<PAGE> 1
As filed with the Securities and Exchange Commission on July 17, 1996
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
APPLIED DIGITAL ACCESS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 68-0132939
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
9855 SCRANTON ROAD, SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices) (Zip Code)
1994 STOCK OPTION/STOCK ISSUANCE PLAN
1994 EMPLOYEE STOCK PURCHASE PLAN
1996 NON-QUALIFIED STOCK OPTION PLAN
(Full title of the plans)
Peter P. Savage
President and Chief Executive Officer
APPLIED DIGITAL ACCESS, INC.
9855 SCRANTON ROAD, SAN DIEGO, CALIFORNIA 92121
(Name and address of agent for service)
(619) 623-2200
(Telephone number, including area code, of agent for service)
This Registration Statement shall become effective immediately upon
filing with the Securities and Exchange Commission, and sales of the
registered securities will thereafter be effected upon option
exercises or share issuances effected under the 1994 Stock
Option/Stock Issuance Plan, the 1994 Employee Stock Purchase Plan
and the 1996 Non-Qualified Stock Option Plan.
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 per Share Price Fee
---------- ---------- --------- ----- ---
<S> <C> <C> <C> <C>
Common Stock (under 1994 Stock
Option/Stock Issuance Plan)............. 1,000,000 shares(1) $6.88(2) $6,880,000 $2,372.41
Common Stock (under 1994
Employee Stock Purchase Plan)........... 100,000 shares(1) $6.88(2) $ 688,000 $ 237.24
Common Stock (under 1996 Non-
Qualified Stock Option Plan)............ 400,000 shares(1) $6.88(2) $2,752,000 $ 948.96
</TABLE>
- --------------------
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1994 Stock Option/Stock
Issuance Plan, the 1994 Employee Stock Purchase Plan and the 1996
Non-Qualified Stock Option 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
Company's outstanding shares of Common Stock.
(2) Estimated solely for the purpose of computing the amount of the
registration fee.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
Applied Digital Access, Inc. (the "Company") hereby incorporates by
reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "Commission"):
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
(b) The Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1996.
(c) The Form 8-A filed by the Company on March 28, 1994 with the
Commission as Registration No. 0-23698 (and all amendments
hereto), in which there is described the terms, rights and
provisions applicable to the Company's outstanding Common
Stock.
All reports and other documents subsequently filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities and Exchange Act
of 1934 (the "1934 Act") 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
(a) Section 317 of the California General Corporation Law provides for
the indemnification of officers and directors of the Company against expenses,
judgments, fines and amounts paid in settlement under certain conditions and
subject to certain limitations.
(b) Article VI of the Bylaws of the Company provides that the Company
shall have power to indemnify any person who is or was an agent of the Company
as provided in Section 317 of the California General Corporation Law. The rights
to indemnity thereunder continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of the person. In addition, expenses incurred by a
director or officer in defending a civil or criminal action, suit of proceeding
by reason of the fact that he or she is or was a director or officer of the
Company (or was serving at the Company's request as a director or officer of
another corporation) shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
Company as authorized by the relevant section of the California General
Corporation Law.
II-1.
<PAGE> 3
(c) Article IV of the Company's Articles of Incorporation provides that
the liability of the directors of the Company for monetary damages shall be
eliminated to the fullest extent permissible under California law. Accordingly,
a director will not be liable for monetary damages for breach of duty to the
Company or its shareholders in any action brought by or in the right of the
Company. However, a director remains liable to the extent required by law for
(i) acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law, (ii) acts or omissions that a director believes to be
contrary to the best interests of the Company or its shareholders or that
involve the absence of good faith on the part of the director, (iii) any
transaction from which a director derived an improper personal benefit, (iv)
acts or omissions that show a reckless disregard for the director's duty to the
Company or its shareholders in circumstances in which the director was aware, or
should have been aware, in the ordinary course of performing a director's
duties, of a risk of serious injury to the Company or its shareholders, (v) acts
or omissions that constitute an unexcused pattern of inattention that amounts to
an abdication of the director's duty to the Company or its shareholders, (vi)
any act or omission occurring prior to the date when the exculpation provision
became effective and (vii) any act or omission as an officer, notwithstanding
that the officer is also a director or that his or her actions, if negligent or
improper, have been ratified by the directors. The effect of the provisions in
the Articles of Incorporation is to eliminate the rights of the Company and its
shareholders (through shareholder derivative suits on behalf of the Company) to
recover monetary damages against a director for breach of duty as a director,
including breaches resulting from negligent behavior in the context of
transactions involving a change of control of the Company or otherwise, except
in the situations described in clauses (i) through (vii) above. These provisions
will not alter the liability of directors under federal securities laws.
(d) Pursuant to authorization provided under the Articles of
Incorporation, the Company has entered into indemnification agreements with each
of its directors. Generally, the indemnification agreements attempt to provide
the maximum protection permitted by California law as it may be amended from
time to time. Moreover, the indemnification agreements provide for certain
additional indemnification. Under such additional indemnification provisions,
however, an individual will not receive indemnification for judgments,
settlements or expenses if he or she is found liable to the Company (except to
the extent the court determines he or she is fairly and reasonably entitled to
indemnity for expenses), for settlements not approved by the Company or
settlements and expenses if the settlement is not approved by the court. The
indemnification agreements provide for the Company to advance to the individual
any and all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding. In order to
receive an advance of expenses, the individual must submit to the Company copies
of invoices presented to him or her for such expenses. Also, the individual must
repay such advances upon a final judicial decision that he or she is not
entitled to indemnification. The Company's Bylaws contain a provision of similar
effect relating to advancement of expenses to a director or officer, subject to
an undertaking to repay if it is ultimately determined that indemnification is
unavailable.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
----- -------
<S> <C>
4.1 Amended and Restated Certificate of Incorporation*
4.2 Amended and Restated Bylaws*
4.3 Specimen Stock Certificate*
5 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
23.2 Consent of Independent Accountants, Coopers & Lybrand L.L.P.
</TABLE>
II-2.
<PAGE> 4
<TABLE>
<S> <C>
24 Power of Attorney. Reference is made to page II-5 of this
Registration Statement.
99.1 1994 Stock Option/Stock Issuance Plan, as amended.
99.2 Form of Stock Option Agreement.**
99.3 Form of Stock Issuance Agreement.**
99.4 1994 Employee Stock Purchase Plan, as amended.
99.5 Form of Stock Purchase Agreement.**
99.6 1996 Non-Qualified Stock Option Plan.
99.7 Form of Stock Option Agreement
</TABLE>
* Filed as an Exhibit to the Company's Registration Statement on Form S-1
(No. 33-75258) effective March 28, 1994 and incorporated herein by
reference.
** Filed as an Exhibit to the Company's Registration Statement on Form S-8
(No. 33-76962) filed March 28, 1994 and incorporated herein by
reference.
Item 9. Undertakings
1. The undersigned registrant hereby undertakes:
(a) 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 (the "1933 Act");
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement;
provided, however, that paragraphs (a)(i) and (a)(ii) shall not apply if the
information required to be in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Company pursuant to Section 13 or
Section 15(d) of the 1934 Act that are incorporated by reference into this
registration statement.
(b) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold upon the termination
of the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Company's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the 1934 Act) that is incorporated by reference in
this registration statement shall be deemed to be a new
II-3.
<PAGE> 5
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.
3. The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the 1934 Act; and, where interim
financial information required to be presented by Article 3 of Regulation S-X is
not set forth in the prospectus, to deliver, or cause to be delivered to each
person to whom the prospectus is sent or given, the latest quarterly report that
is specifically incorporated by reference in the prospectus to provide such
interim financial information.
4. Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers or controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
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 Company of expenses incurred or paid by a director, officer or
controlling person of the Company 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 Company 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-4.
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 17 day
of July, 1996.
APPLIED DIGITAL ACCESS, INC.
By /s/ Peter P. Savage
----------------------------
Peter P. Savage
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Applied Digital Access,
Inc., a California corporation, do hereby constitute and appoint Peter P. Savage
and James L. Keefe, and each of them, the lawful attorneys-in-fact and agents
with full power and authority to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, and either one of them,
determine may be necessary or advisable or required to enable said corporation
to comply with the Securities Act of 1933, as amended, and any rules or
regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, 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
that all said attorneys and agents, or either 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, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Peter P. Savage President and Chief Executive Officer and July 17, 1996
- ---------------------------
Peter P. Savage Director (Principal Executive Officer)
/s/ James L. Keefe Vice President, Finance and Administration, July 17, 1996
- ---------------------------
James L. Keefe Chief Financial Officer (Principal Financial and
Accounting Officer)
/s/ Christopher B. Paisley Director July 17, 1996
- ---------------------------
Christopher B. Paisley
/s/ Patricia L. Higgins Director July 17, 1996
- ---------------------------
Patricia L. Higgins
/s/ Edward F. Tuck Director July 17, 1996
- ---------------------------
Edward F. Tuck
/s/ Geoffrey Y. Yang Director July 17, 1996
- ---------------------------
Geoffrey Y. Yang
</TABLE>
II-5.
<PAGE> 7
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
APPLIED DIGITAL ACCESS, INC.
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
4.1 Amended and Restated Certificate of Incorporation*
4.2 Amended and Restated Bylaws*
4.3 Specimen Stock Certificate*
5 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
23.2 Consent of Independent Accountants, Coopers & Lybrand L.L.P.
24 Power of Attorney. Reference is made to page II-5 of this Registration Statement.
99.1 1994 Stock Option/Stock Issuance Plan, as amended.
99.2 Form of Stock Option Agreement.**
99.3 Form of Stock Issuance Agreement.**
99.4 1994 Employee Stock Purchase Plan, as amended.
99.5 Form of Stock Purchase Agreement.**
99.6 1996 Non-Qualified Stock Option Plan.
99.7 Form of Stock Option Agreement
</TABLE>
* Filed as an Exhibit to the Company's Registration Statement on Form
S-1 (No. 33-75258) effective March 28, 1994 and incorporated herein
by reference.
** Filed as an Exhibit to the Company's Registration Statement on Form
S-8 (No. 33-76962) filed March 28, 1994 and incorporated herein by
reference.
<PAGE> 1
Exhibit 5
Opinion and consent of Brobeck, Phleger & Harrison LLP
<PAGE> 2
July 17, 1996
Applied Digital Access, Inc.
9855 Scranton Road
San Diego, California 92121
Re: Applied Digital Access, Inc. Registration Statement for
Offering of 1,500,000 Shares of Common Stock
Ladies and Gentlemen:
In connection with your registration of 1,500,000 shares of
the Common Stock of Applied Digital Access, Inc. (the "Company") under the
Company's 1994 Stock Option/Stock Issuance Plan, 1994 Employee Stock Purchase
Plan and 1996 Non-qualified Stock Option Plan on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, we advise you that, in
our opinion, when such shares have been issued and sold pursuant to the
provisions of the Company's 1994 Stock Option/Stock Issuance Plan, 1994 Employee
Stock Purchase Plan and 1996 Non-qualified Stock Option Plan, and in accordance
with the Registration Statement, such shares will be duly-authorized,
validly-issued, fully-paid and non-assessable shares of the Company's Common
Stock.
We hereby consent to the reference to the filings of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
Exhibit 23.2
Consent of Independent Accountants, Coopers & Lybrand L.L.P.
We consent to the incorporation by reference in the registration statement of
Applied Digital Access, Inc. on Form S-8 of our report dated January 24, 1996,
on our audits of the financial statements and financial statement schedule of
Applied Digital Access, Inc. as of December 31, 1995 and 1994, and for the
years ended December 31, 1995, 1994, and 1993, which report is included in the
Annual Report on Form 10-K of Applied Digital Access, Inc. for the year ended
December 31, 1995.
