<PAGE>
As filed with the Securities and Exchange Commission on May 24, 1996
Registration No. 33-__________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
FRACTAL DESIGN CORPORATION
(Exact name of Registrant as specified in its charter)
CALIFORNIA 77-0276903
(State of incorporation) (I.R.S. Employer Identification No.)
335 SPRECKELS DRIVE
APTOS, CA 95003
(Address of principal executive offices)
----------------------
1992 ASSUMED RAY DREAM, INC. STOCK OPTION PLAN*
1995 STOCK OPTION PLAN
(Full title of the Plans)
* assumed pursuant to an Agreement and Plan of Reorganization dated
February 17, 1996
----------------------
MARK ZIMMER
CHIEF EXECUTIVE OFFICER
FRACTAL DESIGN CORPORATION
335 SPRECKELS DRIVE
APTOS, CA 95003
(408) 688-5300
(Name, address and telephone number, including area code, of agent for service)
----------------------
Copy to:
James L. Brock, Esq.
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
(415) 854-4488
Page 1 of 8 Pages
Exhibit Index on Page 8
(Calculation of Registration Fee on following page)
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum Maximum Amount of
Amount to be Offering Price Aggregate Registration
Title of Securities to be Registered Registered Per Share Offering Price Fee
- -------------------------------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
1992 ASSUMED RAY DREAM, INC. STOCK OPTION PLAN
Common Stock,
$.001 par value . . . . . . . . . . . . . 219,459 Shares $ 1.2966 (1) $ 284,549.50 $ 98.11
1995 STOCK OPTION PLAN
Common Stock,
$.001 par value . . . . . . . . . . . . . 300,000 Shares $14.875 (2) $4,462,500 $1,538.67
</TABLE>
(1) Computed in accordance with Rule 457(h) under the Securities
Act of 1933 solely for the purpose of calculating the registration
fee. Computation based on the weighted average per share exercise
price (rounded to nearest cent) of outstanding options under the
referenced plan, the shares issuable under which are registered hereby.
(2) Estimated in accordance with Rule 457(h) and 457(c) under
the Securities Act of 1933 solely for the purpose of calculating the
registration fee. The computation with respect to unissued options is
based upon the average of the high and low sale prices of the Common
Stock as reported on The NASDAQ National Market on May 23, 1996.
2
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed with the Securities and
Exchange Commission (the "Commission") are hereby incorporated by
reference:
(a) The Registrant's Prospectus filed on May 2, 1996 pursuant to Rule
424(b)(3) of the Securities Act of 1933, as amended (the "Act"), which contains
statements for the last fiscal year for which such statements have been filed.
(b) The Registrant's quarterly report on Form 10-Q for the fiscal
quarter ending December 31, 1995.
(c) Items 1 and 2 in the Registrant's Registration
Statement on Form 8-A filed with the Commission under Section 12 of
the Exchange Act of 1934, as amended (the "Exchange Act") on September
20, 1995, including any amendment or report filed for the purpose of
updating such description.
All documents subsequently filed by the Registrant pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"), prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been
sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration
Statement and to be part hereof from the date of filing such
documents.
Item 4. DESCRIPTION OF SECURITIES. Not applicable.
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Certain legal matters with respect to the shares will be
passed upon by Venture Law Group, Professional Corporation, Menlo
Park, California. As of the date of this filing, certain attorneys of
Venture Law Group and affiliated partnerships beneficially own an
aggregate of 13,125 shares of the Company's Common Stock and options
to purchase an aggregate of 60,000 shares of the Company's Common
Stock.
Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation limit the liability of directors
for monetary damages arising from breach of their fiduciary duty to the maximum
extent permitted by the California Corporations Code ("California Law"). Such
limitation of liability does not affect the availability of equitable remedies
such as injunctive relief or recession. The limitation on monetary liability
also does not apply to liabilities arising under the federal securities laws.
The Company's Bylaws provide that the Company shall indemnify its
directors and officers to the fullest extent permitted by California Law,
including circumstances in which indemnification is otherwise discretionary
under California Law. The Company has entered into indemnification
agreements with its directors containing provisions which are in some
respects broader than the specific indemnification provisions contained in
the California Corporations Code. The indemnification agreements may require
the Company, among other things, to indemnify its directors against certain
liabilities that may arise by reason of their status or service as directors
(other than liabilities arising from willful misconduct of a culpable
nature), to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified, and to obtain director's
insurance if available on reasonable terms.
The Company believes that the limitation provision in its Articles of
Incorporation and the indemnification provisions in its Articles of
Incorporation, Bylaws and indemnification agreements will facilitate the
Company's ability to continue to attract and retain qualified individuals to
serve as directors of the Company.
3
<PAGE>
The Registrant has also obtained directors and officers' liability
insurance covering, subject to certain exceptions, actions taken by the
Registrant's directors and officers in their capacities as such.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable.
Item 8. EXHIBITS.
Exhibit
Number
---------
4.1 1992 Assumed Ray Dream, Inc. Stock Option Plan and forms of
agreements thereunder.
4.2* 1995 Stock Option Plan and form of Stock Option Agreement.
4.3* Restated Articles of Incorporation.
4.4 Restated Bylaws.
5.1 Opinion of Venture Law Group, a Professional Corporation.
23.1 Consent of Venture Law Group, a Professional Corporation
(included in Exhibit 5.1).
23.2 Consent of Independent Auditors.
24.1 Powers of Attorney (see p. 7).
_______________
* Incorporated by reference from Registrant's Registration Statement on
Form SB-2 (Registration No. 33-96942-LA), as amended, filed with the
Commission on November 9, 1995.
Item 9. UNDERTAKINGS.
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 to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) that, for purposes of determining any liability under the Securities
Act of 1933 (the "Securities 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.
(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 offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
4
<PAGE>
Insofar as the indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
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 a successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant will,
unless in the opinion of its counsel the question has already been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Fractal Design Corporation, a corporation organized and existing
under the laws of the State of California, 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 Aptos,
State of California, on this 24th day of May, 1996.
FRACTAL DESIGN CORPORATION
By: /s/ MARK ZIMMER
-----------------------------------
Mark Zimmer
Chief Executive Officer
6
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mark Zimmer, his or her attorney-in-
fact and agent, with the power of substitution and resubstitution, for him
or her and in his or her name, place or stead, in any and all capacities, to
sign any amendments to this Registration Statement on Form S-8, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting into said attorney-in-
fact and agent, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully as he or she might or could do in person, and ratifying and confirming
all that said attorney-in-fact and agent, or his or her substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
------------- ----------- --------
/s/ MARK ZIMMER Chief Executive Officer May 24, 1996
------------------------- and Director (Principal
Mark Zimmer Executive Officer)
/s/ THOMAS HEDGES Chairman of the Board
------------------------- of Directors May 24, 1996
Thomas Hedges
/s/ LESLIE WRIGHT Vice President Finance
------------------------- and Chief Financial May 22, 1996
Leslie Wright Officer (Principal
Financial Officer)
/s/ BRADEN RIPPETOE Controller (Principal
------------------------- Accounting Officer) May 24, 1996
Braden Rippetoe
/s/ ARTHUR COLLMEYER
------------------------- Director May 22, 1996
Arthur Collmeyer
/s/ CRAIG JOHNSON
------------------------- Director May 24, 1996
Craig Johnson
/s/ LEE JAY LORENZEN
------------------------- Director May 21, 1996
Lee Jay Lorenzen
/s/ STEPHEN E. MANOUSOS
------------------------- Director May 24, 1996
Stephen E. Manousos
/s/ THOMAS UNTERBERG
------------------------- Director May 24, 1996
Thomas Unterberg
------------------------- President and Director May ___, 1996
Eric Hautemont
------------------------- Director May ___, 1996
Alain Rossman
------------------------- Director May ___, 1996
Anthony Sun
7
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
- --------
4.1 1992 Assumed Ray Dream, Inc. Stock Option Plan and forms of
agreements thereunder.
4.2* 1995 Stock Option Plan and form of Stock Option Agreement.
4.3* Restated Articles of Incorporation.
4.4 Restated Bylaws.
5.1 Opinion of Venture Law Group, a Professional Corporation.
23.1 Consent of Venture Law Group, a Professional Corporation
(included in Exhibit 5.1).
23.2 Consent of Independent Auditors.
24.1 Powers of Attorney (see page 7).
* Incorporated by reference from Registrant's Registration Statement
on Form SB-2, as amended, (Registration No. 33-96942-LA) filed with
the Commission on November 9, 1995.
8
<PAGE>
RAY DREAM, INC.
1992 STOCK OPTION PLAN
Amended by the Board of Directors on May 25, 1994
Approved by the Shareholders on October 5, 1995
Amended by the Board of Directors on May 23, 1995
1. PURPOSE. The Ray Dream, Inc. 1992 Stock Option Plan (the "Plan") is
established to attract, retain and reward persons providing services to Ray
Dream, Inc. and any successor corporation thereto (collectively referred to as
the "Company"), and any present or future parent and/or subsidiary corporations
of such corporation (all of whom along with the Company being individually
referred to as a "Participating Company" and collectively referred to as the
"Participating Company Group"), and to motivate such persons to contribute to
the growth and profits of the Participating Company Group in the future. For
purposes of the Plan, a parent corporation and a subsidiary corporation shall be
as defined in sections 424(e) and 424(f) of the Internal Revenue Code of 1986,
as amended (the "Code").
2. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company (the "Board") and/or by a duly appointed committee of
the Board having such powers as shall be specified by the Board. Any subsequent
references herein to the Board shall also mean the committee if such committee
has been appointed and, unless the powers of the committee have been
specifically limited, the committee shall have all of the powers of the Board
granted herein, including, without limitation, the power to terminate or amend
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law. All questions of interpretation of the Plan or of
any options granted under the Plan (an "Option") shall be determined by the
Board, and such determinations shall be final and binding upon all persons
having an interest in the Plan and/or any Option. Options may be either
incentive stock options as defined in section 422 of the Code ("Incentive Stock
Options") or nonqualified stock options. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, or election which is the responsibility of or which
is allocated to the Company herein, provided the officer has apparent authority
with respect to such matter, right, obligation, or election.
3. ELIGIBILITY. Options may be granted only to employees (including
officers) and directors of the Participating Company Group or to individuals who
are rendering services as consultants, advisors, or other independent
contractors to the Participating Company Group. The Board shall, in its sole
discretion, determine which persons shall be granted Options (an "Optionee"). A
director of the Company may only be granted a nonqualified stock option unless
the director is also an employee of the Company. An individual who is rendering
services as a consultant, advisor, or other independent contractor may only be
granted a nonqualified stock option. Eligible persons may be granted more than
one (1) Option.
4. SHARES SUBJECT TO OPTION. Options shall be for the purchase of shares
of the authorized but unissued common stock of the Company (the "Stock"),
subject to adjustment as
<PAGE>
provided in paragraph 9 below. The maximum number of shares of Stock which
may be issued under the Plan shall be Five Hundred Six Thousand Two Hundred
Eighty (506,280) shares. In the event that any outstanding Option for any
reason expires or is terminated or canceled and/or shares of Stock subject to
repurchase are repurchased by the Company, the shares allocable to the
unexercised portion of such Option, or such repurchased shares, may again be
subject to an Option grant.
5. TIME FOR GRANTING OPTIONS. All Options shall be granted, if at all,
within ten (10) years from the earlier of the date the Plan is adopted by the
Board or the date the Plan is duly approved by the shareholders of the Company.
6. TERMS, CONDITIONS AND FORM OF OPTIONS. Subject to the provisions of
the Plan, the Board shall determine for each Option (which need not be
identical) the number of shares of Stock for which the Option shall be granted,
the option exercise price of the Option, the timing and terms of exercisability
and vesting of the Option, whether the Option is to be treated as an Incentive
Stock Option or as a nonqualified stock option and all other terms and
conditions of the Option not inconsistent with the Plan. Options granted
pursuant to the Plan shall be evidenced by written agreements specifying the
number of shares of Stock covered thereby, in such form as the Board shall from
time to time establish, which agreements may incorporate all or any of the terms
of the Plan by reference and shall comply with and be subject to the following
terms and conditions:
(A) OPTION EXERCISE PRICE. The option exercise price for each Option
shall be established in the sole discretion of the Board; provided, however,
that (i) the option exercise price per share for an Incentive Stock Option shall
be not less than the fair market value, as determined by the Board, of a share
of Stock on the date of the granting of the Option, (ii) the option exercise
price per share for a nonqualified stock option shall not be less than eighty-
five percent (85 %) of the fair market value, as determined by the Board, of a
share of Stock on the date of the granting of the Option and (iii) no Option
granted to an Optionee who at the time the Option is granted owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of a Participating Company within the meaning of section
422(b)(6) of the Code and/or ten percent (10%) of the total combined value of
all classes of stock of a Participating Company (a "Ten Percent Owner Optionee")
shall have an option exercise price per share less than one hundred ten percent
(110%) of the fair market value, as determined by the Board, of a share of Stock
on the date of the granting of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a nonqualified stock option) may be
granted with an option exercise price lower than the minimum exercise price set
forth above if such Option is granted pursuant to an assumption or substitution
for another option in a manner qualifying with the provisions of section 424(a)
of the Code.
(B) EXERCISE PERIOD OF OPTIONS. The Board shall have the power to
set the time or times within which each Option shall be exercisable or the event
or events upon the occurrence of which all or a portion of each Option shall be
exercisable and the term of each Option; provided, however, that (i) no Option
shall be exercisable after the expiration of ten (10) years after the date such
Option is granted and (ii) no Option granted to a Ten Percent Owner
-2-
<PAGE>
Optionee shall be exercisable after the expiration of five (5) years after
the date such Option is granted.
(C) PAYMENT OF OPTION EXERCISE PRICE. Payment of the option exercise
price for the number of shares of Stock being purchased pursuant to any Option
shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the
Company of shares of the Company's stock owned by the Optionee having a value,
as determined by the Board (but without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company), not less
than the option exercise price, (iii) by the Optionee's recourse promissory
note, (iv) by the assignment of the proceeds of a sale of some or all of the
shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System), or (v) by any combination thereof. The Board may at any time or from
time to time, by adoption of or by amendment to the form of Standard Option
Agreement described in paragraph 7 below, or by other means, grant Options which
do not permit all of the foregoing forms of consideration to be used in payment
of the option exercise price and/or which otherwise restrict one (1) or more
forms of consideration. Notwithstanding the foregoing, an Option may not be
exercised by tender to the Company of shares of the Company's stock to the
extent such tender of stock would constitute a violation of the provisions of
any law, regulation and/or agreement restricting the redemption of the Company's
stock. Furthermore, no promissory note shall be permitted if an exercise using
a promissory note would be a violation of any law. Any permitted promissory
note shall be due and payable not more than five (5) years after the Option is
exercised, and interest shall be payable at least annually and be at least equal
to the minimum interest rate necessary to avoid imputed interest pursuant to all
applicable sections of the Code. The Board shall have the authority to permit
or require the Optionee to secure any promissory note used to exercise an Option
with the shares of Stock acquired on exercise of the Option and/or with other
collateral acceptable to the Company.
(i) Unless otherwise provided by the Board, an Option may not be
exercised by tender to the Company of shares of the Company's stock unless such
shares of the Company's stock either have been owned by the Optionee for more
than six (6) months or were not acquired, timely or indirectly, from the
Company.
(ii) Unless otherwise provided by the Board, in the event the
Company at any time becomes subject to the regulations promulgated by the Board
of Governors of the Federal Reserve System or any other governmental entity
affecting the extension of credit in connection with the Company's securities,
any promissory note shall comply with such applicable regulations, and the
Optionee shall pay the unpaid principal and accrued interest, if any, to the
extent necessary to comply with such applicable regulations.
(iii) The Company reserves, at any and all times, the right,
in the Company's sole and absolute discretion, to establish, decline to approve
and/or terminate any program and/or procedures for the exercise of Options by
means of an assignment of the proceeds of a sale of some or all of the shares of
Stock to be acquired upon such exercise.
-3-
<PAGE>
7. STANDARD FORM OF STOCK OPTION AGREEMENT. Unless otherwise provided
for by the Board at the time an Option is granted or as otherwise provided for
by this paragraph 7, all Options shall comply with and be subject to the terms
and conditions set forth in the stock option agreement attached hereto as
Exhibit A and incorporated herein by reference (the "Standard Option
Agreement").
