<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 23, 1998
REGISTRATION NO. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
------------
DEPOTECH CORPORATION
(Exact name of Registrant as specified in its charter)
------------
CALIFORNIA 33-0387911
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
10450 SCIENCE CENTER DRIVE
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices) (Zip code)
------------
1995 STOCK OPTION/STOCK ISSUANCE PLAN
1995 EMPLOYEE STOCK PURCHASE PLAN
(Full title of the Plan)
------------
FRED A. MIDDLETON
CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
DEPOTECH CORPORATION
10450 SCIENCE CENTER DRIVE, SAN DIEGO, CALIFORNIA 92121
(619) 625-2424
(Telephone number, including area code, of agent for service)
------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
===================================================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share Price Fee
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 STOCK OPTION/STOCK
ISSUANCE PLAN
- ---------------------------------------------------------------------------------------------------
Common Stock,
no par value 620,000 shares $1.61(2) $998,200(2) $294.47
- ---------------------------------------------------------------------------------------------------
1995 EMPLOYEE STOCK
PURCHASE PLAN
- ---------------------------------------------------------------------------------------------------
Common Stock,
no par value 75,000 shares $1.61(2) $120,750(2) $35.62
Aggregate Registration Fee: $330.09
===================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of Common
Stock which become issuable under the: (i) 1995 Stock Option/Stock Issuance
Plan or (ii) 1995 Employee Stock Purchase Plan by reason of any stock
dividend, stock split, recapitalization or any other similar transaction
effected without the Registrant's receipt of consideration which results in
an increase in the number of outstanding shares of the Registrant's Common
Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the high
and low selling prices per share of the Registrant's Common Stock on June
18, 1998, as reported on the Nasdaq National Market.
================================================================================
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
DepoTech Corporation (the "Registrant") hereby incorporates by reference
into this Registration Statement the following documents previously filed with
the Securities and Exchange Commission (the "SEC"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, filed with the SEC on March 31, 1998;
(b) The Registrant's Quarterly Report on Form 10-Q, as amended, for the
fiscal quarter ended March 31, 1998, filed with the SEC on May 15,
1998 and June 12, 1998, respectively; and
(c) The Registrant's Registration Statement No. 0-26862 on Form 8-A filed
with the SEC on September 26, 1995 in which the terms, rights and
provisions applicable to the Registrant's Common Stock are described.
All reports and definitive proxy or information statements filed pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act") after the date of this Registration Statement and prior
to the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then remaining
unsold shall be deemed to be incorporated by reference into this Registration
Statement and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Registration Statement to the extent that a statement contained herein or
in any subsequently filed document which also is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) Section 317 of the California General Corporation Law allows the
Registrant to indemnify its officers and directors against expenses, judgments,
fines and amounts paid in settlement under certain conditions and subject to
certain limitations.
(b) Article VI of the Bylaws of the Registrant provides that the Registrant
shall have power to indemnify any person who is or was an agent of the
Registrant as provided in Section 317 of the California General Corporation Law.
The rights to indemnity thereunder continue as to a person who has ceased to be
a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of the person. In addition, expenses
incurred by a director or officer in defending a civil or criminal action, suit
or proceeding by reason of the fact that he or she is or was a director or
officer
II-2
<PAGE> 3
of the Registrant (or was serving at the Registrant's request as a director or
officer of another corporation) shall be paid by the Registrant in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the Registrant as authorized by the relevant section of the
California General Corporation Law.
(c) Article IV of the Registrant's Articles of Incorporation provides that
the liability of the directors of the Registrant for monetary damages shall be
eliminated to the fullest extent permissible under California law. Accordingly,
a director will not be liable for monetary damages for breach of duty to the
Registrant or its shareholders in any action brought by or in the right of the
Registrant. However, a director remains liable to the extent required by law for
(i) acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law, (ii) acts or omissions that a director believes to be
contrary to the best interests of the Registrant or its shareholders or that
involve the absence of good faith on the part of the director, (iii) any
transaction from which a director derived an improper personal benefit, (iv)
acts or omissions that show a reckless disregard for the director's duty to the
Registrant or its shareholders in circumstances in which the director was aware,
or should have been aware, in the ordinary course of performing a director's
duties, of a risk of serious injury to the Registrant or its shareholders, (v)
acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the Registrant or its
shareholders, (vi) any act or omission occurring prior to the date when the
exculpation provision became effective and (vii) any act or omission as an
officer, notwithstanding that the officer is also a director or that his or her
actions, if negligent or improper, have been ratified by the directors. The
effect of the provisions in the Articles of Incorporation is to eliminate the
rights of the Registrant and its shareholders (through shareholders' derivative
suits on behalf of the Registrant) to recover monetary damages against a
director for breach of duty as a director, including breaches resulting from
negligent behavior in the context of transactions involving a change of control
of the Registrant or otherwise, except in the situations described in clauses
(i) through (vii) above. These provisions will not alter the liability of
directors under federal securities laws.
(d) Pursuant to authorization provided under the Articles of Incorporation,
the Registrant has entered into indemnification agreements with each of its
directors and officers. Generally, the indemnification agreements attempt to
provide the maximum protection permitted by California law as it may be amended
from time to time. Moreover, the indemnification agreements provide for certain
additional indemnification. Under such additional indemnification provisions,
however, an individual will not receive indemnification for judgments,
settlements or expenses if he or she is found liable to the Registrant (except
to the extent the court determines he or she is fairly and reasonably entitled
to indemnity for expenses), for settlements not approved by the Registrant or
for settlements and expenses if the settlement is not approved by the court. The
indemnification agreements provide for the Registrant to advance to the
individual any and all reasonable expenses (including legal fees and expenses)
incurred in investigating or defending any such action, suit or proceeding. In
order to receive an advance of expenses, the individual must submit to the
Registrant copies of invoices presented to him or her for such expenses. Also,
the individual must repay such advances upon a final judicial decision that he
or she is not entitled to indemnification. The Registrant's Bylaws contain a
provision of similar effect relating to advancement of expenses to a director or
officer, subject to an undertaking to repay if it is ultimately determined that
indemnification is unavailable.
(e) The Registrant maintains a directors' and officers' liability insurance
policy that, subject to certain limitations, terms and conditions, will insure
the directors and officers of the Registrant against losses arising from
wrongful acts (as defined by the policy) in his or her capacity as a director or
officer.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
II-3
<PAGE> 4
ITEM 8. EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
4 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 0-26862 on Form 8-A, which is
incorporated herein by reference pursuant to Item 3(c) of this
Registration Statement.
5 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-5 of this Registration
Statement.
99.1 1995 Stock Option/Stock Issuance Plan (as amended and restated as of May
13, 1998).
99.2 1995 Employee Stock Purchase Plan (as amended and restated as of May 13,
1998).
</TABLE>
ITEM 9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this Registration Statement (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the "1933 Act"), (ii) to
reflect in the prospectus any facts or events arising after the effective date
of this Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement, and (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change to
such information in this Registration Statement; provided, however, that clauses
(1)(i) and (1)(ii) shall not apply if the information required to be included in
a post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act
that are incorporated by reference into this Registration Statement; (2) that
for the purpose of determining any liability under the 1933 Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold upon the termination of the
Registrant's 1995 Stock Option/Stock Issuance Plan and/or 1995 Employee Stock
Purchase Plan.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into this Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers or controlling persons of the Registrant
pursuant to the indemnity provisions summarized in Item 6 or otherwise, the
Registrant has been informed that in the opinion of the SEC such indemnification
is against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California on June 18, 1998.
DEPOTECH CORPORATION
By: /s/ Fred A. Middleton
-------------------------------------
Fred A. Middleton
Chief Executive Officer and
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned officers and directors of DepoTech Corporation, a
California corporation, do hereby constitute and appoint Fred A. Middleton and
Dana S. McGowan and each of them, the lawful attorneys-in-fact and agents, with
full power and authority to do any and all acts and things and to execute any
and all instruments which said attorneys and agents, or either one of them,
determine may be necessary or advisable or required to enable said corporation
to comply with the Securities Act of 1933, as amended, and any rules or
regulation or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement and to any and all instruments or documents filed as part
of or in conjunction with this Registration Statement or amendments or
supplements thereto, and each of the undersigned hereby ratifies and confirms
all that said attorneys and agents, or either one of them, shall do or cause to
be done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Fred A. Middleton
- ---------------------------------- Chief Executive Officer and
Fred A. Middleton Chairman of the Board June 18, 1998
(Principal Executive Officer)
</TABLE>
II-5
<PAGE> 6
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ John P. Longenecker, Ph.D.
- ---------------------------------- President and June 18, 1998
John P. Longenecker, Ph.D. Chief Operating Officer
/s/ Dana S. McGowan
- ---------------------------------- Vice President Finance and June 18, 1998
Dana S. McGowan Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Roger C. Davisson
- ---------------------------------- Director June 18, 1998
Roger C. Davisson
/s/ George W. Dunbar, Jr.
- ---------------------------------- Director June 18, 1998
George W. Dunbar, Jr.
/s/ Stephen B. Howell, M.D.
- ---------------------------------- Director June 18, 1998
Stephen B. Howell, M.D.
