under this Section III in connection with a
Corporate Transaction or Change in Control shall remain subject to the dollar
limitation of Section II of this Article Two. To the extent such dollar
limitation is exceeded, the accelerated option shall be exercisable as a non-
statutory option under the Federal tax laws.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under this Article Two (including
outstanding options under the Predecessor Plan incorporated into this Plan) and
to grant in substitution new options under the Plan covering the same or
different numbers of shares of Common Stock but with an option price per share
not less than (i) one hundred percent (100%) of the Fair Market Value on the new
grant date in the case of a grant of an Incentive Option, (ii) one hundred ten
percent (110%) of such Fair Market Value in the case of a grant of an Incentive
Option to a 10% Shareholder or (iii) eighty-five percent (85%) of such Fair
Market Value in the case of all other grants.
V. INITIAL GRANTS
For purposes of option grants made at the time of the Common Stock is
first registered under Section 12(g) of the 1934 Act or at any time thereafter
prior to the time the Common Stock is first traded on a national securities
exchange or the Nasdaq National Market, the Fair Market Value of the Common
Stock at such time shall be deemed to be equal to the price per share at which
the Common Stock is sold in the initial public offering pursuant to the
Underwriting Agreement.
15
<PAGE>
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. ELIGIBILITY
A. Eligible Optionees. The individuals eligible to receive
------------------
automatic option grants pursuant to the provisions of this Article Three program
shall be limited to those individuals who are serving as non-employee Board
members on the Automatic Grant Program Effective Date or who are first elected
or appointed as non-employee Board members on or after such Effective Date,
whether through appointment by the Board or election by the Corporation's
shareholders. In no event, however, shall a non-employee Board member be
eligible to participate in the Automatic Option Grant Program if such individual
has at any time been in the prior employ of the Corporation (or any parent or
subsidiary corporation). Each non-employee Board member eligible to participate
in the Automatic Option Grant Program pursuant to the foregoing criteria shall
be designated an Eligible Director for purposes of the Plan.
B. Limitation. Except for the option grants to be made pursuant to
----------
the provisions of this Automatic Option Grant Program, Eligible Directors shall
not be eligible to receive any additional option grants or stock issuances under
- ---
this Plan or any other stock plan of the Corporation (or its parent or
subsidiaries).
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants shall be made under this Article
-----------
Three on the dates specified below:
1. Initial Grant. Each Eligible Director who is a non-employee
Board member on the Automatic Grant Program Effective Date and each Eligible
Director who is first elected or appointed as a non-employee Board member after
such date shall automatically be granted, on the Automatic Grant Program
Effective Date or on the date of such initial election or appointment (as the
case may be), a Non-Statutory Option to purchase 9,000 shares of Common Stock
upon the terms and conditions of this Article Three.
2. Annual Grant. On the date of each Annual Shareholders
Meeting, beginning with the 1995 Annual Meeting, each individual who is at the
time serving as an Eligible Director shall automatically be granted, whether or
not such individual is standing for re-election as a Board member at that Annual
Meeting, a Non-Statutory Option to purchase an additional 900 shares of Common
Stock upon the terms and conditions of this Article Three, provided he or she
has served as a non-employee Board
16
<PAGE>
member for at least six (6) months prior to the date of such Annual Meeting.
There shall be no limit on the number of such 900-share option grants any one
Eligible Director may receive over his or her period of Board service.
B. Exercise Price. The exercise price per share of Common Stock
--------------
subject to each automatic option grant made under this Article Three shall be
determined in accordance with the following provisions:
- For the automatic option grants made on the Automatic Grant
Program Effective Date, the exercise price per share of Common Stock shall
be equal to the price per share at which the Common Stock is sold in the
initial public offering of the Common Stock pursuant to the Underwriting
Agreement.
- For all other automatic option grants, the exercise price per
share of Common Stock shall be equal to one hundred percent (100%) of the
Fair Market Value per share of Common Stock on the automatic grant date.
C. Payment.
-------
The exercise price shall be payable in one of the alternative
forms specified below:
(i) full payment in cash or check drawn to the Corporation's
order;
(ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value on the
Exercise Date (as such term is defined below);
(iii) full payment in a combination of shares of Common Stock
held for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date and cash or check drawn to the
Corporation's order; or
(iv) full payment through a sale and remittance procedure
pursuant to which the Optionee shall provide irrevocable written
instructions to (I) a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of
the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares and
(II) the
17
<PAGE>
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale transaction.
