<PAGE>
As filed with the Securities and Exchange Commission on January 17, 1997.
Registration No. 33-___________
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ONTRAK SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0074302
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1010 Rincon Circle, San Jose, California 95131
(Address of Principal Executive Offices)(Zip Code)
___________________________________________
1996 EQUITY INCENTIVE PLAN
(Full title of the plan)
___________________________________________
JAMES W. BAGLEY
Chairman and Chief Executive Officer
OnTrak Systems, Inc.
1010 Rincon Circle, San Jose, California 95131
(Name and address of agent for service)
(408) 577-1010
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Title of Securities Amount to be Maximum Offering Maximum Aggregate Amount of
to be Registered Registered(1) Price per Share(2) Offering Price(2) Registration Fee
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options to purchase
Common Stock, $.0001
par value, issuable
pursuant to 1996 Equity
Incentive Plan Indeterminate N/A N/A N/A
Common Stock, $.0001 par
value, issuable pursuant
to 1996 Equity Incentive
Plan 2,000,000 shs $18.625 $37,250,000 $11,287.88
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Registration Statement shall also cover any additional
shares of Common Stock which become issuable under the 1996 Equity
Incentive Plan by reason of any stock dividend, stock split,
recapitalization or 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) Estimated solely for the purpose of calculating the amount
of the registration fee under Rule 457(h) of the Securities Act of
1933 on the basis of the closing sales price for the Common Stock
on January 13, 1997, as reported on the Nasdaq National Market.
<PAGE>
PART I
EXPLANATORY NOTE
OnTrak Systems, Inc. (the "Registrant") files this Registration
Statement on Form S-8 with the Securities and Exchange Commission (the
"Commission") to register 2,000,000 shares of Common Stock authorized for
issuance pursuant to the Registrant's 1996 Equity Incentive Plan. As
permitted by the rules of the Commission, this Registration Statement omits
the information specified in Part I of Form S-8. The documents containing
the information specified in Part I will be delivered to the participants in
the 1996 Equity Incentive Plan, as required by Securities Act Rule 428(b).
Such documents are not being filed as part of this Registration Statement or
as prospectuses or prospectus supplements pursuant to Rule 424.
I-1
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
There are hereby incorporated by reference into this Registration
Statement the following documents and information previously filed with the
Commission:
1. The Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1996, which contains audited financial statements
for the Registrant's fiscal year ended June 30, 1996.
2. The Registrant's Registration Statement on Form 8-A,
dated June 9, 1995, filed pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as amended by the
Registrant's Form 8-K Report dated November 22, 1996, which contains a
description of the Registrant's Common Stock.
All documents filed by the Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange 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.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 145 of the Delaware General
Corporation Law, the Registrant's Certificate of Incorporation eliminates a
director's personal liability for monetary damages to the Registrant and its
shareholders arising from a breach or alleged breach of the director's
fiduciary duty. This provision does not eliminate the
II-1
<PAGE>
directors' duty of care, and in appropriate circumstances equitable remedies
such as injunctive or other forms of non-monetary relief would remain
available under Delaware law.
Section 145 of the Delaware General Corporation Law authorizes a
corporation to indemnify its directors, officers, employees and other agents in
terms sufficiently broad to permit indemnification (including reimbursement for
expenses) under certain circumstances for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Certificate of Incorporation and Bylaws contain provisions covering
indemnification of corporate directors, officers and other agents against
certain liabilities and expenses incurred as a result of proceedings involving
such persons in their capacities as directors, officers, employees or agents,
including proceedings under the Securities Act or the Exchange Act. The
Registrant has entered into indemnification agreements with its directors and
certain officers and significant shareholders which may require the Registrant,
among other things, to indemnify such officers, directors and significant
shareholders against certain liabilities that may arise by reason of their
status or service as officers, directors or significant shareholders, to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain officers' and directors' insurance if
available on reasonable terms.
The Registrant has obtained insurance policies covering directors and
officers liability and company reimbursement, pursuant to which the Registrant's
officers and directors, or the Registrant if it has made payments to indemnify
its officers and directors, will be reimbursed for certain costs, charges and
expenses incurred as a result of proceedings involving directors and officers in
their capacity as such.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent or significant shareholder of the
Registrant in which indemnification is being sought nor is the Registrant aware
of any threatened litigation that may result in a claim for indemnification by
any director, officer, employee or other agent or significant shareholder of the
Registrant.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
II-2
<PAGE>
ITEM 8. EXHIBITS.
4.1 Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.3 of Exhibits to Registrant's Form 8-K
Report dated November 22, 1996).
4.2 Bylaws of the Registrant (incorporated by reference to
Exhibit 3.4 of Exhibits to Registrant's Form 8-K Report dated
November 22, 1996).
4.3 1996 Equity Incentive Plan.
4.4 Form of Stock Option Agreement for use with the 1996 Equity
Incentive Plan.
5 Opinion of Graham & James LLP.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Graham & James LLP. Reference is made to Exhibit 5.
