<PAGE>
As filed with the Securities and Exchange Commission on April 1, 1999
Registration Statement No. 333-
------------
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 SUPPLEMENTAL 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(2)
- ------------------ ----------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
Common Stock 1,000,000 shares $83.9375 $83,937,500.00 $23,334.625
$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 Supplemental 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 March
30, 1999, as reported by the Nasdaq National Market.
<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, 1998, filed with the SEC on March 31, 1999;
(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
<PAGE>
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").
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(d).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors.
23.2 Consent of Independent Accountants.
23.3 Contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-3 of this
Registration Statement.
99 1998 Supplemental 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
Supplemental 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.
<PAGE>
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.
<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 1st day of
April 1999.
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.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Mory Ejabat President and Chief Executive April 1, 1999
- ---------------------- Officer (Principal Executive Officer)
Mory Ejabat
/s/ Michael F.G. Ashby Executive Vice President, Chief April 1, 1999
- ---------------------- Financial Officer (Principal Financial
Michael F.G. Ashby Officer and Principal Accounting
Officer)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Betsy S. Atkins Director April 1, 1999
- ----------------------
Betsy S. Atkins
/s/ Robert K. Dahl Director April 1, 1999
- ----------------------
Robert K. Dahl
/s/ Roger L. Evans Director April 1, 1999
- ----------------------
Roger L. Evans
/s/ Reed E. Hundt Director April 1, 1999
- ----------------------
Reed E. Hundt
Director April 1, 1999
- ----------------------
C. Richard Kramlich
/s/ James P. Lally Director April 1, 1999
- ----------------------
James P. Lally
/s/ Martin Schoffstall Director April 1, 1999
- ----------------------
Martin Schoffstall
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
ASCEND COMMUNICATIONS, INC.
<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(d).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors.
23.2 Consent of Independent Accountants.
23.3 Contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-3 of this
Registration Statement.
99 1998 Supplemental Stock Incentive Plan.
<PAGE>
EXHIBIT 5
Opinion of Brobeck Phleger & Harrison, LLP
April 1, 1999
Ascend Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Re: Ascend Communications, Inc. Registration Statement on Form S-8
for 1,000,000 Shares of Common Stock and Related Stock Options
Ladies and Gentlemen:
We have acted as counsel to Ascend Communications, Inc., a Delaware
corporation (the "Company") in connection with the registration on Form S-8 (the
"Registration Statement") under the Securities Act of 1933, as amended, of
1,000,000 shares of common stock (the "Shares") and related stock options for
issuance under the Company's 1998 Supplemental Stock Incentive Plan (the
"Plan").
This opinion is being furnished in accordance with the requirements of
Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the establishment of the
Plan. Based on such review, we are of the opinion that, if, as and when the
Shares have been issued and sold (and adequate consideration therefor received)
pursuant to (a) the provisions of option agreements duly authorized under the
Plan and in accordance with the Registration Statement, or (b) duly authorized
direct stock issuances in accordance with the Plan and in accordance with the
Registration Statement, such Shares will be duly authorized, legally issued,
fully paid and nonassessable.
We consent to the filing of this opinion letter as Exhibit 5 to the
Registration Statement.
This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Plan or the Shares.
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 this Registration Statement
(Form S-8 No. 333-_______) pertaining to the 1998 Supplemental Stock Incentive
Plan of Ascend Communications, Inc. and to the incorporation by reference
therein of our report dated January 22, 1999, with respect to the consolidated
financial statements and schedule of Ascend Communications, Inc. included in its
Annual Report (Form 10-K) for the year ended December 31, 1998, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
----------------------
Ernst & Young LLP
Walnut Creek, California
March 26, 1999
<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 audit of the consolidated financial statements and our report
dated January 22, 1997 on our audit of the consolidated financial statement
schedule of Cascade Communications Corp. for the year ended December 31, 1996,
which reports are included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998.
/s/ PricewaterhouseCoopers LLP
-------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 26, 1999
<PAGE>
EXHIBIT 99
ASCEND COMMUNICATIONS, INC.
---------------------------
1998 SUPPLEMENTAL STOCK INCENTIVE PLAN
--------------------------------------
1. Purpose. This 1998 Supplemental Stock Incentive Plan (the "Plan") is
-------
intended to provide incentives to individuals in the employ or service of Ascend
Communications, Inc. (the "Company"), or any present or future parent or
subsidiary of the Company, (collectively, "Related Corporations"), by providing
them with: (a) opportunities to purchase stock in the Company pursuant to
options granted hereunder which do not qualify as "incentive stock options"
under Section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code") ("Options"); (b) awards of stock in the Company ("Awards"); and (c)
opportunities to make direct purchases of stock in the Company ("Purchases").
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.
Share issuances under this Plan shall not reduce or otherwise affect the
number of shares of the Company's Common Stock (the "Common Stock") available
for issuance under the 1998 Stock Incentive Plan. In addition, share issuances
under the 1998 Stock Incentive Plan shall not reduce or otherwise affect the
number of shares of Common Stock available for issuance under this Plan.
The Plan shall become effective immediately upon adoption by the Board
of Directors (the "Board") on September 22, 1998 (the "Effective Date").
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.
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.
1.
<PAGE>
3. Eligible Employees and Others. The persons eligible to participate in
-----------------------------
the Plan shall be limited to those employees (including officers and directors,
but only to the extent such individuals were not previously employed by the
Company prior to the grant and where the grant is an inducement essential to the
individual entering into an employment arrangement with the Company) and
consultants in the service of the Company (or any Related Corporation). In
addition, Stock Rights may be granted to a trust established for the benefit of
an otherwise eligible individual. The Committee may take into consideration a
recipient's individual circumstances in determining whether to grant an Option,
an Award or an authorization to make a Purchase. Granting of any Stock Right to
any individual or entity will neither entitle that individual or entity 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, or shares of Common Stock reacquired by the Company in any manner.
Subject to adjustment as provided in paragraph 14, the aggregate number of
shares which may be issued pursuant to the Plan is 6,000,000 shares. Such
authorized share reserve consists of (i) 5,000,000 shares originally authorized
for issuance under the Plan plus (ii) an additional 1,000,000 shares authorized
by the Board in March 1999. If any Stock Right granted under the 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. However, if shares held by the grantee of a Stock Right 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 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.
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.
7. 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
2.
<PAGE>
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 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.
8. Option Duration. Subject to earlier termination as provided in paragraph
---------------
10, each Option will expire on the date specified by the Committee, but not more
than ten years and one day from the date of grant.
9. Exercise of Option. Subject to the provisions of paragraphs 10 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.
10. Effect of Termination of Service. The following Provisions shall govern
--------------------------------
the exercise of any Options held by the optionee (or a trust benefiting that
employee) 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 option may be exercised within three (3) months following
the date of such cessation of service.
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 during the six (6) month period following the date of
such cessation of service. However, should such disability be deemed
3.
<PAGE>
to constitute permanent disability, then the period during which each
outstanding option for fully vested shares 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 (or the trustee if the Option continues to be
held by a trust following death) 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 10, a bona fide
----------------
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. For the purposes of this paragraph, the leave of absence
provision described above shall not apply to a consultant or advisor of the
Company or any Related Corporation.
F. Options Held in Trust. The Provisions of this paragraph 10 shall
---------------------
govern the exercise of Options held by a trust for the benefit of an otherwise
eligible individual at the time of such individual's cessation of service,
disability, death or misconduct, as well as the exercise of options held
directly by the employee.
11. Repurchase Rights. The Committee may in its discretion determine that it
-----------------
shall be a term and condition of one or more Options exercised under the Plan by
an optionee, or a trust established for the benefit of an otherwise eligible
individual, that the Company or its assigns shall have the right, exercisable
upon the optionee's, or otherwise eligible individual'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 or trust 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
4.
<PAGE>
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 whole or in part,
thereby accelerating the vesting of any or all of the purchased shares.
12. Assignability. No Option shall be assignable or transferable by the
-------------
optionee or except by will or by the laws of descent and distribution. During
the lifetime of the optionee, or individual for whom a trust has been
established, each Option may be exercised only by the optionee.
13. 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 12 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. 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.
14. Adjustments. Upon the occurrence of any of the following events, an
-----------
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.
5.
<PAGE>
(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 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.
C. Dissolution or Liquidation. In the event of the proposed dissolution
--------------------------
or liquidation of the Company, each Option will terminate immediately before the
consummation of such proposed action or at such other time and subject to such
other conditions specified by the Committee.
D. Issuances of Securities. Except as expressly provided herein, no
-----------------------
issuance by the Company of shares of stock of any
6.
<PAGE>
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.
E. 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.
F. 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 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 14 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.
15. 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.
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 14 with respect to changes in capitalization and stock dividends, no
adjustment will be made for dividends or similar rights for which the record
date is before the date such stock certificate is issued.
16. 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). 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.
7.
<PAGE>
17. 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.
18. 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.
19. 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 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.
20. Governing Law. The validity and construction of the Plan and the
-------------
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.
21. 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.
22. Non-U.S. Participants. With respect to any employees of the Company or a
---------------------
Related Corporation who reside outside the United States, and notwithstanding
anything herein to the contrary, the Committee may in its sole discretion amend
the terms of the Plan in order to conform such terms to the requirements of
local law or to meet the objectives of the Plan, and may where appropriate
establish one or more sub-plans to reflect such amended provisions.
8.