(A) MODIFICATIONS FOR NONQUALIFIED STOCK OPTIONS. In the event the
Option is designated as a nonqualified stock option, the Standard Option
Agreement for such Option shall be the Standard Option Agreement as modified as
set forth below unless otherwise specified by the Board:
(i) The title and paragraph 2 of the Standard Option Agreement
shall reflect the Option's status as a nonqualified stock option.
(ii) Paragraph 2 of the Standard Option Agreement shall be
modified to delete therefrom the third sentence referring to whether the entire
option qualifies on an Incentive Stock Option.
(iii) A new paragraph 7(f) shall be added to the Standard
Option Agreement providing that, in the event an Optionee is a director or
consultant or advisor but not an employee of a Participating Company at the time
the Option is granted, termination of the Optionee's status as a director or
consultant or advisor of the Participating Company shall be deemed to be
termination of the Optionee's employment for purposes of the Standard Option
Agreement.
(iv) Paragraph 14 of the Standard Option Agreement providing,
among other things, that the Optionee give the Company notice of sales upon
disqualifying dispositions of Incentive Stock Options shall be deleted and shall
not apply to the Option.
(v) Paragraph 16(d) of the Standard Option Agreement regarding
the stock certificate legend applicable to Incentive Stock Options shall be
deleted and shall not apply to the Option.
(vi) Paragraph 19 of the Standard Option Agreement shall be
modified to delete the provision that amendments to the Standard Option
Agreement may be made without the Optionee's consent if such amendments are
required to enable an Option designated as an Incentive Stock Option to qualify
as an Incentive Stock Option.
(vii) The remaining paragraphs of such modified Standard
Option Agreement for nonqualified stock options shall be renumbered accordingly.
(B) STANDARD TERM FOR OPTIONS. Unless otherwise provided for by the
Board in the grant of an Option, any Option granted hereunder shall be
exercisable for a term of ten (10) years.
8. AUTHORITY TO VARY TERMS. The Board shall have the authority from time
to time to vary the terms of the Standard Option Agreement described in
paragraph 7 above either in
-4-
<PAGE>
connection with the grant of an individual Option or in connection with the
authorization of a new standard form or forms; provided, however, that the
terms and conditions of such revised or amended standard form or forms of
stock option agreement shall be in accordance with the terms of the Plan.
Such authority shall include, but not by way of limitation, the authority to
grant Options which are immediately exercisable subject to the Company's
right to repurchase any shares of Stock acquired by an Optionee on exercise
of an Option in the event such Optionee's employment with the Participating
Company Group is terminated for any reason, with or without cause.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO PLAN. Appropriate adjustments
shall be made in the number and class of shares of Stock subject to the Plan and
to any outstanding Options and in the option exercise price of any outstanding
Options in the event of a stock dividend, stock split, reverse stock split,
combination, reclassification, or like change in the capital structure of the
Company.
10. TRANSFER OF CONTROL. A "Transfer of Control" shall be deemed to have
occurred in the event any of the following occurs with respect to the Company:
(a) the direct or indirect sale or exchange by the shareholders of
the Company of all or substantially all of the stock of the Company where the
shareholders of the Company before such sale or exchange do not retain, timely
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such sale or exchange;
(b) a merger or consolidation in which the Company is not the
surviving corporation;
(c) a merger or consolidation in which the Company is the surviving
corporation where the shareholders of the Company before such merger or
consolidation do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company after such merger or
consolidation;
(d) the sale, exchange, or transfer of all or substantially all of
the assets of the Company (other than a sale, exchange, or transfer to one (1)
or more subsidiary corporations (as defined in paragraph 1 above) of the
Company); or
(e) A liquidation or dissolution of the Company.
In the event of a Transfer of Control, the Board, in its sole discretion,
may arrange with the surviving, continuing, successor, or purchasing corporation
or parent corporation thereof, as the case may be (the "Acquiring Corporation"),
for the Acquiring Corporation to either assume the Company's rights and
obligations under outstanding Options or substitute options for the Acquiring
Corporation's stock for such outstanding Options. Any Options which are neither
assumed or substituted for by the Acquiring Corporation in connection with the
Transfer of Control nor exercised as of the date of the Transfer of Control
shall terminate and cease to be outstanding effective as of the date of the
Transfer of Control.
-5-
<PAGE>
11. PROVISION OF INFORMATION. Each Optionee and purchaser of shares of
Stock upon the exercise of an Option shall receive, at least annually, copies of
the Company's balance sheet and income statement, or substantially equivalent
financial information for the just completed fiscal year. The Company shall not
be required to deliver such information to persons whose duties in connection
with the Company assure their access to equivalent information.
12. OPTIONS NON-TRANSFERABLE. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee. No Option shall be assignable
or transferable by the Optionee, except by will or by the laws of descent and
distribution.
13. TRANSFER OF COMPANY'S RIGHTS. In the event any Participating Company
assigns, other than by operation of law, to a third person, other than another
Participating Company, any of the Participating Company's rights to repurchase
any shares of Stock acquired on the exercise of an Option, the assignee shall
pay to the assigning Participating Company the value of such right as determined
by the Company in the Company's sole discretion. Such consideration shall be
paid in cash. In the event such repurchase right is exercisable at the time of
such assignment, the value of such right shall be not less than the fair market
value of the shares of Stock which may be repurchased under such right (as
determined by the Company) minus the repurchase price of such shares. The
requirements of this paragraph 13 regarding the minimum consideration to be
received by the assigning Participating Company shall not inure to the benefit
of the Optionee whose shares of Stock are being repurchased. Failure of a
Participating Company to comply with the provisions of this paragraph 13 shall
not constitute a defense or otherwise prevent the exercise of the repurchase
right by the assignee of such right.
14. TERMINATION OR AMENDMENT OF PLAN. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan at any time;
provided, however, that without the approval of the Company's shareholders,
there shall be (a) no increase in the total number of shares of Stock covered by
the Plan (except by operation of the provisions of paragraph 9 above), (b) no
change in the class of persons eligible to receive Incentive Stock Options and
(c) no expansion in the class of persons eligible to receive nonqualified stock
options. In any event, no amendment may adversely affect any then outstanding
Option or any unexercised portion thereof, without the consent of the Optionee,
unless such amendment is required to enable an Option designated as an Incentive
Stock Option to qualify as an Incentive Stock Option.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Ray Dream, Inc. 1992 Stock Option Plan was duly adopted by
the Board of Directors of the Company on the 19th day of March, 1992; amended
by the Board of Directors on May 25, 1994; and amended by the Board of
Directors on May 23, 1995.
/s/ John Stockholm
--------------------------------
John Stockholm
-6-
<PAGE>
Date:_______________
NONQUALIFIED STOCK OPTION
EXERCISE FORM
Ray Dream, Inc.
1804 N. Shoreline Boulevard
Mountain View, CA 94043
Attention: Chief Financial Officer
Gentlemen:
The undersigned optionee (the "Optionee ") was granted a nonqualified stock
option (the "Option") to purchase shares of the common stock of Ray Dream, Inc.
(the "Company") pursuant to the Company's 1992 Stock Option Plan (the "Plan")
and pursuant to the Nonqualified Stock Option Agreement dated __________, 199__
(the "Option Agreement"). The Optionee hereby elects to exercise the Option as
to __________ shares of the common stock of the Company (the "Shares").
Enclosed herewith is full payment for the Shares in the manner set forth in
the Option Agreement. The Optionee will make adequate provision for foreign,
federal and state tax withholding obligations of the Company, if any, as more
fully set forth in the Option Agreement.
The Optionee represents and warrants that the Optionee is over eighteen
(18) years of age and that the Optionee is purchasing the Shares solely for the
Optionee's own account, and not on behalf of any other person or as a nominee,
for investment and not with a view to, or for sale in connection with, any
distribution of the Shares, other than a sale of the Shares in connection with
the Company's initial public offering of common stock.
The Optionee further represents that the Optionee does not have any present
intention of selling, offering to sell, or otherwise disposing of or
distributing the Shares or any portion thereof, other than a sale of the Shares
in connection with the Company's initial public offering of common stock; and
that the entire legal and beneficial interest in the Shares the Optionee is
purchasing is being purchased for, and will be held for the account of, the
Optionee only and neither in whole nor in part for any other person.
The Optionee acknowledges and understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and that consequently the Shares must be held indefinitely unless they are
subsequently registered under the Securities Act, an exemption from such
registration is available, or they are sold in accordance with Rule 144 or Rule
701. The Optionee further acknowledges and understands that the Company is
under no obligation to register the Shares and that, in the absence of
registration, the Shares may not be transferred. The Optionee understands that
the certificate or certificates evidencing the Shares will be imprinted with
legends which prohibit the transfer of the Shares unless they are registered or
such registration is not required in the opinion of legal counsel satisfactory
to the Company.
<PAGE>
The Optionee does not have any contract, undertaking, agreement, or
arrangement with any person to sell, transfer, or grant participation to such
person or to any third person with respect to any of the Shares, other than
an agreement to sell the Shares in connection with the Company's initial
public offering of common stock.
The Optionee is aware that Rule 144, promulgated under the Securities Act,
which permits limited public resale of securities acquired in a nonpublic
offering, is not currently available with respect to the Shares and, in any
event, is available only if certain conditions are satisfied. The Optionee
understands that any sale of the Shares that might be made in reliance upon Rule
144 may only be made in limited amounts in accordance with the terms and
conditions of such rule and that a copy of Rule 144 will be delivered to the
Optionee upon request.
The Optionee agrees that the Shares are being acquired by the Optionee in
accordance with and subject to the terms, provisions and conditions of the
Option Agreement, including the Right of First Refusal set forth therein, to all
of which the Optionee hereby expressly assents. These agreements shall inure to
the benefit of and be binding upon the Optionee's heirs, executors,
administrators, successors and assigns. The Optionee agrees, if so requested,
to deposit the certificate or certificates evidencing the Shares, along with a
blank stock assignment separate from certificate executed by the Optionee, with
an escrow agent designated by the Company, to be held by such escrow agent
pursuant to the Company's standard Joint Escrow Instructions.
The Optionee agrees that the Optionee will promptly notify the Chief
Financial Officer of the Company if the Optionee transfers any of the Shares
acquired pursuant to the Option within one (1) year from the date the Optionee
exercises all or part of the Option or within two (2) years of the date of grant
of the Option.
-2-
<PAGE>
The Optionee's address of record is:
- ----------------------------------------
- ----------------------------------------
and the Optionee's Social Security Number is: ----------------------------
Very truly yours,
----------------------------------------
Print Name:
-----------------------------
Receipt of the above is
hereby acknowledged.
RAY DREAM, INC.
By:
----------------------------------
Title:
-------------------------------
Dated:
-------------------------------
-3-
<PAGE>
Date:
---------------
INCENTIVE STOCK OPTION
EXERCISE FORM
Ray Dream, Inc.
1804 N. Shoreline Boulevard
Mountain View, CA 94043
Attention: Chief Financial Officer
Gentlemen:
The undersigned optionee (the "Optionee ,) was granted an incentive stock
option (the "Option") to purchase shares of the common stock of Ray Dream, Inc.
(the "Company") pursuant to the Company' s 1992 Stock Option Plan (the "Plan")
and pursuant to the Incentive Stock Option Agreement dated __________, 199__
(the "Option Agreement"). The Optionee hereby elects to exercise the Option as
to __________ shares of the common stock of the Company (the "Shares").
Enclosed herewith is full payment for the Shares in the manner set forth in
the Option Agreement. The Optionee will make adequate provision for foreign,
federal and state tax withholding obligations of the Company, if any, as more
fully set forth in the Option Agreement.
The Optionee represents and warrants that the Optionee is over eighteen
(18) years of age and that the Optionee is purchasing the Shares solely for the
Optionee's own account, and not on behalf of any other person or as a nominee,
for investment and not with a view to, or for sale in connection with, any
distribution of the Shares, other than a sale of the Shares in connection with
the Company's initial public offering of common stock.
The Optionee further represents that the Optionee does not have any present
intention of selling, offering to sell, or otherwise disposing of or
distributing the Shares or any portion thereof, other than a sale of the Shares
in connection with the Company's initial public offering of common stock; and
that the entire legal and beneficial interest in the Shares the Optionee is
purchasing is being purchased for, and will be held for the account of, the
Optionee only and neither in whole nor in part for any other person.
The Optionee acknowledges and understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and that consequently the Shares must be held indefinitely unless they are
subsequently registered under the Securities Act, an exemption from such
registration is available, or they are sold in accordance with Rule 144 or Rule
701. The Optionee further acknowledges and understands that the Company is
under no obligation to register the Shares and that, in the absence of
registration, the Shares may not be transferred. The Optionee understands that
the certificate or certificates evidencing the Shares will be imprinted with
legends which prohibit the transfer of the Shares unless they are registered or
such registration is not required in the opinion of legal counsel satisfactory
to the Company.
<PAGE>
The Optionee does not have any contract, undertaking, agreement, or
arrangement with any person to sell, transfer, or grant participation to such
person or to any third person with respect to any of the Shares, other than
an agreement to sell the Shares in connection with the Company's initial
public offering of common stock.
The Optionee is aware that Rule 144, promulgated under the Securities Act,
which permits limited public resale of securities acquired in a nonpublic
offering, is not currently available with respect to the Shares and, in any
event, is available only if certain conditions are satisfied. The Optionee
understands that any sale of the Shares that might be made in reliance upon Rule
144 may only be made in limited amounts in accordance with the terms and
conditions of such rule and that a copy of Rule 144 will be delivered to the
Optionee upon request.
The Optionee agrees that the Shares are being acquired by the Optionee in
accordance with and subject to the terms, provisions and conditions of the
Option Agreement, including the Right of First Refusal set forth therein, to all
of which the Optionee hereby expressly assents. These agreements shall inure to
the benefit of and be binding upon the Optionee's heirs, executors,
administrators, successors and assigns. The Optionee agrees, if so requested,
to deposit the certificate or certificates evidencing the Shares, along with a
blank stock assignment separate from certificate executed by the Optionee, with
an escrow agent designated by the Company, to be held by such escrow agent
pursuant to the Company's standard Joint Escrow Instructions.
The Optionee agrees that the Optionee will promptly notify the Chief
Financial Officer of the Company if the Optionee transfers any of the Shares
acquired pursuant to the Option within one (1) year from the date the Optionee
exercises all or part of the Option or within two (2) years of the date of grant
of the Option.
-2-
<PAGE>
The Optionee's address of record is:
- ----------------------------------------
- ----------------------------------------
and the Optionee's Social Security Number is: ----------------------------
Very truly yours,
----------------------------------------
Print Name:
-----------------------------
Receipt of the above is
hereby acknowledged.
RAY DREAM, INC.
By:
----------------------------------
Title:
-------------------------------
Dated:
--------------------------------
-3-
<PAGE>
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
RAY DREAM, INC.
INCENTIVE STOCK OPTION AGREEMENT
Ray Dream, Inc. (the "Company"), granted to the individual named below an
option to purchase certain shares of common stock of the Company, in the manner
and subject to the provisions of this Option Agreement.
1. DEFINITIONS.
(a) "Optionee" shall mean 1 ~
(b) "Date of Option Grant" shall mean 2 ~
(c) "Number of Option Shares" shall mean 3 ~ shares of common stock
of the Company as adjusted from time to time pursuant to paragraph 9 below.
(d) "Exercise Price" shall mean $0.20 per share as adjusted from
time to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the Initial Vesting Date.
(f) "Initial Vesting Date" shall be APRIL 30, 1993
(g) Determination of "Vested Ratio":
Vested Ratio
------------
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee 1/48
is continuously employed by a Participating
Company from the Date of Option Grant until
the Initial Vesting Date
<PAGE>
Plus
----
For each full month of the Optionee's 1/48
continuous employment by a Participating
Company from the Initial Vesting Date.
In no event shall the Vested Ratio exceed 1/1.