/s/ Peter Preuss
- ---------------------------------- Director June 18, 1998
Peter Preuss
/s/ Pieter J. Strijkert, Ph.D.
- ---------------------------------- Director June 18, 1998
Pieter J. Strijkert, Ph.D.
</TABLE>
II-6
<PAGE> 7
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
DEPOTECH CORPORATION
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Exhibit
------- -------
<S> <C>
4 Instruments Defining Rights of Stockholders. Reference is made to Registrant's Registration
Statement No. 0-26862 on Form 8-A, which is incorporated herein by reference pursuant
to Item 3(c) of this Registration Statement.
5 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-5 of this Registration Statement.
99.1 1995 Stock Option/Stock Issuance Plan (as amended and restated as of May 13, 1998).
99.2 1995 Employee Stock Purchase Plan (as amended and restated as of May 13, 1998).
</TABLE>
<PAGE> 1
EXHIBIT 5
Opinion of Brobeck, Phleger & Harrison LLP
June 18, 1998
DepoTech Corporation
10450 Science Center Drive
San Diego, CA 92121
Re: DepoTech Corporation Registration Statement on Form S-8 for
695,000 Shares of Common Stock and Related Stock Options
Ladies and Gentlemen:
We have acted as counsel to DepoTech Corporation, a California
corporation (the "Company"), in connection with the registration on Form S-8
(the "Registration Statement") under the Securities Act of 1933, as amended, of
an additional 695,000 shares of common stock (the "Shares") and related stock
options for issuance under the Company's 1995 Stock Option/Stock Issuance Plan
(the "Option Plan") and the 1995 Employee Stock Purchase Plan (the "Purchase
Plan").
This opinion is being furnished in accordance with the requirements of
Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the establishment and
amendment of the Plan. Based on such review, we are of the opinion that if, as
and when the Shares are issued and sold (and the consideration thereof received)
pursuant to (a) the provisions of option agreements duly authorized under the
Plan and in accordance with the Registration Statement or (b) duly authorized
direct stock issuance in accordance with the Plan and in accordance with the
Registration Statement, such Shares will be duly authorized, legally issued,
fully paid and non-assessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement.
This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you or facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Plan or the Shares.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
-----------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the 1995 Stock Option/Stock Issuance Plan
and the 1995 Employee Stock Purchase Plan of DepoTech Corporation of our report
dated February 6, 1998, with respect to the financial statements of DepoTech
Corporation incorporated by reference in its Annual Report (Form 10-K) for the
year ended December 31, 1997, filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
----------------------
ERNST & YOUNG LLP
San Diego, California
June 18, 1998
<PAGE> 1
EXHIBIT 99.1
1995 Stock Option/Stock Issuance Plan (as amended
and restated as of May 13, 1998)
<PAGE> 2
DEPOTECH CORPORATION
1995 STOCK OPTION/STOCK ISSUANCE PLAN
(AMENDED AND RESTATED AS OF MAY 13, 1998)
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan ("Plan") is intended
to promote the interests of DepoTech Corporation, a California corporation (the
"Corporation"), by providing (i) key employees (including officers) of the
Corporation (or its parent or subsidiary corporations) who are responsible for
the management, growth and financial success of the Corporation (or its parent
or subsidiary corporations), (ii) Directors and (iii) consultants and other
independent contractors who provide valuable services to the Corporation (or its
parent or subsidiary corporations) with the opportunity to acquire or increase
their proprietary interest in the Corporation as an incentive for them to remain
in the service of the Corporation (or its parent or subsidiary corporations).
II. GENERAL
A. Effective Date. The Plan shall become effective on the first
date on which shares of the Corporation's common stock are registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "1934
Act"). Such date is hereby designated as the "Effective Date" of this Plan.
B. Predecessor Plans. This Plan shall serve as the successor to
the Corporation's 1991 Stock Option Plan, 1994 Stock Option Plan and 1995 Stock
Option Plan (together, the "Predecessor Plans"), and no further option grants or
share issuances shall be made under the Predecessor Plans from and after the
Effective Date. Each outstanding option or share issuances under the Predecessor
Plans immediately prior to the Effective Date are hereby incorporated into this
Plan and shall accordingly be treated as outstanding options or share issuances
under this Plan. However, each such option or share issuance shall continue to
be governed solely by the terms and conditions of the instrument evidencing such
grant or issuance, and, except as otherwise expressly provided herein, no
provision of this Plan shall affect or otherwise modify the rights or
obligations of the holders of such incorporated options or shares with respect
to their acquisition of shares of the Corporation's common stock or otherwise
modify the rights or obligations of the holders of such options or shares.
<PAGE> 3
C. Definitions. For purposes of this Plan, the following
provisions shall be applicable in determining the parent and subsidiary
corporations of the Corporation:
Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation shall
be considered to be a PARENT of the Corporation, provided each
such corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation
shall be considered to be a SUBSIDIARY of the Corporation,
provided each such corporation (other than the last corporation)
in the unbroken chain owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
D. No Limitation on Corporate Action. Neither the grant of
options nor the issuance of any shares pursuant to this Plan shall in any way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
E. No Rights as Shareholder. The holder of an option grant under
this Plan shall have none of the rights of a shareholder with respect to any
shares subject to such option until such individual shall have exercised the
option, paid the exercise price for the purchased shares and been issued a stock
certificate for such shares.
III. STRUCTURE OF THE PLAN
A. Components of Plan. The Plan shall be divided into three
separate components: the Discretionary Option Grant Program specified in Article
Two; the Automatic Option Grant Program specified in Article Three; and the
Stock Issuance Program specified in Article Four. Under the Discretionary Option
Grant Program, eligible individuals may be granted options to purchase shares of
the Corporation's common stock at not less than 85% of the Fair Market Value of
such shares on the grant date. Under the Automatic Option Grant Program,
non-employee Directors will automatically be granted options to purchase Common
Stock of the Corporation at 100% of the Fair Market Value on the grant date.
Under the Stock Issuance Program, eligible individuals may be allowed to
purchase shares of the Corporation's common stock at discounts from the Fair
Market Value of such shares of up to 15%. Such shares may be issued as
fully-vested shares or as shares to vest over time.
B. Application of Certain Articles. The provisions of Articles
One and Five of the Plan, except as otherwise expressly provided, shall apply to
the Discretionary Option Grant Program, the Automatic Option Grant Program and
the Stock Issuance Program, and shall accordingly govern the interests of all
individuals in the Plan.
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<PAGE> 4
IV. ADMINISTRATION OF THE PLAN
A. Plan Administrator. The committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 insiders (the "Primary Committee") shall have sole and exclusive authority to
administer the Plan with respect to Section 16 Insiders.
B. Committees. Administration of the Discretionary Option Grant
and Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be vested in the
Primary Committee or a committee of two (2) or more Board members appointed by
the Board to administer the Discretionary Option Grant Program and Stock
Issuance Program with respect to eligible persons other than Section 16 insiders
(the "Secondary Committee"), or the Board may retain the power to administer
those programs with respect to all such persons. The members of the Secondary
Committee may be Board members who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan or any
other stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).
C. Members of Committees. Members of the Primary Committee or any
Secondary Committee shall serve for such period of time as the Board may
determine and may be removed by the Board at any time. The Board may also at any
time terminate the functions of any Secondary Committee and assume all powers
and authority previously delegated to such committee.
D. Service as Committee Members. Service on the Primary Committee
or the Secondary Committee shall constitute service as a Board member, and
members of each such committee shall accordingly be entitled to full
indemnification and reimbursement as Board members for their service on such
committee. No member of the Primary Committee or the Secondary Committee shall
be liable for any act or omission made in good faith with respect to the Plan or
any option grants or stock issuances under the Plan.
E. Authority. Each Plan Administrator shall, within the scope of
its administrative functions under the Plan, have full power and authority
(subject to the express provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper administration of the
Discretionary Option Grant Program and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, such programs and any
outstanding option grants or stock issuances as it may deem necessary or
advisable. Decisions of each Plan Administrator shall be final and binding on
all parties who have an interest in the Discretionary Option Grant Program and
Stock Issuance Program or any outstanding option or stock issuance thereunder.
Each Plan Administrator shall have full authority to
determine, (i) with respect to the option grants made under the Discretionary
Option Grant Program, which eligible individuals are to receive option grants,
the number of shares to be covered by each such grant, whether the granted
option is to be an incentive stock option ("Incentive Option") which satisfies
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Internal
-3-
<PAGE> 5
Revenue Code") or a non-statutory option not intended to meet
such requirements, the time or times at which and the circumstances under which
each granted option is to become exercisable and the maximum term for which the
option may remain outstanding and (ii) with respect to stock issuances under the
Stock Issuance Program, the number of shares to be issued to each Participant,
the vesting schedule and conditions to vesting (if any) to be applicable to the
issued shares, and the consideration to be paid by the individual for such
shares. The Plan Administrator shall have the absolute discretion either to
grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
F. Restriction on Discretion. The administration of the Automatic
Option Grant Program under Article Three shall be self executing in accordance
with the terms and conditions thereof and the Plan Administrator shall not
exercise any discretionary functions in respect to matters governed by Article
Three.