For purposes of this subparagraph C, the Exercise Date shall be the
date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent the sale and remittance procedure specified
above is used for the exercise of the option for vested shares, payment of the
exercise price for the purchased shares must accompany the exercise notice.
D. Option Term. Each automatic grant under this Article Three shall
-----------
have a maximum term of ten (10) years measured from the automatic grant date.
E. Exercisability. Each automatic grant shall become exercisable in
--------------
a series of four (4) equal and successive annual installments over the
Optionee's period of continued service as a Board member, with the first such
installment to become exercisable one (1) year after the automatic grant date.
The exercisability of each automatic grant outstanding under this Article Three
shall be accelerated as provided in Section II.G and Section III of this Article
Three.
F. Non-Transferability. During the lifetime of the Optionee, each
-------------------
automatic option grant shall be exercisable only by the Optionee and shall not
be assignable or transferable by the Optionee other than by will or by the laws
of descent and distribution following Optionee's death.
G. Effect of Termination of Board Membership.
-----------------------------------------
1. Should the Optionee cease to serve as a Board member for any
reason (other than death or Permanent Disability) while holding one or more
automatic option grants under this Article Three, then such individual shall
have a ninety (90)-day period following the date of such cessation of Board
membership in which to exercise each such option for any or all of the shares of
Common Stock for which that option is exercisable at the time of such cessation
of Board service. Each such option shall immediately terminate and cease to be
outstanding, at the time of such cessation of Board service, with respect to any
shares for which the option is not otherwise at that time exercisable.
2. Should the Optionee die within ninety (90) days after
cessation of Board service, then any automatic option grant held by the Optionee
at the time of death may subsequently be exercised, for any or all of the shares
of Common Stock for which such option is exercisable at the time of the
Optionee's cessation of Board membership (less any option shares subsequently
purchased by the Optionee prior to death), by the personal representative of the
Optionee's estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent and
18
<PAGE>
distribution. Any such exercise must occur within six (6) months after the date
of the Optionee's death.
3. Should the Optionee die or become Permanently Disabled while
serving as a Board member, then any automatic option grant held by such Optionee
under this Article Three shall accelerate in full, and the Optionee (or the
representative of the Optionee's estate or the person or persons to whom the
option is transferred upon the Optionee's death) shall have a six (6)-month
period following the date of the Optionee's cessation of Board membership in
which to exercise such option for any or all of the shares of Common Stock
subject to the option at the time of such cessation of Board membership.
4. In no event shall any automatic grant under this Article Three
remain exercisable after the expiration date of the ten (10)-year option term.
Upon the expiration of the applicable post-service exercise period under
subparagraph 1, 2 or 3 above or (if earlier) upon the expiration of the ten
(10)-year option term, the automatic grant shall terminate and cease to be
outstanding for any unexercised shares for which the option was otherwise
exercisable at the time of the Optionee's cessation of Board membership.
H. Shareholder Rights. The holder of an automatic option grant under
------------------
this Article Three shall have none of the rights of a shareholder with respect
to any shares subject to such option until such individual shall have exercised
the option and paid the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each
---------------
automatic option grant shall be as set forth in the form Director Automatic
Grant Agreement attached as Exhibit A.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each automatic option
grant at the time outstanding under this Article Three shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for the Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of such shares.
Immediately after the consummation of the Corporate Transaction, all automatic
option grants under this Article Three shall terminate and cease to be
outstanding.
B. In connection with any Change in Control, each automatic option
grant at the time outstanding under this Article Three shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for the Change in Control, become fully exercisable with respect
to the total number of shares of Common Stock at the time subject to such option
and may be exercised for all or any portion of such shares. Any option
accelerated in connection with the Change in Control shall remain fully
exercisable until the expiration or sooner termination of the option term.
19
<PAGE>
C. The automatic option grants outstanding under this Article Three
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
The provisions of this Automatic Option Grant Program, together with
the automatic option grants outstanding under this Article Three, may not be
amended at intervals more frequently than once every six (6) months, other than
to the extent necessary to comply with applicable Federal income tax laws and
regulations.