/s/ COOPERS & LYBRAND L.L.P.
San Diego, California
July 17, 1996
<PAGE> 1
Exhibit 99.1
1994 Stock Option/Stock Issuance Plan, as Amended
<PAGE> 2
FIRST AMENDMENT TO THE
APPLIED DIGITAL ACCESS, INC.
1994 STOCK OPTION/STOCK ISSUANCE PLAN
The Board of Directors of Applied Digital Access, Inc. ("Corporation")
make this Amendment to the Corporation's 1994 Stock Option/Stock Issuance Plan
(the "Plan") pursuant to Article Five, Section V of the Plan, which Amendment
has been approved by the shareholders of the Corporation.
1. Article One, Section VI.A of the Plan is amended and restated in its
entirety to read as follows:
A. Shares of the Corporation's Common Stock shall be available
for issuance under the Plan and shall be drawn from either the Corporation's
authorized but unissued shares of Common Stock or from reacquired shares of
Common Stock, including shares repurchased by the Corporation on the open
market. The maximum number of shares of Common Stock which may be issued over
the term of the Plan shall not exceed 2,800,000 shares, subject to adjustment
from time to time in accordance with the provisions of this Section VI. Such
authorized number of shares is comprised of (i) 327,153 shares issued under the
Predecessor Plans, (ii) 1,734,290 shares reserved for issuance under the options
granted under the Predecessor Plans (iii) 213,424 shares shares which would have
been available for future option grant or share issuance under the Predecessor
Plans as last approved by the shareholders, plus (iv) an additional increase of
1,525,025 shares.
2. Except as specifically modified herein, the Plan as previously
adopted remains in full force and effect.
<PAGE> 3
APPLIED DIGITAL ACCESS, INC.
1994 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
This 1994 Stock Option/Stock Issuance Plan ("Plan") is
intended to promote the interests of Applied Digital Access, Inc., a California
corporation (the "Corporation"), by providing (i) key employees (including
officers) of the Corporation (or its parent or subsidiary corporations) who are
responsible for the management, growth and financial success of the Corporation
(or its parent or subsidiary corporations), (ii) Directors and (iii) consultants
and other independent contractors who provide valuable services to the
Corporation (or its parent or subsidiary corporations) with the opportunity to
acquire a proprietary or 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).
II. GENERAL
A. The Plan shall become effective on the first date on which
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 "Effective Date" of this Plan.
B. This Plan shall serve as the successor to the Corporation's
1988 Stock Option Plan and the Restricted Stock Purchase Plan (together, the
"Predecessor Plans"), and no further option grants or share issuances shall be
made under the Predecessor Plans from and after the Effective Date. Each
outstanding option or share issuances under the Predecessor Plans immediately
prior to the Effective Date are hereby incorporated into this Plan and shall
accordingly be treated as outstanding options or share issuance under this Plan.
However, each such option or share issuance shall continue to be governed solely
by the terms and conditions of the instrument evidencing such grant or issuance,
and, except as otherwise expressly provided herein, no provision of this Plan
shall affect or otherwise modify the rights or obligations of the holders of
such incorporated options or shares with respect to their acquisition of shares
of the Corporation's common stock or otherwise modify the rights or obligations
of the holders of such options or shares.
C. For purposes of this Plan, 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.
<PAGE> 4
D. Neither the grant of options nor the issuance of any shares
pursuant to this Plan shall in any 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.
E. The holder of an option grant under this Plan 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, paid the exercise
price for the purchased shares and been issued a stock certificate for such
shares.
III. STRUCTURE OF THE PLAN
A. 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 be granted options to purchase shares of the
Corporation's common stock at not less than 85% of the fair market value of such
shares on the grant date. Under the Automatic Option Grant Program, non-employee
Directors will automatically be granted options to purchase Common Stock of the
Corporation at 100% of the fair market value on the grant date. Under the Stock
Issuance Program, eligible individuals may be allowed to purchase shares of the
Corporation's common stock at discounts from the fair market value of such
shares of up to 15%. Such shares may be issued as fully-vested shares or as
shares to vest over time.
B. The provisions of Articles One and Five of the Plan, except
as otherwise expressly provided, shall apply to both the Discretionary Option
Grant Program, the Automatic Option Grant Program and the Stock Issuance Program
and shall accordingly govern the interests of all individuals in the Plan.
IV. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered by a committee
("Committee") of two (2) or more non-employee Board members who assume full
responsibility for the administration of the Plan (the "Plan Administrator").
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 Plan Administrator shall have full power and authority
(subject to the express provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper administration of the Plan
and to make such determinations under, and issue such interpretations of, the
Plan and any outstanding option grants or stock issuances as it may deem
necessary or advisable. Decisions of the Plan Administrator shall be final and
binding on all parties who have an interest in the Plan or any outstanding
option or stock issuance.
C. Notwithstanding the above, the administration of the
Automatic Option Grant Program under Article Three shall be self executing in
accordance with the terms and conditions thereof and the Plan Administrator
shall not exercise any discretionary functions in respect to matters governed by
Article Three.
V. OPTION GRANTS AND STOCK ISSUANCES
A. The persons eligible to receive stock issuances under the
Stock Issuance Program ("Participant") and/or option grants pursuant to the
Discretionary Option Grant Program ("Optionee") are as follows:
(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);
<PAGE> 5
(ii) those consultants or other independent contractors
who provide valuable services to the Corporation (or its parent or
subsidiary corporations).
B. The individuals who will receive option grants under the
Automatic Option Grant Program are (i) those individuals who are elected,
re-elected or appointed as non-employee Board members on or after the Effective
Date of this Plan, provided they have not otherwise been in the prior employ of
the Corporation (or any parent or subsidiary corporation) within the preceding
two-year period.
Except for option grants under the Automatic Option Grant
Program, non-employee members of the Board shall not be eligible to participate
in the Discretionary Option Grant or Stock Issuance Programs under the Plan or
in any other stock option, stock purchase, stock bonus or other stock plan of
the Corporation (or its parent or subsidiary corporations).
C. The Plan Administrator shall have full authority to
determine, (i) with respect to the option grants made under the Discretionary
Option Grant Program, which eligible individuals are to receive option grants,
the number of shares to be covered by each such grant, whether the granted
option is to be an incentive stock option ("Incentive Option") which satisfies
the requirements of Section 422 of the Internal Revenue Code or a non-statutory
option not intended to meet such requirements, the time or times at which and
the circumstances under 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 and conditions to
vesting (if any) to be applicable to the issued shares, and the consideration to
be paid by the individual for such shares. The Plan Administrator shall have no
discretion with regard to the Automatic Option Grant Program. The Plan
Administrator shall not have the discretion to affect in material fashion any
option grants or the terms of any option under the Automatic Option Grant
Program.
D. Notwithstanding any other provision of this Plan, no
individual shall be granted options to acquire more than one million (1,000,000)
shares of stock hereunder.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of the Corporation's Common Stock shall be available
for issuance under the Plan and shall be drawn from either the Corporation's
authorized but unissued shares of Common Stock or from reacquired shares of
Common Stock, including shares repurchased by the Corporation on the open
market. The maximum number of shares of Common Stock which may be issued over
the term of the Plan shall not exceed 2,800,000 shares, subject to adjustment
from time to time in accordance with the provisions of this Section VI. Such
authorized number of shares is comprised of (i) 327,153 shares issued under the
Predecessor Plans, (ii) 1,734,290 shares reserved for issuance under the options
granted under the Predecessor Plans (iii) 213,424 shares shares which would have
been available for future option grant or share issuance under the Predecessor
Plans as last approved by the shareholders, plus (iv) an additional increase of
525,025 shares. The number of shares of Common Stock available for issuance
under the Plan as of January 31, 1994 (before any adjustments required under
Paragraphs B or C of this Section VI and exclusive of shares reserved for
issuance under options outstanding as of such date), is 738,557 shares of Common
Stock.
B. Should one or more outstanding options under this Plan
(including outstanding options under the Predecessor Plans 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 III 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 grant or share issuance under this Plan. Shares subject to any option or
portion thereof surrendered or cancelled in accordance with Section I.D of
Article Five and all shares issuances under the Plan, whether or not such shares
are subsequently repurchased by the Corporation pursuant to its repurchase
rights under the Plan or otherwise surrendered for cancellation, shall reduce on
a share-for-share basis the number of shares of the same class of Common Stock
available for subsequent option grant or stock issuance under the Plan. In
addition, should the exercise price of an outstanding option under the Plan be
paid with shares of
<PAGE> 6
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, 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.
C. In the event any change is made to the Common Stock
issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, conversion or other
change affecting the outstanding Common Stock, or any class of Common Stock as a
class, without the Corporation's receipt of consideration, then appropriate
adjustments shall be made to (i) the number and/or class of shares issuable
under the Plan, (ii) the number and/or class of shares and price per share in
effect under each outstanding option under this Plan (including outstanding
options incorporated into this Plan from the Predecessor Plans). 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.
D. Common Stock issuable under the Discretionary Option Grant
Program or the Stock Issuance Program may be subject to such restrictions on
transfer, repurchase rights or such other restrictions as determined by the Plan
Administrator.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted to Employees of the Corporation or its parent
or subsidiary corporations pursuant to this Article Two 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.
(i) In General. The option price per share shall be
fixed by the Plan Administrator. In no event, however, shall the price for any
share be less than eighty-five percent (85%) of the fair market value of that
share on the date of the option grant.
(ii) 10% Shareholder. If any individual to whom an
option is granted is the owner of stock (as determined under Section 424(d) of
the Internal Revenue Code) possessing 10% or more of the total combined voting
power of all classes of stock of the Corporation or any one of its parent or
subsidiary corporations, then the option price per share shall not be less than
one hundred and ten percent (110%) of the fair market value per share of Common
Stock on the grant date.
(iii) How Payable. The option price shall become
immediately due upon exercise of the option and, subject to the provisions of
Article Five, Section III and the instrument evidencing the grant, shall be
payable in one of the following alternative forms specified below:
- full payment in cash or check drawn to the
Corporation's order;
<PAGE> 7
- full payment in shares of Common Stock held for at
least six (6) months and valued at fair market value on the Exercise Date (as
such term is defined below);
- full payment in a combination of shares of Common
Stock held for at least six (6) months and valued at fair market value on the
Exercise Date and cash or check; or
- full payment through a broker-dealer sale and
remittance procedure pursuant to which the Optionee (I) shall provide
irrevocable written instructions to a 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) shall provide written
directives to the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.
For purposes of this subparagraph (iii), the Exercise Date
shall be the date on which written notice of the option exercise is delivered to
the Corporation. Except to the extent the sale and remittance procedure is
utilized in connection with the exercise of the option, payment of the option
price for the purchased shares must accompany such notice.
B. Term and Exercise of Options. Each option granted under
this Article Two shall have such term as may be fixed by the Plan Administrator,
be exercisable at such time or times and during such period, and on such
conditions, as is determined by the Plan Administrator and set forth in the
stock option agreement evidencing the grant. No such option, however, shall have
a maximum term in excess of ten (10) years from the grant date and no option
granted to a 10% shareholder shall have a maximum term in excess of five (5)
years from the grant date. During the lifetime of the Optionee, the option
(together with any related stock appreciation right) shall be exercisable only
by the Optionee and shall not be assignable or transferable by the Optionee
otherwise than by will or by the laws of descent and distribution following the
Optionee's death.