V. OPTION GRANTS AND STOCK ISSUANCES
A. Eligible Persons. The persons eligible to receive stock
issuances under the Stock Issuance Program ("Participant") and/or option grants
pursuant to the Discretionary Option Grant Program ("Optionee") are as follows:
(i) officers and other key employees of the
Corporation (or its parent or subsidiary corporations) who render services which
contribute to the management, growth or financial success of the Corporation (or
its parent or subsidiary corporations);
(ii) non-employee members of the Board of
Directors; and
(iii) those consultants or other independent
contractors who provide valuable services to the Corporation (or its parent or
subsidiary corporations).
B. Eligible individuals under Automatic Option Grant Program. The
individuals who shall be eligible to participate in the Automatic Option Grant
Program shall be limited to non-employee Board members who are elected to the
Board at or after the annual meeting of shareholders held in 1997 and who, at
the time of such election, have previously served on the Board for a minimum of
six months.
C. Limitation on Issuances. Notwithstanding any other provision
of this Plan, no individual shall be granted stock options, separately
exercisable stock appreciation rights or direct stock issuances for more than
one million (1,000,000) shares of Common Stock hereunder.
-4-
<PAGE> 6
VI. STOCK SUBJECT TO THE PLAN
A. Shares Available. Shares of the Corporation's Common Stock
shall be available for issuance under the Plan and shall be drawn from either
the Corporation's authorized but unissued shares of Common Stock or from
reacquired shares of Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed 3,370,000 shares,
subject to adjustment from time to time in accordance with the provisions of
this Section VI.
B. Additional Available Shares. Should one or more outstanding
options under this Plan (including outstanding options under the Predecessor
Plans incorporated into this Plan) expire or terminate for any reason prior to
exercise in full (including any option cancelled in accordance with the
cancellation-regrant provisions of Section III of Article Two of the Plan), then
the shares subject to the option not so exercised shall be available for
subsequent option grant or share issuance under this Plan. Shares subject to any
option or portion thereof surrendered or cancelled in accordance with Section
I.D of Article Five and all share issuances under the Plan, whether or not such
shares are subsequently repurchased by the Corporation pursuant to repurchase
rights, shall reduce on a share-for-share basis the number of shares of Common
Stock available for subsequent option grant or stock issuance under the Plan. In
addition, should the exercise price of an outstanding option under the Plan be
paid with shares of Common Stock or should shares of Common Stock otherwise
issuable under the Plan be withheld by the Corporation in satisfaction of the
withholding taxes incurred in connection with the exercise of an outstanding
option under the Plan, then the number of shares of Common Stock available for
issuance under the Plan shall be reduced by the gross number of shares for which
the option is exercised.
C. Adjustments. In the event any change is made to the Common
Stock issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, conversion or other
change affecting the outstanding Common Stock, or any class of Common Stock as a
class, without the Corporation's receipt of consideration, then appropriate
adjustments shall be made to (i) the number and/or class of shares issuable
under the Plan, (ii) the number and/or class of shares and price per share in
effect under each outstanding option under this Plan (including outstanding
options incorporated into this Plan from the Predecessor Plans). Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
D. Additional Possible Restrictions. Common Stock issuable under
the Discretionary Option Grant Program or the Stock Issuance Program may be
subject to such restrictions on transfer, repurchase rights or such other
restrictions as determined by the Plan Administrator.
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted to employees of the Corporation (or its parent or
subsidiary corporations) pursuant to this Article Two shall be authorized by
action of the Plan Administrator and may, at the Plan Administrator's
discretion, be either Incentive Options or non-statutory options. Individuals
who are not employees of the Corporation or its parent or subsidiary
corporations may only be granted non-statutory options. Each granted option
shall be evidenced by one or more instruments in a form approved by the Plan
Administrator; provided, however, that each such instrument shall comply with
the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
A. Option Price.
(i) In General. The option price per share
shall be fixed by the Plan Administrator. In no event, however, shall the option
price for any share be less than eighty-five percent (85%) of the Fair Market
Value of that share on the date of the option grant, provided that the Plan
Administrator may fix the exercise price at less than 85% if the optionee makes
a payment to the Company (including payment made by means of a salary reduction
agreement) equal to the excess of the Fair Market Value of the Common Stock on
the option grant date over such exercise price.
(ii) 10% Shareholder. If any individual to whom an
option is granted is the owner of stock (as determined under Section 424(d) of
the Internal Revenue Code) possessing 10% or more of the total combined voting
power of all classes of stock of the Corporation (or any one of its parent or
subsidiary corporations), then the option price per share shall not be less than
one hundred and ten percent (110%) of the Fair Market Value per share of Common
Stock on the grant date.
(iii) How Payable. The option price shall become
immediately due upon exercise of the option and, subject to the provisions of
Article Five, Section III and the instrument evidencing the grant, shall be
payable in one of the following alternative forms specified below:
- full payment in cash or check drawn to the
Corporation's order;
- full payment in shares of Common Stock held for at
least six (6) months and valued at Fair Market Value on the Exercise
Date (as such term is defined below);
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- full payment in a combination of shares of Common
Stock held for at least six (6) months and valued at Fair Market Value
on the Exercise Date and cash or check; or
- full payment through a broker-dealer sale and
remittance procedure pursuant to which the Optionee (I) shall provide
irrevocable written instructions to a designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate option price payable for
the purchased shares plus all applicable Federal and State income and
employment taxes required to be withheld by the Corporation in
connection with such purchase and (II) shall provide written
directives to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale transaction.
For purposes of this subparagraph (iii), the Exercise Date shall
be the date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent the sale and remittance procedure is utilized
in connection with the exercise of the option, payment of the option price for
the purchased shares must accompany such notice.
B. Term and Exercise of Options. Each option granted under this
Article Two shall have such term as may be fixed by the Plan Administrator, be
exercisable at such time or times and during such period, and on such
conditions, as is determined by the Plan Administrator and set forth in the
stock option agreement evidencing the grant. No such option, however, shall have
a maximum term in excess of ten (10) years from the grant date and no option
granted to a 10% shareholder shall have a maximum term in excess of five (5)
years from the grant date.
C. Termination of Service.
(i) Except to the extent otherwise provided pursuant to
Section V of this Article Two, the following provisions shall govern the
exercise period applicable to any outstanding options under this Article Two
which are held by the Optionee at the time of his or her cessation of Service or
death.
- Should an Optionee's Service terminate for any reason
(including death or permanent disability as defined in Section
22(e)(3) of the Internal Revenue Code) while the holder of one or more
outstanding options under the Plan, then none of those options shall
(except to the extent otherwise provided pursuant to Section V of this
Article Two) remain exercisable beyond the later of (i) the limited
post-Service period designated by the Plan Administrator at the time
of the option grant and set forth in the option agreement; or (ii) (A)
ninety (90) days from the date of termination if termination was
caused by other than the death or disability (as defined in Section
22(e)(3) of the Internal Revenue Code) of such Optionee or (B) twelve
(12) months from
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<PAGE> 9
the date of termination if termination was caused by death or
disability of Optionee.
- Any option granted to an Optionee under this Article
Two and exercisable in whole or in part on the date of the Optionee's
death may be subsequently exercised by the personal representative of
the Optionee's estate or by the person or persons to whom the option
is transferred pursuant to the Optionee's will or in accordance with
the laws of descent and distribution, provided and only if such
exercise occurs prior to the earlier of (i) the first anniversary of
the date of the Optionee's death or (ii) the specified expiration date
of the option term. Upon the occurrence of the earlier event, the
option shall terminate and cease to be exercisable.
- Notwithstanding the above, under no circumstances will
any option be exercisable after the specified expiration date of the
option term.
- During the limited post-Service period of
exercisability, the option may not be exercised for more than the
number of shares for which the option was exercisable on the date the
Optionee's Service terminates. Upon the expiration of such limited
exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be exercisable.
(ii) The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to permit one or more options held by the Optionee
under this Article Two to be exercised, during the limited period of
exercisability provided under subparagraph (1) above, not only with respect to
the number of shares for which each such option is exercisable at the time of
the Optionee's cessation of Service but also with respect to one or more
subsequent installments of purchasable shares for which the option would
otherwise have become exercisable had such cessation of Service not occurred.
(iii) For purposes of the foregoing provisions of this Section
I.C of Article Two (and for all other purposes under the Plan):
- The Optionee shall (except to the extent otherwise
specifically provided in the applicable option or issuance agreement) be
deemed to remain in the SERVICE of the Corporation for so long as such
individual renders services on a periodic basis to the Corporation (or
any parent or subsidiary corporation) in the capacity of an employee, a
nonemployee member of the Board or an independent consultant or advisor.
- The Optionee shall be considered to be an EMPLOYEE
for so long as he or she remains in the employ of the Corporation or one
or more parent or subsidiary corporations, subject to the control and
direction of the employer entity not only as to the work to be performed
but also as to the manner and method of performance.
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D. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. Limited Transferability of Options. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory Option
may be assigned in whole or in part during the Optionee's lifetime. The assigned
portion may only be exercised by the person or persons who acquire a proprietary
interest in the option pursuant to the assignment. The terms applicable to the
assigned portion shall be the same as those in effect for the option immediately
prior to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to
all Incentive Options granted under this Article Two. Options which are
specifically designated as "non-statutory" options when issued under the Plan
shall not be subject to such terms and conditions.
A. Eligibility. Incentive Options may only be granted to
individuals who are employees of the Corporation.
B. Option Price. The option price per share of any share of
Common Stock subject to an Incentive Option shall in no event be less than one
hundred percent (100%) of the Fair Market Value of such share of Common Stock on
the grant date.
C. Dollar Limitation. The aggregate Fair Market Value (determined
as of the respective date or dates of grant) of the Common Stock for which one
or more Incentive Options granted to any employee after December 31, 1986, under
this Plan (or any other option plan of the Corporation or its parent or
subsidiary corporations) may for the first time become exercisable as Incentive
Options under the Federal tax laws during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000). To the extent the employee
holds two or more such options which become exercisable for the first time in
the same calendar year, the foregoing limitation on the exercisability of such
options as Incentive Options under the Federal tax laws shall be applied on the
basis of the order in which such options are granted.
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D. Application of Certain Articles. Except as modified by the
preceding provisions of this Section II, the provisions of Articles One, Two and
Five of the Plan shall apply to all Incentive Options granted hereunder. Any
option designated as an Incentive Option but which fails to meet any requirement
of this Section II or of the Internal Revenue Code for qualification as an
Incentive Option shall nevertheless be a valid and outstanding option under the
Plan and shall be treated as a non-statutory option.
III. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding options under this Article Two (including
outstanding options under the Predecessor Plans incorporated into this Plan) and
to grant in substitution new options under this Article Two covering the same or
different numbers of shares of Common Stock but having an option price for each
share which is not less than (i) eighty-five percent (85%) of the Fair Market
Value of such share on the new grant date or (ii) one hundred percent (100%) of
such Fair Market Value in the case of an Incentive Option.
IV. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator determines in
its discretion to implement the stock appreciation right provisions of this
Section IV, one or more Optionees under the Discretionary Option Grant Program
may be granted the right, exercisable upon such terms and conditions as the Plan
Administrator may establish, to surrender all or part of an unexercised option
under this Article Two in exchange for a distribution from the Corporation in an
amount equal to the excess of (i) the Fair Market Value (on the option surrender
date) of the number of shares in which the Optionee is at the time vested under
the surrendered option (or surrendered portion thereof) over (ii) the aggregate
option price payable for such vested shares.
B. No surrender of an option shall be effective hereunder unless
it is approved by the Plan Administrator. If the surrender is so approved, then
the distribution to which the Optionee shall accordingly become entitled under
this Section IV may be made in shares of any class of Common Stock valued at
Fair Market Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of
(i) five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised after the specified expiration date for the option.
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D. One or more officers of the Corporation subject to the
short-swing profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights in
tandem with their outstanding options under this Article Two. Upon the
occurrence of a Hostile Take-Over (as defined in Section II.B of Article Five)
effected at any time when the Corporation's outstanding Common Stock is
registered under Section 12(g) of the 1934 Act, each outstanding option with
such a limited stock appreciation right in effect for at least six (6) months
shall automatically be cancelled, to the extent such option is at the time
exercisable for fully-vested shares of Common Stock. The Optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the vested shares of Common
Stock at the time subject to the cancelled option (or cancelled portion of such
option) over (ii) the aggregate exercise price payable for such shares. The cash
distribution payable upon such cancellation shall be made within five (5) days
following the consummation of the Hostile Take-Over. Neither the approval of the
Plan Administrator nor the consent of the Board shall be required in connection
with such option cancellation and cash distribution. The balance of the option
(if any) shall continue to remain outstanding and exercisable in accordance with
the terms of the instrument evidencing such grant.
E. The shares of Common Stock subject to any option surrendered
or cancelled for an appreciation distribution pursuant to this Section IV shall
NOT be available for subsequent option grant under the Plan.
V. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority to
extend the period of time for which any option granted under this Article Two is
to remain exercisable following the Optionee's cessation of Service or death
from the limited period in effect under Section I.C.(i) of this Article Two to
such greater period of time as the Plan Administrator shall deem appropriate;
provided, however, that in no event shall such option be exercisable after the
specified expiration date of the option term.
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ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant of Options. Each non-employee Board member who is
elected to the Board at or after the annual shareholder meeting held in 1998
shall automatically be granted nonstatutory options to purchase 20,000 shares of
Common Stock at the first such election in which such non-employee Board member
is eligible to receive an Automatic Option Grant. Each continuing eligible
non-employee Board member shall receive an additional grant of nonstatutory
options to purchase 20,000 shares of Common Stock on the fifth anniversary of
the date on which such person was last granted an option under this Article
Three. The number of shares granted pursuant to this Automatic Grant Program
shall be subject to periodic adjustment pursuant to the applicable provisions of
Section VI.C of Article One.
B. Exercise Price. The exercise price per share of each automatic
option grant made under this Article Three shall be equal to one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the grant date.
C. Payment. The exercise price shall be payable in one of the
alternative forms specified below:
(i) full payment in cash or check drawn to the
Corporation's order;
(ii) full payment in shares of Common Stock held for at
least six (6) months and valued at Fair Market Value on the Exercise
Date (as such term is defined below);
(iii) full payment in a combination of shares of Common
Stock held for at least six (6) months and valued at Fair Market Value
on the Exercise Date and cash or check; or
(iv) full payment through a broker-dealer sale and
remittance procedure pursuant to which the non-employee Board member
(A) shall provide irrevocable written instructions to a designated
brokerage firm to effect the immediate sale of the purchased shares
and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate option
price payable for the purchased shares plus all applicable Federal and
state income taxes required to be withheld by the Corporation in
connection with such purchase and (B) shall provide written directives
to the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.
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<PAGE> 14
For purposes of this Section I.C. of Article Three, the
Exercise Date shall be the date on which written notice of the option exercise
is delivered to the Corporation, and the Fair Market Value per share of Common
Stock on any relevant date shall be determined in accordance with the provisions
of Section II.A of Article Five. Except to the extent the sale and remittance
procedure is utilized in connection with the exercise of the option, payment of
the option price for the purchased shares must accompany such notice.
D. Option Term. Each automatic grant under this Article Three
shall have a term of ten (10) years measured from the automatic grant date.
E. Exercisability. Each option granted pursuant to this automatic
option grant program shall become exercisable in a series of sixty (60) equal
monthly installments during the optionee's period of service on the Board, with
the first such installment to become exercisable one month after the automatic
grant date. No option shall become exercisable for any additional option shares
following the optionee's cessation of Board service for any reason.
F. Effect of Termination of Board Membership. Should the optionee
cease to serve as a Board member for any reason (other than death) while holding
one or more automatic option grants under this Article Three, such optionee
shall have a six (6) month period following the date of such cessation of Board
membership in which to exercise each such option for any or all of the shares of
Common Stock for which the option was exercisable at the time of such cessation
of Board service. Each such option shall immediately terminate and cease to be
outstanding at the time of such cessation of Board service with respect to any
shares for which the option is not then exercisable.
Should the optionee die while serving as a member of the Board
or within six (6) months after cessation of Board service, then each outstanding
automatic option grant held by the optionee at the time of death may
subsequently be exercised, for any or all of the shares of Common Stock for
which the option is exercisable at the time of the optionee's cessation of Board
service (less any option shares subsequently purchased by the optionee prior to
death), by the personal representative of the optionee's estate or by the person
or persons to whom the option is transferred pursuant to the optionee's will or
in accordance with the laws of descent and distribution. Any such exercise must
occur within twelve (12) months after the date of the optionee's death. However,
each such automatic option grant shall immediately terminate and cease to be
outstanding, at the time of the optionee's cessation of Board service, with
respect to any option shares for which it is not otherwise at such time
exercisable.
In no event shall any automatic grant under this Article Three
remain exercisable after the specified expiration date of the ten (10)-year
option term. Upon the expiration of the applicable exercise period in accordance
with this paragraph G or (if earlier) upon the expiration of the ten (10) year
option term, the automatic grant shall terminate and cease to be outstanding for
any unexercised shares for which the option was exercisable at the time of the
optionee's cessation of Board service.
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II. LIMITED STOCK APPRECIATION RIGHT.
A. Upon the occurrence of a Hostile Take-Over (as defined in
Section II.B of Article Five), each non-employee Board member holding an
automatic option grant which has been outstanding under this Article Three for a
period of at least six (6) months shall have the unconditional right
(exercisable for a thirty (30)-day period following such Hostile Take-Over) to
surrender such option in return for a cash distribution from the Corporation in
an amount equal to the excess of (i) the Take-Over Price of the shares of Common
Stock at the time subject to the surrendered option (whether or not the option
is otherwise at the time exercisable for such shares) over (ii) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the option surrender date. Neither the approval
of the Plan Administrator nor the consent of the Board shall be required in
connection with such option surrender and cash distribution.
B. The shares of Common Stock subject to each option surrendered
in connection with the Hostile Take-Over shall NOT be available for subsequent
issuance under this Plan.
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ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate purchases without any intervening stock
option grants. The issued shares shall be evidenced by a Stock Issuance
Agreement ("Issuance Agreement") that complies with the terms and conditions of
this Article Four.
A. Consideration. Shares of Common Stock shall be issued under
the Plan for one or more of the following items of consideration, which the Plan
Administrator may deem appropriate in each individual instance:
(i) cash or cash equivalents (such as a personal check
or bank draft) paid to the Corporation;
(ii) in common stock of the Corporation valued at Fair
Market Value on the date of issuance;
(iii) a promissory note payable to the Corporation's
order in one or more installments, which may be subject to
cancellation in whole or in part upon terms and conditions established
by the Plan Administrator;
(iv) past services rendered to the Corporation or any
parent or subsidiary corporation;
(v) any combination of the above approved by the Plan
Administrator.
Shares may, in the absolute discretion of the Plan
Administrator, be issued for consideration with a value less than one-hundred
percent (100%) of the Fair Market Value of such shares, but in no event less
than eighty-five percent (85%) of such Fair Market Value. Notwithstanding the
foregoing, in the case of 10% shareholders, Shares must be issued at one hundred
percent (100%) of Fair Market Value of such shares.
B. Vesting Provisions.
1. Shares of Common Stock issued under this Article Four may,
in the absolute discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service (as such term is defined in Section I.C.(iii) of
Article Two); provided, that such vesting must be at a rate of at least 20% per
year over no more than five years from the date such shares are issued. The
elements of the vesting schedule applicable to any unvested shares of Common
Stock issued under the Plan, namely:
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<PAGE> 17
(i) the Service period to be completed by the
Participant or the performance objectives to be achieved by the
Corporation,
(ii) the number of installments in which the shares are
to vest,
(iii) the interval or intervals (if any) which are to
lapse between installments,
(iv) any conditions or contingencies to vesting, and
(v) the effect which death, disability or other events
designated by the Plan Administrator are to have upon the vesting
schedule,
shall be determined by the Plan Administrator and incorporated into the Issuance
Agreement executed by the Corporation and the Participant at the time such
unvested shares are issued.
2. The Participant shall have full shareholder rights with
respect to any shares of Common Stock issued to him or her under this Article
Four, whether or not his or her interest in those shares is vested. Accordingly,
the Participant shall have the right to vote such shares and to receive any
regular cash dividends paid on such shares. Any new, additional or different
shares of stock or other property (including money paid other than as a regular
cash dividend) which the Participant may have the right to receive with respect
to his or her unvested shares by reason of any stock dividend, stock split,
reclassification of Common Stock or other similar change in the Corporation's
capital structure or by reason of any Corporate Transaction under Section I of
Article Five shall be issued, subject to (i) the same vesting requirements
applicable to his or her unvested shares and (ii) such escrow arrangements as
the Plan Administrator shall deem appropriate.
3. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock under this Article Four,
then those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further shareholder rights with
respect to those shares. The Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel the principal
balance of any outstanding purchase-money note of the Participant to the extent
attributable to such surrendered shares. The surrendered shares may, at the Plan
Administrator's discretion, be retained by the Corporation as Treasury Shares or
may be retired to authorized but unissued share status.
4. The Plan Administrator may in its discretion elect to waive
the surrender and cancellation of one or more unvested shares of Common Stock
(or other assets attributable thereto) which would otherwise occur upon the
non-completion of the vesting schedule applicable to such shares. Such waiver
shall result in the immediate vesting of the Participant's interest in the
shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
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II. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Escrow Arrangements and Legends. Unvested shares under this
Article Four may, in the Plan Administrator's discretion, be held in escrow by
the Corporation until the Participant's interest in such shares vests or may be
issued directly to the Participant with restrictive legends on the certificates
evidencing such unvested shares. To the extent an escrow arrangement is
utilized, the unvested shares and any securities or other assets issued with
respect to such shares (other than regular cash dividends) shall be delivered in
escrow to the Corporation to be held until the Participant's interest in such
shares (or other securities or assets) vests. Alternatively, if the unvested
shares are issued directly to the Participant, the restrictive legend on the
certificates for such shares shall read substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE
ACCORDINGLY SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND TO
(II) CANCELLATION OR REPURCHASE IN THE EVENT THE REGISTERED
HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) CEASES TO REMAIN IN
THE CORPORATION'S SERVICE. SUCH TRANSFER RESTRICTIONS AND THE
TERMS AND CONDITIONS OF SUCH CANCELLATION OR REPURCHASE ARE SET
FORTH IN A STOCK ISSUANCE AGREEMENT BETWEEN THE CORPORATION AND
THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) DATED
__________, 19__, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE CORPORATION."
B. Limited Transferability. The Participant shall have no right
to transfer any unvested shares of Common Stock issued to him or her under this
Article Four. For purposes of this restriction, the term "transfer" shall
include (without limitation) any sale, pledge, assignment, encumbrance, gift, or
other disposition of such shares, whether voluntary or involuntary. Upon any
such attempted transfer, the unvested shares shall immediately be cancelled, and
neither the Participant nor the proposed transferee shall have any rights with
respect to those shares. However, the Participant shall have the right to make a
gift of unvested shares acquired under the Plan to his or her spouse or issue,
including adopted children, or to a trust established for such spouse or issue,
provided the donee of such shares delivers to the Corporation a written
agreement to be bound by all the provisions of the Plan and the Issuance
Agreement applicable to the gifted shares.
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ARTICLE FIVE
MISCELLANEOUS
I. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Assumption of Options. Each outstanding option which is
assumed in connection with a Corporate Transaction (as defined below) or is
otherwise to continue in effect following a Corporate Transaction shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would be issuable, in
consummation of such Corporate Transaction, to an actual holder of the same
number of shares of Common Stock as are subject to such option immediately prior
to such Corporate Transaction, and appropriate adjustments shall also be made to
the option price payable per share, provided the aggregate option price payable
for such securities shall remain the same. Appropriate adjustments shall also be
made to the class and number of securities available for issuance under the Plan
following the consummation of such Corporate Transaction.
B. Acceleration of Options. In the event of any Corporate
Transaction the exercisability of each option grant at the time outstanding
under this Plan which is not continued under paragraph A above shall
automatically accelerate so that each such option shall, immediately prior to
the specified effective date for the Corporate Transaction, become fully
exercisable with respect to the total number of shares of Common Stock at the
time subject to such option and may be exercised for all or any portion of such
shares. Upon the consummation of the Corporate Transaction, all option grants
under this Plan shall terminate and cease to be outstanding. The Plan
Administrator may, in its discretion, extend the provisions of this paragraph B
to options outstanding under the Predecessor Plans.
C. Corporate Transaction. A Corporate Transaction means:
(i) a merger or consolidation in which the Corporation
is not the surviving entity, except for a transaction the principal
purpose of which is to change the State of the Corporation's
incorporation,
(ii) the sale, transfer or disposition of all or
substantially all of the assets of the Corporation, or
(iii) any reverse merger in which the Corporation is the
surviving entity but in which the holders of securities possessing
more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities (as measured immediately
prior to such merger) transfer ownership of those securities to person
or persons not otherwise part of the transferor group.
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<PAGE> 20
D. Change in Control. Except as otherwise provided by the Plan
Administrator in agreements governing the grant of discretionary option grants
or stock issuances, in connection with any Change in Control of the Corporation,
the exercisability of each option grant at the time outstanding under this Plan
shall automatically accelerate so that each such option shall, immediately prior
to the specified effective date for the Change in Control, become fully
exercisable with respect to the total number of shares of Common Stock at the
time subject to such option and may be exercised for all or any portion of such
shares. Similarly, all unvested shares issued under the Plan shall automatically
vest immediately prior to the effective date of the Change in Control. For
purposes of this Article Five, a Change in Control shall be deemed to occur in
the event:
(i) a Hostile Take-Over (as defined below)
(ii) there is a change in the composition of the Board
over a period of twenty-four (24) consecutive months or less such that
a majority of the Board members (rounded up to the next whole number)
cease, by reason of one or more proxy contests for the election of
Board members, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (A) who were still in office at the time such election or
nomination was approved by the Board.
The provisions of this paragraph D shall apply to option grants and/or stock
issuances under the Predecessor Plans only to the extent expressly extended
thereto by the Plan Administrator.
II. CERTAIN DEFINITIONS
A. Fair Market Value. The FAIR MARKET VALUE of a share of Common
Stock shall be determined in accordance with the following provisions:
- If shares of the Class of Common Stock to be valued
are not at the time listed or admitted to trading on any national
stock exchange but is traded on the Nasdaq National Market, the fair
market value shall be the closing selling price per share of a share
of that class on the date in question, as such price is reported by
the National Association of Securities Dealers through the Nasdaq
National Market or any successor system. If there is no reported
closing selling price for the series on the date in question, then the
closing selling price on the last preceding date for which such
quotation exists shall be determinative of fair market value.
- If shares of the class of common stock to be valued
are at the time listed or admitted to trading on any national stock
exchange, then the fair market value of a share of that class shall be
the closing selling price per share on the date in question on the
stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is
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<PAGE> 21
officially quoted in the composite tape of transactions on such
exchange. If there is no reported sale of a share of the class on such
exchange on the date in question, then the fair market value shall be
the closing selling price on the exchange on the last preceding date
for which such quotation exists.
- If shares of the series of common stock to be valued
at the time are neither listed nor admitted to trading on any stock
exchange nor traded on the Nasdaq National Market, then the fair
market value shall be determined by the Plan Administrator after
taking into account such factors as the Plan Administrator shall deem
appropriate, which may include independent professional appraisals.
B. Hostile Take-Over. A HOSTILE TAKE-OVER shall be deemed to
occur in the event (i) any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's shareholders which the Board does not recommend such
shareholders to accept.
C. Take-Over Price. The TAKE-OVER PRICE per share shall be deemed
to be equal to the greater of (a) the fair market value per share on the option
surrender date, as determined pursuant to the valuation provisions of Section
II.A of this Article Five, or (b) the highest reported price per share paid by
the tender offeror in effecting such Hostile Take-Over.
III. LOANS OR GUARANTEE OF LOANS
A. Loans or Guarantees. The Plan Administrator may, in its
discretion, assist any Optionee or Participant (including an Optionee or
Participant who is an officer of the Corporation) in the exercise of one or more
options granted to such Optionee under the Article Two Discretionary Option
Grant Program or the purchase of one or more shares issued to such Participant
under the Article Four Stock Issuance Program, including the satisfaction of any
Federal and State income and employment tax obligations arising therefrom by (i)
authorizing the extension of a loan from the Corporation to such Optionee or
Participant or (ii) permitting the Optionee or Participant to pay the option
price or purchase price for the purchased Common Stock in installments over a
period of years. The terms of any loan or installment method of payment
(including the interest rate and terms of repayment) will be upon such terms as
the Plan Administrator specifies in the applicable option or issuance agreement
or otherwise deems appropriate under the circumstances. Loans and installment
payments may be granted with or without security or collateral (other than to
individuals who are consultants or independent contractors, in which event the
loan must be adequately secured by collateral other than the purchased shares).
However, the maximum credit available to the Optionee or Participant may not
exceed the option or purchase price of the acquired shares (less the par value
of such shares) plus any Federal and State income and employment tax liability
incurred by the Optionee or Participant in connection with the acquisition of
such shares.
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<PAGE> 22
B. Discretion of Plan Administrator. The Plan Administrator may,
in its absolute discretion, determine that one or more loans extended under this
financial assistance program shall be subject to forgiveness by the Corporation
in whole or in part upon such terms and conditions as the Plan Administrator may
deem appropriate.
IV. TAX WITHHOLDING
A. Withholding. The Company's obligation to deliver shares or
cash upon the exercise of stock options or stock appreciation rights granted
under the Discretionary Option Grant Program or the Automatic Option Grant
Program or upon direct issuance under the Stock Issuance Program shall be
subject to the satisfaction of all applicable Federal, State and local income
and employment tax withholding requirements.
B. Withholding of Shares Otherwise Issuable. The Plan
Administrator may, in its discretion and upon such terms and conditions as it
may deem appropriate (including the applicable safe-harbor provisions of SEC
Rule 16b-3), provide any or all holders of outstanding option grants under the
Discretionary Option Grant Program with the election to have the Company
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such options, a portion of such shares with an aggregate fair market value
equal to the designated percentage (up to 100% as specified by the optionee) of
the Federal and State income taxes ("Taxes") incurred in connection with the
acquisition of such shares. In lieu of such direct withholding, one or more
option holders may also be granted the right to deliver shares of Common Stock
to the Company in satisfaction of such Taxes. The withheld or delivered shares
shall be valued at the fair market value on the applicable determination date
for such Taxes or such other date required by the applicable safe-harbor
provisions of SEC Rule 16b-3.
V. AMENDMENT OF THE PLAN AND AWARDS
A. Amendment. Except as herein provided, the Board has complete
and exclusive power and authority to amend or modify the Plan (or any component
thereof) in any or all respects whatsoever. No amendment or modification may
adversely affect the rights and obligations of an Optionee with respect to
options at the time outstanding under the Plan, nor adversely affect the rights
of any Participant with respect to Common Stock issued under the Plan prior to
such action, unless the Optionee or Participant consents to such amendment or
modification. In addition, certain amendments may require shareholder approval
if so determined by the Board or pursuant to applicable laws or regulations.
B. Limitation on Amendment of Options. Notwithstanding Article
Five, Section V.A, neither the provisions of the Automatic Option Grant Program
nor the options outstanding under Article Three may be amended at intervals more
frequently than once every six (6) months, other than to the extent necessary to
comport with changes in the Internal Revenue Code, the Employee Retirement
Income Security Act or any rules thereunder.
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<PAGE> 23
C. Escrow Prior to Shareholder Approval. (i) Options to purchase
shares of Common Stock may be granted under the Discretionary Option Grant
Program and (ii) shares of Common Stock may be issued under the Stock Issuance
Program, which are in both instances in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
issued under the Discretionary Option Grant Program or the Stock Issuance
Program are held in escrow until shareholder approval is obtained for a
sufficient increase in the number of shares available for issuance under the
Plan. If such shareholder approval is not obtained within twelve (12) months
after the date the first such excess option grants or excess share issuances are
made, then (I) any unexercised excess options shall terminate and cease to be
exercisable and (II) the Corporation shall promptly refund the purchase price
paid for any excess shares actually issued under the Plan and held in escrow,
together with interest (at the applicable Short Term Federal Rate) for the
period the shares were held in escrow.
VI. EFFECTIVE DATE AND TERM OF PLAN
A. Effective Date. This Plan, as successor to the Company's
Predecessor Plans, shall become effective as of the Effective Date, and no
further option grants shall be made under the Predecessor Plans after such
Effective Date. If shareholder approval of this Plan is not obtained within
twelve (12) months after the date this Plan is adopted by the Board, then each
option granted under this Plan from and after the Effective Date shall terminate
without ever becoming exercisable for the option shares and all shares issued
hereunder shall be repurchased by the Corporation at the purchase price paid,
together with interest (at the applicable Short Term Federal Rate). However, in
the event such shareholder approval is not obtained, the Predecessor Plans shall
continue in effect in accordance with the terms and provisions last approved by
the Corporation's shareholders, and all outstanding options and unvested stock
issuances under the Predecessor Plans shall remain in full force and effect in
accordance with the instruments evidencing such options and issuances.
B. Predecessor Plans. Each outstanding option and share issuance
under the Predecessor Plans immediately prior to the Effective Date of this Plan
are hereby incorporated into this Plan and shall accordingly be treated as an
outstanding option or share issuance under this Plan. However, each such option
or share issuance shall continue to be governed solely by the terms and
conditions of the instrument evidencing such grant or issuance, and except as
otherwise expressly provided in this Plan, no provision of this Plan shall
affect or otherwise modify the rights or obligations of the holders of such
options or shares with respect to their acquisition of shares of Common Stock,
or otherwise modify the rights or obligations of the holders of such options or
shares.
C. Applicability of Certain Procedures to Predecessor Plans. The
sale and remittance procedure authorized for the exercise of outstanding options
under this Plan shall be available for all options granted under this Plan on or
after the Effective Date and for all non-statutory options outstanding under the
Predecessor Plans and incorporated into this Plan. The Plan Administrator may
also allow such procedure to be utilized in connection with one or more
disqualifying dispositions of Incentive Option shares effected after the
Effective Date, whether such Incentive Options were granted under this Plan or
the Predecessor Plans.
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<PAGE> 24
D. Termination. The Plan shall terminate upon the earlier of (i)
the tenth anniversary of the Effective Date or (ii) the date on which all shares
available for issuance under the Plan shall have been issued or cancelled
pursuant to the exercise, surrender or cash-out of the options granted under the
Discretionary Option Grant Program or the issuance of shares (whether vested or
unvested) under the Stock Issuance Program. If the date of termination is
determined under clause (i) above, then all option grants and unvested stock
issuances outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing such
grants or issuances.
VII. USE OF PROCEEDS
Cash proceeds received by the Company from the sale of shares
under the Plan shall be used for general corporate purposes.
VIII. REGULATORY APPROVALS
A. Regulatory Approvals. The implementation of the Plan, the
granting of any option under the Discretionary Option Grant Program, the
issuance of any shares under the Stock Issuance Program, and the issuance of
Common Stock upon the exercise or surrender of the option grants made hereunder
shall be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
options granted under it, and the Common Stock issued pursuant to it.
B. Federal and State Securities Laws. No shares of Common Stock
or other assets shall be issued or delivered under this Plan unless and until
there shall have been compliance with all applicable requirements of Federal and
State securities laws, including the filing and effectiveness of the Form S-8
registration statement for the shares of Common Stock issuable under the Plan,
and all applicable listing requirements of any securities exchange on which
stock of the same class is then listed.
IX. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan,
nor any action taken by the Plan Administrator hereunder, nor any provision of
the Plan shall be construed so as to grant any individual the right to remain in
the employ or service of the Corporation (or any parent or subsidiary
corporation) for any period of specific duration, and the Corporation (or any
parent or subsidiary corporation retaining the services of such individual) may
terminate such individual's employment or service at any time and for any
reason, with or without cause.
X. MISCELLANEOUS PROVISIONS
A. Successors. The provisions of the Plan shall inure to the
benefit of, and be binding upon, the Corporation and its successors or assigns,
whether by Corporate Transaction or otherwise, and the Participants and
Optionees, the legal representatives of their respective estates, their
respective heirs or legatees and their permitted assignees.
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<PAGE> 1
EXHIBIT 99.2
1995 Employee Stock Purchase Plan (as amended
and restated as of May 13, 1998)
<PAGE> 2
DEPOTECH CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
(AMENDED AS OF MAY 13, 1998)
I. PURPOSE
This DepoTech Corporation 1995 Employee Stock Purchase Plan (the
"Plan") is intended to provide Qualifying Employees (as defined below) with the
opportunity to acquire a proprietary interest in the Company by accumulating
amounts for the Qualifying Employee's Account (as defined below) through payroll
deductions and the periodic application of such amounts to the purchase of
shares of the Company's Common Stock.
II. DEFINITIONS
For purposes of plan administration, the following terms shall
have the meanings indicated:
Act shall mean the Securities Act of 1933 (as amended).
Account means the total amount held for the benefit of a
Participant hereunder which Account will be increased by any payroll deductions
from the Participant and will be decreased by amounts applied to the purchase of
shares or refunded to or for the benefit of the Participant hereunder.
Board means the Company's Board of Directors.
Code means the Internal Revenue Code of 1986, as amended from
time to time.
Common Stock means shares of the Company's Common Stock.
Company means DepoTech Corporation, a California corporation, and
any corporate successor to all or substantially all of the assets or voting
stock of DepoTech Corporation which adopts or assumes the Plan.
Corporate Affiliate means any company which is a parent or
subsidiary corporation of the Company (as determined in accordance with Code
Section 424), including any parent or subsidiary corporation which becomes such
after the Effective Date.
<PAGE> 3
Effective Date means the first day of the term of this Plan as
set forth in Article XI.A, which term is scheduled to commence upon the
effective date of the Form S-8 Registration Statement covering the shares of
Common Stock issuable under the Plan. However, for any Corporate Affiliate which
becomes a Participating Company in the Plan after the first day of the initial
Option Period, a subsequent Effective Date shall be designated with respect to
participation by its Qualifying Employees.
Entry Date means the date on which a Participant first joins the
Option Period in effect under the Plan.
Option Period shall mean the periods described in Section IV of
this Plan.
Participant means any Qualifying Employee of a Participating
Company who has enrolled and is actively participating in the Plan.
Participating Company means the Company and any Corporate
Affiliate designated from time to time by the Board.
Purchase Period means each six-month period, beginning on the
first business day of each January and each July, and ending on the last
business day of June and December, respectively, except that the first Purchase
Period of the initial Option Period under this Plan shall be a period of more
than six-months, commencing on the Effective Date and ending on the last
business day of June 1996.
Qualifying Employee means any person who is engaged, on a
regularly-scheduled basis of more than twenty (20) hours per week and more than
five (5) months per calendar year, in the rendition of personal services to the
Company, or any Participating Company in exchange for amounts which constitute
wages under Section 3121(a) of the Code, provided that no person who owns
(within the meaning of Code Section 424(d)) or holds outstanding options or
other rights to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Corporate Affiliates shall be a Qualifying Employees.
Regular Compensation means the basic earnings paid to a
Participant by Participating Companies plus (i) any pre-tax contributions made
by the Participant to any Code Section 401(k) salary deferral plan or any Code
Section 125 cafeteria benefit program (now existing or hereafter established),
(ii) commissions, and (iii) bonuses payable pursuant to any formal bonus plan
which has been approved and adopted by the Board. Regular Compensation shall not
include (I) overtime payments, profit-sharing distributions and other
incentive-type payments or (II) contributions (other than Code Section 401(k) or
Code Section 125 contributions) made on the Participant's behalf under any
employee benefit or welfare plan (now existing or hereafter established).
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<PAGE> 4
Service means the period during which an individual remains a
Qualifying Employee and all periods of Service shall be measured from such
individual's most recent date of hire by the Company or such Corporate
Affiliate.
III. ADMINISTRATION
The Plan shall be administered by a committee comprised of two
(2) or more non-employee Board members appointed from time to time by the Board
(the "Plan Administrator"). The Plan Administrator shall have full authority to
administer the Plan, including authority to interpret and construe any provision
of the Plan. Decisions of the Plan Administrator shall be final and binding on
all parties who have an interest in the Plan.
IV. OPTION PERIODS
A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive Option Periods during the term of the Plan
until the maximum number of shares of Common Stock available for issuance under
the Plan shall have been issued.
B. The initial Option Period will begin on the Effective Date and
will end on the last business day in December 1998. Subsequent Option Periods
will extend for a period of one year commencing on the first business day of
January in each year and ending on the last business day of December.
C. Each Participant will have purchase rights as set forth in
Article VII for each Option Period, the purchase price for which shall be
collected through payroll deductions and which purchase rights shall be
exercised in successive installments for each Purchase Period within the Option
Period.
D. The acquisition of Common Stock through participation in the
Plan for any Option Period shall neither limit nor require the acquisition of
Common Stock by the Participant in any subsequent Option Period.
V. ELIGIBILITY AND PARTICIPATION
A. Each Qualifying Employee shall be eligible to participate in
an Option Period under the Plan in accordance with the following provisions:
- All Qualifying Employees on the first day of any Option Period
may enter that Option Period by enrolling in accordance with Section V.C
below.
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<PAGE> 5
- A Qualifying Employee who was not eligible to enter an Option
Period on the first day of the Option Period may enter that Option
Period on the first day of the next Purchase Period by enrolling in
accordance with Section V.C below.
B. A Qualifying Employee who does not enroll for an Option Period
on the first date such Qualifying Employee is permitted to enroll hereunder may
not subsequently enroll in that Option Period.
C. To enroll in the Plan, a Qualifying Employee must complete the
enrollment forms prescribed by the Plan Administrator and file such forms with
the Plan Administrator (or its designate) on or before the date such Qualifying
Employee is first permitted to enter the Option Period.
D. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock under the Plan may be any multiple
of one percent (1%) of the Regular Compensation paid to the Participant during
each Purchase Period of the Option Period, up to a maximum of fifteen percent
(15%) of Regular Compensation. The deduction rate so authorized shall continue
in effect for the remainder of the Option Period, except to the extent such rate
is changed in accordance with the following guidelines:
- The Participant may, at any time during a Purchase
Period, reduce the rate of payroll deduction. Such reduction shall
become effective as soon as possible after filing of the requisite
reduction form with the Plan Administrator (or its designate), but the
Participant may not effect more than one such reduction during the same
Purchase Period.
- The Participant may, prior to the commencement of any
new Purchase Period within the Option Period, increase or decrease the
rate of payroll deduction for the new Purchase Period by filing the
appropriate form with the Plan Administrator (or its designate). The new
rate shall become effective as of the first day of the next Purchase
Period.
Payroll deductions will automatically cease upon the
termination of the Participant's purchase right in accordance with the
applicable provisions of Section VII below.
VI. STOCK SUBJECT TO PLAN
A. The maximum number of shares of Common Stock which may be
issued under the Plan shall be 325,000 shares of Common Stock (subject to
adjustment under Section VI.B below).
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<PAGE> 6
B. In the event any change is made to the Company's outstanding
Common Stock by reason of any stock dividend, stock split, combination of shares
or other change affecting such outstanding Common Stock as a class without
receipt of consideration, then appropriate adjustments shall be made by the Plan
Administrator to (i) the class and maximum number of shares issuable over the
term of the Plan, (ii) the class and maximum number of shares purchasable per
Participant during any one Option Period and (iii) the class and number of
shares and the price per share in effect under each purchase right at the time
outstanding under the Plan. Such adjustments shall be designed to preclude the
dilution or enlargement of rights and benefits under the Plan.
VII. PURCHASE RIGHTS
Each Participant in a particular Option Period shall have the
right to purchase shares of Common Stock at the close of each Purchase Period
during such Option Period on the terms and conditions set forth below (the
"Purchase Rights"). Each Participant shall execute a purchase agreement
embodying such terms and conditions and such other provisions (not inconsistent
with the Plan) as the Plan Administrator may require.
Purchase Price. The Purchase Rights shall be exercised at the end
of each Purchase Period at a purchase price equal to eighty-five percent (85%)
of the lower of (i) the fair market value per share of the Common Stock on the
Participant's Entry Date or (ii) the fair market value per share of the Common
Stock on the last business day of the Purchase Period. However, for each
Participant whose Entry Date is other than the first day of the Option Period,
the amount determined under clause (i) shall not be less than 85% of the fair
market value of the Common Stock on the first day of such Option Period.
Valuation. For purposes of determining the fair market value per
share of Common Stock on any relevant date, the following procedures shall be in
effect:
- If fair market value is to be determined on a day on which the
Common Stock being actively traded through the Nasdaq National
Market or any national securities exchange, then the fair market
value shall be the closing selling price on that date, as
officially quoted on the Nasdaq National Market or national
securities exchange, or if there is no quoted selling price for
such date, then the closing selling price on the next preceding
day for which there does exist such a quotation.
- If fair market value is to be determined prior to such Section
12(g) registration of the Common Stock, then the fair market
value of the Common Stock on such date shall be determined by the
Plan Administrator after taking into account such factors as the
Plan Administrator deems appropriate.
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<PAGE> 7
Number of Purchasable Shares. The number of shares purchasable by
a Participant each Purchase Period shall be the number of whole shares obtained
by dividing the amount in Participant's Account at the end of such Purchase
Period by the purchase price in effect for the Purchase Period. Notwithstanding
the above, no Participant shall have the right to purchase shares of Common
Stock to the extent that, immediately after the grant, such Participant would
own (within the meaning of Code Section 424(d)), or hold outstanding options or
other rights to purchase, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Company or
any of its Corporate Affiliates.
Payment. Payment for the Common Stock purchased under the Plan
shall be effected by means of the Participant's authorized payroll deductions.
Such deductions shall begin with the first full pay period following the
Effective Date following the Participant's Entry Date into the Option Period and
shall (unless sooner terminated by the Participant) continue through the pay day
ending with or immediately prior to the last day of the Option Period. The
amounts so collected shall be credited to the Participant's Account under the
Plan, but no interest shall be paid on the balance from time to time outstanding
in such Account. The amounts collected from a Participant may be commingled with
the general assets of the Company and may be used for general corporate
purposes.
Termination of Purchase Right. The following provisions shall
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the last
five (5) business days of the Purchase Period, terminate his/her
outstanding purchase right under the Plan by filing the prescribed
notification form with the Plan Administrator (or its designate). No
further payroll deductions shall be collected from the Participant
with respect to the terminated purchase right, and any payroll
deductions collected for the current Purchase Period shall, at the
Participant's election, be immediately refunded or held for the
purchase of shares on the end of the Purchase Period. If no such
election is made, then such funds shall be refunded as soon as
possible after the close of such Purchase Period.
(ii) After the termination of purchase rights for an
Option Period, the Participant may not subsequently rejoin that Option
Period. In order to resume participation in any subsequent Option
Period, such individual must re-enroll in the Plan for that Option
Period.
(iii) If a Participant ceases to be a Qualifying
Employee for any reason whatsoever during an Option Period then all
payroll deductions shall terminate and all funds held in the
Participant's Account will be promptly paid to the Participant or the
Participant's legal representative.
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<PAGE> 8
No further purchases of shares hereunder shall occur after the
Participant has ceased to be a Qualifying Employee.
Stock Purchase. Subject to the limitations set forth herein,
funds held in a Participant's Account at the end of a Purchase Period (and which
are not required to be refunded hereunder) shall be applied to the purchase of
whole shares of Common Stock for the Participant on the last business day of the
Purchase Period at the purchase price in effect for such Purchase Period. Any
payroll deductions not applied to such purchase because they are not sufficient
to purchase a whole share shall be held for the purchase of Common Stock in the
next Purchase Period. Any payroll deductions not applied to the purchase of
Common Stock for any other reason shall be promptly refunded to the Participant.
Proration of Purchase Rights. If the total number of shares of
Common Stock which would otherwise be purchased hereunder on any date exceed the
number of shares then available for issuance under the Plan, the Plan
Administrator shall make a pro-rata allocation of the available shares to
Participants on a uniform and nondiscriminatory basis.
Rights as Shareholder. A Participant shall have no shareholder
rights with respect to the shares subject to his/her outstanding purchase right
until the shares are actually purchased on the Participant's behalf in
accordance with the applicable provisions of the Plan. No adjustments shall be
made for dividends, distributions or other rights for which the record date is
prior to the date of such purchase.
A Participant shall be entitled to receive, as soon as
practicable after purchase hereunder, a stock certificate for the number of
shares purchased for the Participant. Such certificate may, upon the
Participant's request, be issued in the names of the Participant and his/her
spouse as community property or as joint tenants with right of survivorship.
Assignability. No purchase right granted under the Plan shall be
assignable or transferable by the Participant other than by will or by the laws
of descent and distribution following the Participant's death, and during the
Participant's lifetime the purchase right shall be exercisable only by the
Participant.
Change in Ownership. Should the Company or its shareholders enter
into an agreement to dispose of all or substantially all of the assets or
outstanding capital stock of the Company by means of:
(i) a sale, merger or other reorganization in which
the Company will not be the surviving corporation (other than a
reorganization effected primarily to change the State in which the
Company is incorporated), or
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<PAGE> 9
(ii) a reverse merger in which the Company is the
surviving corporation but in which more than 50% of the Company's
outstanding voting stock is transferred to holders different from
those who held the stock immediately prior to the reverse merger,
then all outstanding purchase rights under the Plan shall
automatically be exercised immediately prior to the consummation of such sale,
merger, reorganization or reverse merger by applying the amounts in each
Participant's Account to the purchase of whole shares of Common Stock at
eighty-five percent (85%) of the lower of (i) the fair market value of the
Common Stock on the Participant's Entry Date into the Option Period in which
such transaction occurs or (ii) the fair market value of the Common Stock
immediately prior to the consummation of such transaction. However, the
applicable share limitations of Articles VII and VIII shall continue to apply to
any such purchase, and the clause (i) amount above shall not, for any
Participant whose Entry Date for the Option Period is other than the start date
of such Option Period, be less than the fair market value of the Common Stock on
such start date.
The Company shall use its best efforts to provide at least ten
(10)-days advance written notice of the occurrence of any such sale, merger,
reorganization or reverse merger, and Participants shall, following the receipt
of such notice, have the right to terminate their outstanding purchase rights in
accordance with the applicable provisions of this Article VII.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (I) rights to purchase Common
Stock accrued under any other purchase right outstanding under this Plan and
(II) similar rights accrued under other employee stock purchase plans (within
the meaning of Code Section 423) of the Company or its Corporate Affiliates,
would otherwise permit such Participant to purchase more than $25,000 worth of
stock of the Company or any Corporate Affiliate (determined on the basis of the
fair market value of such stock on the date or dates such rights are granted to
the Participant) for each calendar year such rights are at any time outstanding.
B. For purposes of applying such accrual limitations, the right
to acquire Common Stock pursuant to each purchase right outstanding under the
Plan shall accrue as follows:
(i) The right to acquire Common Stock under each such
purchase right shall accrue in a series of successive semi-annual
installments as and when the purchase right first becomes exercisable
for each
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semi-annual installment on the last business day of each Purchase
Period for which the right remains outstanding.
(ii) No right to acquire Common Stock under any
outstanding purchase right shall accrue to the extent the Participant
has already accrued in the same calendar year the right to acquire
$25,000 worth of Common Stock (determined on the basis of the fair
market value on the date or dates of grant) pursuant to one or more
purchase rights held by the Participant during such calendar year.
(iii) If by reason of such accrual limitations, any
purchase right of a Participant does not accrue for a particular
Purchase Period, then the payroll deductions which the Participant
made during that Purchase Period with respect to such purchase right
shall be promptly refunded.
C. In the event there is any conflict between the provisions of
this Article VIII and one or more provisions of the Plan or any instrument
issued thereunder, the provisions of this Article VIII shall be controlling.
IX. STATUS OF PLAN UNDER FEDERAL TAX LAWS
The Plan is designed to qualify as an employee stock purchase
plan under Code Section 423.
X. AMENDMENT AND TERMINATION
A. The Board may alter, amend, suspend or discontinue the Plan
following the close of any Purchase Period. However, the Board may not, without
the approval of the Company's shareholders:
(i) materially increase the number of shares issuable
under the Plan or the maximum number of shares which may be purchased
per Participant during any one Option Period under the Plan, except
that the Plan Administrator shall have the authority, exercisable
without such shareholder approval, to effect adjustments to the extent
necessary to reflect changes in the Company's capital structure
pursuant to Section VI.B;
(ii) alter the purchase price formula so as to reduce
the purchase price payable for the shares issuable under the Plan; or
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(iii) materially increase the benefits accruing to
Participants under the Plan or materially modify the requirements for
eligibility to participate in the Plan.
B. The Company shall have the right, exercisable in the sole
discretion of the Plan Administrator, to terminate all outstanding purchase
rights under the Plan immediately following the close of any Purchase Period.
Should the Company elect to exercise such right, then the Plan shall terminate
in its entirety. No further purchase rights shall thereafter be granted or
exercised, and no further payroll deductions shall thereafter be collected,
under the Plan.
XI. GENERAL PROVISIONS
A. The term of this Plan shall commence on the effective date of
the Registration Statement on Form S-8 covering the Common Stock issuable under
the Plan, provided that the term shall not commence, and no shares of Common
Stock shall be issued hereunder, until (i) the Plan shall have been approved by
the shareholders; (ii) the Company shall have complied with all applicable
requirements, all applicable listing requirements of any securities exchange on
which shares of the Common Stock are listed and all other applicable
requirements established by law or regulation and the Plan Administrator shall
have determined to commence granting Purchase Rights hereunder. In the event
shareholder approval is not obtained, or Company compliance with the Act is not
effected, within twelve (12) months after the date on which the Plan is adopted
by the Board, the Plan shall terminate and have no further force or effect.
B. The Plan shall terminate on June 30, 2005.
C. All costs and expenses incurred in the administration of the
Plan shall be paid by the Company.
D. Neither the action of the Company in establishing the Plan,
nor any action taken under the Plan by the Board or the Plan Administrator, nor
any provision of the Plan itself shall be construed so as to grant any person
the right to remain in the employ of the Company or any Corporate Affiliate for
any period, and such person's employment may be terminated at any time, with or
without cause.
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