20
<PAGE>
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
----------------------
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares may be issued under the Stock Issuance Program through direct
and immediate purchases without any intervening stock option grants. The issued
shares shall be evidenced by a Stock Issuance Agreement ("Issuance Agreement")
that complies with the terms and conditions of this Article Four.
A. CONSIDERATION
-------------
1. Shares of Common Stock shall be issued under the Stock
Issuance Program for one or more of the following items of consideration which
the Plan Administrator may deem appropriate in each individual instance:
(i) cash or check drawn to the Corporation's order;
(ii) a promissory note payable to the Corporation's order
in one or more installments, which may be subject to cancellation in whole
or in part upon terms and conditions established by the Plan Administrator;
or
(iii) past services rendered to the Corporation or any
parent or subsidiary corporation.
2. Shares of Common Stock may, in the absolute discretion of
the Plan Administrator, be issued for consideration with a value less than one
hundred percent (100%) of the Fair Market Value of such shares at the time of
issuance, but in no event less than eighty-five percent (85%) of such Fair
Market Value.
B. VESTING PROVISIONS
------------------
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the absolute discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service. The elements of the vesting schedule
applicable to any unvested shares of Common Stock issued under the Stock
Issuance Program, namely:
21
<PAGE>
(i) the Service period to be completed by the Participant
or the performance objectives to be achieved by the Corporation,
(ii) the number of installments in which the shares are to
vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
(iv) the effect which death, Permanent Disability or other
event designated by the Plan Administrator is to have upon the vesting
schedule,
shall be determined by the Plan Administrator and incorporated into the Issuance
Agreement executed by the Corporation and the Participant at the time such
unvested shares are issued.
2. The Participant shall have full shareholder rights with
respect to any shares of Common Stock issued to him or her under the Plan,
whether or not his or her interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends paid on such shares. Any new, additional or different shares of
stock or other property (including money paid other than as a regular cash
dividend) which the Participant may have the right to receive with respect to
his or her unvested shares by reason of any stock dividend, stock split,
reclassification of Common Stock or other similar change in the Corporation's
capital structure or by reason of any Corporate Transaction shall be issued,
subject to (i) the same vesting requirements applicable to his or her unvested
shares and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock under the Plan, then those
shares shall be immediately surrendered to the Corporation for cancellation, and
the Participant shall have no further shareholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money promissory note), the Corporation shall repay to
the Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to such surrendered shares.
4. The Plan Administrator may in its discretion elect to waive
the surrender and cancellation of one or more unvested shares of Common Stock
(or other assets attributable thereto) which would otherwise occur upon the non-
completion of the vesting schedule applicable to such shares. Such waiver shall
result in the immediate vesting of the Participant's interest in the shares of
Common Stock as to which the waiver applies.
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Such waiver may be effected at any time, whether before or after the
Participant's cessation of Service.
II. CORPORATE TRANSACTIONS/CHANGE IN CONTROL
A. Upon the occurrence of any Corporate Transaction, all unvested
shares of Common Stock at the time outstanding under the Stock Issuance Program
shall immediately vest in full, except to the extent the Plan Administrator
imposes limitations in the Issuance Agreement which preclude such accelerated
vesting in whole or in part.
B. The Plan Administrator shall have the discretionary authority,
exercisable either in advance of any actually-anticipated Change in Control or
at the time of an actual Change in Control, to provide for the immediate and
automatic vesting of one or more unvested shares outstanding under the Stock
Issuance Program at the time of such Change in Control. The Plan Administrator
shall also have full power and authority to condition any such accelerated
vesting upon the subsequent termination of the Participant's Service within a
specified period following the Change in Control.
III. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Unvested shares may, in the Plan Administrator's discretion, be
held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing such unvested shares. To the extent an
escrow arrangement is utilized, the unvested shares and any securities or other
assets issued with respect to such shares (other than regular cash dividends)
shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such shares (or other securities or assets) vests.