(h) "Option Term Date" shall mean date which is the tenth
anniversary of the Date of Option Grant less one day.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Company" shall mean Ray Dream, Inc., a California corporation,
and any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and (ii) any
present or future parent and/or subsidiary corporation of the Company while
such corporation is a parent or subsidiary of the Company. For purposes of
this Option Agreement, a parent corporation and a subsidiary corporation shall
be as defined in sections 424(e) and 424(f) of the Code.
(l) "Participating Company Group" shall mean at any point in time
all corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Ray Dream, Inc. 1992 Stock Option Plan.
2. STATUS OF THE OPTION. This Option is intended to be an incentive
stock option as described in section 422 of the Code, but the Company does not
represent or warrant that this Option qualifies as such. The Optionee should
consult with the Optionee's own tax advisors regarding the tax effects of this
Option and the requirements necessary to obtain favorable income tax treatment
under section 422 of the Code, including, but not limited to, holding period
requirements. (NOTE: If the aggregate Exercise Price of the Option (that is,
the Exercise Price multiplied by the Number of Option Shares) plus the
aggregate exercise price of any other incentive stock options held by the
Optionee (whether granted pursuant to the Plan or any other stock option plan
of the Participating Company Group) is greater than One Hundred Thousand
Dollars ($100,000), the Optionee should contact the Chief Financial Officer of
the Company to ascertain whether the entire Option qualifies as an incentive
stock option.)
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be
-2-
<PAGE>
final and binding upon all persons having an interest in the Option. Any
officer of a Participating Company shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, or election which is
the responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
4. EXERCISE OF THE OPTION.
(a) RIGHT TO EXERCISE. The Option shall first become exercisable on
the Initial Exercise Date. The Option shall be exercisable on and after the
Initial Exercise Date and prior to the termination of the Option in the amount
equal to the Number of Option Shares multiplied by the Vested Ratio as set
forth in paragraph 1 above less the number of shares previously acquired upon
exercise of the Option subject to the Optionee's agreement that any shares
purchased upon exercise are subject to the Company's repurchase rights set
forth in paragraph 11 below. In no event shall the Option be exercisable for
more shares than the Number of Option Shares.
(b) METHOD OF EXERCISE. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must
be delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the participating company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment
of the exercise price for the number of shares being purchased and (ii) an
executed copy, if required herein, of the then current form of escrow agreement
referenced below.
(c) FORM OF PAYMENT OF OPTION PRICE. Such payment shall be made (i)
in cash, by check, or cash equivalent, (ii) by tender to the Company of shares
of the Company's common stock owned by the Optionee having a value not less
than the option price, which either have been owned by the Optionee for more
than six (6) months or were not acquired, directly or indirectly, from the
Company, (iii) by Immediate Sales Proceeds, as defined below, or (iv) by any
combination of the foregoing. Notwithstanding the foregoing, the Option may
not be exercised by tender to the Company of shares of the Company's common
stock to the extent such tender of stock would constitute a violation of the
provisions of any law, regulation and/or agreement restricting the redemption
of the Company's common stock. "Immediate Sales Proceeds" shall mean the
assignment in form acceptable to the Company of the proceeds of a sale of some
or all of the shares acquired upon the exercise of the Option pursuant to a
program and/or procedure approved by the Company (including, without
limitation, through an exercise complying with the provisions of Regulation T
as promulgated from time to time by the Board of Governors of the Federal
Reserve System). The Company reserves, at any and all times, the right, in the
Company's sole and absolute discretion, to decline to approve any such program
and/or procedure.
(d) WITHHOLDING. At the time the Option is exercised, in whole or in
part, or at any time thereafter as requested by the Company, the Optionee hereby
authorizes payroll
-3-
<PAGE>
withholding and otherwise agrees to make adequate provision for foreign,
federal and state tax withholding obligations of the Company, if any, which
arise in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part of any shares acquired on exercise of the Option,
(iii) the operation of any law or regulation providing for the imputation of
interest, or (iv) the lapsing of any restriction with respect to any shares
acquired on exercise of the Option.
(e) CERTIFICATE REGISTRATION. The certificate or certificates for
the shares as to which the Option shall be exercised shall be registered in the
name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. The
grant of the Option and the issuance of the shares upon exercise of the Option
shall be subject to compliance with all applicable requirements of federal or
state law with respect to such securities. The Option may not be exercised if
the issuance of shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other law or regulations. IT IS
UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES. Section 260.141.11 of the Rules of
the Commissioner of Corporations of the State of California is set forth in
paragraph 15 herein. In addition, no Option may be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect
with respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable
exemption from the registration requirements of the Securities Act. THE
OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE
FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE
TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. As a
condition to the exercise of the Option, the Company may require the Optionee
to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
(g) FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NON-TRANSFERABILITY OF THE OPTION. The Option may be exercised
during the lifetime of the Optionee only by the Optionee and may not be
assigned or transferred in any manner except by will or by the laws of descent
and distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as
defined above, (b) the last date for exercising the Option following
termination of employment as described in paragraph 7 below, or (c) upon a
Transfer of Control as described in paragraph 8 below.
-4-
<PAGE>
7. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF THE OPTION. If the Optionee ceases to be an
employee of the Participating Company Group for any reason, except death or
disability, the Option, to the extent unexercised and exercisable by the
Optionee on the date on which the Optionee ceased to be an employee, may be
exercised by the Optionee within three (3) months after the date on which the
Optionee's employment terminated, but in any event no later than the Option Term
Date. If the Optionee's employment with the Company is terminated because of
the death or disability of the Optionee, the Option, to the extent unexercised
and exercisable by the Optionee on the date on which the Optionee ceased to be
an employee, may be exercised by the Optionee (or the Optionee's legal
representative) at any time prior to the expiration of twelve (12) months from
the date on which the Optionee's employment terminated, but in any event no
later than the Option Term Date. The Optionee's employment shall be deemed to
have terminated on account of death if the Optionee dies within three (3) months
after the Optionee's termination of employment. Except as provided in this
paragraph 7(a), the Option shall terminate and may not be exercised after the
Optionee ceases to be an employee of the Participating Company Group.
(b) TERMINATION OF EMPLOYMENT DEFINED. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated either
upon an actual termination of employment or upon the Optionee's employer ceasing
to be a Participating Company.
(c) EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth above is prevented by the provisions of paragraph 4(f) above, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Term Date.
(d) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b). Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above would subject the Optionee to suit under Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which the Optionee would no longer be subject to such
suit, (ii) the one hundred and ninetieth (190th) day after the Optionee's
termination of employment, or (i/i) the Option Term Date.
(e) LEAVE OF ABSENCE. For purposes hereof, the Optionee's employment
with the Participating Company Group shall not be deemed to terminate if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, however, a leave of absence
shall be treated as employment for purposes of determining the Optionee's Vested
Ratio if and only if the leave of absence is designated by the Company as (or
required by law to be) a leave for which vesting credit is given.
-5-
<PAGE>
8. OWNERSHIP CHANGE AND TRANSFER OF CONTROL. An "Ownership Change" shall
be deemed to have occurred in the event any of the following occurs with respect
to the Company:
(a) the direct or indirect sale or exchange by the shareholders of
the Company of all or substantially all of the stock of the Company;
(b) a merger or consolidation in which the Company is a party;
(c) the sale, exchange, or transfer of all or substantially all of
the assets of the Company (other than a sale, exchange, or transfer to one (1)
or more subsidiary corporations as defined in paragraph 1(k) above of the
Company; or
(d) a liquidation or dissolution of the Company.
A "Transfer of Control" shall mean an Ownership Change in which the
shareholders of the Company before such Ownership Change do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such transaction or in which the Company is not the
surviving corporation.
In the event of a Transfer of Control, the Board, in its sole discretion,
may arrange with the surviving, continuing, successor, or purchasing corporation
or parent corporation thereof, as the case may be (the "Acquiring Corporation"),
for the Acquiring Corporation to assume the Company's rights and obligations
under this Option Agreement or substitute an option for the Acquiring
Corporation's stock of the Option. The Option shall terminate and cease to be
outstanding effective as of the date of the Transfer of Control to the extent
that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the
date of the Transfer of Control.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO THE OPTION. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, combination, reclassification, or like change in the
capital structure of the Company. In the event a majority of the shares which
are of the same class as the shares that are subject to the Option are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change) shares of another corporation (the "New Shares"), the Company
may unilaterally amend the Option to provide that the Option is exercisable for
New Shares. In the event of any such amendment, the number of shares and the
exercise price shall be adjusted in a fair and equitable manner.
10. RIGHTS AS A SHAREHOLDER OR EMPLOYEE. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
-6-
<PAGE>
11. RIGHT OF FIRST REFUSAL.
(a) RIGHT OF FIRST REFUSAL. In the event the Optionee proposes to
sell, pledge, or otherwise transfer any Vested Shares (the "Transfer Shares") to
any person or entity, including, without limitation, any shareholder of the
Participating Company Group, the Company shall have the right to repurchase the
Transfer Shares under the terms and subject to the conditions set forth in this
paragraph 11 (the "Right of First Refusal").
(b) NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of
the Transfer Shares, that Optionee shall give a written notice (the "Transfer
Notice") to the Company describing fully the proposed transfer, including the
number of Transfer Shares, the name and address of the proposed transferee (the
"Proposed Transferee") and, if the transfer is voluntary, the proposed transfer
price and containing such information necessary to show the bona fide nature of
the proposed transfer. In the event of a bona fide gift or involuntary
transfer, the proposed transfer price shall be deemed to be the fair market
value of the Transfer Shares as determined by the Company in good faith. In the
event the Optionee proposes to transfer any Vested Shares to more than one (1)
Proposed Transferee, the Optionee shall provide a separate Transfer Notice for
the proposed transfer to each Proposed Transferee. The Transfer Notice shall be
signed by both the Optionee and the Proposed Transferee and must constitute a
binding commitment of the Optionee and the Proposed Transferee for the transfer
of the Transfer Shares to the Proposed Transferee subject only to the Right of
First Refusal.
(c) BONA FIDE TRANSFER. In the event that the Company shall
determine that the information provided by the Optionee in the Transfer Notice
is insufficient to establish the bona fide nature of a proposed voluntary
transfer, the Company shall give the Optionee written notice of the Optionee's
failure to comply with the procedure described in this paragraph 11 and the
Optionee shall have no right to transfer the Transfer Shares without first
complying with the procedure described in this paragraph 11. The Optionee shall
not be permitted to transfer the Transfer Shares if the proposed transfer is not
bona fide.
(d) EXERCISE OF THE RIGHT OF FIRST REFUSAL. In the event the
proposed transfer is deemed to be bona fide, the Company shall have the right to
purchase all, but not less than all, of the Transfer Shares at the purchase
price and on the terms set forth in the Transfer Notice by delivery to the
Optionee of a notice of exercise of the Right of First Refusal within thirty
(30) days after the date the Transfer Notice is delivered to the Company. The
Company's exercise or failure to exercise the Right of First Refusal with
respect to any proposed transfer described in a Transfer Notice shall not affect
the Company's ability to exercise the Right of First Refusal with respect to any
proposed transfer described in any other Transfer Notice, whether or not such
other Transfer Notice is issued by the Optionee or issued by a person other than
the Optionee with respect to a proposed transfer to the same Proposed
Transferee. If the Company exercises the Right of First Refusal, the Company
and the Optionee shall thereupon consummate the sale of the Transfer Shares to
the Company on the terms set forth in the Transfer Notice; provided, however,
that in the event the Transfer Notice provides for the payment for the Transfer
Shares other than in cash, the Company shall have the option of paying for the
Transfer Shares by the discounted cash equivalent of the consideration described
in the Transfer Notice as reasonably determined by the Company. For purposes of
the foregoing, cancellation of any indebtedness of
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<PAGE>
the Optionee to any Participating Company shall be treated as payment to the
Optionee in cash to the extent of the unpaid principal and any accrued interest
canceled.
(e) FAILURE TO EXERCISE THE RIGHT OF FIRST REFUSAL. If the Company
fails to exercise the Right of First Refusal in full within the period specified
in paragraph 11 (d) above, the Optionee may conclude a transfer to the Proposed
Transferee of the Transfer Shares on the terms and conditions described in the
Transfer Notice, provided such transfer occurs not later than one hundred twenty
(120) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Optionee and
the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the Transfer Shares was actually carried out on the terms and
conditions described in the Transfer Notice. No Transfer Shares shall be
transferred on the books of the Company until the Company has received such
assurances, if so demanded, and has approved the proposed transfer as bona
fide. Any proposed transfer on terms and conditions different from those
described in the Transfer Notice, as well as any subsequent proposed transfer
by the Optionee, shall again be subject to the Right of First Refusal and shall
require compliance by the Optionee with the procedure described in this
paragraph 11.
(f) TRANSFEREES OF THE TRANSFER SHARES. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interests subject to the provisions of this paragraph 11
providing for the Right of First Refusal with respect to any subsequent
transfer. Any sale or transfer of any shares acquired upon exercise of the
Option shall be void unless the provisions of this paragraph 11 are met.
(g) TRANSFERS NOT SUBJECT TO THE RIGHT OF FIRST REFUSAL. The Right
of First Refusal shall not apply to any transfer or exchange of the shares
acquired pursuant to the exercise of the Option if such transfer is in
connection with an Ownership Change. If the consideration received pursuant to
such transfer or exchange consists of stock of a Participating Company, such
consideration shall remain subject to the Right of First Refusal unless the
provisions of paragraph 11(i) below result in a termination of the Right of
First Refusal.
(h) ASSIGNMENT OF THE RIGHT OF FIRST REFUSAL. The Company shall have
the right to assign the Right of First Refusal at any time, whether or not the
Optionee has attempted a transfer, to one (1) or more persons as may be selected
by the Company.
(i) EARLY TERMINATION OF THE RIGHT OF FIRST REFUSAL. The other
provisions of this paragraph 11 notwithstanding, the Right of First Refusal
shall terminate, and be of no further force and effect upon (i) the occurrence
of a Transfer of Control, unless the surviving, continuing, successor, or
purchasing corporation, as the case may be, assumes the Company's rights and
obligations under the Plan, or (ii) the existence of a public market for the
class of shares subject to the Right of First Refusal. A "public market" shall
be deemed to exist if (x) such stock is listed on a national securities exchange
(as that term is used in the Exchange Act) or (y) such stock is traded on the
over-the-counter market and prices therefor are published daily on business days
in a recognized financial journal.
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<PAGE>
12. ESCROW.
(a) ESTABLISHMENT OF ESCROW. To insure shares subject to the Right
of First Refusal will be available for repurchase, the Company may require the
Optionee to deposit the certificate or certificates evidencing the shares which
the Optionee purchases upon exercise of the Option with an escrow agent
designated by the Company under the terms and conditions of an escrow agreement
approved by the Company. If the Company does not require such deposit as a
condition of exercise of the Option, the Company reserves the right at any time
to require the Optionee to so deposit the certificate or certificates in
escrow. The Company shall bear the expenses of the escrow.
(b) DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after the
expiration of the Right of First Refusal, the escrow agent shall deliver to the
Optionee the shares no longer subject to such restriction.
(c) NOTICE AND PAYMENTS. In the event the shares held in escrow are
subject to the Company's exercise of the Right of First Refusal, the notices
required to be given to the Optionee shall be given to the escrow agent and any
payment required to be given to the Optionee shall be given to the escrow
agent. Within thirty (30) days after payment by the Company, the escrow agent
shall deliver the shares which the Company has purchased to the Company and
shall deliver the payment received from the Company to the Optionee.
13. STOCK DIVIDENDS SUBJECT TO OPTION AGREEMENT. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to the Right of First Refusal with the
same force and effect as the shares subject to the Right of First Refusal
immediately before such event.
14. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION. The Optionee shall
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year from the date the Optionee exercises all or part of the Option or within
two (2) years of the date of grant of the Option. Until such time as the
Optionee disposes of such shares in a manner consistent with the provisions of
this Option Agreement, the Optionee shall hold all shares acquired pursuant to
the Option in the Optionee's name (and not in the name of any nominee) for the
one-year period immediately after exercise of the Option and the two-year period
immediately after grant of the Option. At any time during the one-year or two-
year periods set forth above, the Company may place a legend or legends on any
certificate or certificates representing shares acquired pursuant to the Option
requesting the transfer agent for the Company's stock to notify the Company of
any such transfers. The obligation of the Optionee to notify the Company of any
such transfer shall continue notwithstanding that a legend has been placed on
the certificate or certificates pursuant to the preceding sentence.
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<PAGE>
15. RULES OF THE COMMISSIONER OF CORPORATIONS. The Optionee is hereby
delivered a copy of Section 260.141.11 of the Rules of the Commissioner of
Corporations of the State of California, adopted pursuant to the California
Corporate Securities Act of 1968. References to the "Code" in the following
text are references to the California Corporations Code.
260.141.11. RESTRICTION ON TRANSFER.
(a) The issuer of any security upon which a restriction on transfer
has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall
cause a copy of this section to be delivered to each issuee or transferee of
such security at the time the certificate evidencing the security is delivered
to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate
a sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in subdivision (i) of Section 25102
of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants, or spouse, or
any custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants, or
spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other
lien given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this role not required;
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<PAGE>
(10) by way of a sale qualified under Sections 25111, 25112,
25113, or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112
or 25113 of the Code, provided that no order under Section 25140 or subdivision
(a) of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property
Law or by the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102; provided that any such transfer is on the condition that
any certificate evidencing the security issued to such transferee shall contain
the legend required by this section.
(c) The certificates representing all such securities subject to such
a restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend prominently stamped or printed
thereon in capital letters of not less than 10-point size reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMlSSIONER'S RULES."
16. LEGENDS. The Company may at any time place legends referencing the
Right of First Refusal set forth in paragraph 11 above and any applicable
federal or state securities law restrictions on all certificates representing
shares of stock subject to the provisions of this Option Agreement. The
Optionee shall, at the request of the Company, promptly present to the Company
any and all certificates representing shares acquired pursuant to the Option in
the possession of the Optionee in order to effectuate the provisions of this
paragraph.
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<PAGE>
Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
(c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH
HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THIS CORPORATION."
(d) "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION
AS DEFINED IN SECTION 422A OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL NOTIFY THE CORPORATION
IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED HOLDER HEREOF MADE
ON OR BEFORE THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE
OPTION IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY NOMINEE)
PRIOR TO THIS DATE."
17. INITIAL PUBLIC OFFERING. The Optionee hereby agrees that in the event
of an initial public offering of stock made by the Company under the Securities
Act, the Optionee shall not offer, sell, contract to sell, pledge, hypothecate,
grant any option to purchase or make any short sale of, or otherwise dispose of
any shares of stock of the Company or any rights to acquire stock of the Company
for such period of time as may be established by the underwriter for such
initial public offering; provided, however, that such period of time shall not
exceed one hundred eighty (180) days from the effective date of the registration
statement to be fled in connection with such initial public offering. The
foregoing limitation shall not apply to shares registered in the initial public
offering under the Securities Act.
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<PAGE>
18. BINDING EFFECT. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
19. TERMINATION OR AMENDMENT. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee unless such amendment is required to enable the Option to qualify as an
Incentive Stock Option.
20. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
21. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
RAY DREAM, INC.
By: /s/ Joseph Consul
---------------------------------
Title: Chief Financial Officer
------------------------------
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Right of First Refusal set
forth in paragraph 11, and hereby accepts the Option subject to all of the terms
and provisions thereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Option Agreement.
The undersigned acknowledges receipt of a copy of the Plan and a copy of
Section 260.141.11 of the Rules of the Commissioner of Corporations of the State
of California regarding restriction on transfer.
Date:
-----------------------------
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Signature
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Print Name
------------------------------
------------------------------
Address
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<PAGE>
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
RAY DREAM, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
Ray Dream, Inc. (the "Company"), granted to the individual named below an
option to purchase certain shares of common stock of the Company, in the manner
and subject to the provisions of this Option Agreement.
1. DEFINITIONS.
(a) "Optionee" shall mean 1 ~.
(b) "Date of Option Grant" shall mean MAY 23, 1995.
(c) "Number of Option Shares" shall mean 2 ~ shares of common stock
of the Company as adjusted from time to time pursuant to paragraph 9 below.
(d) "Exercise Price" shall mean $0.20 per share as adjusted from time
to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the date occurring one (1) year
after the Date of Option Grant.
(i) "Initial Vesting Date" shall be APRIL 30, 1995.
(g) Determination of "Vested Ratio":
VESTED RATIO
------------
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the 1/48
Optionee is continuously employed by a
<PAGE>
Participating Company from the Date of
Option Grant until the Initial Vesting Date
Plus
----
For each full month of the Optionee's 1/48
continuous employment by a Participating
Company from the Initial Vesting Date
In no event shall the Vested Ratio exceed 1/1.
(h) "Option Term Date" shall mean the date which is the tenth
anniversary of the Date of Option Grant less one day.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Company" shall mean Ray Dream, Inc., a California corporation,
and any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and (ii) any
present or future parent and/or subsidiary corporation of the Company while such
corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in sections 424(e) and 424(f) of the Code.
(l) "Participating Company Group" shall mean at any point in time all
corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Ray Dream, Inc. 1992 Stock Option Plan.
2. STATUS OF THE OPTION. This Option is intended to be a nonqualified
stock option and shall not be treated as an incentive stock option, as described
in section 422A of the Code.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all
persons having an interest in the Option. Any officer of a Participating
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, or election.
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<PAGE>
4. EXERCISE OF THE OPTION.
(a) RIGHT TO EXERCISE. The Option shall first become exercisable on
the Initial Exercise Date. The Option shall be exercisable on and after the
Initial Exercise Date and prior to the termination of the Option in the amount
equal to the Number of Option Shares multiplied by the Vested Ratio as set forth
in paragraph 1 above less the number of shares previously acquired upon exercise
of the Option subject to the Optionee's agreement that any shares purchased upon
exercise are subject to the Company's repurchase rights set forth in paragraph
11 below. In no event shall the Option be exercisable for more shares than the
Number of Option Shares.
(b) METHOD OF EXERCISE. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment of
the exercise price for the number of shares being purchased and (ii) an executed
copy, if required herein, of the then current form of escrow agreement
referenced below.
(c) FORM OF PAYMENT OF OPTION PRICE. Such payment shall be made (i)
in cash, by check, or cash equivalent, (ii) by tender to the Company of shares
of the Company's common stock owned by the Optionee having a value not less than
the option price, which either have been owned by the Optionee for more than six
(6) months or were not acquired, directly or indirectly, from the Company, (iii)
by Immediate Sales Proceeds, as defined below, or (iv) by any combination of the
foregoing. Notwithstanding the foregoing, the Option may not be exercised by
tender to the Company of shares of the Company's common stock to the extent such
tender of stock would constitute a violation of the provisions of any law,
regulation and/or agreement restricting the redemption of the Company's common
stock. "Immediate Sales Proceeds" shall mean the assignment in form acceptable
to the Company of the proceeds of a sale of some or all of the shares acquired
upon the exercise of the Option pursuant to a program and/or procedure approved
by the Company (including, without limitation, through an exercise complying
with the provisions of Regulation T as promulgated from time to time by the
Board of Governors of the Federal Reserve System). The Company reserves, at any
and all times, the right, in the Company's sole and absolute discretion, to
decline to approve any such program and/or procedure.
(d) WITHHOLDING. At the time the Option is exercised, in whole or in
part, or at any time thereafter as requested by the Company, the Optionee hereby
authorizes payroll withholding and otherwise agrees to make adequate provision
for foreign, federal and state tax withholding obligations of the Company, if
any, which arise in connection with the Option, including, without limitation,
obligations arising upon (i) the exercise, in whole or in part, of the Option,
(ii) the transfer, in whole or in part, of any shares acquired on exercise of
the Option, (iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares acquired on exercise of the Option.
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<PAGE>
(e) CERTIFICATE REGISTRATION. The certificate or certificates for
the shares as to which the Option shall be exercised shall be registered in the
name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. The
grant of the Option and the issuance of the shares upon exercise of the Option
shall be subject to compliance with all applicable requirements of federal or
state law with respect to such securities. The Option may not be exercised if
the issuance of shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other law or regulations. IT IS
UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES. Section 260,141.11 of the Rules of
the Commissioner of Corporations of the State of California is set forth in
paragraph 14 herein. In addition, no Option may be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS
ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. As a condition to the exercise
of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
(g) FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NON-TRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) upon a Transfer of Control
as described in paragraph 8 below.
7. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF THE OPTION. If the Optionee ceases to be an
employee of the Participating Company Group for any reason, except death or
disability within the meaning of section 422(c) of the Code, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee
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<PAGE>
within three (3) months after the date on which the Optionee's employment
terminated, but in any event no later than the Option Term Date. If the
Optionee's employment with the Company is terminated because of the death or
disability of the Optionee within the meaning of section 422(c) of the Code,
the Option, to the extent unexercised and exercisable by the Optionee on the
date on which the Optionee ceased to be an employee, may be exercised by the
Optionee (or the Optionee's legal representative) at any time prior to the
expiration of twelve (12) months from the date on which the Optionee's
employment terminated, but in any event no later than the Option Term Date.
The Optionee's employment shall be deemed to have terminated on account of
death if the Optionee dies within three (3) months after the Optionee's
termination of employment. Except as provided in this paragraph 7(a), the
Option shall terminate and may not be exercised after the Optionee ceases to be
an employee of the Participating Company Group.
(b) TERMINATION OF EMPLOYMENT DEFINED. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated either
upon an actual termination of employment or upon the Optionee's employer ceasing
to be a Participating Company.
(c) EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth above is prevented by the provisions of paragraph 4(f) above, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Term Date.
(d) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b). Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above would subject the Optionee to suit under Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which the Optionee would no longer be subject to such
suit, (ii) the one hundred and ninetieth (190th) day after the Optionee's
termination of employment, or (iii) the Option Term Date.
(e) LEAVE OF ABSENCE. For purposes hereof, the Optionee's employment
with the Participating Company Group shall not be deemed to terminate if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company) of ninety (90) days or less. In the event of a
leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, however, a leave of absence
shall be treated as employment for purposes of determining the Optionee's Vested
Ratio if and only if the leave of absence is designated by the Company as (or
required by law to be) a leave for which vesting credit is given.
(i) APPLICATION TO DIRECTORS AND CONSULTANTS. For purposes of this
Option Agreement, in the event the Optionee is a director or consultant or an
advisor but not an employee of the Participating Company at the time the Option
is granted, termination of the Optionee's status as a director or consultant or
an advisor of the Participating Company shall be deemed to be termination of the
Optionee's employment.
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<PAGE>
8. OWNERSHIP CHANGE AND TRANSFER OF CONTROL. An "Ownership Change" shall
be deemed to have occurred in the event any of the following occurs with respect
to the Company:
(a) the direct or indirect sale or exchange by the shareholders of
the Company of all or substantially all of the stock of the Company;
(b) a merger or consolidation in which the Company is a party;
(c) the sale, exchange, or transfer of all or substantially all of
the assets of the Company (other than a sale, exchange, or transfer to one (1)
or more subsidiary corporations as defined in paragraph 1(k) above of the
Company; or
(d) a liquidation or dissolution of the Company.
A "Transfer of Control" shall mean an Ownership Change in which the
shareholders of the Company before such Ownership Change do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such transaction or in which the Company is not the
surviving corporation.
In the event of a Transfer of Control, the Board, in its sole discretion,
may arrange with the surviving, continuing, successor, or purchasing corporation
or parent corporation thereof, as the case may be (the "Acquiring Corporation"),
for the Acquiring Corporation to assume the Company's rights and obligations
under this Option Agreement or substitute an option for the Acquiring
Corporation's stock of the Option. The Option shall terminate and cease to be
outstanding effective as of the date of the Transfer of Control to the extent
that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the
date of the Transfer of Control.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO THE OPTION. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, combination, reclassification, or like change in the
capital structure of the Company. In the event a majority of the shares which
are of the same class as the shares that are subject to the Option are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change) shares of another corporation (the "New Shares"), the Company
may unilaterally amend the Option to provide that the Option is exercisable for
New Shares. In the event of any such amendment, the number of shares and the
exercise price shall be adjusted in a fair and equitable manner.
10. RIGHTS AS A SHAREHOLDER OR EMPLOYEE. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
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11. RIGHT OF FIRST REFUSAL.
(a) RIGHT OF FIRST REFUSAL. In the event the Optionee proposes to
sell, pledge, or otherwise transfer any Vested Shares (the "Transfer Shares") to
any person or entity, including, without limitation, any shareholder of the
Participating Company Group, the Company shall have the right to repurchase the
Transfer Shares under the terms and subject to the conditions set forth in this
paragraph 11 (the "Right of First Refusal").
(b) NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of
the Transfer Shares, the Optionee shall give a written notice (the "Transfer
Notice") to the Company describing fully the proposed transfer, including the
number of Transfer Shares, the name and address of the proposed transferee (the
"Proposed Transferee") and, if the transfer is voluntary, the proposed transfer
price and containing such information necessary to show the bona fide nature of
the proposed transfer. In the event of a bona fide gift or involuntary
transfer, the proposed transfer price shall be deemed to be the fair market
value of the Transfer Shares as determined by the Company in good faith. In the
event the Optionee proposes to transfer any Vested Shares to more than one (1)
Proposed Transferee, the Optionee shall provide a separate Transfer Notice for
the proposed transfer to each Proposed Transferee. The Transfer Notice shall be
signed by both the Optionee and the Proposed Transferee and must constitute a
binding commitment of the Optionee and the Proposed Transferee for the transfer
of the Transfer Shares to the Proposed Transferee subject only to the Right of
First Refusal.
(c) BONA FIDE TRANSFER. In the event that the Company shall
determine that the information provided by the Optionee in the Transfer Notice
is insufficient to establish the bona fide nature of a proposed voluntary
transfer, the Company shall give the Optionee written notice of the Optionee's
failure to comply with the procedure described in this paragraph 11 and the
Optionee shall have no right to transfer the Transfer Shares without first
complying with the procedure described in this paragraph 11. The Optionee shall
not be permitted to transfer the Transfer Shares if the proposed transfer is not
bona fide.
(d) EXERCISE OF THE RIGHT OF FIRST REFUSAL. In the event the
proposed transfer is deemed to be bona fide, the Company shall have the right to
purchase all, but not less than all, of the Transfer Shares at the purchase
price and on the terms set forth in the Transfer Notice by delivery to the
Optionee of a notice of exercise of the Right of First Refusal within thirty
(30) days after the date the Transfer Notice is delivered to the Company. The
Company's exercise or failure to exercise the Right of First Refusal with
respect to any proposed transfer described in a Transfer Notice shall not affect
the Company's ability to exercise the Right of First Refusal with respect to any
proposed transfer described in any other Transfer Notice, whether or not such
other Transfer Notice is issued by the Optionee or issued by a person other than
the Optionee with respect to a proposed transfer to the same Proposed
Transferee. If the Company exercises the Right of First Refusal, the Company
and the Optionee shall thereupon consummate the sale of the Transfer Shares to
the Company on the terms set forth in the Transfer Notice; provided, however,
that in the event the Transfer Notice provides for the payment for the Transfer
Shares other than in cash, the Company shall have the option of paying for the
Transfer Shares by the discounted cash equivalent of the consideration described
in the Transfer Notice as reasonably determined by the Company. For purposes of
the foregoing, cancellation of any indebtedness of
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the Optionee to any Participating Company shall be treated as payment to the
Optionee in cash to the extent of the unpaid principal and any accrued interest
canceled.
(e) FAILURE TO EXERCISE THE RIGHT OF FIRST REFUSAL. If the Company
fails to exercise the Right of First Refusal in full within the period specified
in paragraph 11(d) above, the Optionee may conclude a transfer to the Proposed
Transferee of the Transfer Shares on the terms and conditions described in the
Transfer Notice, provided such transfer occurs not later than one hundred twenty
(120) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Optionee and
the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the Transfer Shares was actually carried out on the terms and
conditions described in the Transfer Notice. No Transfer Shares shall be
transferred on the books of the Company until the Company has received such
assurances, if so demanded, and has approved the proposed transfer as bona
fide. Any proposed transfer on terms and conditions different from those
described in the Transfer Notice, as well as any subsequent proposed transfer
by the Optionee, shall again be subject to the Right of First Refusal and shall
require compliance by the Optionee with the procedure described in this
paragraph 11.
(f) TRANSFEREES OF THE TRANSFER SHARES. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interests subject to the provisions of this paragraph 11
providing for the Right of First Refusal with respect to any subsequent
transfer. Any sale or transfer of any shares acquired upon exercise of the
Option shall be void unless the provisions of this paragraph 11 are met.
(g) TRANSFERS NOT SUBJECT TO THE RIGHT OF FIRST REFUSAL. The Right
of First Refusal shall not apply to any transfer or exchange of the shares
acquired pursuant to the exercise of the Option if such transfer is in
connection with an Ownership Change. If the consideration received pursuant to
such transfer or exchange consists of stock of a Participating Company, such
consideration shall remain subject to the Right of First Refusal unless the
provisions of paragraph 1l(i) below result in a termination of the Right of
First Refusal.
(h) ASSIGNMENT OF THE RIGHT OF FIRST REFUSAL. The Company shall have
the right to assign the Right of First Refusal at any time, whether or not the
Optionee has attempted a transfer, to one (1) or more persons as may be selected
by the Company.
(i) EARLY TERMINATION OF THE RIGHT OF FIRST REFUSAL. The other
provisions of this paragraph 11 notwithstanding, the Right of First Refusal
shall terminate, and be of no further force and effect upon (i) the occurrence
of a Transfer of Control, unless the surviving, continuing, successor, or
purchasing corporation, as the case may be, assumes the Company's rights and
obligations under the Plan, or (ii) the existence of a public market for the
class of shares subject to the Right of First Refusal. A "public market" shall
be deemed to exist if (x) such stock is listed on a national securities exchange
(as that term is used in the Exchange Act) or (y) such stock is traded on the
over-the-counter market and prices therefor are published daily on business days
in a recognized financial journal.
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12. ESCROW.
(a) ESTABLISHMENT OF ESCROW. To insure shares subject to the Right
of First Refusal will be available for repurchase, the Company may require the
Optionee to deposit the certificate or certificates evidencing the shares which
the Optionee purchases upon exercise of the Option with an escrow agent
designated by the Company under the terms and conditions of an escrow agreement
approved by the Company. If the Company does not require such deposit as a
condition of exercise of the Option, the Company reserves the right at any time
to require the Optionee to so deposit the certificate or certificates in
escrow. The Company shall bear the expenses of the escrow.
(b) DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after
the expiration of the Right of First Refusal, the escrow agent shall deliver to
the Optionee the shares no longer subject to such restriction.
(c) NOTICE AND PAYMENTS. In the event the shares held in escrow are
subject to the Company's exercise of the Right of First Refusal, the notices
required to be given to the Optionee shall be given to the escrow agent and any
payment required to be given to the Optionee shall be given to the escrow
agent. Within thirty (30) days after payment by the Company, the escrow agent
shall deliver the shares which the Company has purchased to the Company and
shall deliver the payment received from the Company to the Optionee.
13. STOCK DIVIDENDS SUBJECT TO OPTION AGREEMENT. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to the Right of First Refusal with the
same force and effect as the shares subject to the Right of First Refusal
immediately before such event.
14. RULES OF THE COMMISSIONER OF CORPORATIONS. The Optionee is hereby
delivered a copy of Section 260.141.11 of the Rules of the Commissioner of
Corporations of the State of California, adopted pursuant to the California
Corporate Securities Act of 1968. References to the "Code" in the following
text are references to the California Corporations Code.
260.141.11. RESTRICTION ON TRANSFER.
(a) The issuer of any security upon which a restriction on transfer
has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall
cause a copy of this section to be delivered to each issuee or transferee of
such security at the time the certificate evidencing the security is delivered
to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate
a sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
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(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in subdivision (i) of Section 25102
of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants, or spouse, or
any custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants, or
spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) If the interest sold or transferred is a pledge or other
lien given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112,
25113, or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112
or 25113 of the Code, provided that no order under Section 25140 or subdivision
(a) of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another state;
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(15) by the State Controller pursuant to the Unclaimed Property
Law or by the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this role, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102;
provided that any such transfer is on the condition that any
certificate evidencing the security issued to such transferee shall contain the
legend required by this section.
(c) The certificates representing all such securities subject to such
a restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend prominently stamped or printed
thereon in capital letters of not less than/O-point size reading as follows: "IT
IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED) IN THE COMMISSIONER'S RULES."
15. LEGENDS. The Company may at any time place legends referencing the
Right of First Refusal set forth in paragraph 11 above and any applicable
federal or state securities law restrictions on all certificates representing
shares of stock subject to the provisions of this Option Agreement. The
Optionee shall, at the request of the Company, promptly present to the Company
any and all certificates representing shares acquired pursuant to the Option in
the possession of the Optionee in order to effectuate the provisions of this
paragraph. Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
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(b) Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
(c) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT
OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN
AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THIS CORPORATION."
16. INITIAL PUBLIC OFFERING. The Optionee hereby agrees that in the event
of an initial public offering of stock made by the Company under the Securities
Act, the Optionee shall not offer, sell, contract to sell, pledge, hypothecate,
grant any option to purchase or make any short sale of, or otherwise dispose of
any shares of stock of the Company or any rights to acquire stock of the Company
for such period of time as may be established by the underwriter for such
initial public offering; provided, however, that such period of time shall not
exceed one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such initial public offering. The
foregoing limitation shall not apply to shares registered in the initial public
offering under the Securities Act.
17. BINDING EFFECT. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
18. TERMINATION OR AMENDMENT. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee.
19. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
20. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
RAY DREAM, INC.
By: /s/ Joseph Consul
----------------------------------
Title: Chief Financial Officer
-------------------------------
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The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Right of First Refusal set
forth in paragraph 11, and hereby accepts the Option subject to all of the terms
and provisions thereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Option Agreement.
The undersigned acknowledges receipt of a copy of the Plan and a copy of
Section 260.141.11 of the Rules of the Commissioner of Corporations of the State
of California regarding restriction on transfer.
Date:
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Signature
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Print Name
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Address
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BYLAWS
OF
FRACTAL DESIGN CORPORATION
A CALIFORNIA CORPORATION
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL EXECUTIVE OR BUSINESS OFFICES.
The Board of Directors shall fix the location of the principal executive
office of the Corporation at any place within or outside the State of
California. If the principal executive office is located outside California and
the Corporation has one (1) or more business offices in California, the Board
shall fix and designate a principal business office in California.
SECTION 2. OTHER OFFICES.
Branch or subordinate offices may be established at any time and at any
place by the Board of Directors.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS.
Meetings of Shareholders shall be held at any place within or outside the
State of California designated by the Board of Directors. In the absence of a
designation by the Board, Shareholders' meetings shall be held at the
Corporation's principal executive office.
SECTION 2. ANNUAL MEETING.
The annual meeting of the Shareholders shall be held on the third Monday in
March of each year at 10:00 a.m. If, however, this day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At this meeting, Directors shall be elected and
any other proper business within the power of the Shareholders may be
transacted.
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SECTION 3. SPECIAL MEETING.
A special meeting of the Shareholders shall be held at such time and at
such location as may be designated in the call therefore and may be called by
the Board of Directors, by the Chairman of the Board, by the President or Vice-
President, or by the Chief Financial Officer or by one (1) or more Shareholders
holding shares that in the aggregate are entitled to cast ten percent (10%) or
more of the votes at that meeting.
If a special meeting is called by anyone other than the Board of Directors,
the person or persons calling the meeting shall make a request in writing,
delivered personally or sent by registered mail or telegraphic or other
facsimile transmission, to the Chairman of the Board or the President, Vice-
President, or Secretary, specifying the time and date of the meeting (which is
not less than 35 nor more than 60 days after receipt of the request) and the
general nature of the business proposed to be transacted. Within twenty (20)
days after receipt, the Officer receiving the request shall cause notice to be
given to the Shareholders entitled to vote, in accordance with Sections 4 and 5
of this Article II, stating that a meeting will be held at the time requested by
the person(s) calling the meeting, and stating the general nature of the
business proposed to be transacted. If notice is not given within twenty (20)
days after receipt of the request, the person or persons requesting the meeting
may give the notice. Nothing contained in this paragraph shall be construed as
limiting, fixing, or affecting the time when a meeting of Shareholders called by
action of the Board may be held.
SECTION 4. NOTICE OF SHAREHOLDERS' MEETINGS.
Written notice of all annual and special meetings of Shareholders shall be
sent or otherwise given in accordance with Section 5 of this Article II, not
fewer than ten (10) nor more than sixty (60) says before the date of the
meeting. Shareholders entitled to notice shall be determined in accordance with
Section 11 of this Article II. The notice shall specify the place, date, and
hour of the meeting, and (i) in the case of a special meeting, the general
nature of the business to be transacted, an no other business may be transacted
or (ii) in the case of the annual meeting, those matters which the Board of
Directors, at the time of giving the notice, intends to present for action by
the Shareholders. If Directors are to be elected, the notice shall include the
names of all nominees whom the Board intends, at the time of the notice, to
present for election.
The notice shall also state the general nature of any proposed action to be
taken at the meeting to approve any of the following matters:
(i) A transaction in which a Director has a financial interest,
within the meaning of Section 310 of the California Corporations Code;
(ii) An Amendment of the Articles of Incorporation under Section 902
of that Code;
(iii) A reorganization under Section 1201 of that Code;
(iv) A voluntary dissolution under Section 1900 of that Code; or
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(v) A distribution in dissolution that requires approval of the
outstanding shares under Section 2007 of that Code.
SECTION 5. MANNER OF GIVING NOTICE: AFFIDAVIT OF NOTICE.
Notice of any Shareholder's meeting shall be given either personally or by
first-class mail or telegraphic or other written communication, charges
prepaid, addressed to the Shareholder at the address appearing on the
Corporation's books or given by the Shareholder to the Corporation for purposes
of notice. If no address appears on the Corporation's books or has been given
as specified above, notice shall be either (1) sent by first-class mail
addressed to the Shareholder at the Corporation's principal executive office,
or (2) published at least once in a newspaper of general circulation in the
county where the Corporation's principal executive office is located. Notice
is deemed to have been given at the time when delivered personally or deposited
in the mail or sent by other means of written communication.
If any notice or report mailed to a Shareholder at the address appearing on
the Corporation's books is returned marked to indicate that the United States
Postal Service is unable to deliver the documents to the Shareholder at that
address, all future notices or reports shall be deemed to have been duly given
without further mailing if the Corporation holds the document available for the
Shareholder on written demand at the Corporation's principal executive office
for a period of one (1) year from the date the notice or report was given to all
other Shareholders.
An affidavit of the mailing, or other authorized means of giving notice or
delivering a document, of any notice of Shareholders' meeting, report, or other
document sent to Shareholders, may be executed by the Corporation's Secretary,
Assistant Secretary, or Transfer Agent, and shall be filed and maintained in the
Minute Book of the Corporation and shall be prima facie evidence of the giving
of the notice or report.
SECTION 6. QUORUM.
The presence in person or by proxy of the Holders of a majority of the
shares entitled to vote at any meeting of the Shareholders shall constitute a
quorum for the transaction of business. The Shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough Shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
SECTION 7. ADJOURNED MEETING; NOTICE.
Any Shareholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
shares represented at that meeting, either in person or by proxy, but in the
absence of a quorum, no other business may be transacted at that meeting, except
as provided in Section 6 of this Article II.
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When any meeting of Shareholders, either annual or special, is adjourned to
another time or place, notice of the adjourned meeting need not be given if the
time and place are announced at the meeting at which the adjournment is taken,
unless a new record date for the adjourned meeting is fixed, or unless the
adjournment is for more than forty-five (45) days from the date set for the
original meeting, in which case the Board of Directors shall set a new record
date. Notice of any such adjourned meeting, if required, shall be given to each
Shareholder of record entitled to vote at the adjourned meeting, in accordance
with Sections 4 and 5 of this Article II. At any adjourned meeting, the
Corporation may transact any business that might have been transacted at the
original meeting.
SECTION 8. VOTING.
The Shareholders entitled to vote at any meeting of Shareholders shall be
determined in accordance with Section 11 of this Article II, subject to the
provisions of Sections 702 through 704 of the Corporations Code of California
(relating to voting shares held by a fiduciary, in the name of a Corporation, or
in joint ownership). The Shareholders' vote may be by voice vote or by ballot,
provided, however, that any election for Directors must be by ballot if demanded
by any Shareholder before the voting has begun. On any matter other than the
election of Directors, any Shareholder may vote part of the shares in favor of
the proposal and refrain from voting the remaining shares or vote them against
the proposal, but, if the Shareholder fails to specify the number of shares that
the Shareholder is voting affirmatively, it will be conclusively presumed that
the Shareholder's approving vote is with respect to all shares that the
Shareholder is entitled to vote. If a quorum is present (or if a quorum has
been present earlier at the meeting but some Shareholders have withdrawn), the
affirmative vote of a majority of the shares represented and voting, provided
such shares voting affirmatively also constitute a majority of the number of
shares required for a quorum, shall be the act of the Shareholders unless the
vote of a greater number or voting by classes is required by law or by the
Articles of Incorporation.
At a Shareholders' meeting at which Directors are to be elected, no
Shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which that Shareholder normally
would be entitled to cast), unless the candidates' names have been placed in
nomination before commencement of the voting and a Shareholder has given notice
at the meeting, before the voting has begun, of the Shareholder's intention to
cumulate votes. If any Shareholder has given such a notice, then all
Shareholders entitled to vote may cumulate their votes for candidates in
nomination, and may give one candidate a number of votes equal to the number of
Directors to be elected multiplied by the number of votes to which that
Shareholder's shares are normally entitled, or distribute the Shareholder's
votes on the same principle among any or all of the candidates, as the
Shareholder thinks fit. The candidates receiving the highest number of votes,
up to the number of Directors to be elected, shall be elected.
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SECTION 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS.
The transaction of any meeting of Shareholders, either annual or special,
however called and noticed and wherever held, shall be valid as though they were
had at a meeting duly held after regular call and notice, if a quorum is present
either in person or by proxy, and if each person entitled to vote who was not
present in person or by proxy, whether before or after the meeting, signs a
written waiver of notice or a consent to holding the meeting or an approval of
the Minutes of the meeting. The waiver of notice or consent need not specify
either the business to be transacted or the purpose of any annual or special
meeting of the Shareholders, except that if action is taken or proposed to be
taken for approval of any of those matters specified in Section 601(f) of the
California Corporations Code, the waiver of notice or consent is required to
state the general nature of the action or proposed action. All waivers,
consents, and approvals shall be filed with the Corporate Records or made a part
of the Minutes of the meeting.
Shareholder's attendance at a meeting also constitutes a waiver of notice
of that meeting, unless the Shareholder at the beginning of the meeting objects
to the transaction of any business on the ground that the meeting was not
lawfully called or convened. In addition, attendance at a meeting does not
constitute a waiver of any right to object to consideration of matters required
by law to be included in the notice of the meeting which were not so included,
if that objection is expressly made at the meeting.
SECTION 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
(a) Any action that could be taken at an annual or special meeting of
Shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the Holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted, subject to
Paragraph (b) of this Section.
(b) The election of a Director by the Shareholders by written consent to
fill a vacancy (other than one created by removal) not filled by the Board of
Directors requires the written consent of a majority of the outstanding shares
entitled to vote. Any other election of Directors by written consent requires
the unanimous written consent of all shares entitled to vote for the election of
Directors.
(c) All consents shall be filed with the Secretary of the Corporation and
shall be maintained in the Corporate Records. Any Shareholder giving a written
consent, or the Shareholder's Proxy holders, or a Transferee of the shares or a
personal representative of the Shareholder or their respective Proxy holders,
may revoke the consent by a writing received by the Secretary of the Corporation
prior to the time that written consents of the number of shares required to
authorize the proposed action have been filed with the Secretary of the
Corporation, but may not do so thereafter. Such revocation is effective upon
its receipt by the Secretary of the Corporation.
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(d) Unless the consents of all Shareholders entitled to vote have been
solicited in writing, prompt notice shall be given of any corporate action
approved by Shareholders without a meeting by less than unanimous consent, to
those Shareholders entitled to vote who have not consented in writing. As to
approvals required by California Corporations Code Section 310 (transactions in
which a Director has a financial interest), Section 317 (indemnification of
corporate agent), Section 1201 (corporate reorganization), and Section 2007
(certain distributions on dissolution), notice of the approval shall be given at
least ten (10) days before the consummation of any action authorized by the
approval. Notice shall be given in the manner specified in Sections 4 and 5 of
this Article II.