24 Power of Attorney. Reference is made to Page II-5.
ITEM 9. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the 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 the Registration
Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
II-3
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by reference in
the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described in Item 6, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the 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 Act and
will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Jose, State of California, on
this 17th day of January, 1997.
ONTRAK SYSTEMS, INC.
By: JAMES W. BAGLEY
-------------------
James W. Bagley
Chairman and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James W. Bagley and Patrick C.
O'Connor, or either of them, as his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
JAMES W. BAGLEY Chief Executive Officer January 17, 1997
- ----------------- (Principal Executive Officer)
James W. Bagley and Chairman of the Board
of Directors
II-5
<PAGE>
PATRICK C. O'CONNOR Vice President- January 17, 1997
- -------------------- Finance and Chief
Patrick C. O'Connor Financial Officer
(Principal Financial
and Accounting Officer)
MICHAEL C. CHILD Director January 17, 1997
- --------------------
Michael C. Child
JERAULD J. CUTINI Director January 17, 1997
- --------------------
Jerauld J. Cutini
RICHARD J. ELKUS, JR. Director January 17, 1997
- --------------------
Richard J. Elkus, Jr.
GARY HULTQUIST Director January 17, 1997
- --------------------
Gary Hultquist
II-6
<PAGE>
EXHIBIT 4.3
ONTRAK SYSTEMS, INC.
1996 EQUITY INCENTIVE PLAN
ONTRAK SYSTEMS, INC. hereby adopts the OnTrak Systems, Inc. 1996 Equity
Incentive Plan, effective as of November 21, 1996, as follows:
SECTION 1
BACKGROUND, PURPOSE AND DURATION
1.1 BACKGROUND AND EFFECTIVE DATE. The Plan permits the grant of
Nonstatutory Stock Options, Incentive Stock Options and Restricted Stock.
The Plan is effective as of November 21, 1996, subject to ratification by an
affirmative vote of the holders of a majority of the Shares which are present
in person or by proxy and entitled to vote at the 1996 Annual Meeting of
Stockholders. Awards may be granted prior to the receipt of such vote, but
such grants shall be null and void if such vote is not in fact received.
1.2 PURPOSE OF THE PLAN. The Plan is intended to attract, motivate, and
retain (1) employees of the Company and its Affiliates, (2) consultants who
provide significant services to the Company and its Affiliates, and (3)
directors of the Company who are not employees of either the Company or any
Affiliate. The Plan also is designed to encourage stock ownership by
Participants, thereby aligning their interests with those of the Company's
shareholders.
SECTION 2
DEFINITIONS
The following words and phrases shall have the following meanings unless
a different meaning is plainly required by the context:
2.1 "1934 ACT" means the Securities Exchange Act of 1934, as amended.
Reference to a specific section of the 1934 Act or regulation thereunder
shall include such section or regulation, any valid regulation promulgated
under such section, and any comparable provision of any future legislation or
regulation amending, supplementing or superseding such section or regulation.
2.2 "AFFILIATE" means any corporation or any other entity (including,
but not limited to, partnerships and joint ventures) controlling, controlled
by, or under common control with the Company.
2.3 "AWARD" means, individually or collectively, a grant under the Plan
of Nonstatutory Stock Options, Incentive Stock Options or Restricted Stock.
<PAGE>
2.4 "AWARD AGREEMENT" means the written agreement setting forth the
terms and provisions applicable to each Award granted under the Plan.
2.5 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
2.6 "CODE" means the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under
such section, and any comparable provision of any future legislation or
regulation amending, supplementing or superseding such section or regulation.
2.7 "COMMITTEE" means the committee appointed by the Board (pursuant to
Section 3.1) to administer the Plan.
2.8 "COMPANY" means OnTrak Systems, Inc., a California corporation, or
any successor thereto.
2.9 "CONSULTANT" means any consultant, independent contractor, or other
person who provides significant services to the Company or its Affiliates,
but who is neither an Employee nor a Director.
2.10 "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company.
2.11 "DISABILITY" means a permanent and total disability within the
meaning of Code Section 22(e)(3), provided that in the case of Awards other
than Incentive Stock Options, the Committee in its discretion may determine
whether a permanent and total disability exists in accordance with uniform
and non-discriminatory standards adopted by the Committee from time to time.
2.12 "EMPLOYEE" means any employee of the Company or of an Affiliate,
whether such employee is so employed at the time the Plan is adopted or
becomes so employed subsequent to the adoption of the Plan.
2.13 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended. Reference to a specific section of ERISA or regulation
thereunder shall include such section or regulation, any valid regulation
promulgated under such section, and any comparable provision of any future
legislation or regulation amending, supplementing or superseding such section
or regulation.
2.14 "EXERCISE PRICE" means the price at which a Share may be purchased
by a Participant pursuant to the exercise of an Option.
2.15 "FAIR MARKET VALUE" means the last quoted per share selling price
for Shares on the relevant date, or if there were no sales on such date, the
arithmetic
2
<PAGE>
mean of the highest and lowest quoted selling prices on the nearest day
before and the nearest day after the relevant date, as determined by the
Committee. Notwithstanding the preceding, for federal, state, and local
income tax reporting purposes, fair market value shall be determined by the
Committee (or its delegate) in accordance with uniform and nondiscriminatory
standards adopted by it from time to time.