Alternatively, if the unvested shares are issued directly to the Participant,
the restrictive legend on the certificates for such shares shall read
substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE
ACCORDINGLY SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND (II)
CANCELLATION OR REPURCHASE IN THE EVENT THE REGISTERED HOLDER (OR HIS/HER
PREDECESSOR IN INTEREST) CEASES TO REMAIN IN THE CORPORATION'S SERVICE.
SUCH TRANSFER RESTRICTIONS AND THE TERMS AND CONDITIONS OF SUCH
CANCELLATION OR REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE AGREEMENT
BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR
IN INTEREST) DATED ________________, 199__, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THE CORPORATION."
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B. The Participant shall have no right to transfer any unvested
shares of Common Stock issued to him or her under the Stock Issuance Program.
For purposes of this restriction, the term "transfer" shall include (without
limitation) any sale, pledge, assignment, encumbrance, gift, or other
disposition of such shares, whether voluntary or involuntary. Upon any such
attempted transfer, the unvested shares shall immediately be cancelled, and
neither the Participant nor the proposed transferee shall have any rights with
respect to those shares. However, the Participant shall have the right to make a
gift of unvested shares acquired under the Stock Issuance Program to his or her
spouse or issue, including adopted children, or to a trust established for such
spouse or issue, provided the donee of such shares delivers to the Corporation a
written agreement to be bound by all the provisions of the Stock Issuance
Program and the Issuance Agreement applicable to the gifted shares.
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ARTICLE FIVE
MISCELLANEOUS
-------------
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any
Optionee or Participant (including an Optionee or Participant who is an officer
of the Corporation) in the exercise of one or more options granted to such
Optionee under the Discretionary Option Grant Program or the purchase of one or
more shares issued to such Participant under the Stock Issuance Program,
including the satisfaction of any Federal and state income and employment tax
obligations arising therefrom, by (i) authorizing the extension of a loan from
the Corporation to such Optionee or Participant or (ii) permitting the Optionee
or Participant to pay the option price or purchase price for the purchased
Common Stock in installments over a period of years. The terms of any loan or
installment method of payment (including the interest rate and terms of
repayment) shall be upon such terms as the Plan Administrator specifies in the
applicable option or issuance agreement or otherwise deems appropriate under the
circumstances. Loans or installment payments may be authorized with or without
security or collateral. However, any loan made to a consultant or other non-
employee advisor must be secured by property other than the purchased shares of
Common Stock. In all events, the maximum credit available to the Optionee or
Participant may not exceed the option or purchase price of the acquired shares
plus any Federal and state income and employment tax liability incurred by the
Optionee or Participant in connection with the acquisition of such shares.
B. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Plan Administrator may deem appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to amend
or modify the Plan (or any component thereof) in any or all respects whatsoever.
However, (i) no such amendment or modification shall adversely affect rights and
obligations with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any Participant with respect to Common Stock
issued under the Stock Issuance Program prior to such action, unless the
Optionee or Participant consents to such amendment, and (ii) any amendment made
to the Automatic Option Grant Program (or any options outstanding thereunder)
shall be in compliance with the limitation of Section IV of Article Three. In
addition, the Board may not, without the approval of the Corporation's
shareholders, amend the Plan to (i) materially increase the maximum number of
shares
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issuable under the Plan, the number of shares for which options may be granted
under the Automatic Option Grant Program, or the maximum number of shares for
which any one person may be granted options, separately exercisable stock
appreciation rights and direct stock issuances per calendar year, except for
permissible adjustments under Section VI.C. of Article One, (ii) materially
modify the eligibility requirements for Plan participation or (iii) materially
increase the benefits accruing to Plan participants.
B. (i) Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program and (ii) shares of Common Stock may
be issued under the Stock Issuance Program, which are in both instances in
excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under the Discretionary Option Grant
Program or the Stock Issuance Program are held in escrow until shareholder
approval is obtained for a sufficient increase in the number of shares available
for issuance under the Plan. If such shareholder approval is not obtained within
twelve (12) months after the date the first such excess option grants or excess
share issuances are made, then (I) any unexercised excess options shall
terminate and cease to be exercisable and (II) the Corporation shall promptly
refund the purchase price paid for any excess shares actually issued under the
Plan and held in escrow, together with interest (at the applicable Short Term
Federal Rate) for the period the shares were held in escrow.
III. TAX WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock upon
the exercise of stock options for such shares or the vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income tax and employment tax withholding requirements.