SECTION 11. RECORD DATE FOR SHAREHOLDER NOTICE OF MEETING, VOTING, AND
GIVING CONSENT.
(a) For purposes of determining the Shareholders entitled to receive
notice of and vote at a Shareholders' meeting or give written consent to
corporate action without a meeting, the Board may fix in advance a record date
that is not more than sixty (60) nor less than ten (10) days before the date of
a Shareholders' meeting, or not more than sixty (60) days before any other
action.
(b) If no record date is fixed:
(i) The record date for determining Shareholders entitled to receive
notice of and vote at a Shareholders' meeting shall be the business day next
preceding the day on which notice is given, or if notice is waived as provided
in Section 9 of this Article II.
(ii) The record date for determining Shareholders entitled to give
consent to corporate action in writing without a meeting, if no prior action has
been taken by the Board, shall be the day on which the first written consent is
given.
(iii) The record date for determining Shareholders for any other
purpose shall be as set forth in Section 1 of Article IX of these Bylaws.
(c) A determination of Shareholders of record entitled to receive notice
of and vote at a Shareholders' meeting shall apply to any adjournment of the
meeting unless the Board fixes a new record date for the adjourned meeting.
However, the Board shall fix a new record date if the adjournment is to a date
more than forty-five (45) days after the date set for the original meeting.
(d) Only Shareholders of record on the Corporation's books at the close of
business on the record date shall be entitled to any of the notice and voting
rights listed in subsection (a) of this Section, notwithstanding any transfer of
shares on the Corporation's books after the record date, except as otherwise
required by law.
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SECTION 12. PROXIES.
Every person entitled to vote for Directors or on any other matter shall
have the right to do so either in person or by one or more Agents authorized by
a written proxy signed by the person and filed with the Secretary of the
Corporation. A proxy shall be deemed signed if the Shareholder's name is placed
on the proxy (whether by manual signature, typewriting, telegraphic
transmission, or otherwise) by the Shareholder or the Shareholder's attorney in
fact. A validly executed proxy that does not state that it is irrevocable shall
continue in full force and effect unless (i) revoked by the person executing it,
before the vote pursuant to that proxy, by a writing delivered to the
Corporation stating that the proxy is revoked, or by attendance at the meeting
and voting in person by the person executing the proxy or by a subsequent proxy
executed by the same person and presented at the meeting; or (ii) written notice
of the death or incapacity of the Maker of that proxy is received by the
Corporation before the vote pursuant to that proxy is counted; provided,
however, that no proxy shall be valid after the expiration of eleven (11) months
from the date of the proxy, unless otherwise provided in the proxy. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Sections 705(e) and 705(f) of the Corporations
Code of California.
SECTION 13. INSPECTORS OF ELECTION.
Before any meeting of Shareholders, the Board of Directors may appoint any
persons other than nominees for office to act as inspectors of election at the
meeting or its adjournment. If no inspectors of election are so appointed, the
chairman of the meeting may, and on the request of any Shareholder or a
Shareholder's proxy shall, appoint inspectors of election at the meeting. The
number of inspectors shall be either one (1) or three (3). If inspectors are
appointed at a meeting on the request of one (1) or more Shareholders or
proxies, the Holders of a majority of shares or their proxies present at the
meeting shall determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, the chairman of the meeting may, and upon the request of any
Shareholder or a Shareholder's proxy shall, appoint a person to fill that
vacancy.
These inspectors shall: (a) determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, and the authenticity, validity, and effect of proxies; (b) receive
votes, ballots, or consents; (c) hear and determine all challenges and questions
in any way arising in connection with the right to vote; (d) count and tabulate
all votes or consents; (e) determine when the polls shall close; (f) determine
the result; and (g) do any other acts that may be proper to conduct the election
or vote with fairness to all Shareholders.
SECTION 14. ACTION WITHOUT A MEETING.
Any action which may be taken at a meeting of Shareholders may be taken
without a meeting by a writing executed by all the Shareholders entitled to
vote, such writing shall be made a part of the permanent records of the
Corporation.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 1. POWERS.
Subject to the provisions of the California General Corporation Law and
any limitations in the Articles of Incorporation and these Bylaws relating to
action required to be approved by the Shareholders or by the outstanding
shares, the business and affairs of the Corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board of
Directors.
Without prejudice to these general powers, and subject to the same
limitations, the Board of Directors shall have the power to:
(a) Select and remove all Officers, Agents, and employees of the
Corporation; prescribe any powers and duties for them that are consistent with
law, with the Articles of Incorporation, and with these Bylaws; fix their
compensation; and require from them security for faithful service.
(b) Change the principal executive office or the principal business
office in the State of California from one (1) location to another; cause the
Corporation to be qualified to do business in any other state, territory,
dependency, or country; conduct business within or outside the State of
California; and designate any place within or outside the State of California
for the holding of any Shareholder's meeting or meetings, including annual
meetings.
(c) Adopt, make, and use a corporate seal; prescribe the forms of
certificates of stock; and alter the form of the seal and certificates.
(d) Authorize the issuance of shares of stock of the Corporation on
any lawful terms, in consideration of money paid, labor done, services actually
rendered, debts or securities canceled, or tangible or intangible property
actually received.
(e) Borrow money and incur indebtedness on behalf of the Corporation,
and cause to be executed and delivered for the Corporation's purposes, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations, and other evidences of debt and securities.
SECTION 2. NUMBER AND QUALIFICATION OF DIRECTORS.
The number of authorized Directors shall be not less than five (5) nor more
than seven (7); provided, however, that the exact number of authorized Directors
shall be five (5) until changed, within the limits specified above, by a
resolution amending this Section, duly adopted by the Shareholders as set forth
in Article X, below. The maximum or minimum number of Directors cannot be
changed, nor can a fixed number be substituted for the maximum and minimum
numbers, except by a duly adopted Amendment to the Articles of Incorporation or
by an
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Amendment to this Bylaw duly approved as set forth in Article X, below. An
Amendment that would reduce the minimum number to less than five (5), however,
cannot be adopted if the votes cast against its adoption at a Shareholders'
meeting or the shares not consenting to an action by written consent are equal
to more than one sixth (1/6) of the outstanding shares entitled to vote. No
Amendment may change the stated maximum number of authorized Directors to a
number greater than two (2) times the stated minimum number minus one (1).
SECTION 3. ELECTION AND TERM OF OFFICE OF DIRECTORS.
Directors shall be elected at each annual meeting of the Shareholders to
hold office until the next annual meeting. Each Director, including a Director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
No reduction of the authorized number of Directors shall have the effect of
removing any Director before that Director's term of office expires.
SECTION 4. TENURE OF OFFICE.
Each Director shall hold office until the annual meeting of Shareholders
following his election and until his successor is elected and qualified, or
until his earlier resignation, removal from office, or death. A Director not
re-elected at any meeting of Shareholders called for that purpose shall be
deemed to have been removed from office.
SECTION 5. VACANCIES.
A vacancy in the Board of Directors shall be deemed to exist (a) if a
Director dies, resigns, or is removed by the Shareholders or an appropriate
Court, as provided in Sections 303 and 304 of the California Corporations Code;
(b) if the Board of Directors declares vacant the office of a Director who has
been convicted of a felony or declared of unsound mind by an Order of Court;
(c) if the authorized number of Directors is increased; or (d) if at any
Shareholders' meeting at which one (1) or more Directors are elected the
Shareholders fail to elect the full authorized number of Directors to be voted
for at that meeting.
Any Director may resign effective on giving written notice to the Chairman
of the Board, the President, the Secretary, or the Board of Directors, unless
the notice specifies a later effective date. If the resignation is effective at
a future time, the Board may elect a successor to take office when the
resignation becomes effective.
Except for a vacancy caused by the removal of a Director, vacancies on the
Board may be filled by a majority of the Directors then in office, whether or
not they constitute a quorum, or by a sole remaining Director. A vacancy on the
Board caused by the removal of a Director may be filled only by the
Shareholders, except that a vacancy created when the Board declares the office
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of a Director vacant as provided in clause (b) of the first paragraph of this
Section of the Bylaws may be filled by the Board of Directors.
The Shareholders may elect a Director at any time to fill a vacancy not
filled by the Board of Directors, but any such election by written consent shall
require the consent of a majority of the outstanding shares entitled to vote.
The term of office of a Director elected to fill a vacancy shall run until
the next annual meeting of the Shareholders, and such a Director shall hold
office until a successor is elected and qualified.
SECTION 6. PLACE OF MEETINGS; TELEPHONE MEETINGS.
Regular meetings of the Board of Directors may be held at any place within
or outside the State of California as designated from time to time by the
Board. In the absence of a designation, regular meetings shall be held at the
principal executive office of the Corporation. Special meetings of the Board
shall be held at any place within or outside the State of California designated
in the notice of the meeting, or if the notice does not state a place, or it
there is no notice, at the principal executive office of the Corporation. Any
meeting, regular or special, may be held by conference telephone or similar
communication equipment, provided that all Directors participating can hear one
another.
SECTION 7. ANNUAL DIRECTORS' MEETING.
Immediately after each annual Shareholders' meeting, the Board of Directors
shall hold a regular meeting at the same place, or at any other place that has
been designated by the Board of Directors, to consider matters of organization,
election of Officers, and other business as desired. Notice of this meeting
shall not be required unless some place other than the place of the annual
Shareholders' meeting has been designated.
SECTION 8. OTHER REGULAR MEETINGS.
Other regular meetings of the Board of Directors shall be held without call
at times to be fixed by the Board of Directors from time to time. Such regular
meetings may be held without notice.
SECTION 9. SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called for any purpose
or purposes at any time by the Chairman of the Board, the President, any
Vice-President, the Secretary, or any two (2) Directors.
Special meetings shall be held on four (4) days written notice by mail or
forty-eight (48) hours notice delivered personally or by telephone or
telegraph. Oral notice given personally or by
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telephone may be transmitted either to the Director or to a person at the
Director's office who can reasonably be expected to communicate it promptly to
the Director. Written notice, if used, shall be addressed to each Director at
the address shown on the Corporation's records. The notice need not specify the
purpose of the meeting, nor need it specify the place if the meeting is to be
held at the principal executive office of the Corporation.
Notice by mail shall be deemed to have been given at the time a written
notice is deposited in the United States mail, postage prepaid. Any other
written notice shall be deemed to have been given at the time it is personally
delivered to the recipient or is delivered to a common carrier for transmission,
or actually transmitted by the person giving the notice by electronic means, to
the recipient. Oral notice shall be deemed to have been given at the time it is
communicated, in person or by telephone or wireless, to the recipient or to a
person at the office of the recipient who the person giving the notice has
reason to believe will promptly communicate it to the recipient.
SECTION 10. QUORUM.
A majority of the authorized number of Directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 12 of
this Article III. Every act or decision done or made by a majority of the
authorized number of Directors shall be regarded as the act of the Board of
Directors, subject to the provisions of Corporations Code of California Section
310 (as to approval of contracts or transactions in which a Director has a
direct or indirect material financial interest), Section 311 (as to appointment
of committees), and Section 317(e) (as to indemnification of Directors). A
meeting at which a quorum is initially present may continue to transact
business, notwithstanding the withdrawal of Directors, if any action taken is
approved by at least a majority of the authorized number of Directors.
SECTION 11. WAIVER OF NOTICE.
Notice of a meeting, although otherwise required, need not be given to any
Director who (a) either before or after the meeting signs a waiver of notice or
a consent to holding the meeting without being given notice, (b) signs an
approval of the Minutes of the meeting, or (c) attends the meeting without
protesting the lack of notice before or at the beginning of the meeting.
Waivers of notice or consents need not specify the purpose of the meeting. All
waivers, consents, and approvals of the Minutes shall be filed with the
Corporate Records or made a part of the Minutes of the meeting.
SECTION 12. ADJOURNMENT TO ANOTHER TIME OR PLACE.
Whether or not a quorum is present, a majority of the Directors present may
adjourn any meeting to another time or place.
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SECTION 13. NOTICE OF ADJOURNED MEETING.
Notice of the time and place of resuming a meeting that has been adjourned
need not be given unless the adjournment is for more than twenty-four (24)
hours, in which case notice shall be given, before the time set for resuming the
adjourned meeting, to the Directors who were not present at the time of the
adjournment. Notice need not be given in any case to Directors who were present
at the time of adjournment.
SECTION 14. ACTION WITHOUT A MEETING.
Any action required or permitted to be taken by the Board of Directors may
be taken without a meeting, if all members of the Board of Directors shall
individually or collectively consent in writing to that action. Any action by
written consent shall have the same force and effect as a unanimous vote of the
Board of Directors. All written consents shall be filed with the Minutes of the
proceedings of the Board of Directors.
SECTION 15. FEES AND COMPENSATION OF DIRECTORS.
Directors and members of committees of the Board may be compensated for
their services, and shall be reimbursed for expenses, as fixed or determined by
resolution of the Board of Directors. This section shall not be construed to
preclude any Director from serving the Corporation in any other capacity, as an
Officer, Agent, employee, or otherwise, and receiving compensation for those
services.
ARTICLE IV
COMMITTEES
SECTION 1. EXECUTIVE AND OTHER COMMITTEES OF THE BOARD.
The Board of Directors may, by resolution adopted by a majority of the
authorized number of Directors, designate an executive committee or one (1) or
more other committees, each consisting of two (2) or more Directors. The Board
may designate one (1) or more Directors as alternate members of any committee,
to replace any absent member at a committee meeting. The appointment of
committee members or alternate members requires the vote of a majority of the
authorized number of Directors. A committee may be granted any or all of the
powers and authority of the Board of Directors establishing the committee,
except with respect to:
(a) Approving any action for which the California Corporations Code
also requires the approval of the Shareholders or of the outstanding shares;
(b) Filling vacancies on the Board of Directors or any committee of
the Board;
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(c) Fixing Directors' compensation for serving on the Board or a
committee of the Board;
(d) Adopting, amending, or repealing Bylaws;
(e) Amending or repealing any resolution of the Board of Directors
which by its express terms is not so amendable or repealable;
(f) Making distributions to Shareholders, except at a rate or in a
periodic amount or within a price range determined by the Board of Directors; or
(g) Appointing other committees of the Board or their members.
SECTION 2. MEETINGS AND ACTIONS OF COMMITTEES.
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, Bylaw provisions applicable to meetings and actions of the
Board of Directors, with such changes in the context of those Bylaws as are
necessary to substitute the committee and its members for the Board of Directors
and its members, except that (a) the time of regular meetings of committees may
be determined either by resolution of the Board of Directors or by resolution of
the committee; (b) special meetings of committees may also be called by
resolution of the Board of Directors; and (c) notice of special meetings of
committees shall also be given to all alternative members who shall have the
right to attend all meetings of the committee. The Board of Directors may adopt
rules for the governance of any committee not inconsistent with the provisions
of these Bylaws.
ARTICLE V
OFFICERS
SECTION 1. OFFICERS.
The Officers of the Corporation shall be a President, a Secretary, and a
Chief Financial Officer. The Corporation may also have, at the discretion of
the Board of Directors, a Chairman of the Board, one (1) or more Vice-
Presidents, one (1) or more Assistant Secretaries, one (1) or more Assistant
Treasurers, and such other Officers as may be appointed in accordance with the
provisions of Section 3 of this Article V. Any number of offices may be held by
the same person.
SECTION 2. ELECTION OF OFFICERS.
The Officers of the Corporation, except for subordinate Officers appointed
in accordance with the provisions of Section 3 of this Article V, shall be
chosen annually by the Board of Directors. An Officer need not be a Director or
Shareholder of the Corporation.
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SECTION 3. SUBORDINATE OFFICERS.
The Board of Directors may appoint, and may empower the President to
appoint other Officers as required by the business of the Corporation, whose
duties shall be as provided in the Bylaws, or as determined from time to time by
the Board of Directors or the President.
SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS.