2.16 "FISCAL YEAR" means the fiscal year of the Company.
2.17 "GRANT DATE" means, with respect to an Award, the date that the
Award was granted.
2.18 "INCENTIVE STOCK OPTION" means an Option to purchase Shares which is
designated as an Incentive Stock Option and is intended to meet the
requirements of Section 422 of the Code.
2.19 "NONEMPLOYEE DIRECTOR" means a Director who is not an employee of
either the Company or of any Affiliate.
2.20 "NONSTATUTORY STOCK OPTION" means an option to purchase Shares which
is not intended to be an Incentive Stock Option.
2.21 "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option.
2.22 "PARTICIPANT" means an Employee, Consultant, or Nonemployee Director
who has an outstanding Award.
2.23 "PERIOD OF RESTRICTION" means the period during which the transfer
of Shares of Restricted Stock are subject to restrictions and, therefore, the
Shares are subject to a substantial risk of forfeiture. As provided in
Section 6, such restrictions may be based on the passage of time, the
achievement of target levels of performance, or the occurrence of other
events as determined by the Committee, in its discretion.
2.24 "PLAN" means the OnTrak Systems, Inc. 1996 Equity Incentive Plan, as
set forth in this instrument and as hereafter amended from time to time.
2.25 "RESTRICTED STOCK" means an Award granted to a Participant pursuant
to Section 6.
2.26 "RETIREMENT" means, in the case of an Employee, a Termination of
Service by reason of the Employee's retirement at or after his or her normal
retirement date. With respect to a Consultant, no Termination of Service
shall be deemed to be on account of "Retirement." With respect to a
Nonemployee Director, "Retirement" means termination of service on the Board
at or after age 65.
2.27 "RULE 16B-3" means Rule 16b-3 promulgated under the 1934 Act, and
any future regulation amending, supplementing or superseding such regulation.
3
<PAGE>
2.28 "SECTION 16 PERSON" means a person who, with respect to the Shares,
is subject to Section 16 of the 1934 Act.
2.29 "SHARES" means the shares of Common Stock of the Company.
2.30 "SUBSIDIARY" means any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain then owns 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.
2.31 "TERMINATION OF SERVICE" means (a) in the case of an Employee, a
cessation of the employee-employer relationship between an employee and the
Company or an Affiliate for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability,
Retirement, or the disaffiliation of an Affiliate, but excluding any such
termination where there is a simultaneous reemployment by the Company or an
Affiliate; and (b) in the case of a Consultant, a cessation of the service
relationship between a Consultant and the Company or an Affiliate for any
reason, including, but not by way of limitation, a termination by
resignation, discharge, death, Disability, or the disaffiliation of an
Affiliate, but excluding any such termination where there is a simultaneous
re-engagement of the consultant by the Company or an Affiliate.
SECTION 3
ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Committee.
The Committee shall consist of not less than two (2) Directors. The members
of the Committee shall be appointed from time to time by, and shall serve at
the pleasure of, the Board of Directors. The Committee shall be comprised
solely of Directors who both are (a) "non-employee directors" under Rule
16b-3, and (b) "outside directors" under Section 162(m) of the Code.
3.2 AUTHORITY OF THE COMMITTEE. It shall be the duty of the Committee
to administer the Plan in accordance with the Plan's provisions. The
Committee shall have all powers and discretion necessary or appropriate to
administer the Plan and to control its operation, including, but not limited
to, the power to (a) determine which Employees and Consultants shall be
granted Awards, (b) prescribe the terms and conditions of the Awards (other
than the Options granted to Nonemployee Directors), (c) interpret the Plan
and the Awards, (d) adopt such procedures and subplans as are necessary or
appropriate to permit participation in the Plan by Employees, Consultants and
Directors who are foreign nationals or employed outside of the United States,
(e) adopt rules for the administration, interpretation and application of the
Plan as are consistent therewith, and (f) interpret, amend or revoke any such
rules.
4
<PAGE>
3.3 DELEGATION BY THE COMMITTEE. The Committee, in its sole discretion
and on such terms and conditions as it may provide, may delegate all or any
part of its authority and powers under the Plan to one or more directors or
officers of the Company; provided, however, that the Committee may not
delegate its authority and powers (a) with respect to Section 16 Persons, or
(b) in any way which would jeopardize the Plan's qualification under Section
162(m) of the Code or Rule 16b-3.
3.4 NONEMPLOYEE DIRECTOR OPTIONS. Notwithstanding any contrary
provision of this Section 3, the Board shall administer grants of Options to
Nonemployee Directors, and the Committee shall exercise no discretion with
respect to grants of Options to Nonemployee Directors. In the Board's
administration of Options granted to Nonemployee Directors, the Board shall
have all of the authority and discretion otherwise granted to the Committee
with respect to the administration of the Plan.