The Plan Administrator may, in its discretion and in accordance with
the provisions of this Section III of Article Five and such supplemental rules
as the Plan Administrator may from time to time adopt (including the applicable
safe-harbor provisions of Rule 16b-3 of the Securities and Exchange Commission),
provide any or all holders of non-statutory options (other than the automatic
grants made pursuant to Article Three of the Plan) or unvested shares under the
Plan with the right to use shares of Common Stock in satisfaction of all or part
of the Federal, state and local income and employment tax liabilities incurred
by such holders in connection with the exercise of their options or the vesting
of their shares (the "Taxes"). Such right may be provided to any such holder in
either or both of the following formats:
(i) Stock Withholding: The holder of the non-statutory option
-----------------
or unvested shares may be provided with the election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such non-statutory option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal
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to the percentage of the applicable Taxes (not to exceed one hundred percent
(100%)) designated by the holder.
(ii) Stock Delivery: The Plan Administrator may, in its
--------------
discretion, provide the holder of the non-statutory option or the unvested
shares with the election to deliver to the Corporation, at the time the non-
statutory option is exercised or the shares vest, one or more shares of Common
Stock previously acquired by such individual (other than in connection with the
option exercise or share vesting triggering the Taxes) with an aggregate Fair
Market Value equal to the percentage of the Taxes incurred in connection with
such option exercise or share vesting (not to exceed one hundred percent (100%))
designated by the holder.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. Provided this Plan is approved by the Corporation's shareholders
on or before the Plan Effective Date, this Plan shall, as successor to the
Predecessor Plan, become effective as of such Effective Date, and no further
option grants or stock issuances shall be made under the Predecessor Plan from
and after the Plan Effective Date.
B. Each stock option grant outstanding under the Predecessor Plan
immediately prior to the Plan Effective Date shall be incorporated into this
Plan and treated as an outstanding option under this Plan, but each such option
shall continue to be governed solely by the terms and conditions of the
instrument evidencing such grant, and nothing in this Plan shall be deemed to
affect or otherwise modify the rights or obligations of the holders of such
options with respect to their acquisition of shares of Common Stock thereunder.
Each unvested share of Common Stock outstanding under the Predecessor Plan on
the Plan Effective Date shall continue to be governed solely by the terms and
conditions of the instrument evidencing such share issuance, and nothing in this
Plan shall be deemed to affect or otherwise modify the rights or obligations of
the holder of such unvested shares.
C. The option/vesting acceleration provisions of Section III of Article
Two and Section II of Article Four relating to Corporate Transactions and
Changes in Control may, in the Plan Administrator's discretion, be extended to
one or more stock options or unvested share issuances which are outstanding
under the Predecessor Plan on the Plan Effective Date but which do not otherwise
provide for such acceleration.
D. The Plan shall terminate upon the earlier of (i) December 8, 2003
-------
or (ii) the date on which all shares available for issuance under the Plan shall
have been issued pursuant to the exercise of the options granted under the Plan
or the issuance of shares (whether vested or unvested) under the Stock Issuance
Program. If the date of termination is determined under clause (i) above, then
all option grants and unvested share issuances outstanding on such date shall
thereafter continue to have force and effect in accordance with the provisions
of the instruments evidencing such grants or issuances.
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V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants or share issuances under the Plan shall be used for
general corporate purposes
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option under
the Plan, the issuance of any shares under the Stock Issuance Program, and the
issuance of Common Stock upon the exercise or surrender of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which stock of the same class is then listed.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan, nor
any action taken by the Plan Administrator hereunder, nor any provision of the
Plan shall be construed so as to grant any individual the right to remain in the
employ or service of the Corporation (or any parent or subsidiary corporation)
for any period of specific duration, and the Corporation (or any parent or
subsidiary corporation retaining the services of such individual) may terminate
such individual's employment or service at any time and for any reason, with or
without cause.
VIII. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets under the Plan
may not be assigned, encumbered or otherwise transferred by any Optionee or
Participant.
B. The provisions of the Plan relating to the exercise of options
and the vesting of shares shall be governed by the laws of the State of
California, as such laws are applied to contracts entered into and performed in
such State.
C. The provisions of the Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
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