Any Officer chosen by the Board of Directors may be removed at any time,
with or without cause or notice, by the Board of Directors. Subordinate
Officers appointed by persons other than the Board under Section 3 of this
Article V may be removed at any time, with or without cause or notice, by the
Board of Directors or by the Officer by whom appointed. Officers may be
employed for a specified term under a contract of employment if authorized by
the Board of Directors; such Officers may be removed from office at any time
under this Section, and shall have no claim against the Corporation or
individual Officers or Board members because of the removal except any right to
monetary compensation to which the Officer may be entitled under the contract of
employment.
Any Officer may resign at any time by giving written notice to the
Corporation. Resignations shall take effect on the date of receipt of the
notice, unless a later time is specified in the notice. Unless otherwise
specified in the notice, acceptance of the resignation is not necessary to make
it effective. Any resignation is without prejudice to the rights, if any, of
the Corporation to monetary damages under any contract of employment to which
the Officer is a party.
SECTION 5. VACANCIES IN OFFICES.
A vacancy in any office resulting from an Officer's death, resignation,
removal, disqualification, or from any other cause shall be filled in the manner
prescribed in these Bylaws for regular election or appointment to that office.
SECTION 6. CHAIRMAN OF THE BOARD.
The Board of Directors may elect a Chairman, who shall preside, if present,
at Board meetings and shall exercise and perform such other powers and duties as
may be assigned from time to time by the Board of Directors. If there is not
President, the Chairman of the Board shall, in addition, be the Chief Executive
Officer of the Corporation, and shall have the powers and duties as set forth in
Section 7 of this Article V.
SECTION 7. PRESIDENT.
Except to the extent that the Bylaws or the Board of Directors assign
specific powers and duties to the Chairman of the Board (if any), the President
shall be the Corporation's General Manager and Chief Executive Officer and,
subject to the control of the Board of Directors, shall
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have general supervision, direction, and control over the Corporation's
business and its Officers. The managerial powers and duties of the President
shall include, but are not limited to, all the general powers and duties of
management usually vested in the office of President of a Corporation, and the
President shall have other powers and duties as prescribed by the Board of
Directors or the Bylaws. The President shall preside at all meetings of the
Shareholders and, in the absence of the Chairman of the Board or if there is no
Chairman of the Board, shall also preside at meetings of the Board of
Directors.
SECTION 8. VICE-PRESIDENTS.
If desired, one (1) or more Vice-Presidents may be chosen by the Board of
Directors in accordance with the provisions for electing Officers set forth in
Section 2 of this Article V. In the absence or disability of the President,
the President's duties and responsibilities shall be carried out by the highest
ranking available Vice-President if Vice-Presidents are ranked, or if not, by a
Vice-President designated by the Board of Directors. When so acting, a
Vice-President shall have all the powers of and be subject to all the
restrictions on the President. Vice-Presidents of the Corporation shall have
such other powers and perform such other duties as prescribed from time to time
by the Board of Directors, the Bylaws, or the President (or Chairman of the
Board if there is no President).
SECTION 9. SECRETARY.
(a) MINUTES. The Secretary shall be present at all Shareholders'
meetings and all Board meetings and shall take the Minutes of the meeting. If
the Secretary is unable to be present, the Secretary or the presiding Officer of
the meeting shall designate another person to take the Minutes of the meeting.
The Secretary shall keep, or cause to be kept, at the principal
executive office or such other place as designated by the Board of Directors, a
book of minutes of all meetings and actions of the Shareholders, of the Board of
Directors, and of committees of the Board. The minutes of each meeting shall
state the time and place the meeting was held; whether it was regular or
special; if special, how it was called or authorized; the names of Directors
present at Board or committee meetings; the number of shares present or
represented at Shareholders' meetings; and an accurate account of the
proceedings.
(b) RECORD OF SHAREHOLDERS. The Secretary shall keep, or cause to be
kept, at the principal executive office or at the office of the transfer agent
or registrar, a record or duplicate record of Shareholders. This record shall
show the names of all Shareholders and their addresses, the number and classes
of shares held by each, the number and date of share certificates issued to each
Shareholder, and the number and date of cancellation of any certificates
surrendered for cancellation.
(c) NOTICE OF MEETINGS. The Secretary shall give notice, or cause
notice to be given, of all Shareholders' meetings, Board meetings, and meetings
of committees of the Board for which notice is required by statute or by the
Bylaws. If the Secretary or other person
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authorized by the Secretary to give notice fails to act, notice of any meeting
may be given by any other Officer of the Corporation.
(d) OTHER DUTIES. The Secretary shall keep the seal of the
Corporation, if any, in safe custody. The Secretary shall have such other
powers and perform other duties as prescribed by the Board of Directors or by
the Bylaws.
SECTION 10. CHIEF FINANCIAL OFFICER.
The Chief Financial Officer shall keep or cause to be kept adequate and
correct books and records of accounts of the properties and business
transactions of the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained earnings, and shares.
The books of account shall at all reasonable times be open to inspection by any
Director.
The Chief Financial Officer shall (1) deposit corporate funds and other
valuables in the Corporation's name and to its credit with depositories
designated by the Board of Directors; (2) make disbursements of corporate funds
as authorized by the Board; (3) render a statement of the Corporation's
financial condition and an account of all transactions conducted as Chief
Financial Officer whenever requested by the President or the Board of Directors;
(4) have other powers and perform other duties as prescribed by the Board of
Directors or the Bylaws.
Unless the Board of Directors has elected a separate Treasurer, the Chief
Financial Officer shall be deemed to be the Treasurer for purposes of giving any
reports or executing any certificates or other documents.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND OTHER AGENTS
SECTION 1. AGENTS, PROCEEDINGS, AND EXPENSES.
For the purposes of this Article, "Agent" means any person who is or was a
Director, Officer, employee, or other agent of this Corporation, or is or was
serving at the request of this Corporation as a Director, Officer, employee, or
agent of another foreign or domestic corporation, partnership, joint venture,
trust or other enterprise, or was a Director, Officer, employee, or agent of a
foreign or domestic corporation which was a Predecessor Corporation of this
Corporation or of another enterprise at the request of such Predecessor
Corporation; "proceeding" means any threatened, pending, or completed action or
proceeding, whether civil, criminal, administrative, or investigative; and
"expenses" include, without limitation, attorney's fees and any expenses of
establishing a right to indemnification under Section 4 or Section 5(c) of this
Article VI.
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SECTION 2. ACTION OTHER THAN BY THE CORPORATION.
This Corporation shall have the power to indemnify any person who was or is
a party, or is threatened to be made a party, to any proceeding (other than an
action by or in the right of this Corporation to procure a judgment in its
favor) by reason of the fact that such person is or was an Agent of this
Corporation, against expenses, judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with such proceeding if that
person acted in good faith and in a manner that that person reasonably believed
to be in the best interests of this Corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of that person was
unlawful. The termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner that the person reasonably believed to be in the best interests of this
Corporation or that the person had reasonable cause to believe that the person's
conduct was not unlawful.
SECTION 3. ACTIONS BY THE CORPORATION.
This Corporation shall have the power to indemnify any person who was or is
a party, or is threatened to be made a party, to any threatened, pending, or
completed action by or in the right of this Corporation to procure a judgment in
its favor by reason of the fact that such person is or was an Agent of this
Corporation, against expenses actually and reasonably incurred by such person in
connection with the defense or settlement of that action, if such person acted
in good faith, in a manner such person believed to be in the best interests of
this Corporation and its Shareholders. No indemnification shall be made under
this Section 3:
(a) With respect to any claim, issue, or matter as to which such
person has been adjudged to be liable to this Corporation in the performance of
such person's duty to this Corporation and its Shareholders, unless and only to
the extent that the court in which such proceeding is or was pending shall
determine upon application that, in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for expenses and then
only to the extent that the court shall determine;
(b) Of amounts paid in settling or otherwise disposing of a pending
action without court approval; or
(c) Of expenses incurred in defending a pending action that is
settled or otherwise disposed of without court approval.
SECTION 4. SUCCESSFUL DEFENSE BY AGENT.
To the extent that an Agent of this Corporation has been successful on the
merits in defense of any proceeding referred to in Sections 2 or 3 of this
Article VI or in defense of any claim, issue, or matter therein, the Agent shall
be indemnified against expenses actually and reasonably incurred by the Agent in
connection therewith.
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SECTION 5. REQUIRED APPROVAL.
Except as provided in Section 4 of this Article VI, any indemnification
under this Article shall be made by this Corporation only if authorized in the
specific case, upon a determination that indemnification of the Agent is proper
in the circumstances because the Agent has met the applicable standard of
conduct set forth in either Section 2 or 3 of this Article VI by one of the
following:
(a) A majority vote of all of the Directors who are not parties to
such proceeding;
(b) (i) The affirmative vote of a majority of the shares of this
Corporation entitled to vote represented at a duly held meeting at which a
quorum is present; or (ii) the written consent of Holders of a majority of the
outstanding shares entitled to vote (for purposes of this subsection 5(b), the
shares owned by the person to be indemnified shall not be considered
outstanding or entitled to vote thereon); or
(c) The court in which the proceeding is or was pending, on
application made by this Corporation or the Agent or the attorney or other
person rendering services in connection with the defense, whether or not such
application by the Agent, attorney, or other person is opposed by this
Corporation.
SECTION 6. ADVANCE OF EXPENSE.
Expenses incurred in defending any proceeding may be advanced by this
Corporation before the final disposition of such proceeding upon receipt of an
undertaking by or on behalf of the Agent to repay the amount of the advance if
it shall be determined ultimately that the Agent is not entitled to be
indemnified as authorized in this Article.
SECTION 7. OTHER CONTRACTUAL RIGHTS.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification maybe
entitled under any Bylaw, agreement, vote of Shareholders or disinterested
Directors, or otherwise, both as to action in any official capacity and as to
action in another capacity while holding such office, to the extent such
additional rights to indemnification are authorized in the Articles of the
Corporation. The rights of indemnity hereunder shall continue as to a person
who has ceased to be a Director, Officer, employee or Agent and shall inure to
the benefit of the heirs, executors and administrators of the person. Nothing
contained in this Section shall affect any right to indemnification to which
persons other than Agents may be entitled by contract or otherwise.
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SECTION 8. LIMITATIONS.
No indemnification or advance shall be made under this Article, except as
provided in Section 4 or Section 5(c), in any circumstance where it appears:
(a) That it would be inconsistent with a provision of the Articles,
Bylaws, a resolution of the Shareholders, or any Agreement in effect at the time
of the accrual of the alleged cause of action asserted in the proceeding in
which expenses were incurred or other amounts were paid, which prohibits or
otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
SECTION 9. INSURANCE.
If so decided by the Board of Directors, this Corporation may purchase and
maintain insurance on behalf of any Agent of the Corporation insuring against
any liability asserted against or incurred by the Agent in that capacity or
arising out of the agent's status as such, whether or not this Corporation would
have the power to indemnify the Agent against that liability under the
provisions of this Article.
SECTION 10. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN.
This Article does not apply to any proceeding against any Trustee,
Investment Manager, or other fiduciary of any employee benefit plan in that
person's capacity as such, even though that person may also be an Agent of the
Corporation. The Corporation shall have the power to indemnify, and to purchase
and maintain insurance on behalf of, any such Trustee, Investment Manager, or
other fiduciary of any benefit plan for any or all of the Directors, Officers
and employees of the Corporation or any of its subsidiary or affiliated
Corporations.
ARTICLE VII
RECORDS AND REPORTS
SECTION 1. MAINTENANCE OF SHAREHOLDER RECORD AND INSPECTION BY
SHAREHOLDERS.
The Corporation shall keep at its principal executive office or at the
office of its transfer agent or registrar, as determined by resolution of the
Board of Directors, a record of the names and addresses of all Shareholders and
the number and class of shares held by each Shareholder.
A Shareholder or Shareholders holding at least five percent (5%) in the
aggregate of the outstanding voting shares of the Corporation have the right to
do either or both of the following:
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(a) inspect and copy the record of Shareholders' names and addresses
and shareholdings during usual business hours, on five (5) days' prior written
demand on the Corporation, or
(b) obtain from the Corporation's transfer agent, on written demand
and tender of the transfer agent's usual charges for this service, a list of the
names and addresses of Shareholders who are entitled to vote for the election of
Directors, and their shareholdings, as of the most recent date for which a list
has been compiled or as of a specified date later than the date of demand. This
list shall be made available within five (5) days after (i) the date of demand,
or (ii) the specified later date as of which the list is to be compiled. The
record of Shareholders shall also be open to inspection on the written demand of
any Shareholder or Holder of a voting trust certificate, at any time during
usual business hours, for a purpose reasonably related to the Holder's interests
as a Shareholder or Holder of a voting trust certificate. Any inspection and
copying under this Section may be made in person or by an agent or attorney of
the Shareholder or Holder of a voting trust certificate making the demand.
SECTION 2. MAINTENANCE AND INSPECTION OF BYLAWS.
The Corporation shall keep at its principal executive office, or if its
principal executive office is not in the State of California, at its principal
business office in this state, the original or a copy of the Bylaws as amended
to date, which shall be open to inspection by the Shareholders at all reasonable
times during office hours. If the principal executive office of the Corporation
is outside the State of California and the Corporation has no principal business
office in this state, the Secretary shall, upon the written request of any
Shareholder, furnish to that Shareholder a copy of the Bylaws as amended to
date.
SECTION 3. MAINTENANCE AND INSPECTION OF MINUTES AND ACCOUNTING
RECORDS.
The minutes of proceedings of the Shareholders, Board of Directors, and
committees of the Board, and the accounting books and records shall be kept at
the principal executive office of the Corporation, or at such other place or
places as designated by the Board of Directors. The minutes shall be kept in
written form, and the accounting books and records shall be kept either in
written form or in a form capable of being converted into written form. The
minutes and accounting books and records shall be open to inspection on the
written demand of any Shareholder or Holder of a voting trust certificate at
any reasonable time during usual business hours, for a purpose reasonably
related to the Holder's interests as a Shareholder or Holder of a voting trust
certificate. The inspection may be made in person or by an agent or attorney,
and shall include the right to copy and make extracts. These rights of
inspection shall extend to the records of each subsidiary of the Corporation.
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SECTION 4. INSPECTION BY DIRECTORS.
Every Director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind and the physical
properties of the Corporation and each of its subsidiary Corporations. This
inspection by a Director may be made in person or by an agent or attorney and
the right of inspection includes the right to copy and make extracts of
documents.
SECTION 5. ANNUAL REPORT TO SHAREHOLDERS.
(a) Inasmuch as, and for as long as, there are fewer than one hundred
(100) Shareholders, the requirement of an annual report to Shareholders referred
to in Section 1501 of the California Corporations Code is expressly waived.
However, nothing in this Provision shall be interpreted as prohibiting the Board
of Directors from issuing annual or other periodic reports to the Shareholders,
as the Board considers appropriate.
(b) If at any time the number of Shareholders shall exceed one
hundred (100), subsection (a) shall be deemed repealed, and the following
provisions shall be substituted therefore:
The Board of Directors shall cause an annual report to be sent to the
Shareholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the Corporation. This report shall be sent at least
fifteen (15) days (if third class mail is used, 35 days) before the annual
meeting of Shareholders to be held during the next fiscal year and in the manner
specified for giving notice to Shareholders in Sections 4 and 5 of Article II of
these Bylaws. The annual report shall contain a balance sheet as of the end of
the fiscal year and an income statement and a statement of changes in financial
position for the fiscal year prepared in accordance with generally accepted
accounting principles applied on a consistent basis and accompanied by a report
of independent accountants, or, if there is no such report, the certificate of
an authorized Officer of the that the statements were prepared without audit
from the Corporation's books and records.
SECTION 6. FINANCIAL STATEMENTS.
The Corporation shall keep copies of all annual financial statements,
quarterly or other periodic income statements, and accompanying balance sheets
prepared by the Corporation on file in the Corporation's principal executive
office for twelve (12) months; these documents shall be exhibited at all
reasonable times, or copies provided, to any Shareholder on demand.
If no annual report for the last fiscal year has been sent to Shareholders,
on written request of any Shareholder made more than one hundred twenty (120)
days after the close of the fiscal year the Corporation shall deliver or mail to
the Shareholder, within thirty (30) days after receipt of the request, a balance
sheet as of the end of that fiscal year and an income statement and statement of
changes in financial position for that fiscal year.
