<PAGE> 1
As filed with the Securities and Exchange Commission on March 17, 1998
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)
DELAWARE 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)
AMENDED AND RESTATED
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 Amended and Restated 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 Amended and
Restated 1996 Non-Qualified
Stock Option Plan).............. 550,000 shares(1) $8.31(2) $4,570,500 $1,180
</TABLE>
- -----------------------------
(1) This Registration Statement shall also cover any additional shares of Common
Stock which become issuable under the Amended and Restated 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 under Rules 457(h) and 457(c) of the Securities Act of 1933, as amended.
<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, 1996.
(b) The Company's Quarterly Report on Form 10-Q for the period ended March
31, 1997.
(c) The Company's Quarterly Report on Form 10-Q for the period ended June
30, 1997.
(d) The Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1997.
(e) The Company's Reports on Form 8-K and Form 8-K/A, filed on December
23, 1997 and January 12, 1998, respectively, as File No. 0-23698.
(f) The Form 8-A filed by the Company on March 28, 1994 with the
Commission as Registration No. 0-23698 (and all amendments thereto),
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 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
Section 145 of the Delaware General Corporation Law permits indemnification
of officers and directors of the Company under certain conditions and subject to
certain limitations. Section 145 of the Delaware General Corporation Law also
provides that a corporation has the power to purchase and maintain insurance on
behalf of its officers and directors against any liability asserted against such
person and incurred by him or her in such capacity, or arising out of his or her
status as such, whether or not the corporation would have the power to indemnify
him or her against such liability under the provisions of Section 145 of the
Delaware General Corporation Law.
Article VII, Section 1 of the Bylaws of the Company provides that the
Company shall indemnify its directors and executive officers to the fullest
extent not prohibited by the Delaware 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 inure to the benefit of the heirs, executors and
administrators of the person. In addition, expenses incurred by a director or
executive officer in defending any civil, criminal, administrative or
investigative action, suit or 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 Delaware General Corporation Law.
II-1.
<PAGE> 3
As permitted by Section 102(b)(7) of the Delaware General Corporation Law,
Article V, Section (A) of the Company's Certificate of Incorporation provides
that a director of the Company shall not be personally liable for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or acts or omissions that involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law or (iv) for any transaction from which the
director derived any improper personal benefit.
The Company has entered into indemnification agreements with each of its
directors and executive officers. Generally, the indemnification agreements
attempt to provide the maximum protection permitted by Delaware 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 for 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 has purchased directors' and officers' liability insurance. The
Company intends to enter into additional indemnification agreements with each of
its directors and executive officers to effectuate these indemnity provisions.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
Exhibit
Number Exhibit
------- -------
4.1 Certificate of Incorporation*
4.2 Bylaws*
5 Opinion and Consent of Company Counsel, Gray Cary Ware &
Freidenrich L.L.P.
23.1 Consent of Company Counsel 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 Amended and Restated 1996 Non-qualified Stock Option Plan
99.2 Form of Stock Option Agreement
* Filed as an Exhibit to the Company's Report on Form 8-K filed on
December 23, 1997 (File No. 000-23698) 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, as amended (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
II-2.
<PAGE> 4
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 registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
3. 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 Securities and Exchange 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-3.
<PAGE> 5
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 16th day of
March, 1998.
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 Delaware 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 March 16, 1998
- ------------------------------ and Director (Principal Executive
Peter P. Savage Officer)
/s/ James L. Keefe Vice President, Finance and March 16, 1998
- ------------------------------ Administration, Chief Financial Officer
James L. Keefe (Principal Financial and Accounting
Officer)
/s/ Christopher B. Paisley Director March 16, 1998
- ------------------------------
Christopher B. Paisley
/s/ Edward F. Tuck Director March 16, 1998
- ------------------------------
Edward F. Tuck
/s/ Kenneth E. Olsen Director March 16, 1998
- ------------------------------
Kenneth E. Olsen
</TABLE>
II-4.
<PAGE> 6
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
APPLIED DIGITAL ACCESS, INC.
<PAGE> 7
EXHIBIT INDEX
Exhibit
Number Exhibit
------ -------
4.1 Certificate of Incorporation*
4.2 Bylaws*
5 Opinion and Consent of Company Counsel, Gray Cary Ware &
Freidenrich L.L.P.
23.1 Consent of Company Counsel 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 Amended and Restated 1996 Non-Qualified Stock Option Plan
99.2 Form of Stock Option Agreement
* Filed as an Exhibit to the Company's Report on Form 8-K filed on
December 23, 1997 (File No. 000-23698) and incorporated herein by
reference.
<PAGE> 1
Exhibit 5
Opinion and Consent of Company Counsel,
Gray Cary Ware & Freidenrich L.L.P.
March 16, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
As legal counsel for Applied Digital Access, Inc., a Delaware
corporation (the "Company"), we are rendering this opinion in connection with
the registration under the Securities Act of 1933, as amended, of up to 550,000
shares of the Common Stock of the Company which may be issued pursuant to the
exercise of options granted under the Applied Digital Access, Inc. Amended and
Restated 1996 Non-qualified Stock Option Plan (the "Plan"). We have examined all
instruments, documents and records which we deemed relevant and necessary for
the basis of our opinion hereinafter expressed. In such examination, we have
assumed the genuineness of all signatures and the authenticity of all documents
submitted to us as originals and the conformity to the originals of all
documents submitted to us as copies.