C. Termination of Service.
(i) Except to the extent otherwise provided pursuant
to Section V of this Article Two, the following provisions shall govern the
exercise period applicable to any outstanding options under this Article Two
which are held by the Optionee at the time of his or her cessation of Service or
death.
- Should an Optionee's Service terminate for any reason
(including death or permanent disability as defined in Section 22(e)(3) of the
Internal Revenue Code) while the holder of one or more outstanding options under
the Plan, then none of those options shall (except to the extent otherwise
provided pursuant to Section V of this Article Two) remain exercisable beyond
the later of (i) the limited post-Service period designated by the Plan
Administrator at the time of the option grant and set forth in the option
agreement; or (ii) (A) ninety (90) days from the date of termination if
termination was caused by other than the death or disability (as defined in
Section 22(e)(3) of the Internal Revenue Code) of such Optionee or (B) twelve
(12) months from the date of termination if termination was caused by death or
disability of Optionee.
- Any option granted to an Optionee under this Article Two and
exercisable in whole or in part on the date of the Optionee's 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,
provided and only if such exercise occurs prior to the earlier
<PAGE> 8
of (i) the first anniversary of the date of the Optionee's death or (ii) the
specified expiration date of the option term. Upon the occurrence of the earlier
event, the option shall terminate and cease to be exercisable.
- Under no circumstances, however, shall any such option be
exercisable after the specified expiration date of the option term.
- During the limited post-Service period of exercisability,
the option may not be exercised for more than the number of shares for which the
option is exercisable on the date the Optionee's Service terminates. Upon the
expiration of such limited exercise period or (if earlier) upon the expiration
of the option term, the option shall terminate and cease to be exercisable.
(ii) 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 period of
exercisability provided under subparagraph (i) above, not only with respect to
the number of shares 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 purchasable shares for which the option would
otherwise have become exercisable had such cessation of Service not occurred.
(iii) For purposes of the foregoing provisions of this Section
I.C of Article Two (and for all other purposes under the Plan):
- The Optionee shall (except to the extent otherwise
specifically provided in the applicable option or issuance agreement) be deemed
to remain in the SERVICE of the Corporation for so long as such individual
renders services on a periodic basis to the Corporation (or any parent or
subsidiary corporation) in the capacity of an Employee, a non-employee member of
the Board or an independent consultant or advisor.
- The Optionee shall be considered to be an EMPLOYEE for so
long as he or she remains 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.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable
to all Incentive Options granted under this Article Two. Incentive Options may
only be granted to individuals who are Employees of the Corporation. Options
which are specifically designated as "non-statutory" options when issued under
the Plan shall not be subject to such terms and conditions.
A. Option Price. The option price per share of any 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 share of Common Stock on
the grant date.
B. 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
<PAGE> 9
during any one calendar year shall not exceed the sum of One Hundred Thousand
Dollars ($100,000). To the extent the Employee holds two 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 Options
under the Federal tax laws shall be applied on the basis of the order in which
such options are granted.
C. 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. 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 Plans incorporated into this Plan) and
to grant in substitution new options under this Article Two covering the same or
different numbers of shares of Common Stock but having an option price for each
share which is not less than (i) eighty-five percent (85%) of the fair market
value of such share on the new grant date or (ii) one hundred percent (100%) of
such fair market value in the case of an Incentive Option.
IV. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator determines in
its discretion to implement the stock appreciation right provisions of this
Section IV, one or more Optionees under the Discretionary Option Grant Program
may be granted the right, exercisable upon such terms and conditions as the Plan
Administrator may establish, to surrender all or part of an unexercised option
under this Article Two in exchange for a distribution from the Corporation in an
amount equal to the excess of (i) the fair market value (on the option surrender
date) of the number of shares in which the Optionee is at the time vested under
the surrendered option (or surrendered portion thereof) over (ii) the aggregate
option price payable for such vested shares.
B. No surrender of an option shall be effective hereunder
unless it is approved by the Plan Administrator. If the surrender is so
approved, then the distribution to which the Optionee shall accordingly become
entitled under this Section IV may be made in shares of any class of Common
Stock valued at fair market value on the option surrender date, in cash, or
partly in shares and partly in cash, as the Plan Administrator shall in its sole
discretion deem appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of
(i) five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised more than ten (10) years after the date of the option grant.
D. One or more officers of the Corporation subject to the
short-swing profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights in
tandem with their outstanding options under this Article Two. Upon the
occurrence of a Hostile Take-Over (as defined in Section II.B of Article Five)
effected at any time when the Corporation's outstanding Common Stock is
registered under Section 12(g) of the 1934 Act, each outstanding option with
such a limited stock appreciation right in effect for at least six (6) months
shall automatically be cancelled, to the extent such option is at the time
exercisable for fully-vested shares of Common Stock. The Optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the vested shares of Common
Stock at the time subject to the cancelled option (or cancelled portion of such
option) over (ii) the aggregate exercise price payable for such shares. The cash
distribution payable upon such cancellation shall be made within five (5) days
following the consummation of the Hostile Take-Over. Neither the approval of the
Plan Administrator nor the consent of the Board shall be required in
<PAGE> 10
connection with such option cancellation and cash distribution. The balance of
the option (if any) shall continue to remain outstanding and exercisable in
accordance with the terms of the instrument evidencing such grant.
E. The shares of Common Stock subject to any option
surrendered or cancelled for an appreciation distribution pursuant to this
Section IV shall NOT be available for subsequent option grant under the Plan.
V. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority to
extend the period of time for which any option granted under this Article Two is
to remain exercisable following the Optionee's cessation of Service or death
from the limited period in effect under Section I.C.(i) of this Article Two to
such greater period of time as the Plan Administrator shall deem appropriate;
provided, however, that in no event shall such option be exercisable after the
specified expiration date of the option term.
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant of Options. Option grants will be made automatically
to each non-employee Board member who has not otherwise been in the prior employ
of the Corporation during the preceding two years, on the Effective Date and
each time such person is elected, re-elected, appointed or reappointed to the
Board after the Effective Date. Each such person shall automatically be granted
a nonstatutory option to purchase (i) 7,500 on the Effective Date if such person
is a non-employee Board member on such Date ("Effective Date Grants"); (ii)
15,000 shares if such person is first elected or appointed as a non-employee
Board member after the Effective Date on the date of such first election or
appointment ("First Election Grants"); and (iii) 3,000 shares to each such
person each time he or she is reelected to the Board after the Effective Date on
the date of such reelection ("Reelection Grants"). The number of shares granted
pursuant to this Automatic Grant Program shall be subject to periodic adjustment
pursuant to the applicable provisions of Section VI.C of Article One.
B. Exercise Price. The exercise price per share of each
automatic option grant made under this Article Three shall be equal to one
hundred percent (100%) of the fair market value per share of Common Stock on the
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 at least six (6) months 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 at least six (6) months and valued at fair
market value on the Exercise Date and cash or check; or
<PAGE> 11
(iv) full payment through a broker-dealer sale and
remittance procedure pursuant to which the non-employee Board member (A) shall
provide irrevocable written instructions to a 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 taxes required to be withheld by the
Corporation in connection with such purchase and (B) shall provide written
directives to the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.
For purposes of this Section I.C. of Article Three, the
Exercise Date shall be the date on which written notice of the option exercise
is delivered to the Corporation, and the fair market value per share of Common
Stock on any relevant date shall be determined in accordance with the provisions
of Section II.A of Article Five. Except to the extent the sale and remittance
procedure is utilized in connection with the exercise of the option, payment of
the option price for the purchased shares must accompany such notice.
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 Effective Date Grant shall become
exercisable in a series of forty-eight (48) equal monthly installments during
the optionee's period of service on the Board, with the first such installment
to become exercisable one month after the automatic grant date. Each First
Election Grant shall become exercisable as to twenty-five percent of the shares
(25%) one year from the automatic grant date, and in a series of thirty-six (36)
equal monthly installments during the optionee's period of service on the Board,
with the first of such installment to become exercisable one year and one month
after the automatic grant date. Each Reelection Grant shall become exercisable
one year from the automatic grant date. No option shall become exercisable for
any additional option shares following the optionee's cessation of Board service
for any reason.
F. Non-Transferability. During the lifetime of the optionee,
each automatic option grant, together with the limited stock appreciation right
pertaining to such option, if any, shall be exercisable only by the optionee and
shall not be assignable or transferable by the optionee other than a transfer of
the option effected by will or by the laws of descent and distribution following
optionee's death.
G. Effect of Termination of Board Membership.
Should the optionee cease to serve as a Board member for
any reason (other than death) while holding one or more automatic option grants
under this Article Three, then such optionee shall have a six (6) month 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 the
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.
Should the optionee die while serving as a member of the
Board or within six (6) months after cessation of Board service, then each
outstanding 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 the option is exercisable at the time of the optionee's cessation of Board
service (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 distribution. Any such exercise must
occur within twelve (12) months after the date of the optionee's death. However,
each such automatic option grant shall immediately terminate and cease to be
outstanding, at the time of the optionee's cessation of Board service, with
respect to any option shares for which it is not otherwise at such time
exercisable.
<PAGE> 12
In no event shall any automatic grant under this Article
Three remain exercisable after the specified expiration date of the ten
(10) year option term. Upon the expiration of the applicable exercise period in
accordance with subparagraphs 1 and 2 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
exercisable at the time of the optionee's cessation of Board service.
II. LIMITED STOCK APPRECIATION RIGHT.
A. Upon the occurrence of a Hostile Take-Over (as defined in
Section II.B of Article Five), each non-employee Board member holding an
automatic option grant which has been outstanding under this Article Three for a
period of at least six (6) months shall have the unconditional right
(exercisable for a thirty (30)-day period following such Hostile Take-Over) to
surrender such option in return for a cash distribution from the Corporation in
an amount equal to the excess of (i) the Take-Over Price of the shares of Common
Stock at the time subject to the surrendered option (whether or not the option
is otherwise at the time exercisable for such shares) over (ii) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the option surrender date. Neither the approval
of the Plan Administrator nor the consent of the Board shall be required in
connection with such option surrender and cash distribution.
B. The shares of Common Stock subject to each option
surrendered in connection with the Hostile Take-Over shall NOT be available for
subsequent issuance under this Plan.
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock 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
Shares of Common Stock shall be issued under the Plan
for one or more of the following items of consideration, which the Plan
Administrator may deem appropriate in each individual instance:
(i) cash or cash equivalents (such as a personal check
or bank draft) paid the Corporation;
(ii) in common stock of the Corporation valued at fair
market value on the date of issuance;
(iii) 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;
(iv) past services rendered to the Corporation or any
parent or subsidiary corporation;
<PAGE> 13
(v) any combination of the above approved by the Plan
Administrator.
Shares 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, but in no event less
than eighty-five percent (85%) of such fair market value. Notwithstanding the
foregoing, in the case of 10% shareholders, Shares must be issued at one hundred
percent (100%) of fair market value of such shares.
B. VESTING PROVISIONS
1. Shares of Common Stock issued under this Article Four 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 (as such term is defined in Section I.C.(iii) of
Article Two); provided, that such vesting must be at a rate of at least 20% per
year over no more than five years from the date such shares are issued. The
elements of the vesting schedule applicable to any unvested shares of Common
Stock issued under the Plan, namely:
(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,
(iv) any conditions or contingencies to vesting, and
(v) the effect which death, 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 this Article
Four, 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 under Section I of
this Article Five 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 this Article Four,
then those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder rights with
respect to those shares. The Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel the principal
balance of any outstanding purchase-money note of the Participant to the extent
attributable to such surrendered shares. The surrendered shares may, at the Plan
Administrator's discretion, be retained by the Corporation as Treasury Shares or
may be retired to authorized but unissued share status.
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
<PAGE> 14
result in the immediate vesting of the Participant's interest in the shares of
Common Stock as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
II. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Unvested shares under this Article Four 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 TO (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 __________, 19__, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION."
B. The Participant shall have no right to transfer any
unvested shares of Common Stock issued to him or her under this Article Four.
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 Plan 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 Plan and the Issuance
Agreement applicable to the gifted shares.
ARTICLE FIVE
MISCELLANEOUS
I. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Each outstanding option which is assumed in connection with
a Corporate Transaction or is otherwise to continue in effect following a
Corporate Transaction (as defined below) shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply and pertain to the number
and class of securities which would be issuable, in consummation of such
Corporate Transaction, to an actual holder of the same number of shares of
Common Stock as are subject to such option immediately prior to such Corporate
Transaction, and 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. Appropriate adjustments shall also be made to
the class and number of securities available for issuance under the Plan
following the consummation of such Corporate Transaction.
<PAGE> 15
B. In the event of any Corporate Transaction (as defined
below) the exercisability of each option grant at the time outstanding under
this Plan which is not continued under paragraph A hereof 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. Upon the
consummation of the Corporate Transaction, all option grants under this Plan
shall terminate and cease to be outstanding. The Plan Administrator may, in its
discretion, extend the provisions of this Paragraph B to options outstanding
under the Predecessor Plans.
C. A Corporate Transaction means:
(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 of the Corporation's incorporation,
(ii) the sale, transfer or disposition of all or
substantially all of the assets of the Corporation in liquidation or dissolution
of the Corporation, or
(iii) any reverse merger in which the Corporation is
the surviving entity but in which the holders of securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities (as measured immediately prior to such merger) transfer
ownership of those securities to person or persons not otherwise part of the
transferor group.
D. Except as otherwise provided by the Plan Administrator in
agreements governing the grant of discretionary option grants or stock
issuances, in connection with any Change in Control of the Corporation, the
exercisability of each option grant at the time outstanding under this Plan
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. Similarly, all unvested shares issued under the Plan shall automatically
vest immediately prior to the effective date of the Change in Control. For
purposes of this Article Five, a Change in Control shall be deemed to occur in
the event:
(i) any person or related group of persons
(other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the
Corporation) directly or indirectly acquires beneficial ownership
(within the meaning of Rule 13d-3 of the Securities Exchange Act of
1934, as amended) 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) there is a change in the composition of the Board
over a period of twenty-four (24) consecutive months or less such that
a majority of the Board members (rounded up to the next whole number)
cease, by reason of one or more proxy contests for the election of
Board members, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (A) who were still in office at the time such election or
nomination was approved by the Board.
The provisions of this Paragraph D shall apply to option grants and/or stock
issuances under the Predecessor Plans only to the extent expressly extended
thereto by the Plan Administrator.
<PAGE> 16
II. CERTAIN DEFINITIONS
A. Fair Market Value. The fair market value of a share of
Common Stock shall be determined in accordance with the following provisions:
- If shares of the Class of Common Stock to be valued are not
at the time listed or admitted to trading on any national stock
exchange but is traded on the NASDAQ National Market System, the fair
market value shall be the closing selling price per share of a share of
that class on the date in question, as such price is reported by the
National Association of Securities Dealers through the NASDAQ National
Market System or any successor system. If there is no reported closing
selling price for the series 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 shares of the class of common stock to be valued are at
the time listed or admitted to trading on any national stock exchange,
then the fair market value of a share of that class shall be the
closing selling price per share on the date in question on the stock
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 a share of the class 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.
- If shares of the series of common stock to be valued at the
time are neither listed nor admitted to trading on any stock exchange
nor traded on the NASDAQ National Market System, then the fair market
value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate,
which may include independent professional appraisals, in a manner
consistent with the provisions of Section 260.140.50 of the Rules of
the California Corporations Commissioner.
B. Hostile Take-Over. A HOSTILE TAKE-OVER shall be deemed to
occur in the event (i) any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) 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.
C. Take-Over Price. The Take-Over Price per share shall be
deemed to be equal to the greater of (a) the fair market value per share on the
option surrender date, as determined pursuant to the valuation provisions of
Section II.A of this Article Five, or (b) the highest reported price per share
paid by the tender offeror in effecting such Hostile Take-Over.
III. LOANS OR GUARANTEE OF LOANS
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 Article Two Discretionary Option Grant Program or the
purchase of one or more shares issued to such Participant under the Article Four
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) will be upon such terms as the Plan Administrator specifies
in the applicable option or
<PAGE> 17
issuance agreement or otherwise deems appropriate under the circumstances. Loans
and installment payments may be granted with or without security or collateral
(other than to individuals who are consultants or independent contractors, in
which event the loan must be adequately secured by collateral other than the
purchased shares). However, the maximum credit available to the Optionee or
Participant may not exceed the option or purchase price of the acquired shares
(less the par value of such 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.
IV. TAX WITHHOLDING
A. The Company's obligation to deliver shares or cash upon the
exercise of stock options or stock appreciation rights granted under the
Discretionary Option Grant Program or the Automatic Option Grant Program or upon
direct issuance under the Stock Issuance Program shall be subject to the
satisfaction of all applicable Federal, State and local income and employment
tax withholding requirements.
B. The Plan Administrator may, in its discretion and upon such
terms and conditions as it may deem appropriate (including the applicable
safe-harbor provisions of SEC Rule 16b-3) provide any or all holders of
outstanding option grants under the Discretionary Option Grant Program with the
election to have the Company withhold, from the shares of Common Stock otherwise
issuable upon the exercise of such options, a portion of such shares with an
aggregate fair market value equal to the designated percentage (up to 100% as
specified by the optionee) of the Federal and State income taxes ("Taxes")
incurred in connection with the acquisition of such shares. In lieu of such
direct withholding, one or more option holders may also be granted the right to
deliver shares of Common Stock to the Company in satisfaction of such Taxes. The
withheld or delivered shares shall be valued at the Fair Market Value on the
applicable determination date for such Taxes or such other date required by the
applicable safe-harbor provisions of SEC Rule 16b-3.
V. AMENDMENT OF THE PLAN AND AWARDS
A. Except as herein provided, 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. No amendment or modification may
adversely affect the rights and obligations of an Optionee 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 Plan prior to
such action, unless the Optionee or Participant consents to such amendment. 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 issuable under the Plan (except for permissible adjustments under Article
One, Section VI) or (ii) materially modify the eligibility requirements for
participation in the Plan or materially increase the benefits accruing to
Optionees or Participants under the Plan.
B. Notwithstanding Article Five, Section V.A, neither the
provisions of the Automatic Option Grant Program nor the options outstanding
under Article Three may be amended at intervals more frequently than once every
six (6) months, other than to the extent necessary to comport with changes in
the Internal Revenue Code, the Employee Retirement Income Security Act or any
rules thereunder.
C. (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 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
<PAGE> 18
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.
VI. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan, as successor to the Company's Predecessor Plans,
shall become effective as of the Effective Date, and no further option grants
shall be made under the Option Plan nor shall any further shares be issued under
the Stock Plan from and after such Effective Date. If shareholder approval of
this Plan is not obtained within twelve months after the date this Plan is
adopted by the Board, then each option granted under this Plan from and after
the Effective Date shall terminate without ever becoming exercisable for the
option shares and all shares issued hereunder shall be repurchased by the
Corporation at the purchase price paid, together with interest (at the
applicable Short Term Federal Rate). However, in the event such shareholder
approval is not obtained, the Predecessor Plans shall continue in effect in
accordance with the terms and provisions last approved by the Corporation's
shareholders, and all outstanding options and unvested stock issuances under the
Predecessor Plans shall remain in full force and effect in accordance with the
instruments evidencing such options and issuances.
B. Each outstanding option and share issuance under the
Predecessor Plans immediately prior to the Effective Date of this Plan are
hereby incorporated into this Plan and shall accordingly be treated as an
outstanding option or share issuance under this Plan. However, each such option
or share issuance shall continue to be governed solely by the terms and
conditions of the instrument evidencing such grant or issuance, and except as
otherwise expressly provided in this Plan, no provision of this Plan shall
affect or otherwise modify the rights or obligations of the holders of such
options or shares with respect to their acquisition of shares of Common Stock,
or otherwise modify the rights or obligations of the holders of such options or
shares.
C. The sale and remittance procedure authorized for the
exercise of outstanding options under this Plan shall be available for all
options granted under this Plan on or after the Effective Date and for all
non-statutory options outstanding under the Option Plan and incorporated into
this Plan. The Plan Administrator may also allow such procedure to be utilized
in connection with one or more disqualifying dispositions of Incentive Option
shares effected after the Effective Date, whether such Incentive Options were
granted under this Plan or the Option Plan.
D. The Plan shall terminate upon the earlier of (i) the tenth
anniversary of the Effective Date or (ii) the date on which all shares available
for issuance under the Plan shall have been issued or cancelled pursuant to the
exercise, surrender or cash-out of the options granted under the Discretionary
Option Grant Program 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 stock 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.
VII. USE OF PROCEEDS
Cash proceeds received by the Company from the sale of shares
under the Plan shall be used for general corporate purposes.
<PAGE> 19
VIII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
under the Discretionary Option Grant Program, 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.
IX. 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.
X. 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 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.
<PAGE> 1
Exhibit 99.4
1994 Employee Stock Purchase Plan, as Amended
<PAGE> 2
FIRST AMENDMENT TO THE
APPLIED DIGITAL ACCESS, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of Applied Digital Access, Inc. ("Corporation")
make this Amendment to the Corporation's 1994 Employee Stock Purchase Plan (the
"Plan") pursuant to Article Five, Section V of the Plan, which Amendment has
been approved by the shareholders of the Corporation.
1. Section VI.A of the Plan is amended and restated in its entirety to
read as follows:
A. The maximum number of shares of Common Stock which may be
issued under the Plan shall be 300,000 shares of Common Stock (subject
to adjustment under Section VI.B below).
2. Except as specifically modified herein, the Plan as previously
adopted remains in full force and effect.
<PAGE> 3
APPLIED DIGITAL ACCESS, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE
This Applied Digital Access, Inc. 1994 Employee Stock Purchase
Plan (the "Plan") is intended to provide Qualifying Employees with the
opportunity to acquire a proprietary interest in the Company by accumulating
amounts for the Employee's Account through payroll deductions and the periodic
application of such amounts to the purchase of shares of the Company's Common
Stock.
II. DEFINITIONS
For purposes of plan administration, the following terms shall
have the meanings indicated:
Act shall mean the Securities Act of 1933 (as amended).
Account means the amount held for the benefit of a Participant
hereunder which Account will be increased by any payroll deductions from the
Participant and will be decreased by amounts applied to the purchase of shares
or refunded to or for the benefit of the Participant hereunder.
Board means the Company's Board of Directors.
Code means the Internal Revenue Code of 1986, as amended from
time to time.
Common Stock means shares of the Company's Common Stock.
Company means Applied Digital Access, Inc., a California
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Applied Digital Access, Inc. which adopts the Plan.
Corporate Affiliate means any company which is a parent or
subsidiary corporation of the Company (as determined in accordance with Code
Section 424), including any parent or subsidiary corporation which becomes such
after the Effective Date.
Effective Date means the first day of the term of this Plan as
set forth in Article XI.A, which term is scheduled to commence upon the
effective date of the S-8 Registration Statement covering the shares of Common
Stock issuable under the Plan. However, for any Corporate Affiliate which
becomes a Participating Company in the Plan after the first day of the initial
option period, a subsequent Effective Date shall be designated with respect to
participation by its Qualifying Employees.
Entry Date means the date on which a Participant first joins
the option period in effect under the Plan.
Participant means any Qualifying Employee of a Participating
Company who has enrolled and is actively participating in the Plan.
Participating Company means the Company and any Corporate
Affiliate designated from time to time by the Board.
Qualifying Employee means any person who is engaged, on a
regularly-scheduled basis of more than twenty (20) hours per week and more than
five (5) months per calendar year, in the rendition of personal services to the
Company, or any Participating Company in exchange for amounts which constitute
wages under Section 3121(a) of the Code, provided that no person who owns
(within the meaning of Code Section 424(d)) or holds outstanding options or
other rights to purchase stock possessing five percent (5%) or more of the total
<PAGE> 4
combined voting power or value of all classes of stock of the Company or any of
its Corporate Affiliates shall be a Qualifying Employees.
Quarter means a calendar quarter and (except for the first
Quarter of the initial option period or as otherwise designated by the Plan
Administrator), each Quarter shall begin on the first business day of the
Quarter and shall end on the last business day of such Quarter. The first
Quarter of the initial option period under this Plan shall commence on the
Effective Date and shall end on June 30, 1994.
Regular Compensation means the basic earnings paid to a
Participant by Participating Companies plus (i) any pre-tax contributions made
by the Participant to any Code Section 401(k) salary deferral plan or any Code
Section 125 cafeteria benefit program (now existing or hereafter established),
(ii) commissions, and (iii) bonuses payable pursuant to any formal bonus plan
which has been approved and adopted by the Board. Regular Compensation shall not
include (I) overtime payments, profit-sharing distributions and other
incentivetype payments or (II) contributions (other than Code Section 401(k) or
Code Section 125 contributions) made on the Participant's behalf under any
employee benefit or welfare plan (now existing or hereafter established).
Service means the period during which an individual remains a
Qualifying Employee and all periods of Service shall be measured from such
individual's most recent date of hire by the Company or such Corporate
Affiliate.
III. ADMINISTRATION
The Plan shall be administered by a committee comprised of two
(2) or more non-employee Board members appointed from time to time by the Board
(the "Plan Administrator"). The Plan Administrator shall have full authority to
administer the Plan, including authority to interpret and construe any provision
of the Plan. Decisions of the Plan Administrator shall be final and binding on
all parties who have an interest in the Plan.
IV. OPTION PERIODS
A. Shares of Common Stock shall be offered for purchase under
the Plan through a series of successive option periods during the term of the
Plan until the maximum number of shares of Common Stock available for issuance
under the Plan shall have been issued.
B. The initial option period will begin on the Effective Date
and will end on the last business day in December, 1995. Subsequent option
periods will coincide with calendar years.
C. Each Participant will have purchase rights as set forth in
Article VII for each option period, the purchase price for which shall be
collected through payroll deductions and which purchase rights shall be
exercised in successive installments each Quarter within the option period.
D. The acquisition of Common Stock through participation in
the Plan for any option period shall neither limit nor require the acquisition
of Common Stock by the Participant in any subsequent option period.
V. ELIGIBILITY AND PARTICIPATION
A. Each Qualifying Employee shall be eligible to participate
in an option period under the Plan in accordance with the following provisions:
- All Qualifying Employees on the Effective Date may enter the initial
option period on the Effective Date by enrolling in accordance with Section
V.C below.
<PAGE> 5
- A Qualifying Employee with at least three (3) months of Service on
the first day of any subsequent option period may enter that option period
on such first day by enrolling in accordance with Section V.C below.
- A Qualifying Employee who was not previously eligible to enter an
option period may enter that option period on the first day of the Quarter
next following the date such Qualifying Employee has at least three (3)
months of Service by enrolling in accordance with Section V.C below.
B. A Qualifying Employee who does not enroll for an option
period on the first date such Qualifying Employee is permitted to enroll
hereunder may not subsequently enroll in that option period.
C. To enroll in the Plan, a Qualifying Employee must complete
the enrollment forms prescribed by the Plan Administrator and file such forms
with the Plan Administrator (or its designate) on or before the date such
Qualifying Employee is first permitted to enter the Option Period.
D. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock under the Plan may be any multiple
of one percent (1%) of the Regular Compensation paid to the Participant during
each Quarter of the option period, up to a maximum of fifteen percent (15%) of
Regular Compensation. The deduction rate so authorized shall continue in effect
for the remainder of the option period, except to the extent such rate is
changed in accordance with the following guidelines:
- The Participant may, at any time during a Quarter, reduce
the rate of payroll deduction. Such reduction shall become effective as
soon as possible after filing of the requisite reduction form with the
Plan Administrator (or its designate), but the Participant may not
effect more than one such reduction during the same Quarter.
- The Participant may, prior to the commencement of any new
Quarter within the option period, increase or decrease the rate of
payroll deduction for the new Quarter by filing the appropriate form
with the Plan Administrator (or its designate). The new rate shall
become effective as of the first day of the next Quarter.
Payroll deductions will automatically cease upon the
termination of the Participant's purchase right in accordance with the
applicable provisions of Section VII below.
VI. STOCK SUBJECT TO PLAN
A. The maximum number of shares of Common Stock which may be
issued under the Plan shall be 200,000 shares of Common Stock (subject to
adjustment under Section VI.B below).
B. In the event any change is made to the Company's
outstanding Common Stock by reason of any stock dividend, stock split,
combination of shares or other change affecting such outstanding Common Stock as
a class without receipt of consideration, then appropriate adjustments shall be
made by the Plan Administrator to (i) the class and maximum number of shares
issuable over the term of the Plan, (ii) the class and maximum number of shares
purchasable per Participant during any one option period and (iii) the class and
number of shares and the price per share in effect under each purchase right at
the time outstanding under the Plan. Such adjustments shall be designed to
preclude the dilution or enlargement of rights and benefits under the Plan.
VII. PURCHASE RIGHTS
Each Participant in a particular option period shall have the
right to purchase shares of Common Stock in a series of successive quarterly
installments during such option period on the terms and conditions set forth
below (the "Purchase Rights"). Each Participant shall execute a purchase
agreement embodying such terms and conditions and such other provisions (not
inconsistent with the Plan) as the Plan
<PAGE> 6
Administrator may require.
Purchase Price. The Purchase Rights shall be exercised at the
end of each Quarter at a purchase price equal to eighty-five percent (85%) of
the lower of (i) the fair market value per share of the Common Stock on the
Participant's Entry Date or (ii) the fair market value per share of the Common
Stock on the last business day of the Quarter. However, for each Participant
whose Entry Date is other than the first day of the option period, the amount
determined under clause (i) shall not be less than the fair market value of the
Common Stock on the first day of such option period.
Valuation. For purposes of determining the fair market value
per share of Common Stock on any relevant date, the following procedures shall
be in effect:
- If fair market value is to be determined on or after the date the
Common Stock is first registered under Section 12(g) of the Securities
Exchange Act of 1934, then the fair market value shall be the closing
selling price on that date, as officially quoted on the NASDAQ National
Market System, or if there is no quoted selling price for such date,
then the closing selling price on the next preceding day for which
there does exist such a quotation.
- If fair market value is to be determined prior to such Section 12(g)
registration of the Common Stock, then the fair market value of the
Common Stock on such date shall be determined by the Plan Administrator
after taking into account such factors as the Plan Administrator deems
appropriate.
Number of Purchasable Shares. The number of shares purchasable
by a Participant each Quarter shall be the number of whole shares obtained by
dividing the amount in Participant's Account at the end of such Quarter by the
purchase price in effect for the Quarter.
Notwithstanding the above, no Participant shall have the right
to purchase shares of Common Stock to the extent that, immediately after the
grant, such Participant would own (within the meaning of Code Section 424(d)) or
hold outstanding options or other rights to purchase, stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or any of its Corporate Affiliates.
Payment. Payment for the Common Stock purchased under the Plan
shall be effected by means of the Participant's authorized payroll deductions.
Such deductions shall begin on the first pay day coincident with or immediately
following the Participant's Entry Date into the option period and shall (unless
sooner terminated by the Participant) continue through the pay day ending with
or immediately prior to the last day of the option period. The amounts so
collected shall be credited to the Participant's Account under the Plan, but no
interest shall be paid on the balance from time to time outstanding in such
Account. The amounts collected from a Participant may be commingled with the
general assets of the Company and may be used for general corporate purposes.
Termination of Purchase Right. The following provisions shall
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the last
five (5) business days of the Quarter, terminate his/her outstanding
purchase right under the Plan by filing the prescribed notification
form with the Plan Administrator (or its designate). No further payroll
deductions shall be collected from the Participant with respect to the
terminated purchase right, and any payroll deductions collected for the
current Quarter shall, at the Participant's election, be immediately
refunded or held for the purchase of shares on the end of the Quarter.
If no such election is made, then such funds shall be refunded as soon
as possible after the close of such Quarter.
<PAGE> 7
(ii) After the termination of purchase rights for an
option period, the Participant may not subsequently rejoin that option
period. In order to resume participation in any subsequent option
period, such individual must re-enroll in the Plan for that option
period.
(iii) If a Participant ceases to be a Qualifying
Employee for any reason whatsoever during an option period then all
payroll deductions shall terminate and all funds held in the
Participant's Account will be promptly paid to the Participant or the
Participant's legal representative. No further purchases of shares
hereunder shall occur after the Participant has ceased to be a
Qualifying Employee.
Stock Purchase. Subject to the limitations set forth herein,
funds held in a Participant's Account at the end of a Quarter (and which are not
required to be refunded hereunder) shall be applied to the purchase of whole
shares of Common Stock for the Participant on the last business day of the
Quarter at the purchase price in effect for such Quarter. Any payroll deductions
not applied to such purchase because they are not sufficient to purchase a whole
share shall be held for the purchase of Common Stock in the next Quarter. Any
payroll deductions not applied to the purchase of Common Stock for any other
reason shall be promptly refunded to the Participant.
Proration of Purchase Rights. If the total number of shares of
Common Stock which would otherwise be purchased hereunder on any date exceed the
number of shares then available for issuance under the Plan, the Plan
Administrator shall make a pro-rata allocation of the available shares to
Participants on a uniform and nondiscriminatory basis.
Rights as Shareholder. A Participant shall have no shareholder
rights with respect to the shares subject to his/her outstanding purchase right
until the shares are actually purchased on the Participant's behalf in
accordance with the applicable provisions of the Plan. No adjustments shall be
made for dividends, distributions or other rights for which the record date is
prior to the date of such purchase.
A Participant shall be entitled to receive, as soon as
practicable after purchase hereunder, a stock certificate for the number of
shares purchased for the Participant. Such certificate may, upon the
Participant's request, be issued in the names of the Participant and his/her
spouse as community property or as joint tenants with right of survivorship.
Assignability. No purchase right granted under the Plan shall
be assignable or transferable by the Participant other than by will or by the
laws of descent and distribution following the Participant's death, and during
the Participant's lifetime the purchase right shall be exercisable only by the
Participant.
Change in Ownership. Should the Company or its shareholders
enter into an agreement to dispose of all or substantially all of the assets or
outstanding capital stock of the Company by means of:
(i) a sale, merger or other reorganization in which the
Company will not be the surviving corporation (other than a
reorganization effected primarily to change the State in which the
Company is incorporated), or
(ii) a reverse merger in which the Company is the
surviving corporation but in which more than 50% of the Company's
outstanding voting stock is transferred to holders different from those
who held the stock immediately prior to the reverse merger,
then all outstanding purchase rights under the Plan shall
automatically be exercised immediately prior to the consummation of such sale,
merger, reorganization or reverse merger by applying the amounts in each
Participant's Account to the purchase of whole shares of Common Stock at
eighty-five percent (85%) of the lower of (i) the fair market value of the
Common Stock on the Participant's Entry Date into the option period in which
such transaction occurs or (ii) the fair market value of the Common Stock
immediately prior to the consummation of such transaction. However, the
applicable share limitations of Articles VII and VIII shall continue to apply to
any such purchase, and the clause (i) amount above shall not, for any
Participant whose
<PAGE> 8
Entry Date for the option period is other than the start date of such option
period, be less than the fair market value of the Common Stock on such start
date.
The Company shall use its best efforts to provide at least ten
(10)-days advance written notice of the occurrence of any such sale, merger,
reorganization or reverse merger, and Participants shall, following the receipt
of such notice, have the right to terminate their outstanding purchase rights in
accordance with the applicable provisions of this Article VII.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to
acquire Common Stock pursuant to any purchase right outstanding under this Plan
if and to the extent such accrual, when aggregated with (I) rights to purchase
Common Stock accrued under any other purchase right outstanding under this Plan
and (II) similar rights accrued under other employee stock purchase plans
(within the meaning of Section 423 of the Code) of the Company or its Corporate
Affiliates, would otherwise permit such Participant to purchase more than
$25,000 worth of stock of the Company or any Corporate Affiliate (determined on
the basis of the fair market value of such stock on the date or dates such
rights are granted to the Participant) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations, the
right to acquire Common Stock pursuant to each purchase right outstanding under
the Plan shall accrue as follows:
(i) The right to acquire Common Stock under each such
purchase right shall accrue in a series of successive quarterly
installments as and when the purchase right first becomes exercisable
for each quarterly installment on the last business day of each Quarter
for which the right remains outstanding.
(ii) No right to acquire Common Stock under any
outstanding purchase right shall accrue to the extent the Participant
has already accrued in the same calendar year the right to acquire
$25,000 worth of Common Stock (determined on the basis of the fair
market value on the date or dates of grant) pursuant to one or more
purchase rights held by the Participant during such calendar year.
(iii) If by reason of such accrual limitations, any
purchase right of a Participant does not accrue for a particular
Quarter, then the payroll deductions which the Participant made during
that Quarter with respect to such purchase right shall be promptly
refunded.
C. In the event there is any conflict between the provisions
of this Article VIII and one or more provisions of the Plan or any instrument
issued thereunder, the provisions of this Article VIII shall be controlling.
IX. STATUS OF PLAN UNDER FEDERAL TAX LAWS
The Plan is designed to qualify as an employee stock purchase
plan under Code Section 423.
X. AMENDMENT AND TERMINATION
A. The Board may alter, amend, suspend or discontinue the Plan
following the close of any Quarter. However, the Board may not, without the
approval of the Company's shareholders:
(i) materially increase the number of shares issuable
under the Plan or the maximum number of shares which may be purchased
per Participant during any one option period under the Plan, except
that the Plan Administrator shall have the authority, exercisable
<PAGE> 9
without such stockholder approval, to effect adjustments to the extent
necessary to reflect changes in the Company's capital structure
pursuant to Section VI.B;
(ii) alter the purchase price formula so as to reduce
the purchase price payable for the shares issuable under the Plan; or
(iii) materially increase the benefits accruing to
Participants under the Plan or materially modify the requirements for
eligibility to participate in the Plan.
B. The Company shall have the right, exercisable in the sole
discretion of the Plan Administrator, to terminate all outstanding purchase
rights under the Plan immediately following the close of any Quarter. Should the
Company elect to exercise such right, then the Plan shall terminate in its
entirety. No further purchase rights shall thereafter be granted or exercised,
and no further payroll deductions shall thereafter be collected, under the Plan.
XI. GENERAL PROVISIONS
A. The term of this Plan shall commence on the effective date
of the S-8 Registration Statement covering the common stock issuable under the
Plan, provided that the term shall not commence, and no shares of Common Stock
shall be issued hereunder, until (i) the Plan shall have been approved by the
shareholders; (ii) the Company shall have complied with all applicable
requirements, all applicable listing requirements of any securities exchange on
which shares of the Common Stock are listed and all other applicable
requirements established by law or regulation and the Plan Administrator shall
have determined to commence granting Purchase Rights hereunder. In the event
shareholder approval is not obtained, or Company compliance with the Act is not
effected, within twelve (12) months after the date on which the Plan is adopted
by the Board, the Plan shall terminate and have no further force or effect.
B. The Plan shall terminate on December 31, 2003.
C. All costs and expenses incurred in the administration of
the Plan shall be paid by the Company.
D. Neither the action of the Company in establishing the Plan,
nor any action taken under the Plan by the Board or the Plan Administrator, nor
any provision of the Plan itself shall be construed so as to grant any person
the right to remain in the employ of the Company or any Corporate Affiliate for
any period, and such person's employment may be terminated at any time, with or
without cause.
<PAGE> 1
Exhibit 99.6
1996 Non-qualified Stock Option Plan
<PAGE> 2
APPLIED DIGITAL ACCESS, INC.
1996 NON-QUALIFIED STOCK OPTION PLAN
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
This 1996 Non-qualified Stock Option Plan ("Plan") is intended
to promote the interests of Applied Digital Access, Inc., a California
corporation (the "Corporation"), by providing (i) key employees of the
Corporation (or its parent or subsidiary corporations) other than officers who
are responsible for the growth and financial success of the Corporation (or its
parent or subsidiary corporations), and (ii) consultants and other independent
contractors who provide valuable services to the Corporation (or its parent or
subsidiary corporations) with the opportunity to acquire or 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).
II. GENERAL
A. The Plan shall become effective on May 23, 1996, the date
on which this Plan was approved by the Board of Directors of the Corporation.
Such date is hereby designated as the "Effective Date" of this Plan.
B. This Plan shall not supersede or replace any prior plan of
the Corporation.
C. For purposes of this Plan, 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.
D. Neither the grant of options nor the issuance of any shares
pursuant to this Plan shall in any 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.
E. The holder of an option grant under this Plan 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, paid the exercise
price for the purchased shares and been issued a stock certificate for such
shares.
<PAGE> 3
III. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered by a committee
("Committee") of two (2) or more non-employee Board members who assume full
responsibility for the administration of the Plan (the "Plan Administrator").
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 Plan Administrator shall have full power and authority
(subject to the express provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper administration of the Plan
and to make such determinations under, and issue such interpretations of, the
Plan and any outstanding option grants or stock issuances as it may deem
necessary or advisable. Decisions of the Plan Administrator shall be final and
binding on all parties who have an interest in the Plan or any outstanding
option or stock issuance.
IV. OPTION GRANTS AND STOCK ISSUANCES
A. The persons eligible to receive option grants pursuant to
the Plan ("Optionee") are as follows:
(i) key employees of the Corporation (or its parent or
subsidiary corporations) who render services which contribute to the
growth and financial success of the Corporation (or its parent or
subsidiary corporations) other than officers of the corporation;
(ii) those consultants (other than Board members) or
other independent contractors who provide valuable services to the
Corporation (or its parent or subsidiary corporations).
B. The Plan Administrator shall have full authority to
determine which eligible individuals are to receive option grants, the number of
shares to be covered by each such grant, the time or times at which and the
circumstances under which each granted option is to become exercisable and the
maximum term for which the option may remain outstanding.
V. STOCK SUBJECT TO THE PLAN
A. Shares of the Corporation's Common Stock shall be available
for issuance under the Plan and shall be drawn from either the Corporation's
authorized but unissued shares of Common Stock or from reacquired shares of
Common Stock, including shares repurchased by the Corporation on the open
market. The maximum number of shares of Common Stock which may be issued over
the term of the Plan shall not exceed 400,000 shares, subject to adjustment from
time to time in accordance with the provisions of this Section V.
B. Should one or more outstanding options under 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 III 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 grant
or share issuance under this Plan. Shares subject to any option or portion
thereof surrendered or cancelled in accordance with Section I.D of Article
Three, and all shares issued under the Plan, whether or not such shares are
subsequently repurchased by the Corporation, shall reduce on a share-for-share
basis the number of shares of Common Stock available for subsequent option grant
under the Plan. In addition, should the exercise price of an outstanding option
under the 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, 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.
C. In the event any change is made to the Common Stock
issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, conversion
<PAGE> 4
or other change affecting the outstanding Common Stock, or any class of Common
Stock as a class, without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the number and/or class of shares
issuable under the Plan, (ii) the number and/or class of shares and price per
share in effect under each outstanding option under this 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.
D. Common Stock issuable under the Plan may be subject to such
restrictions on transfer, repurchase rights or such other restrictions as
determined by the Plan Administrator.
ARTICLE TWO
OPTION GRANTS
I. TERMS AND CONDITIONS OF OPTIONS
Options granted to Employees of the Corporation or its parent
or subsidiary corporations pursuant to this Plan shall be authorized by action
of the Plan Administrator and may, at the Plan Administrator's discretion. 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.
A. Option Price.
(i) In General. The option price per share shall be
fixed by the Plan Administrator. In no event, however, shall the price for any
share be less than eighty-five percent (85%) of the fair market value of that
share on the date of the option grant.
(ii) How Payable. The option price shall become
immediately due upon exercise of the option and, subject to the provisions of
Article Three, Section III and the instrument evidencing the grant, shall be
payable in one of the following alternative forms specified below:
- full payment in cash or check drawn to the
Corporation's order;
- full payment in shares of Common Stock held for
at least six (6) months and valued at fair market value on the Exercise
Date (as such term is defined below);
- full payment in a combination of shares of
Common Stock held for at least six (6) months and valued at fair market
value on the Exercise Date and cash or check; or
- full payment through a broker-dealer sale and
remittance procedure pursuant to which the Optionee (I) shall provide
irrevocable written instructions to a 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) shall provide written directives
to the Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale
transaction.
<PAGE> 5
For purposes of this subparagraph (ii), the Exercise Date
shall be the date on which written notice of the option exercise is delivered to
the Corporation. Except to the extent the sale and remittance procedure is
utilized in connection with the exercise of the option, payment of the option
price for the purchased shares must accompany such notice.
B. Term and Exercise of Options. Each option granted under
this Article Two shall have such term as may be fixed by the Plan Administrator,
be exercisable at such time or times and during such period, and on such
conditions, as is determined by the Plan Administrator and set forth in the
stock option agreement evidencing the grant. No such option, however, shall have
a maximum term in excess of ten (10) years from the grant date. Unless otherwise
permitted by the Plan Administrator, 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 otherwise than by will or by the laws of descent
and distribution following the Optionee's death.
C. Termination of Service.
(i) Except to the extent otherwise provided pursuant
to Section III of this Article Two, the following provisions shall govern the
exercise period applicable to any outstanding options under this Article Two
which are held by the Optionee at the time of his or her cessation of Service or
death.
- Should an Optionee's Service terminate for any
reason (including death or permanent disability as defined in Section
22(e)(3) of the Internal Revenue Code) while the holder of one or more
outstanding options under the Plan, then none of those options shall
(except to the extent otherwise provided pursuant to Section V of this
Article Two) remain exercisable beyond the later of (i) the limited
post-Service period designated by the Plan Administrator at the time of
the option grant and set forth in the option agreement; or (ii) (A)
ninety (90) days from the date of termination if termination was caused
by other than the death or disability (as defined in Section 22(e)(3)
of the Internal Revenue Code) of such Optionee or (B) twelve (12)
months from the date of termination if termination was caused by death
or disability of Optionee.
- Any option granted to an Optionee under this
Article Two and exercisable in whole or in part on the date of the
Optionee's 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, provided and only
if such exercise occurs prior to the earlier of (i) the first
anniversary of the date of the Optionee's death or (ii) the specified
expiration date of the option term. Upon the occurrence of the earlier
event, the option shall terminate and cease to be exercisable.
- Under no circumstances, however, shall any such
option be exercisable after the specified expiration date of the option
term.
- During the limited post-Service period of
exercisability, the option may not be exercised for more than the
number of shares for which the option is exercisable on the date the
Optionee's Service terminates. Upon the expiration of such limited
exercise period or (if earlier) upon the expiration of the option term,
the option shall terminate and cease to be exercisable.
(ii) 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 period of
exercisability provided under subparagraph (i) above, not only with respect to
the number of shares for which each such option is exercisable at the time of
the
<PAGE> 6
Optionee's cessation of Service but also with respect to one or more subsequent
installments of purchasable shares for which the option would otherwise have
become exercisable had such cessation of Service not occurred.
(iii) For purposes of the foregoing provisions of
this Section I.C of Article Two (and for all other purposes under the
Plan):
- The Optionee shall (except to the extent otherwise
specifically provided in the applicable option or issuance agreement)
be deemed to remain in the SERVICE of the Corporation for so long as
such individual renders services on a periodic basis to the Corporation
(or any parent or subsidiary corporation) in the capacity of an
Employee, a non-employee member of the Board or an independent
consultant or advisor.
- The Optionee shall be considered to be an EMPLOYEE
for so long as he or she remains 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.
II. 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 and to
grant in substitution new options under this Article Two covering the same or
different numbers of shares of Common Stock but having an option price for each
share which is not less than eighty-five percent (85%) of the fair market value
of such share on the new grant date.
III. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority to
extend the period of time for which any option granted under this Article Two is
to remain exercisable following the Optionee's cessation of Service or death
from the limited period in effect under Section I.C.(i) of this Article Two to
such greater period of time as the Plan Administrator shall deem appropriate;
provided, however, that in no event shall such option be exercisable after the
specified expiration date of the option term.
ARTICLE THREE
MISCELLANEOUS
I. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Each outstanding option which is assumed in connection with
a Corporate Transaction or is otherwise to continue in effect following a
Corporate Transaction (as defined below) shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply and pertain to the number
and class of securities which would be issuable, in consummation of such
Corporate Transaction, to an actual holder of the same number of shares of
Common Stock as are subject to such option immediately prior to such Corporate
Transaction, and 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. Appropriate adjustments shall also be made to
the class and number of securities available for issuance under the Plan
following the consummation of such Corporate Transaction.
B. The Plan Administrator may, in its discretion, provide
that, in the event of any Corporate Transaction (as defined below), the
exercisability of each option grant at the time outstanding under this Plan
which is not continued under paragraph A hereof will automatically accelerate so
that each such option shall, immediately prior to the specified effective date
for the Corporate Transaction, become fully exercisable
<PAGE> 7
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. Upon
the consummation of the Corporate Transaction, all option grants under this Plan
shall terminate and cease to be outstanding.
C. A Corporate Transaction means:
(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 of the Corporation's
incorporation,
(ii) the sale, transfer or disposition of all or
substantially all of the assets of the Corporation in liquidation or
dissolution of the Corporation, or
(iii) any reverse merger in which the Corporation is
the surviving entity but in which the holders of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities (as measured immediately prior to
such merger) transfer ownership of those securities to person or
persons not otherwise part of the transferor group.
D. Except as otherwise provided by the Plan Administrator in
agreements governing the grant of discretionary option grants or stock
issuances, in connection with any Change in Control of the Corporation, the
exercisability of each option grant at the time outstanding under this Plan
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. Similarly, all unvested shares issued under the Plan shall automatically
vest immediately prior to the effective date of the Change in Control. For
purposes of this Article Five, a Change in Control shall be deemed to occur in
the event:
(i) any person or related group of persons
(other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the
Corporation) directly or indirectly acquires beneficial ownership
(within the meaning of Rule 13d-3 of the Securities Exchange Act of
1934, as amended) 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) there is a change in the composition of the Board
over a period of twenty-four (24) consecutive months or less such that
a majority of the Board members (rounded up to the next whole number)
cease, by reason of one or more proxy contests for the election of
Board members, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (A) who were still in office at the time such election or
nomination was approved by the Board.
II. CERTAIN DEFINITIONS
A. Fair Market Value. The fair market value of a share of
Common Stock shall be determined in accordance with the following provisions:
- If shares of the Class of Common Stock to be valued are
not at the time listed or admitted to trading on any national stock
exchange but is traded on the NASDAQ National Market System, the fair
market value shall be the closing selling price per share of a share of
that class on the date in question, as such price is reported by the
National
<PAGE> 8
Association of Securities Dealers through the NASDAQ National Market
System or any successor system. If there is no reported closing selling
price for the series 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 shares of the class of common stock to be valued are
at the time listed or admitted to trading on any national stock
exchange, then the fair market value of a share of that class shall be
the closing selling price per share on the date in question on the
stock 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 a share of the class 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.
- If shares of the series of common stock to be valued at
the time are neither listed nor admitted to trading on any stock
exchange nor traded on the NASDAQ National Market System, then the fair
market value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem
appropriate, which may include independent professional appraisals, in
a manner consistent with the provisions of Section 260.140.50 of the
Rules of the California Corporations Commissioner.
B. Hostile Take-Over. A HOSTILE TAKE-OVER shall be deemed to
occur in the event (i) any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) 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.
C. Take-Over Price. The Take-Over Price per share shall be
deemed to be equal to the greater of (a) the fair market value per share on the
option surrender date, as determined pursuant to the valuation provisions of
Section II.A of this Article Five, or (b) the highest reported price per share
paid by the tender offeror in effecting such Hostile Take-Over.
III. LOANS OR GUARANTEE OF LOANS
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 Plan, 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) will be upon such terms as the Plan Administrator specifies
in the applicable option or issuance agreement or otherwise deems appropriate
under the circumstances. Loans and installment payments may be granted with or
without security or collateral (other than to individuals who are consultants or
independent contractors, in which event the loan must be adequately secured by
collateral other than the purchased shares). However, the maximum credit
available to the Optionee or Participant may not exceed the option or purchase
price of the acquired shares (less the par value of such 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.
<PAGE> 9
IV. TAX WITHHOLDING
A. The Company's obligation to deliver shares upon the
exercise of stock options shall be subject to the satisfaction of all applicable
Federal, State and local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion and upon such
terms and conditions as it may deem appropriate, provide any or all holders of
outstanding option grants under the Plan with the election to have the Company
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such options, a portion of such shares with an aggregate fair market value
equal to the designated percentage (up to 100% as specified by the optionee) of
the Federal and State income taxes ("Taxes") incurred in connection with the
acquisition of such shares. In lieu of such direct withholding, one or more
option holders may also be granted the right to deliver shares of Common Stock
to the Company in satisfaction of such Taxes. The withheld or delivered shares
shall be valued at the Fair Market Value on the applicable determination date
for such Taxes.
V. AMENDMENT OF THE PLAN AND AWARDS
Except as herein provided, 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. No amendment or modification may
adversely affect the rights and obligations of an Optionee 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 Plan prior to
such action, unless the Optionee or Participant consents to such amendment. 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 issuable under the Plan (except for permissible adjustments under Article
One, Section VI) or (ii) materially modify the eligibility requirements for
participation in the Plan or materially increase the benefits accruing to
Optionees or Participants under the Plan.
VI. EFFECTIVE DATE AND TERM OF PLAN
This Plan shall become effective as of the Effective Date. The
Plan shall terminate upon the earlier of (i) the tenth anniversary of the
Effective Date or (ii) the date on which all shares available for issuance under
the Plan shall have been issued or cancelled pursuant to the exercise, surrender
or cash-out of the options granted under the Plan. If the date of termination is
determined under clause (i) above, then all option grants and unvested stock
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.
VII. USE OF PROCEEDS
Cash proceeds received by the Company from the sale of shares
under the Plan shall be used for general corporate purposes.
VIII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
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.
<PAGE> 10
IX. 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.
X. 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 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.
<PAGE> 1
Exhibit 99.7
Form of Stock Option Agreement
<PAGE> 2
APPLIED DIGITAL ACCESS, INC.
NOTICE OF GRANT OF NON-QUALIFIED STOCK OPTION
(1996 NON-QUALIFIED STOCK OPTION PLAN)
Notice is hereby given of the following stock option grant (the
"Option") to purchase shares of the Common Stock of Applied Digital Access, Inc.
(the "Company"):
Optionee:
---------------------------------------------------
Grant Date:
-------------------------------------------------
Option Price: $ per share
-----------------------
Number of Option Shares: shares
------------------------------
Expiration Date:
--------------------------------------------
Type of Option: Non-Statutory Stock Option
Exercise Schedule:
Other Special Provisions:
Optionee agrees to be bound by the terms and conditions of the Option
as set forth in the Stock Option Agreement attached hereto as Exhibit "A."
Optionee also understands that the Option is granted subject to and in
accordance with the express terms and conditions of the Applied Digital Access,
Inc. 1996 Non-qualified Stock Option Plan (the "Plan"), a copy of which is
attached hereto as Exhibit "B," and agrees to be bound by the terms and
conditions of the Plan.
Optionee hereby acknowledges receipt of the official plan prospectus
attached hereto as Exhibit "C."
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in the Stock Option
Agreement or the Plan shall confer upon the Optionee the right to continue in
the Service of the Company for any period of specific duration or interfere with
or otherwise restrict in any way the rights of the Company or the Optionee,
which rights are
<PAGE> 3
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason whatsoever, with or without cause.
APPLIED DIGITAL ACCESS, INC.
By:
---------------------------
Title:
------------------------
------------------------------
OPTIONEE
Address:
------------------------------
------------------------------
Dated: , 199
--------------------- --
<PAGE> 4
APPLIED DIGITAL ACCESS, INC.
STOCK OPTION AGREEMENT
(1996 Non-qualified Stock Option Plan)
WITNESSETH:
RECITALS
A. Applied Digital Access, Inc. (the "Company") has adopted the 1996
Non-qualified Stock Option Plan (the "Plan") for the purpose of attracting and
retaining the services of selected key employees and consultants and other
independent contractors (not including officers and directors) who contribute to
the financial success of the Company or its parent or subsidiary corporations.
B. Optionee is an individual who is to render valuable services to the
Company or its parent or subsidiary corporations.
C. This Agreement is executed pursuant to, and is intended to carry out
the purposes of, the Plan in connection with the Company's grant of a stock
option to Optionee.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions set
forth in this Agreement, the Company hereby grants to Optionee, as of the grant
date (the "Grant Date") specified in the accompanying Notice of Grant of Stock
Option (the "Notice of Grant"), a stock option to purchase up to that number of
shares of the Company's Common Stock (the "Option Shares") as is specified in
the Notice of Grant. The Option Shares shall be purchasable from time to time
during the option term at the option price per share (the "Option Price")
specified in the Notice of Grant.
2. OPTION TERM. This option shall have a maximum term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the expiration date (the "Expiration Date") specified in the Notice
of Grant, unless sooner terminated in accordance with Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. This option shall be neither transferable
nor assignable by Optionee other than by will or by the laws of descent and
distribution following the Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. EXERCISABILITY. This option shall become exercisable for the Option
Shares in one or more installments as specified in the Notice of Grant. As the
option becomes exercisable for the Option Shares in one or more such
installments, those installments shall accumulate and the option shall remain
exercisable for the accumulated installments until the Expiration Date or the
sooner termination of the option term under Paragraph 5 or 6 of this Agreement.
5. TERMINATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be exercisable) prior to the
Expiration Date should one of the following provisions become applicable:
(i) Except to the extent otherwise provided in subparagraphs
(ii) through (iii) below, should Optionee cease to remain in the
Service of the Company at any time during the option term, then this
option shall not remain exercisable for more than a ninety (90)-day
period commencing with the date of such cessation of Service. Upon the
expiration of such ninety (90)-day period or (if earlier) upon the
specified Expiration Date of the option term, this option shall
terminate and cease to be outstanding.
(ii) Should Optionee die while in Service or within the
ninety (90)-day period following his or her cessation of Service, then
the personal representative of the Optionee's estate or the person or
persons to whom this option is transferred pursuant to the Optionee's
<PAGE> 5
will or in accordance with the law of descent and distribution shall
have the right to exercise this option. Such right shall lapse, and
this option shall terminate and cease to remain exercisable, upon the
earlier of (A) the expiration of the twelve (12)-month period measured
from the date of Optionee's death or (B) the Expiration Date.
(iii) Should Optionee become permanently disabled and cease by
reason thereof to remain in Service at any time during the option term,
then this option shall not remain exercisable for more than a twelve
(12) month period commencing with the date of such cessation of
Service. Upon the expiration of such limited period of exercisability
or (if earlier) upon the Expiration Date, this option shall terminate
and cease to be outstanding.
(iv) In no event shall this option be exercisable at any time
after the specified Expiration Date of the option term.
(v) During the limited post-Service period of exercisability
determined in accordance with subparagraphs (i) through (iii) above,
this option may not be exercised for more than the number of Option
Shares (if any) for which this option is, at the time of the Optionee's
cessation of Service, exercisable in accordance with either the normal
exercise provisions specified in the Notice of Grant or the special
acceleration provisions of Paragraph 6 of this Agreement. However, the
number of Option Shares purchasable after the Optionee's death shall be
reduced for any Option Shares purchased by the Optionee after his or
her cessation of Service but prior to death.
(vi) For purposes of this Paragraph 5 and for all other
purposes under this Agreement, the following definitional provisions
shall be in effect:
A. The Optionee shall be deemed to remain in
SERVICE for so long as the Optionee continues to render periodic
services to the Company or any parent or subsidiary corporation,
whether as an Employee, a non-employee member of the Company's Board of
Directors or an independent consultant or advisor.
B. The Optionee shall be deemed to be an EMPLOYEE
and to continue in the Company's employ for so long as the Optionee
remains in the employ of the Company or one or more of its parent or
subsidiary corporations, subject to the control and direction of the
employer entity as to both the work to be performed and the manner and
method of performance.
C. The Optionee shall be deemed to be PERMANENTLY
DISABLED if the Optionee is, by reason of any medically determinable
physical or mental impairment expected to result in death or to be of
continuous duration of not less than twelve (12) consecutive months or
more, unable to perform his or her usual duties for the Company or the
parent or subsidiary corporation retaining his or her services.
D. A corporation shall be considered to be a
SUBSIDIARY corporation of the Company if it is a member of an unbroken
chain of corporations beginning with the Company, provided each such
corporation in the chain (other than the last corporation) owns, at the
time of determination, stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
E. A corporation shall be considered to be a PARENT
corporation of the Company if it is a member of an unbroken chain
ending with the Company, provided each such corporation in the chain
(other than the Company) owns, at the time of determination, stock
possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
<PAGE> 6
6. CORPORATE TRANSACTION.
A. For purposes of this Section III, a "Corporate Transaction"
shall be one or more of the following stockholder-approved transactions:
(i) a merger or consolidation in which the Company
is not the surviving entity, except for a transaction the principal
purpose of which is to change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all
or substantially all of the assets of the Company in liquidation or
dissolution of the Company, or
(iii) any reverse merger in which the Company is
the surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's
outstanding securities are transferred to holders different from those
who held such securities immediately prior to such merger.
B. If this option is to be assumed in connection with the
Corporate Transaction or is otherwise to continue in effect, then it shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would have been
issuable, in consummation of such Corporate Transaction, to an actual holder of
the same number of shares of Common Stock as are subject to such option
immediately prior to such Corporate Transaction. Appropriate adjustments shall
also be made to the option price payable per share, provided that the aggregate
option price payable for such securities shall remain the same.
C. In the event of any Corporate Transaction in which this
option will not be assumed or otherwise continued (after such adjustment as may
be required under paragraph B), the exercisability of this option shall
automatically accelerate so that, immediately prior to the specified effective
date for the Corporate Transaction, it shall 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. This
option, to the extent not previously exercised, shall terminate upon the
consummation of the Corporate Transaction and cease to be exercisable, unless it
is expressly assumed by the successor corporation or parent thereof.
D. This Agreement shall not in any way affect the right of the
Company to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES.
A. In the event any change is 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 Company's receipt
of consideration, then appropriate adjustments shall be made to (i) the total
number of Option Shares subject to this option and (ii) the Option Price payable
per share in order to reflect such change and thereby preclude a dilution or
enlargement of benefits hereunder.
B. If this option is to be assumed in connection with a
Corporate Transaction or is otherwise to continue in effect, then this option
shall, immediately after such Corporate Transaction, be appropriately adjusted
to apply and pertain to the number and class of securities which would have been
issued to the Optionee in the consummation of such Corporate Transaction had the
option been exercised 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 hereunder shall remain the
same.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall not
have any of the rights of a stockholder with respect to the Option Shares until
such individual shall have exercised the option, paid the Option Price for the
purchased shares and been issued a stock certificate for such shares.
<PAGE> 7
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or in the case of exercise after Optionee's death, the Optionee's
executor, administrator, heir or legatee, as the case may be) must take the
following actions:
(i) Execute and deliver to the Secretary of the
Company (a) a written notice of exercise (the "Exercise Notice"), in
substantially the form of Exhibit I attached hereto, in which there is
specified the number of Option Shares for which the option is
exercised.
(ii) Pay the aggregate Option Price for the
purchased shares in one or more of the following alternative forms:
1. full payment in cash or check drawn to
the Company's order;
2. full payment in shares of Common Stock
of the Company held by the Optionee for at least six (6) months and
valued at Fair Market Value on the Exercise Date (as such terms are
defined below);
3. full payment in a combination of shares
of Common Stock of the Company held by the Optionee for at least six
(6) months and valued at Fair Market Value on the Exercise Date, and
cash or check drawn to the Company's order;
4. full payment effected through a
broker-dealer sale and remittance procedure pursuant to which the
Optionee (I) shall provide irrevocable written instructions to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Company, 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
Company by reason of such purchase and (II) shall provide written
directives to the Company to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction; or
5. full payment in any other form which
the Plan Administrator may, in its discretion, approve at the time of
exercise in accordance with the provisions of Paragraph 15 of this
Agreement.
(iii) Furnish to the Company appropriate
documentation that the person or persons exercising the option (if
other than the Optionee) have the right to exercise this option.
B. For purposes of this Agreement, the Fair Market Value of a
share of Common Stock on any relevant date shall be determined in accordance
with subparagraphs (i) and (ii) below, and the Exercise Date shall be the date
on which the executed Exercise Notice is delivered to the Company. Except to the
extent the sale and remittance procedure specified above is utilized for the
exercise of the option, payment of the Option Price for the purchased shares
must accompany the Exercise Notice. The procedure for measuring Fair Market
Value shall be as follows:
(i) 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 System, Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question, as such price is reported by the National Association of
Securities Dealers through the NASDAQ National Market System 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.
<PAGE> 8
(ii) 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 of Common Stock on the date in question on the
stock 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.
(iii) If shares of the series of common stock to be valued at
the time are neither listed nor admitted to trading on any stock
exchange nor traded in the over-the-counter market, then the fair
market value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem
appropriate, including one or more independent professional appraisals.
C. As soon after the Exercise Date as practical, the Company
shall mail or deliver to or on behalf of the Optionee (or to any other person or
persons exercising this option) a certificate or certificates representing the
purchased shares.
D. In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
A. The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Company and the
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange on which shares of the Option
Shares may be listed at the time of such exercise and issuance.
B. In connection with the exercise of this option, Optionee
shall execute and deliver to the Company such representations in writing as may
be requested by the Company in order for it to comply with the applicable
requirements of federal and state securities laws.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Company.
12. LIABILITY OF COMPANY.
A. If the Option Shares covered by this Agreement exceed, as
of the Grant Date, the number of shares of Common Stock which may without
stockholder approval be issued under the Plan, then this option shall be void
with respect to such excess shares, unless stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock issuable under the
Plan is obtained in accordance with the provisions of Article 4, Section III of
the Plan.
B. The inability of the Company to obtain approval from any
regulatory body having authority deemed by the Company to be necessary to the
lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Company of any liability with respect to the non-issuance or sale of
the Common Stock as to which such approval shall not have been obtained. The
Company, however, shall use its best efforts to obtain all such approvals.
13. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or in
the Plan shall confer upon the Optionee any right to continue in the Service of
the Company (or any parent or subsidiary corporation of the Company employing or
retaining Optionee) for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Company (or any parent or
subsidiary corporation of the Company employing or retaining Optionee) or the
Optionee, which rights are hereby expressly reserved by each, to terminate the
Optionee's Service at any time for any reason whatsoever, with or without cause.
<PAGE> 9
14. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Company in care of the Corporate Secretary at the Company's principal
corporate offices. Any notice required to be given or delivered to Optionee
shall be in writing and addressed to Optionee at the address indicated below
Optionee's signature line on the Notice of Grant. All notices shall be deemed to
have been given or delivered upon personal delivery or upon deposit in the U.S.
mail, postage prepaid and properly addressed to the party to be notified.
15. LOANS. The Plan Administrator may, in its absolute discretion and
without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Company or (ii) permitting the Optionee to pay the Option 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, the
collateral requirements and terms of repayment) shall be established by the Plan
Administrator in its sole discretion.
16. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
17. GOVERNING LAW. The interpretation, performance, and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
18. WITHHOLDING. Optionee hereby agrees to make appropriate
arrangements with the Company or parent or subsidiary corporation employing
Optionee for the satisfaction of any Federal, State or local income tax
withholding requirements and Federal social security employee tax requirements
applicable to the exercise of this option.
<PAGE> 10
EXHIBIT I
NOTICE OF EXERCISE OF STOCK OPTION
I hereby notify Applied Digital Access, Inc. (the "Company") that I
elect to purchase _____ shares of the Company's Common Stock (the "Purchased
Shares") pursuant to that certain option (the "Option") granted to me under the
Company's 1996 Non-qualified Stock Option Plan (the "Plan") on _________, 199_
to purchase up to __________ shares of such Common Stock at an option price of
$____ per share (the "Option Price").
Concurrently with the delivery of this Exercise Notice to the Secretary
of the Company, I shall pay to the Company the Option Price for the Purchased
Shares in accordance with the provisions of my agreement with the Company
evidencing the Option and shall deliver whatever additional documents may be
required by such agreement as a condition for exercise.
- --------------------- ---------------------------
Date Optionee
Address:
---------------------------
---------------------------
Print name in exact
manner it is to
appear on the stock
certificate:
---------------------------
---------------------------
Address to which
certificate is to be
sent, if different
from address above:
---------------------------
---------------------------
Social Security Number:
---------------------------