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A Shareholder or Shareholders holding five percent (5%) or more of the
outstanding shares of any class of stock of the Corporation may request in
writing an income statement for the most recent three-month, six-month, or nine-
month period (ending more than thirty (30) days before the date of the request)
of the current fiscal year, and a balance sheet of the Corporation as of the end
of that period. If such documents are not already prepared, the Chief Financial
Officer shall cause them to be prepared and shall deliver the documents
personally or mail them to the requesting Shareholders within thirty (30) days
after receipt of the request. A balance sheet, income statement, and statement
of changes in financial position for the last fiscal year shall also be
included, unless the Corporation has sent the Shareholders an annual report for
the last fiscal year.
Quarterly income statements and balance sheets referred to in this Section
shall be accompanied by the report, if any, of independent accountants engaged
by the Corporation or the certificate of an authorized Corporate Officer stating
that the financial statements were prepared without audit from the Corporation's
books and records.
SECTION 7. ANNUAL STATEMENT OF GENERAL INFORMATION.
(a) Every year, during the calendar month in which the original
Articles of Incorporation were filed with the California Secretary of State, or
during the preceding five (5) calendar months, the Corporation shall file a
statement with the Secretary of State on the prescribed form, setting forth the
authorized number of Directors; the names and complete business or residence
addresses of all incumbent Directors; the names and complete business or
residence addresses of the Chief Executive Officer, the Secretary, and the Chief
Financial Officer; the street address of the Corporation's principal executive
office or principal business office in this state; a statement of the general
type of business constituting the principal business activity of the
Corporation; and a designation of the agent of the Corporation for the purpose
of service of process, all in compliance with Section 1502 of the Corporations
Code of California.
(b) Notwithstanding the provisions of Paragraph (a) of this Section,
if there has been no change in the information contained in the Corporation's
last annual statement on file in the Secretary of State's office, the
Corporation may, in lieu of filing the annual statement described in Paragraph
(a) of this Section, advise the Secretary of State, on the appropriate form,
that no changes in the required information have occurred during the applicable
period.
ARTICLE VIII
SHARES
SECTION 1. CERTIFICATES.
Certificates evidencing ownership of the shares of the Corporation shall be
issued to those entitled to them by subscription, transfer, or otherwise. All
certificates shall certify the number of shares and the class or series of
shares represented by the certificate. All certificates shall be signed in the
name of the Corporation by (1) either the Chairman of the Board of Directors,
the
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Vice-Chairman of the Board of Directors, the President, or any Vice-President,
and (2) either the Chief Financial Officer, any Assistant Treasurer, the
Secretary, or any Assistant Secretary. Any or all of the signatures on the
certificate may be facsimile. If any Officer, transfer agent, or registrar who
has signed or whose facsimile signature has been placed on a certificate shall
have ceased to be that Officer, transfer agent, or registrar before that
certificate is issued, the certificate may be issued by the Corporation with
the same effect as if that person were an Officer, transfer agent, or registrar
at the date of issue.
Each certificate for shares shall bear such recitals as may be required by
law. No fractional shares shall be issued. A full record of each certificate
so issued shall be entered on the stub therefor. No certificate shall be issued
for stock until the Corporation has been fully paid therefor, but subscribers
shall have the right to vote stock subscribed for while not in default.
SECTION 2. TRANSFER.
Except as provided in any agreement between the Shareholders, such
certificates shall be transferable in person or by attorney, but no transfer of
shares shall be entered upon the records of the Corporation until the previous
certificate, if any, given for the same shall have been surrendered and
canceled; provided, however, that the Board of Directors shall have power and
authority to make such rules and regulations as they deem expedient from time to
time concerning the issue, registration, or transfer of share certificates of
this Corporation, and to take such action in specific cases as they deem proper
concerning lost, destroyed, or mutilated certificates.
SECTION 3. LOST CERTIFICATES.
Except as provided in this Section 3, no new certificates for shares shall
be issued to replace old certificates unless the old certificate is surrendered
to the Corporation for cancellation at the same time. If share certificates or
certificates for any other security have been lost, stolen, or destroyed, the
Board of Directors may authorize the issuance of replacement certificates on
terms and conditions as required by the Board, which may include a requirement
that the Owner give the Corporation a bond (or other adequate security)
sufficient to indemnify the Corporation against any claim that may be made
against it (including any expense or liability) on account of the alleged loss,
theft or destruction of the old certificate or the issuance of the replacement
certificate.
ARTICLE IX
GENERAL CORPORATE MATTERS
SECTION 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING.
For purposes of determining the Shareholders entitled to receive payment of
dividends or other distributions or allotment of rights, or entitled to exercise
any rights in respect of any other
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lawful action (other than voting at and receiving notice of Shareholders'
meetings and giving written consent of the Shareholders without a meeting), the
Board of Directors may fix in advance a record date which shall be not more
than sixty (60) nor less than ten (10) days before the date of the dividend
payment, distribution, allotment, or other action. If a record date is so
fixed, only Shareholders of record at the close of business on that date shall
be entitled to receive the dividend, distribution, or allotment of rights, or
to exercise the other rights, as the case maybe, notwithstanding any transfer
of shares on the Corporation's books after the record date, except as otherwise
provided by statute.
If the Board of Directors does not so fix a record date in advance, the
record date shall be at the close of business on the latter of (1) the day on
which the Board of Directors adopts the applicable resolution or (2) the
sixtieth (60th) day before the date of the dividend payment, distribution
allotment other action.
SECTION 2. AUTHORIZED SIGNATORIES FOR CHECKS.
All checks, drafts, other orders for payment of money, notes, or other
evidences of indebtedness issued in the name of or payable to the Corporation
shall be signed or endorsed by such person persons and in such manner authorized
from time to time by resolution of the Board of Directors.
SECTION 3. EXECUTING CORPORATE CONTRACTS AND INSTRUMENTS.
Except as otherwise provided in the Articles or in these Bylaws, the Board
of Directors by resolution may authorize any Officer, Officers, Agent, or Agents
to enter into any contract or to execute any instrument in the name of and on
behalf of the Corporation. This authority may be general or its may be confined
to one (1) or more specific matters. No Officer, Agent, employee, or other
person purporting to act on behalf of the Corporation shall have any power or
authority to bind the Corporation in any way, to pledge the Corporation's
credit, or to render the Corporation liable for any purpose or in any amount,
unless that person was acting with authority duly granted by the Board of
Directors as provided in these Bylaws, or unless an unauthorized act was later
ratified by the Corporation.
SECTION 4. CORPORATE SEAL.
The corporate seal shall be circular in form, and shall have inscribed
thereon the name of the Corporation, the date of its incorporation, and the word
"California."
SECTION 5. SHARES OF OTHER CORPORATIONS: HOW VOTED.
Shares of other Corporations standing in the name of this Corporation shall
be voted by one (1) of the following persons, listed in order of preference:
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(1) Chairman of the Board; (2) President; and (3) other person designated
by the President.
The authority to vote shares granted by this Section includes the authority
to execute a proxy in the name of the Corporation for purposes of voting the
shares.
SECTION 6. REIMBURSEMENT OF CORPORATION IF PAYMENT NOT TAX DEDUCTIBLE.
If all or part of the compensation, including expenses, paid by the
Corporation to a Director, Officer, Agent, or employee is finally determined not
to be allowable to the Corporation as a federal or state income tax deduction,
the Director, Officer, Agent, or employee to whom the payment was made shall
repay to the Corporation the amount disallowed. The Board of Directors shall
enforce repayment of each such amount disallowed by the taxing authorities.
SECTION 7. CONSTRUCTION AND DEFINITIONS.
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in Sections 100 through 195 of the California
Corporations Code shall govern the construction of these Bylaws. Without
limiting the generality of this provision, the singular number includes the
plural, the plural number includes the singular, and the term "person" includes
both a Corporation and a natural person.
ARTICLE X
AMENDMENTS
SECTION 1. AMENDMENT BY SHAREHOLDERS.
New Bylaws may be adopted or these Bylaws may be amended or repealed only
by the vote or written consent of Holders of two thirds (2/3) of the outstanding
shares entitled to vote; provided, however, that if these Bylaws contain an
Article restricting transfers of stock of the Corporation, such Article may be
amended or deleted only by unanimous vote or consent of all Shareholders. New
Bylaws may not be adopted and these Bylaws may not be amended or repealed by the
Board of Directors.
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<PAGE>
ADOPTION OF BYLAWS
ACTION OF INCORPORATOR TAKEN
WITHOUT A MEETING BY WRITTEN CONSENT
The following action is taken by the Incorporator of FRACTAL DESIGN
CORPORATION, a California Corporation, by written consent, without a Meeting, on
April 22, 1991, under Section 210 of the California Corporations Code.
The following resolution approving a form of Bylaws for the government of
this Corporation is adopted:
RESOLVED that the Bylaws presented to the Incorporator be adopted as
the Bylaws of this Corporation, and that a copy of those Bylaws shall
be inserted in the Minute Book of this Corporation.
The following resolution electing the Directors of the Corporation is
adopted:
RESOLVED that the following persons are elected as Directors of this
Corporation for the ensuing fiscal year and until their successors
have been elected and qualified:
Mark Zimmer
Thomas Hedges
Lee J. Lorenzen
Stephen R. Thomas
Stephen E. Manousos
The undersigned, the Incorporator of this Corporation, consents to the
foregoing action and hereby resigns as Incorporator.
Dated: April 22, 1991
/s/ THOMAS E. MALLETT
---------------------------------------
Thomas E. Mallett, Incorporator
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FRACTAL DESIGN CORPORATION
CERTIFICATE OF ADOPTION OF BYLAWS
CERTIFICATE BY SECRETARY.
I DO HEREBY CERTIFY AS FOLLOWS:
That I am the duly elected, qualified and acting Secretary of the above-
named Corporation, that the foregoing Bylaws were adopted as the Bylaws of said
Corporation on the 22nd day of April, 1991, by Thomas E. Mallett, the person
appointed in the Articles of Incorporation to act as Incorporator.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal this 22ND day of April, 1991.
/s/ STEPHEN THOMAS
-----------------------------------
Stephen Thomas, Secretary
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CERTIFICATE OF AMENDMENT
TO THE BY-LAWS
OF
FRACTAL DESIGN CORPORATION
The undersigned, being the duly acting and appointed Secretary of Fractal
Design Corporation, a California corporation, hereby certifies that the Board of
Directors and a majority of the holders of the outstanding stock of this
corporation amended Article III, Section 3.2 of the Bylaws of this corporation
to read as follows, effective as of the date set forth below:
"NUMBER AND QUALIFICATION OF DIRECTORS. The number of directors of
the Corporation shall be not less than five (5) nor more than seven
(7). The exact number of directors shall be six (6) until changed,
within the limits specified above, by a bylaw amending this Section 2,
duly adopted by the board of directors or by the shareholders. The
indefinite number of directors may be changed, or a definite number
may be fixed without provision for an indefinite number, by a duly
adopted amendment to the articles of incorporation or by an amendment
to this bylaw duly adopted by the vote or written consent of holders
of a majority of the outstanding shares entitled to vote; provided,
however, that an amendment reducing the fixed number or the minimum
number of directors to a number less than five (5) cannot be adopted
if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of an action by written consent, are equal to
more than sixteen and two-thirds percent (16-2/3%) of the outstanding
shares entitled to vote thereon. No amendment may change the stated
maximum number of authorized directors to a number greater than two
(2) times the stated minimum number of directors minus one (1)."
Dated: January 26, 1994
/s/ CRAIG W. JOHNSON
----------------------------------
Craig W. Johnson, Secretary
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<PAGE>
CERTIFICATE OF AMENDMENT
TO THE BY-LAWS
OF
FRACTAL DESIGN CORPORATION
The undersigned, being the duly acting and appointed Secretary of Fractal Design
Corporation, a California corporation, hereby certifies that the Board of
Directors and a majority of the holders of the outstanding stock of this
corporation amended Article III, Section 3.2 of the Bylaws of this corporation
to read as follows, effective as of the date set forth below:
"NUMBER AND QUALIFICATION OF DIRECTORS. The number of directors of
the Corporation shall be not less than five (5) nor more than seven
(7). The exact number of directors shall be seven (7) until changed,
within the limits specified above, by a bylaw amending this Section 2,
duly adopted by the board of directors or by the shareholders. The
indefinite number of directors may be changed, or a definite number
may be fixed without provision for an indefinite number, by a duly
adopted amendment to the articles of incorporation or by an amendment
to this bylaw duly adopted by the vote or written consent of holders
of a majority of the outstanding shares entitled to vote; provided,
however, that an amendment reducing the fixed number or the minimum
number of directors to a number less than five (5) cannot be adopted
if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of an action by written consent are equal to
more than sixteen and two-thirds percent (16-2/3%) of the outstanding
shares entitled to vote thereon. No amendment may change the stated
maximum number of authorized directors to a number greater than two
(2) times the stated minimum number of directors minus one (1)".
Dated: September 9, 1994
/s/ CRAIG W. JOHNSON
---------------------------------
Craig W. Johnson, Secretary
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<PAGE>
CERTIFICATE OF AMENDMENT
TO THE BY-LAWS
OF
FRACTAL DESIGN CORPORATION
The undersigned, being the duly acting and appointed Secretary of Fractal
Design Corporation, a California corporation, hereby certifies that the Board of
Directors amended Article III, Section 3.2 of the Bylaws of this corporation to
read as follows, effective as of the date set forth below:
"NUMBER AND QUALIFICATION OF DIRECTORS. The number of directors of
the Corporation shall be not less than six (6) nor more than eleven
(11). The exact number of directors shall be ten (10) until changed,
within the limits specified above, by a bylaw amending this Section 2,
duly adopted by the board of directors or by the shareholders. The
indefinite number of directors may be changed, or a definite number
may be fixed without provision for an indefinite number, by a duly
adopted amendment to the articles of incorporation or by an amendment
to this bylaw duly adopted by the vote or written consent of holders
of a majority of the outstanding shares entitled to vote; provided,
however, that an amendment reducing the fixed number or the minimum
number of directors to a number less than five (5) cannot be adopted
if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of an action by written consent, are equal to
more than sixteen and two-thirds percent (16-2/3%) of the outstanding
shares entitled to vote thereon. No amendment may change the stated
maximum number of authorized directors to a number greater than two
(2) times the stated minimum number of directors minus one (1)."
Dated: May 24, 1996
/s/ CRAIG W. JOHNSON
------------------------------------
Craig W. Johnson, Secretary
<PAGE>
[VENTURE LOGO]
VENTURE LAW GROUP
-----------------
A PROFESSIONAL CORPORATION
May 24, 1996
Fractal Design Corporation
335 Spreckels Drive
Aptos, California 95003
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 (the "Registration
Statement") filed by you with the Securities and Exchange Commission (the
"Commission") on or about May 24, 1996 in connection with the registration
under the Securities Act of 1933, as amended, of an aggregate of 519,459 shares
of Common Stock (the "Shares") pursuant to the Company's 1995 Stock Option Plan
and the 1992 Assumed Ray Dream, Inc. Stock Option Plan (collectively, the
"Plans"). As your counsel in connection with the Registration Statement, we
have examined the proceedings taken and are familiar with the proceedings
proposed to be taken by you in connection with the sale and issuance of the
Shares.
It is our opinion that upon conclusion of the proceedings being taken or
contemplated under the Plans or by us, as your counsel, to be taken prior to
the issuance of the Shares, and upon completion of the proceedings being taken
in order to permit such transactions to be carried out in accordance with the
securities laws of the various states where required, the Shares when issued
and sold in the manner described in the Registration Statement will be legally
and validly issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in
the Registration Statement, including the Prospectus constituting a part
thereof, and in any amendment thereto.
Sincerely,
VENTURE LAW GROUP
A Professional Corporation
/s/ VENTURE LAW GROUP
2800 SAND HILL ROAD
MENLO PARK, CA 94025
PHONE 415-854-4488
FAX 415-854-1121
--------------------
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated September 1, 1995, which appears on
page F-2 of the Prospectus dated May 2, 1996 contained in the Registration
Statement on Form S-4 (No. 333-2110) of Fractal Design Corporation.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
San Jose, California
May 24, 1996