We are admitted to practice only in the State of California and we
express no opinion concerning any law other than the law of the State of
California, the corporation laws of the State of Delaware and the federal law of
the United States. As to matters of Delaware corporation law, we have based our
opinion solely upon our examination of such laws and the rules and regulations
of the authorities administering such laws, all as reported in standard,
unofficial compilations. We have not obtained opinions of counsel licensed to
practice in jurisdictions other than the State of California. Based on such
examination, we are of the opinion that the 550,000 shares of Common Stock which
may be issued upon the exercise of options granted under the Plan are duly
authorized shares of the Company's Common Stock, and, when issued against
payment of the purchase price therefor in accordance with the provisions of the
Plan, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement referred to above and the use of our name wherever it
appears therein.
Respectfully submitted,
/s/ GRAY CARY WARE & FREIDENRICH LLP
<PAGE> 1
Exhibit 23.1
Consent of Company Counsel is contained in Exhibit 5
<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 18, 1997 on
our audits of the financial statements and financial statement schedule of
Applied Digital Access, Inc. as of December 31, 1996 and 1995, and for the years
ended December 31, 1996, 1995 and 1994, which report is included in the Annual
Report on Form 10-K of Applied Digital Access, Inc. for the year ended December
31, 1996.
/s/ COOPERS & LYBRAND L.L.P.
San Diego, California
March 16, 1998
<PAGE> 1
Exhibit 24
Power of Attorney. Reference is made to page II-5 of this Registration Statement
<PAGE> 1
Exhibit 99.1
Amended and Restated 1996 Non-qualified Stock Option Plan
APPLIED DIGITAL ACCESS, INC.
AMENDED AND RESTATED
1996 NON-QUALIFIED STOCK OPTION PLAN
ARTICLE ONE
GENERAL
PURPOSE OF THE PLAN
This Amended and Restated 1996 Non-qualified Stock Option Plan ("Plan") is
intended to promote the interests of Applied Digital Access, Inc., a Delaware
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).
GENERAL
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.
This Plan shall not supersede or replace any prior plan of the Corporation.
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
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<PAGE> 2
classes of stock in one of the other corporations in such chain.
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.
ADMINISTRATION OF THE PLAN
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.
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.
OPTION GRANTS AND STOCK ISSUANCES
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).
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.
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<PAGE> 3
STOCK SUBJECT TO THE PLAN
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 950,000 shares, subject to adjustment from time to time in
accordance with the provisions of this Section V.
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.
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. 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.
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
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.
-3-
<PAGE> 4
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.
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.
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.
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<PAGE> 5
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 (1)
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.
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<PAGE> 6
(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.
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.
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
CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
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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.
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 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.
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.
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
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<PAGE> 8
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.
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CERTAIN DEFINITIONS
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.
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.
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.
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LOANS OR GUARANTEE OF LOANS
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.
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.
TAX WITHHOLDING
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.
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.
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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.
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.
USE OF PROCEEDS
Cash proceeds received by the Company from the sale of shares under the
Plan shall be used for general corporate purposes.
REGULATORY APPROVALS
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.
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.
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<PAGE> 12
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.
MISCELLANEOUS PROVISIONS
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.
The provisions of the Plan shall inure to the benefit of, and be binding
upon, the Corporation and its successors or assigns, whether by Corporate
Transaction or otherwise, and the Participants and Optionees, the legal
representatives of their respective estates, their respective heirs or legatees
and their permitted assignees.
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<PAGE> 1
Exhibit 99.2
Form of Stock Option Agreement
APPLIED DIGITAL ACCESS, INC.
STOCK OPTION AGREEMENT
(AMENDED AND RESTATED 1996 NON-QUALIFIED STOCK OPTION PLAN)
WITNESSETH:
RECITALS
A. Applied Digital Access, Inc. (the "Company") has adopted the Amended and
Restated 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.
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<PAGE> 2
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 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.
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<PAGE> 3
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.
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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.
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<PAGE> 5
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.
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
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<PAGE> 6
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.
(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.
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<PAGE> 7
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.
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.
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<PAGE> 8
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.
-8-
<PAGE> 9
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
Amended and Restated 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:
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-----------------------------------
-----------------------------------
Social Insurance Number:
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<PAGE> 10
APPLIED DIGITAL ACCESS, INC.
NOTICE OF GRANT OF NON-QUALIFIED STOCK OPTION
(AMENDED AND RESTATED 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:
Vesting Commencement Date:
Option Price: $______ per share
Number of Option Shares: ________ shares
Expiration Date:
Type of Option: Non-Statutory Stock Option
Exercise Schedule:
This Option shall become exercisable in accordance with the following
schedule:
i) 25% of the Option Shares twelve months after the Vesting
Commencement Date.
ii) Beginning twelve months after the Vesting Commencement Date, one
forty-eighth (1/48) of the Option Shares vest in each of thirty six
(36) consecutive and equal monthly installments.
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. Amended and
Restated 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."
<PAGE> 11
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
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.
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By: Peter P. Savage
Title: President/CEO
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Optionee:
Address:
