<PAGE>
As filed with the Securities and Exchange Commission on June 1, 1998
Registration Nos. 33-94886, 33-82550 and 333-10879.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-----------------------
ASCEND COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3092033
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
ONE ASCEND PLAZA
1701 HARBOR BAY PARKWAY
ALAMEDA, CA 94502
(Address of principal executive offices) (Zip Code)
------------------------
ASCEND COMMUNICATIONS, INC.
1998 STOCK INCENTIVE PLAN
(Full title of the Plans)
-----------------------
MORY EJABAT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ASCEND COMMUNICATIONS, INC.
ONE ASCEND PLAZA
1701 HARBOR BAY PARKWAY
ALAMEDA, CA 94502
(510) 769-6001
(Name, address including zip code, and telephone number, including area code, of
agent for service)
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee(3)
---------- ------------ ------------ --------- ------------
<S> <C> <C> <C> <C>
Common Stock 35,106,564 shares $42.75 $384,750,000 $113,501.25
$0.001 par value
</TABLE>
================================================================================
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Ascend Communications, Inc.
1998 Stock Incentive Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without Registrant's
receipt of consideration which results in an increase in the number of the
outstanding shares of Registrant's Common Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the high
and low selling prices per share of the Registrant's Common Stock on May
26, 1998, as reported by the Nasdaq National Market.
(3) Under General Instruction E, the Registration Fee is calculated solely on
the basis of the additional 9,000,000 shares of Common Stock authorized for
issuance under the new Plan. The applicable filing fees have been paid for
the remaining 26,106,564 shares in connection with their registration
on the Form S-8 Registration Statements Nos. 33-82550, 33-94886 and 333-
10879.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
---------------------------------------
Ascend Communications, Inc. (the "Registrant") hereby incorporates by
reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "SEC"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, as amended on May 29, 1998, filed with the
SEC on March 31, 1998; and
(b) The Registrant's Registration Statement No. 000-23774 on Form 8-A
filed with the SEC on March 31, 1994 pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in
which there is described the terms, rights and provisions
applicable to the Registrant's outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
Item 4. Description of Securities
-------------------------
Not Applicable.
Item 5. Interests of Named Experts and Counsel
--------------------------------------
Not Applicable.
Item 6. Indemnification of Directors and Officers
-----------------------------------------
Delaware law authorizes corporations to eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach or alleged breach of the directors' "duty of care." While the
relevant statute does not change directors' duty of care, it enables
corporations to limit available relief to equitable remedies such as injunction
or rescission. The statute has no effect on directors' duty of loyalty, acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, illegal payment of dividends and approval of any transaction
from which a director derives an improper personal benefit.
The Registrant has adopted provisions in its Certificate of
Incorporation which eliminate the personal liability of its directors to the
Registrant and its stockholders for monetary damages for breach or alleged
breach of their duty of care. The Bylaws of the Registrant provide for
indemnification of its directors, officers, employees and agents to the full
extent permitted by the General Corporation Law of the State of Delaware, the
Registrant's state of incorporation, including those circumstances in which
indemnification would otherwise be discretionary under Delaware law. Section 145
of the General Corporation Law of the State of Delaware provides for
indemnification in terms sufficiently broad to indemnify such individuals, under
certain circumstances, for liabilities (including reimbursement of expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act").
<PAGE>
Item 7. Exemption from Registration Claimed
-----------------------------------
Not Applicable.
Item 8. Exhibits
--------
Number Exhibit
------ -------
4 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 000-23774 on Form 8-A,
including the exhibits thereto, which is incorporated herein by
reference pursuant to Item 3(b).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors.
23.2 Consent of Independent Accountants.
23.3 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit
5.
24 Power of Attorney. Reference is made to page II-3 of this
Registration Statement.
99 1998 Stock Incentive Plan.
Item 9. Undertakings
------------
A. The undersigned Registrant hereby undertakes: (1) to file, during
any period in which offers or sales are being made, a post-effective amendment
to this Registration Statement (i) to include any prospectus required by Section
10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts or events
arising after the effective date of 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 clauses (1)(i) and (1)(ii) shall
--------
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are
incorporated by reference into this Registration Statement; (2) 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 (3) to remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the Registrant's 1998
Stock Incentive Plan.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into 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.
C. Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers, or controlling persons of the
Registrant pursuant to the foregoing indemnification provisions summarized in
Item 6 or otherwise, the Registrant has been advised that, in the opinion of the
SEC, such indemnification is against public policy as expressed in the 1933 Act,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Alameda, State of California on this
21st day of May 1998.
ASCEND COMMUNICATIONS, INC.
By: /s/ Mory Ejabat
-------------------------------------
Mory Ejabat
President and Chief Executive Officer
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Ascend Communications,
Inc., a Delaware corporation, do hereby constitute and appoint Mory Ejabat and
Michael F.G. Ashby and each one 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 any one of them,
determine may be necessary or advisable or required to enable said corporation
to comply with the Securities Act of 1933, as amended, and any rules or
regulations or requirements of the 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
all that said attorneys and agents, or any one of them, shall do or cause to be
done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Mory Ejabat President and Chief Executive May 21, 1998
- ----------------------- Officer (Principal Executive Officer)
Mory Ejabat
Michael F.G. Ashby Executive Vice President, Chief May 21, 1998
- ----------------------- Financial Officer (Principal Financial
Michael F.G. Ashby Officer and Principal Accounting Officer)
II-3
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ Daniel E. Smith Director, Executive Vice President and May 21, 1998
- ----------------------- General Manager, Core System
Daniel E. Smith
/s/ Betsy S. Atkins Director May 21, 1998
- -----------------------
Betsy S. Atkins
/s/ Robert K. Dahl Director May 21, 1998
- -----------------------
Robert K. Dahl
/s/ Roger L. Evans Director May 21, 1998
- -----------------------
Roger L. Evans
/s/ C. Richard Kramlich Director May 21, 1998
- -----------------------
C. Richard Kramlich
/s/ James P. Lally Director May 21, 1998
- -----------------------
James P. Lally
/s/ Martin Schoffstall Director May 21, 1998
- -----------------------
Martin Schoffstall
II-4
<PAGE>
EXHIBIT INDEX
-------------
Number Exhibit
------ -------
4 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 000-23774 on Form 8-A,
including the exhibits thereto, which is incorporated herein by
reference pursuant to Item 3(b).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors.
23.2 Consent of Independent Accountants.
23.3 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit
5.
24 Power of Attorney. Reference is made to page II-3 of this
Registration Statement.
99 1998 Stock Incentive Plan.
<PAGE>
EXHIBIT 5
Opinion and consent of Brobeck, Phleger & Harrison LLP
May 29, 1998
Ascend Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Re: Registration Statement for Offering of
35,106,564 Shares of Common Stock
---------------------------------------
Ladies and Gentlemen:
We refer to your registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of 35,106,564 shares
of the Common Stock of Ascend Communications, Inc. (the "Company") under the
Company's 1998 Stock Incentive Plan. We advise you that, in our opinion, when
such shares have been issued and sold pursuant to the applicable provisions of
the 1998 Stock Incentive 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 filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the Ascend Communications, Inc. 1998 Stock Incentive
Plan and in the related prospectus for the registration of 35,106,564 shares of
its common stock of our report January 22, 1998 with respect to the consolidated
financial statements and financial statement schedule of Ascend Communications,
Inc. included in its annual report (Form 10-K/A) for the year ended December
31, 1997, filed with the Securities and Exchange Commission.
/S/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Walnut Creek, California
May 27, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
of Ascend Communications, Inc. (the "Company") on Form S-8 of our report dated
January 22, 1997, except for Note M as to which the date is March 30, 1997, on
our audits of the consolidated financial statements and our report dated January
22, 1997 on our audits of the consolidated financial statement schedule of
Cascade Communications Corp. as of December 31, 1996, and for the years ended
December 31, 1996 and 1995, which reports are included in the Company's Annual
Report on Form 10-K/A for the year ended December 31, 1997.
/S/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
May 27, 1998
<PAGE>
EXHIBIT 99
ASCEND COMMUNICATIONS, INC.
---------------------------
1998 STOCK INCENTIVE PLAN
-------------------------
1. PURPOSE. This 1998 Stock Incentive Plan (the "Plan") is intended to
-------
provide incentives: (a) to the officers and other employees of Ascend
Communications, Inc. (the "Company"), and of any present or future parent or
subsidiary of the Company (collectively, "Related Corporations"), by providing
them with opportunities to purchase stock in the Company pursuant to options
granted hereunder which qualify as "incentive stock options" under Section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code") ("ISO"or
"ISOs"); (b) to directors, officers, employees and consultants of the Company
and Related Corporations by providing them with opportunities to purchase stock
in the Company pursuant to options granted hereunder which do not qualify as
ISOs ("Non-Qualified Option" or "Non-Qualified Options"); (c) to directors,
officers, employees and consultants of the Company and Related Corporations by
providing them with awards of stock in the Company ("Awards"); and (d) to
directors, officers, employees and consultants of the Company and Related
Corporations by providing them with opportunities to make direct purchases of
stock in the Company ("Purchases"). Both ISOs and Non-Qualified Options are
referred to hereafter individually as an "Option" and collectively as "Options".
Options, Awards and authorizations to make Purchases are referred to hereafter
collectively as "Stock Rights". As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation",
respectively, as those terms are defined in Section 424 of the Code.
This Plan will serve as the successor to the Company's existing First Amended
and Restated 1989 Stock Option Plan (the "Predecessor Plan"), and no further
Option grants will be made under the Predecessor Plan from and after the
adoption of this Plan by the Company's stockholders at the 1998 Annual Meeting
(the "Effective Date"). All outstanding stock Options under the Predecessor
Plan on the Effective Date will be incorporated into this Plan and will
accordingly be treated as outstanding stock Options under this Plan. However,
each outstanding Option grant so incorporated will continue to be governed
solely by the express terms and conditions of the agreement evidencing such
grant, and no provision of this Plan shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such incorporated Options
with respect to their acquisition of shares of the Company's common stock
thereunder.
2. ADMINISTRATION OF THE PLAN.
--------------------------
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan will be
---------------------------------
administered by a committee or committees appointed by the Board of Directors of
the Company (the "Board") and consisting of two or more members of the Board.
The Board may delegate responsibility for administration of the Plan with
respect to designated Stock Right recipients to different committees, subject to
such limitations as the Board deems appropriate. Members of a committee will
serve for such term as the Board may determine, and may be removed by the Board
at any time. The term "Committee," when used in this Plan, refers to the
---------
committee that has been delegated authority with respect to a matter. In
determining the composition of any committee or subcommittee, the Board
1
<PAGE>
or committee, as the case may be, shall consider the desirability of compliance
with the compositional requirements of (i) Rule 16(b)-3 of the Securities and
Exchange Commission with respect to Stock Rights grantees who are subject to the
trading restrictions of Section 16(b) of the Securities and Exchange Act of 1934
(the "1934 Act") with respect to securities of the Company and (ii) Section
162(m) of the Internal Revenue Code (the "Code"), but shall not be bound by such
compliance.
B. COMMITTEE ACTIONS. Any Committee has full authority to administer the
-----------------
Plan within the scope of its delegated responsibilities, including authority to
interpret and construe any relevant provision of the Plan, to adopt rules and
regulations that it deems necessary, to determine which individuals are eligible
to participate and/or receive Stock Rights under the Plan, to determine the
amount and/or number of shares subject to such Stock Right, and to determine the
terms of such Stock Right made under the Plan (which terms need not be
identical). Decisions of a Committee made within the discretion delegated to it
by the Board are final and binding on all persons.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted to any employee of the
-----------------------------
Company or any Related Corporation. Those officers and directors of the Company
who are not employees may not be granted ISOs under the Plan. Non-Qualified
Options, Awards and authorizations to make Purchases may be granted to any
employee, officer or director (whether or not also an employee) or consultant of
the Company or any Related Corporation. The Committee may take into
consideration a recipient's individual circumstances in determining whether to
grant an ISO, a Non-Qualified Option, an Award or an authorization to make a
Purchase. Granting of any Stock Right to any individual will neither entitle
that individual to, nor disqualify him from, participation in any other grant of
Stock Rights.
4. STOCK. The stock subject to Options, Awards and Purchases will be
-----
authorized but unissued shares of Common Stock of the Company, par value $.001
per share (the "Common Stock"), or shares of Common Stock reacquired by the
Company in any manner. Subject to adjustment as provided in Paragraph 15, the
aggregate number of shares which may be issued pursuant to the Plan is nine (9)
million shares plus the number of shares of Common Stock remaining for issuance
on the Effective Date under the Predecessor Plan (whether or not subject to
outstanding Options under the Predecessor Plan). If any Stock Right granted
under the Plan (including Options incorporated into this Plan from the
Predecessor Plan) expires or terminates for any reason without having been
exercised in full or ceases for any reason to be exercisable in whole or in
part, the unpurchased shares subject to such Stock Right will again be available
for grants of Stock Rights under the Plan. If any Stock Right or any Option
incorporated into this Plan from the Predecessor Plan is exercised, the maximum
number of shares remaining for issuance under this Plan will be reduced by the
number of shares with respect to which such Options are exercised. However, if
shares held by the grantee of a Stock Right (including Options incorporated into
this Plan from the Predecessor Plan) are delivered to the Company, or are
withheld from shares otherwise issuable under the Stock Right, in payment of all
or a portion of the exercise price or tax withholding obligations under the
Stock Right, only the net number of shares issued by the Company (i.e., the
gross number less the shares delivered or withheld) will be counted toward the
aggregate limit of this paragraph 4. No employee of the Company or any Related
Corporation may
2
<PAGE>
be granted in any calendar year Stock Rights with respect to more than
500,000 shares of Common Stock, in the aggregate.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan at
------------------------
any time after the Effective Date and before the tenth anniversary of the
Effective Date. The date of grant of a Stock Right under the Plan will be the
date specified by the Committee at the time it grants the Stock Right. The
Committee may, with the consent of the optionee, convert an ISO granted under
the Plan to a Non-Qualified Option pursuant to paragraph 15. Unless otherwise
specified by the Committee in connection with a particular grant, Options
granted under the Plan are intended to qualify as performance-based compensation
to the extent required under Section 162(m) of the Code and the regulations
thereunder. The Committee shall have full power and authority, exercisable in
its sole discretion, to extend one or more provisions of the Plan to one or more
outstanding stock Options under the Predecessor Plan which are incorporated into
this Plan but which do not otherwise contain such provisions.
6. OPTION PRICE. The exercise price per share will be fixed by the
------------
Committee, provided, however, that in no event will the exercise price per share
be less than one hundred percent (100%) of the fair market value per share of
Common Stock on the Option grant date. In the case of an ISO to be granted to
an employee owning stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Related
Corporation, the price per share specified in the agreement relating to such ISO
shall not be less than one hundred ten percent (110%) of the fair market value
per share of Common Stock on the date of grant.
7. DOLLAR LIMITATION ON ISOS. To the extent that the aggregate fair market
-------------------------
value (determined as of the respective date or dates of grant) of the shares
with respect to which Options that would otherwise be ISOs are exercisable for
the first time by any individual during any calendar year under the Plan (or any
other plan of the Company or any Related Corporation) exceeds the sum of One
Hundred Thousand Dollars ($100,000) (or a greater amount permitted under the
Internal Revenue Code), whether by reason of acceleration or otherwise, those
Options will not be treated as ISOs. In making this determination, Options will
be taken into account in the order in which they were granted.
8. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is granted
----------------------------------
under the Plan, the Company's Common Stock is publicly traded, "fair market
value" shall be determined as of the last business day for which the prices or
quotes discussed in this sentence are available on the date such Option is
granted and shall mean (i) the average (on that date) of the high and low prices
of the Common Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the last reported sale price (on that date) of the
Common Stock on the Nasdaq National Market, if the Common Stock is not then
traded on a national securities exchange; or (iii) the closing bid price (or
average of bid prices) last quoted (on that date) by an established quotation
service for over-the-counter securities, if the Common Stock is not reported on
the Nasdaq National Market. However, if the Common Stock is not publicly traded
at the time an Option is granted under the Plan, "fair market value" shall be
the fair value of the Common Stock as determined by the
3
<PAGE>
Committee after taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and offer prices of the
Common Stock in private transactions negotiated at arm's length.
9. OPTION DURATION. Subject to earlier termination as provided in paragraph
---------------
11, each Option will expire on the date specified by the Committee, but not more
than (i) ten years and one day from the date of grant in the case of Non-
Qualified Options, (ii) ten years from the date of grant in the case of ISOs
generally, and (iii) five years from the date of grant in the case of ISOs
granted to an employee owning stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
Related Corporation. Subject to earlier termination as provided in paragraph 11,
the term of each ISO will be the term set forth in the original instrument
granting such ISO, except with respect to any part of such ISO that is converted
into a Non-Qualified Option pursuant to paragraph 15.
10. EXERCISE OF OPTION. Subject to the provisions of paragraphs 11 through
------------------
14, each Option granted under the Plan will be exercisable as follows:
A. VESTING. The Option will either be fully exercisable on the date of
-------
grant, subject to such restrictions or repurchase rights as the Committee shall
determine, or will become exercisable thereafter in such installments as the
Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes
----------------------------
exercisable it will remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may be exercised at
----------------
any time or from time to time, in whole or in part, for up to the total number
of shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the right to
-----------------------
accelerate the date of exercise of any installment of any Option; provided that
the Committee shall not, without the consent of an optionee, accelerate the
permitted exercise date of any installment of any Option granted to any employee
as an ISO (and not previously converted into a Non-Qualified Option pursuant to
paragraph 15) if such acceleration would adversely affect the optionee's rights
thereunder.
11. EFFECT OF TERMINATION OF SERVICE. The following Provisions shall govern
--------------------------------
the exercise of any Options held by the optionee at the time of cessation of
service, disability, death or misconduct:
A. CESSATION OF SERVICE. Except to the extent otherwise specifically
--------------------
provided in the documents evidencing the Option, any outstanding Option
exercisable for fully vested shares at the time the optionee ceases to provide
services to the Company or a Related Corporation as an employee, a non-employee
Board member or a consultant for any reason other than disability, death or
misconduct, then the optionee will have a period of three (3) months following
the date of
4
<PAGE>
such cessation of service during which to exercise each outstanding Option held
by such optionee.
B. DISABILITY. Should such service terminate by reason of disability,
----------
then any outstanding Option exercisable by the optionee for fully vested shares
at the time the optionee ceases to provide services to the Company may be
subsequently exercised by the optionee during the six (6) month period following
the date of such cessation of service. However, should such disability be deemed
to constitute permanent disability, then the period during which each
outstanding option for fully vested shares held by the optionee is to remain
exercisable will be extended by an additional six (6) months so that the
exercise period will be the twelve (12)-month period following the date of the
optionee's cessation of service by reason of such permanent disability. The term
"Permanent Disability," as used in this Plan, means a disability expected to
--------------------
result in death or has lasted or can be expected to last for a continuous
period of twelve (12) months or more.
C. DEATH. Any Option exercisable for fully vested shares by the
-----
Optionee at the time of 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 during the twelve (12) month period following
the date of the optionee's death.
D. MISCONDUCT. Should the optionee's service be terminated for
----------
misconduct, then all outstanding Options at the time held by the optionee will
immediately terminate and cease to be outstanding. The term "Misconduct," when
----------
used in this Plan, means the commission of any act of fraud, embezzlement or
dishonesty by the optionee, any unauthorized use or disclosure by such person of
confidential information or trade secrets of the Company (or any Parent or
Subsidiary), or any other intentional misconduct by such person adversely
affecting the business or affairs of the Company or any Related Corporation in a
material manner. The foregoing definition shall not be deemed to be inclusive of
all the acts or omissions which the Company or any Related Corporation may
consider as grounds for the dismissal or discharge of any optionee or other
person in the service of the Company or any Related Corporation.
E. LEAVE OF ABSENCE. For purposes of this paragraph 11, a bona fide
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leave of absence (such as those attributable to illness, military obligations or
governmental service) with the written consent of the Committee, or to the
extent required by statute, will not be considered an interruption of service
under the Plan.
12. REPURCHASE RIGHTS. The Committee may in its discretion determine that it
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shall be a term and condition of one or more Options exercised under the Plan
that the Company or its assigns shall have the right, exercisable upon the
optionee's separation from service with the Company or any Related Corporation,
to repurchase any or all of the shares of Common Stock previously acquired by
the optionee upon the exercise of that Option. Any such repurchase right will
be exercisable on such terms and conditions (including establishment of the
appropriate vesting schedule and other provisions for the expiration of the
repurchase right in one or more installments) as the Committee may specify in
the instrument evidencing the right. The Committee will also have full power
and authority to provide for the automatic termination of repurchase rights, in
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whole or in part, thereby accelerating the vesting of any or all of the
purchased shares.
13. ASSIGNABILITY. No Option shall be assignable or transferable by the
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optionee except by will or by the laws of descent and distribution. During the
lifetime of the optionee each Option may be exercised only by the optionee.
14. TERMS AND CONDITIONS OF OPTIONS. Options will be evidenced by
-------------------------------
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments must conform to the terms and
conditions set forth in paragraphs 6 through 13 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions and repurchase rights applicable to shares
of Common Stock issuable upon exercise of Options. In granting any Non-
Qualified Option, the Committee may specify that such Non-Qualified Option is
subject to the restrictions set forth herein with respect to ISOs, or to such
other termination and cancellation provisions as the Committee may determine.
The Committee may from time to time confer authority and responsibility on one
or more of its own members and/or one or more officers of the Company to execute
and deliver such instruments. The proper officers of the Company are authorized
and directed to take any and all action necessary or advisable from time to time
to carry out the terms of such instruments.
15. ADJUSTMENTS. Upon the occurrence of any of the following events, an
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optionee's rights with respect to Options granted hereunder will be adjusted as
hereinafter provided, unless otherwise specifically provided in the written
agreement between the optionee and the Company relating to such Option:
A. RECAPITALIZATION. If 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 receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities to issuable under the Plan, (ii) the number and/or class of
securities and, if applicable, price per share in affect under each outstanding
Stock Right under the Plan and (iii) the maximum number of shares issuable to
one individual pursuant to paragraph 4.
B. TRANSFER OF CONTROL AND OTHER TRANSACTIONS. A "Transfer of Control"
------------------------------------------
will be deemed to have occurred in the event any of the following occurs with
respect to the Company (which for this purpose includes a successor whose stock
is issued under the Plan).
(i) the direct or indirect sale or exchange by the stockholders of
the Company of all or substantially all of the stock of the Company where the
stockholders of the Company immediately before such sale or exchange do not
retain, directly or indirectly and in substantially the same proportion,
beneficial interest in voting stock of the Company or surviving entity
representing at least a majority of the voting power of all voting stock of the
Company.
(ii) a merger, consolidation, reorganization or similar transaction in
which the stockholders of the Company immediately before such merger do not
retain, directly or indirectly and in substantially the same proportion,
beneficial interest in the voting stock of the
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surviving entity representing a majority of the voting power of all voting
stock; or
(iii) the sale, exchange, or transfer (including, without limitation,
pursuant to a liquidation or dissolution) of all or substantially all of the
Company's assets (other than a sale, exchange, or transfer to one (1) or more
corporations where the stockholders of the Company immediately before such sale,
exchange, or transfer retain, directly or indirectly and in substantially the
same proportion, beneficial interest in voting stock of the corporation(s) to
which the assets were transferred) representing at least a majority of the
combined voting power of all voting stock of such entity.
In the event of any Transfer of Control, each outstanding Option, shall
automatically accelerate so that each such Option shall, immediately prior to
effective date of the Transfer of 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 any or all of those shares as fully vested shares of
Common Stock, subject to the consummation of the Transfer of Control. An Option
shall not so accelerate if and to the extent: (i) such Option is assumed or
otherwise continued in full force or effect by the successor corporation (or
parent thereof) pursuant to the terms of the Transfer of Control, (ii) such
Option is replaced with a cash incentive program of the successor corporation
which preserves the spread existing at the time of the Transfer of Control on
the shares of Common Stock for which the Option is not otherwise at that time
exercisable and provides for subsequent payout in accordance with the same
vesting schedule applicable to those option shares or (iii) the acceleration of
such Option is subject to other limitations imposed by the Committee at the time
of the Option grant. All outstanding repurchase rights outstanding on Common
Stock previously issued under the Plan will also terminate automatically, and
such shares will immediately vest in full, immediately before a Transfer of
Control, except to the extent: (i) those repurchase rights are assigned to the
successor corporation (or parent thereof) or otherwise continue in full force
and effect pursuant to the terms of the Transfer of Control or (ii) such
accelerated vesting is precluded by other limitations imposed by the Committee
at the time the repurchase right is issued.
Notwithstanding the foregoing, any Options held by individuals who hold
positions with the Company at the level of vice president or higher, including
without limitation the president and executive vice presidents, at the time of a
Transfer of Control shall be accelerated such that the optionee shall be
entitled to an additional twelve months of vesting, or if the Option would have
been fully vested in less that twelve month, then the Option shall be fully
vested.
C. MODIFICATION OF ISOS. Notwithstanding the foregoing, any
--------------------
adjustments made pursuant to subparagraphs A, B or C with respect to ISOs shall
be made only after the Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424 of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such adjustments.
F. DISSOLUTION OR LIQUIDATION. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, each Option will terminate
immediately before the consummation of
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such proposed action or at such other time and subject to such other conditions
specified by the Committee.
G. ISSUANCES OF SECURITIES. Except as expressly provided herein, no
-----------------------
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
H. FRACTIONAL SHARES. No fractional shares will be issued under the
-----------------
Plan and the optionee will receive from the Company cash in lieu of such
fractional shares.
I. ADJUSTMENTS. Upon the happening of any of the events described in
-----------
subparagraphs A or B above, the class and aggregate number of shares set forth
in paragraph 4 hereof that are subject to Stock Rights which previously have
been or subsequently may be granted under the Plan (including outstanding
Options incorporated into this Plan from the Predecessor Plan) will also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments to
be made under this paragraph 15 and, subject to paragraph 2, its determination
shall be conclusive.
If any person owning restricted Common Stock obtained by exercise of a Stock
Right made hereunder receives shares or securities or cash in connection with a
corporate transaction described in subparagraphs A, B or C above as a result of
owning such restricted Common Stock, such shares or securities or cash shall be
subject to all of the conditions and restrictions applicable to the restricted
Common Stock with respect to which such shares or securities or cash were
issued, unless otherwise determined by the Committee.
16. MEANS OF EXERCISING STOCK RIGHTS. A Stock Right (or any part or
--------------------------------
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice must identify the Stock Right being
exercised and specify the number of shares as to which such Stock Right is being
exercised, accompanied by full payment of the purchase price therefor either (a)
in United States dollars in cash or by check, (b) at the discretion of the
Committee, through delivery of shares of Common Stock having a fair market value
equal as of the date of the exercise to the cash exercise price of the Stock
Right, (c) at the discretion of the Committee, by delivery of a promissory note,
the terms of which (including the interest rate and the terms of repayment)
shall be established by the Committee, (d) at the discretion of the Committee,
by delivery of notice in such form as the Company may designate together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds to pay the exercise price or (e) at the
discretion of the Committee, by any combination of (a), (b), (c) or (d) above.
If the Committee exercises its discretion to permit payment of the exercise
price of an ISO by means of the methods set forth in clauses (b), (c), (d) or
(e) of the preceding sentence, such discretion shall be exercised in writing at
the time of the grant of the ISO in question. The holder of a Stock Right shall
not have the rights of a shareholder with respect to the shares covered by such
Stock Right until the date of issuance of a stock certificate for such shares.
Except as expressly provided above in paragraph 15 with respect to changes in
capitalization and stock dividends, no
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<PAGE>
adjustment will be made for dividends or similar rights for which the record
date is before the date such stock certificate is issued.
17. TERM AND AMENDMENT OF PLAN. The Plan will expire on the tenth
--------------------------
anniversary of the Effective Date (except as to Options outstanding on that
date). Subject to the provisions of paragraph 5 above, Stock Rights may be
granted under the Plan before the date of stockholder approval of the Plan. The
Board shall have complete and exclusive power and authority to amend or modify
the Plan in any or all respects. However, no such amendment or modification may
adversely affect the rights and obligations with respect to Stock Rights at the
time outstanding under the Plan unless the grantee consents to such amendment or
modification. In addition, certain amendments may, as determined by the Board
in its sole discretion, require stockholder approval pursuant to applicable laws
or regulations.
Stock Rights may be granted under the Plan that are in excess of the number of
shares then available for issuance under the Plan, provided any excess shares
actually issued shall be held in escrow until there is obtained stockholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock available for issuance under the Plan. If such stockholder approval is
not obtained within twelve (12) months after the date the first such excess
issuances are made, then (i) any unexercised Options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the
Company shall promptly refund to the holders of any such Stock Rights the
exercise or purchase price paid for any excess shares 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, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.
18. APPLICATION OF FUNDS. The proceeds received by the Company from the sale
--------------------
of shares pursuant to Options granted and Purchases authorized under the Plan
shall be used for general corporate purposes.
19. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
-----------------------
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
20. TAX WITHHOLDING.
---------------
A. OBLIGATION. The Company's obligation to deliver shares upon the
----------
exercise of Stock Rights under the Plan is subject to the satisfaction of all
applicable Federal, State and local income and employment tax withholding
requirements.
B. STOCK WITHHOLDING. The Committee may require or permit, in its
-----------------
discretion and upon such terms and conditions as it may deem appropriate any or
all holders of outstanding Stock Rights under the Plan to elect to have the
Company withhold, from the shares of Common Stock otherwise issuable pursuant to
such Stock Right, one or more of such shares with an aggregate fair market value
equal to the Federal, State and local income and employment taxes ("Taxes")
incurred in connection with the acquisition of such shares. Holders of Stock
Rights
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<PAGE>
under the Plan may also be granted the right to deliver previously acquired
shares of Common Stock held for the requisite period to avoid a charge to
earnings in satisfaction of such Taxes. The withheld or delivered shares will be
valued at fair market value on the applicable determination date for such Taxes.
21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each employee who
----------------------------------------------
receives an ISO must agree to notify the Company in writing immediately after
the employee makes a Disqualifying Disposition of any Common Stock acquired
pursuant to the exercise of an ISO. A Disqualifying Disposition is any
disposition (including any sale) of such Common Stock before the later of (a)
two years after the date the employee was granted the ISO, or (b) one year after
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
22. GOVERNING LAW. The validity and construction of the Plan and the
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instruments evidencing Stock Rights shall be governed by the laws of the State
of Delaware, or the laws of any other jurisdiction in which the Company or its
successors in interest may be organized.
23. NO EMPLOYMENT/SERVICE RIGHTS. Nothing in the Plan confers upon the
----------------------------
grantee of a Stock Right any right to continue in service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Company or any Related Corporation or of the grantee, which rights are
hereby expressly reserved by each, to terminate such person's service at any
time for any reason, with or without cause.
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