3.5 DECISIONS BINDING. All determinations and decisions made by the
Committee, the Board, and any delegate of the Committee pursuant to the
provisions of the Plan shall be final, conclusive, and binding on all
persons, and shall be given the maximum deference permitted by law.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section
4.3, the total number of Shares available for grant under the Plan shall not
exceed 2,000,000. Shares granted under the Plan may be either authorized but
unissued Shares or treasury Shares.
4.2 LAPSED AWARDS. If an Award is settled in cash, or is cancelled,
terminates, expires, or lapses for any reason, any Shares subject to such
Award again shall be available to be the subject of an Award.
4.3 ADJUSTMENTS IN AWARDS AND AUTHORIZED SHARES. In the event of any
merger, reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, split-up, share combination, or other change in
the corporate structure of the Company affecting the Shares, the Committee
shall adjust the number and class of Shares which may be delivered under the
Plan, the number, class, and price of Shares subject to outstanding Awards,
and the numerical limits of Sections 5.1 and 6.1, in such manner as the
Committee (in its sole discretion) shall determine to be appropriate to
prevent the dilution or diminution of such Awards. In the case of Options
granted to Nonemployee Directors, the foregoing adjustments shall be made by
the Board, and any such adjustments also shall apply to future grants.
Notwithstanding the preceding, the number of Shares subject to any Award
always shall be a whole number.
5
<PAGE>
SECTION 5
STOCK OPTIONS
5.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Employees and Consultants at any time and from time
to time as determined by the Committee in its sole discretion, and Options
may be granted to Nonemployee Directors at any time and from time to time as
determined by the Board in its sole discretion. The Committee, in its sole
discretion, shall determine the number of Shares subject to each Option,
provided that during any Fiscal Year, the employee who serves as Chief
Executive Officer of the Company shall not be granted Options covering more
than 800,000 Shares and no other Participant shall be granted Options
covering more than 300,000 Shares. The Committee may grant Incentive Stock
Options, Nonstatutory Stock Options, or a combination thereof.
5.2 AWARD AGREEMENT. Each Option shall be evidenced by an Award
Agreement that shall specify the Exercise Price, the expiration date of the
Option, the number of Shares to which the Option pertains, any conditions to
exercise of the option, and such other terms and conditions as the Committee,
in its discretion, shall determine. The Award Agreement shall also specify
whether the Option is intended to be an Incentive Stock Option or a
Nonstatutory Stock Option.
5.3 EXERCISE PRICE. Subject to the provisions of this Section 5.3, the
Exercise Price for each Option shall be determined by the Committee in its
sole discretion.
5.3.1 NONSTATUTORY STOCK OPTIONS. In the case of a
Nonstatutory Stock Option, the Exercise Price shall be not less than one
hundred percent (100%) of the Fair Market Value of a Share on the Grant Date.
5.3.2 INCENTIVE STOCK OPTIONS. In the case of an Incentive
Stock Option, the Exercise Price shall be not less than one hundred percent
(100%) of the Fair Market Value of a Share on the Grant Date; provided,
however, that if on the Grant Date, the Employee (together with persons whose
stock ownership is attributed to the Employee pursuant to Section 424(d) of
the Code) owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any of its Subsidiaries, the
Exercise Price shall be not less than one hundred and ten percent (110%) of
the Fair Market Value of a Share on the Grant Date.
5.3.3 SUBSTITUTE OPTIONS. Notwithstanding the provisions of
Sections 5.3.1 and 5.3.2, in the event that the Company or an Affiliate
consummates a transaction described in Section 424(a) of the Code (e.g., the
acquisition of property or stock from an unrelated corporation), persons who
become Employees or Consultants on account of such transaction may be granted
Options in substitution for options granted by their former employer. If
such substitute options are granted, the Committee, in its sole discretion
and consistent with Section 424(a) of the Code, may determine that such
substitute Options shall have an exercise price less than one hundred percent
(100%) of the Fair market Value of the Shares on the Grant Date.
6
<PAGE>
5.4 EXPIRATION OF OPTIONS.
5.4.1 EXPIRATION DATES. Each Option shall terminate no later
than the first to occur of the following events:
(a) The date for termination of the Option set forth in
the written Award Agreement; or
(b) The expiration of ten (10) years from the Grant
Date; or
(c) The expiration of one (1) year from the date of the
Optionee's Termination of Service for a reason other than the Optionee's
death, Disability or Retirement; or
(d) The expiration of three (3) years from the date of
the Optionee's Termination of Service by reason of Disability; or
(e) The expiration of three (3) years from the date of
the Optionee's Retirement (except as provided in Section 5.8.2 regarding
Incentive Stock Options).
5.4.2 DEATH OF OPTIONEE. Notwithstanding Section 5.4.1, if an
Optionee dies prior to the expiration of his or her Options, the Committee,
in its discretion, may provide that his or her Options shall be exercisable
for up to three (3) years after the date of death, provided that in no event
may an Option be exercisable more than ten (10) years after the Grant Date.
5.4.3 COMMITTEE DISCRETION. Subject to the limits of Sections
5.4.1 and 5.4.2, the Committee, in its sole discretion, (a) shall provide in
each Award Agreement when each Option expires and becomes unexercisable, and
(b) may, after an Option is granted, extend the maximum term of the Option
(subject to Section 5.8.4 regarding Incentive Stock Options).
5.5 EXERCISABILITY OF OPTIONS. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions
as the Committee shall determine in its sole discretion. After an Option is
granted, the Committee, in its sole discretion, may accelerate the
exercisability of the Option. However, in no event may any Option granted to
a Section 16 Person be exercisable until at least six (6) months following
the Grant Date (or such shorter period as may be permissible while
maintaining compliance with Rule 16b-3).
5.6 PAYMENT. Options shall be exercised by the Participant's delivery
of a written notice of exercise to the Chief Financial Officer of the Company
(or its designee), setting forth the number of Shares with respect to which
the Option is to be exercised, accompanied by full payment for the Shares.
7
<PAGE>
Upon the exercise of any Option, the Exercise Price shall be payable to
the Company in full in cash or its equivalent. The Committee, in its sole
discretion, also may permit exercise (a) by tendering previously acquired
Shares having an aggregate Fair Market value at the time of exercise equal to
the total Exercise Price, or (b) by any other means which the Committee, in
its sole discretion, determines to both provide legal consideration for the
Shares, and to be consistent with the purposes of the Plan.
As soon as practicable after receipt of a written notification of
exercise and full payment for the Shares purchased, the Company shall deliver
to the Participant (or the Participant's designated broker), Share
certificates (which may be in book entry form) representing such Shares.
5.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose
such restrictions on any Shares acquired pursuant to the exercise of an
Option as it may deem advisable, including, but not limited to, restrictions
related to applicable Federal securities laws, the requirements of any
national securities exchange or system upon which Shares are then listed or
traded, or any blue sky or state securities laws.
5.8 CERTAIN ADDITIONAL PROVISIONS FOR INCENTIVE STOCK OPTIONS.
5.8.1 EXERCISABILITY. The aggregate Fair Market Value
(determined on the Grant Date(s)) of the Shares with respect to which
Incentive Stock Options are exercisable for the first time by any Employee
during any calendar year (under all plans of the Company and its
Subsidiaries) shall not exceed $100,000.
5.8.2 TERMINATION OF SERVICE. No Incentive Stock Option may
be exercised more than three (3) months after the Participant's Termination
of Service for any reason other than Disability or death, unless (a) the
Participant dies during such three-month period, and (b) the Award Agreement
or the Committee permits later exercise. No Incentive Stock Option may be
exercised more than one (1) year after the Participant's termination of
employment on account of Disability, unless (a) the Participant dies during
such one-year period, and (b) the Award Agreement or the Committee permit
later exercise.
5.8.3 COMPANY AND SUBSIDIARIES ONLY. Incentive Stock Options
may be granted only to persons who are employees of the Company or a
Subsidiary on the Grant Date.
5.8.4 EXPIRATION. No Incentive Stock Option may be exercised
after the expiration of ten (10) years from the Grant Date; provided,
however, that if the Option is granted to an Employee who, together with
persons whose stock ownership is attributed to the Employee pursuant to
Section 424(d) of the Code, owns stock possessing more than 10% of the total
combined voting power of all classes of the stock of the Company or any of
its Subsidiaries, the Option may not be exercised after the expiration of
five (5) years from the Grant Date.
8
<PAGE>
5.9 TRANSFER OF OPTIONS. The Committee may, in its discretion, either
(a) authorize all or a portion of the Options granted to a Participant to be
on terms which permit transfer by such Participant, or (b) upon request of a
Participant amend an Option to permit transfer by such Participant, to (i)
the spouse, children or grandchildren of the Participant ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members, (iii) a partnership in which such Immediate Family Members
are the only partners, or (iv) any other entity affiliated with the
Participant that may be approved by the Committee, provided that (x) there
may be no consideration for any such transfer, (y) the Award Agreement
pursuant to which such Options are granted, and any amendment thereto, must
be approved by the Committee, and must expressly provide for transferability
in a manner consistent with this Section 5.9, and (z) subsequent transfers of
transferred Options shall be prohibited except those in accordance with
Section 7.7. Following transfer, any such Options shall continue to be
subject to the same terms and conditions as were applicable immediately prior
to transfer, provided that the term optionee or Participant shall be deemed
to refer to the transferee. The events of termination of employment of
Section 5.4 hereof or in the Award Agreement shall continue to be applied
with respect to the original Participant, following which the Options shall
be exercisable by the transferee only to the extent, and for the periods
specified in the Award Agreement or Section 5.4, as applicable.
SECTION 6
RESTRICTED STOCK
6.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of
the Plan, the Committee, at any time and from time to time, may grant Shares
of Restricted stock to Employees and Consultants in such amounts as the
Committee, in its sole discretion, shall determine. The Committee, in its
sole discretion, shall determine the number of Shares to be granted to each
Participant, provided that during any Fiscal Year no Participant shall
receive more than 20,000 Shares of Restricted Stock.
6.2 RESTRICTED STOCK AGREEMENT. Each Award of Restricted Stock shall
be evidenced by an Award Agreement that shall specify the Period of
Restriction, the number of Shares granted, and such other terms and
conditions as the Committee, in its sole discretion, shall determine. Unless
the Committee determines otherwise, Shares of Restricted Stock shall be held
by the Company as escrow agent until the restrictions on such Shares have
lapsed.
6.3 TRANSFERABILITY. Except as provided in this Section 6, Shares of
Restricted Stock may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable Period of
Restriction. However, in no event may the restrictions on Restricted Stock
granted to a Section 16 Person lapse prior to six (6) months following the
Grant Date (or such shorter period as may be permissible while maintaining
compliance with Rule 16b-3).
9
<PAGE>
6.4 OTHER RESTRICTIONS. The Committee, in its sole discretion, may
impose such other restrictions on Shares of Restricted Stock as it may deem
advisable or appropriate, in accordance with this Section 6.4.
6.4.1 GENERAL RESTRICTIONS. The Committee may set restrictions
based upon the achievement of specific performance objectives (Company-wide,
divisional, or individual), applicable Federal or state securities laws, or
any other basis determined by the Committee in its discretion.
6.4.2 SECTION 162(m) PERFORMANCE RESTRICTIONS. For purposes of
qualifying grants of Restricted Stock as "performance-based compensation"
under Section 162(m) of the Code, the Committee, in its discretion, may set
restrictions based upon the achievement of performance objectives established
by the Committee. The performance objectives shall be set by the Committee
on or before the latest date permissible to enable the Restricted Stock to
qualify as "performance-based compensation" under Section 162(m) of the Code.
In granting Restricted Stock which is intended to qualify under Code Section
162(m), the Committee shall follow any procedures determined by it from time
to time to be necessary or appropriate to ensure qualification of the
Restricted Stock under Code Section 162(m) (e.g., in determining the
performance objectives).
6.4.3 LEGEND ON CERTIFICATES. The Committee, in its
discretion, may legend the certificates representing Restricted Stock to give
appropriate notice of such restrictions. For example, the Committee may
determine that some or all certificates representing Shares of Restricted
Stock shall bear the following legend:
"The sale or other transfer of the shares of stock
represented by this certificate, whether voluntary, involuntary
or by operation of law, is subject to certain restrictions on
transfer as set forth in the OnTrak Systems, Inc. 1996 Equity
Incentive Plan, and in a Restricted Stock Agreement. A copy of
the Plan and such Restricted Stock Agreement may be obtained
from the Secretary of OnTrak Systems, Inc."
6.5 REMOVAL OF RESTRICTIONS. Except as otherwise provided in this
Section 6, Shares of Restricted Stock covered by each Restricted Stock grant
made under the Plan shall be released from escrow as soon as practicable
after the last day of the Period of Restriction. The Committee, in its
discretion, may accelerate the time at which any restrictions shall lapse,
and remove any restrictions; provided, however, that the Period of
Restriction on Shares granted to a Section 16 Person may not lapse until at
least six (6) months after the Grant Date (or such shorter period as may be
permissible while maintaining compliance with Rule 16b-3). After the
restrictions have lapsed, the Participant shall be entitled to have any
legend or legends under Section 6.4.3 removed from his or her Share
certificate, and the Shares shall be freely transferable by the Participant.
10
<PAGE>
6.6 VOTING RIGHTS. During the Period of Restriction, Participants
holding Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares, unless the Committee determines
otherwise.
6.7 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of
Restriction, Participants holding Shares of Restricted Stock shall be
entitled to receive all dividends and other distributions paid with respect
to such Shares unless otherwise provided in the Award Agreement. If any such
dividends or distributions are paid in Shares, the Shares shall be subject to
the same restrictions on transferability and forfeitability as the Shares of
Restricted Stock with respect to which they were paid.
6.8 RETURN OF RESTRICTED STOCK TO COMPANY. On the date set forth in
the Award Agreement, the Restricted Stock for which restrictions have not
lapsed shall revert to the Company and again shall become available for grant
under the Plan.
SECTION 7
MISCELLANEOUS
7.1 DEFERRALS. The Committee, in its sole discretion, may permit a
Participant to defer receipt of the payment of cash or the delivery of Shares
that would otherwise be due to such Participant under an Award. Any such
deferral elections shall be subject to such rules and procedures as shall be
determined by the Committee in its sole discretion.
7.2 NO EFFECT ON EMPLOYMENT OR SERVICE. Nothing in the Plan shall
interfere with or limit in any way the right of the Company to terminate any
Participant's employment or service at any time, with or without cause. For
purposes of the Plan, transfer of employment of a Participant between the
Company and any one of its Affiliates (or between Affiliates) shall not be
deemed a Termination of Service. Employment with the Company and its
Affiliates is on an at-will basis only.
7.3 PARTICIPATION. No Employee or Consultant shall have the right to
be selected to receive an Award under this Plan, or, having been so selected,
to be selected to receive a future Award.
7.4 INDEMNIFICATION. Each person who is or shall have been a member of
the Committee, or of the Board, shall be indemnified and held harmless by the
Company against and from (a) any loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may
be a party or in which he or she may be involved by reason of any action
taken or failure to act under the Plan or any Award Agreement, and (b) from
any and all amounts paid by him or her in settlement thereof, with the
Company's approval, or paid by him or her in satisfaction of any judgment in
any such claim, action, suit, or proceeding against him or her, provided he
or she shall give the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and defend it on
his or her own behalf. The
11
<PAGE>
foregoing right of indemnification shall not be exclusive of any other rights
of indemnification to which such persons may be entitled under the Company's
Articles of Incorporation or Bylaws, by contract, as a matter of law, or
otherwise, or under any power that the Company may have to indemnify them or
hold them harmless.
7.5 SUCCESSORS. All obligations of the Company under the Plan, with
respect to Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business or assets of the Company.
7.6 BENEFICIARY DESIGNATIONS. If permitted by the Committee, a
Participant under the Plan may name a beneficiary or beneficiaries to whom
any vested but unpaid Award shall be paid in the event of the Participant's
death. Each such designation shall revoke all prior designations by the
Participant and shall be effective only if given in a form and manner
acceptable to the Committee. In the absence of any such designation, any
vested benefits remaining unpaid at the Participant's death shall be paid to
the Participant's estate and, subject to the terms of the Plan and of the
applicable Award Agreement, any unexercised vested Award may be exercised by
the administrator or executor of the Participant's estate.
7.7 NONTRANSFERABILITY OF AWARDS. Except as expressly authorized by
the Committee pursuant to Section 5.9, no Award granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will, by the laws of descent and distribution, or to the
limited extent provided in
7.8 NO RIGHTS AS STOCKHOLDER. Except to the limited extent provided in
Sections 6.6 and 6.7, no Participant (nor any beneficiary) shall have any of
the rights or privileges of a stockholder of the Company with respect to any
Shares issuable pursuant to an Award (or exercise thereof), unless and until
certificates representing such Shares shall have been issued, recorded on the
records of the Company or its transfer agents or registrars, and delivered to
the Participant (or beneficiary).
SECTION 8
AMENDMENT, TERMINATION, AND DURATION
8.1 AMENDMENT, SUSPENSION, OR TERMINATION. The Board, in its sole
discretion, may amend or terminate the Plan, or any part thereof, at any time
and for any reason. However, if and to the extent required to maintain the
Plan's qualification under Rule 16b-3, any such amendment shall be subject to
stockholder approval. The amendment, suspension, or termination of the Plan
shall not, without the consent of the Participant, alter or impair any rights
or obligations under any Award theretofore granted to such Participant. No
Award may be granted during any period of suspension or after termination of
the Plan.
12
<PAGE>
8.2 DURATION OF THE PLAN. The Plan shall commence on the date
specified herein, and subject to Section 8.1 (regarding the Board's right to
amend or terminate the Plan), shall remain in effect thereafter. However,
without further stockholder approval, no Incentive Stock Option may be
granted under the Plan after November 21, 2006.
SECTION 9
TAX WITHHOLDING
9.1 WITHHOLDING REQUIREMENTS. Prior to the delivery of any Shares or
cash pursuant to an Award (or exercise thereof), the Company shall have the
power and the right to deduct or withhold, or require a Participant to remit
to the Company, an amount sufficient to satisfy Federal, state, and local
taxes (including the Participant's FICA obligation) required to be withheld
with respect to such Award (or exercise thereof). The Participant shall
remain responsible for the payment of all such withholding taxes with respect
to any Options that are transferred in accordance with the provisions of
Section 5.9.
9.2 WITHHOLDING ARRANGEMENTS. The Committee, in its sole discretion
and pursuant to such procedures as it may specify from time to time, may
permit a Participant to satisfy such tax withholding obligation, in whole or
in part by (a) electing to have the Company withhold otherwise deliverable
Shares, or (b) delivering to the Company already-owned shares having a Fair
Market Value equal to the amount required to be withheld. The amount of the
withholding requirement shall be deemed to include any amount which the
Committee agrees may be withheld at the time the election is made not to
exceed the amount determined by using the maximum Federal, state or local
marginal income tax rates applicable to the Participant with respect to the
Award on the date that the amount of tax to be withheld is to be determined.
The Fair Market Value of the Shares to be withheld or delivered shall be
determined as of the date that the taxes are required to be withheld.
SECTION 10
LEGAL CONSTRUCTION
10.1 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
10.2 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
10.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations,
13
<PAGE>
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
10.4 SECURITIES LAW COMPLIANCE. With respect to Section 16 Persons,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent any provision of the Plan, Award
Agreement or action by the Committee fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the
Committee.
10.5 GOVERNING LAW. The Plan and all Award Agreements shall be
construed in accordance with and governed by the laws of the State of
California.
10.6 CAPTIONS. Captions are provided herein for convenience only, and
shall not serve as a basis for interpretation or construction of the Plan.
14
<PAGE>
EXECUTION
IN WITNESS WHEREOF, OnTrak Systems, Inc., by its duly authorized
officer, has executed the Plan on the date indicated below.
ONTRAK SYSTEMS, INC.
Dated: November 21, 1996 By: JAMES W. BAGLEY
---------------------------
Name: James W. Bagley
--------------------
Title: Chairman & CEO
-------------------
15
<PAGE>
EXHIBIT 4.4
NONSTATUTORY STOCK OPTION AGREEMENT
OnTrak Systems, Inc., a Delaware corporation (the "Company"), hereby
grants to __________________ (the "Optionee"), an option (the "Option") to
purchase a total of ____________________ (_______) shares of Common Stock of
the Company (the "Shares"), at the price set forth herein, and in all
respects subject to the terms, definitions and provisions of the Company's
1996 Equity Incentive Plan (the "Plan"), which is incorporated herein by
reference.
1. NATURE OF THE OPTION. The Option is intended to be a nonstatutory
option and NOT an incentive stock option within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
2. Option Price. The Option Price is $___________ for each Share.
3. VESTING AND EXERCISE OF OPTION. The Option shall vest and become
exercisable during its term as follows:
(a) VESTING AND RIGHT TO EXERCISE.
(i) The Option shall vest and become exercisable with respect
to one-fourth of the Shares subject to the Option at the end of each of the
first four (4) years from __________________. Subject to the provisions of
subparagraphs (ii) and (iii) below, the Optionee can exercise any portion of
the Option which has vested until the expiration of the Option Term set forth
in Section 7 of this Agreement.
(ii) In the event of the Optionee's Termination of Service to
the Company (as defined in Section 2.31 of the Plan), the Option may be
exercised as follows:
(A) If Termination of Service is due to Disability (as
defined in Section 2.11 of the Plan), the Option may be exercised at any time
within six (6) months following the date of Termination of Service, but only
to the extent of the accrued right to exercise at the date of Termination of
Service, provided that the Option may not be exercised after the expiration
of the Option Term.
(B) If Termination of Service is due to death, the Option
may be exercised at any time within six (6) months following the date of
death, but only to the extent of the accrued right to exercise at the date of
death, provided that the Option may not be exercised after the expiration of
the Option Term.
(C) If Termination of Service is due to any other reason, the
Option may be exercised at any time within thirty (30) days following the date
of Termination of Service, but only to the extent of the accrued right to
exercise at the date
<PAGE>
of Termination of Service, provided that the Option may not be exercised
after the expiration of the Option Term.
(iii) The Option may not be exercised for fractional
shares or for less than ten (10) Shares.
(b) METHOD OF EXERCISE. In order to exercise any portion of this
Option which has vested, the Optionee shall notify the Company in writing of
the election to exercise the Option, the number of shares in respect of which
the Option is being exercised, accompanied by payment in full of the
aggregate purchase price of the Shares to be purchased. The certificate or
certificates for Shares as to which the Option has been exercised shall be
registered in the name of the Optionee.
(c) RESTRICTIONS ON EXERCISE. This Option may not be exercised if
the issuance of the shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
Federal or state securities law or any other law or regulation. Furthermore,
the method and manner of payment of the Option Price will be subject to the
rules under Part 207 of Title 12 of the Code of Federal Regulations
("Regulation G") as promulgated by the Federal Reserve Board if such rules
apply to the Company at the date of exercise. As a condition to the exercise
of this Option, the Company may require the Optionee to make any
representation or warranty to the Company at the time of exercise of the
Option as in the opinion of legal counsel for the Company may be required by
any applicable law or regulation, including the execution and delivery of an
appropriate representation statement. Accordingly, the stock certificates for
the Shares issued upon exercise of this Option may bear appropriate legends
restricting transfer.
4. NON-TRANSFERABILITY OF OPTION. This Option may be exercised during
the lifetime of the Optionee only by the Optionee and, subject to the
provisions of Section 7.6 of the Plan, may not be transferred in any manner
other than by will or by the laws of descent and distribution. The terms of
this Option shall be binding upon the executors, administrators, heirs and
successors of the Optionee.
5. METHOD OF PAYMENT. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) certified or bank cashier's check;
(c) in the event there exists a public market for the Company's
Common Stock on the date of exercise, by delivery of a sell order to a broker
for the shares being purchased and an agreement to pay the purchase price of
the shares being purchased (or irrevocable instructions to the Optionee's
broker to deliver to the
2
<PAGE>
Company the amount of sale proceeds required to pay the exercise price)
on or before the settlement date for the sale of such shares;
(d) authorization to retain from the total number of shares as to
which the Option is exercised that number of shares having a fair market
value on the date of exercise equal to the exercise price for the total
number of shares as to which the Option is exercised; or
(e) in the event there exists a public market for the Company's
Common Stock on the date of exercise, by surrender of shares of the Company's
Common Stock, provided that if such shares were acquired upon exercise of an
incentive stock option, the Optionee must have first satisfied the holding
period requirements under Section 422(a)(1) of the Code. In this case
payment shall be made as follows:
(i) Optionee shall deliver to the Secretary of the Company a
written notice which shall set forth the portion of the purchase price the
Optionee wishes to pay with Common Stock, and the number of shares of such
Common Stock the Optionee intends to surrender pursuant to the exercise of
this Option, which shall be determined by dividing the aforementioned portion
of the purchase price by the average of the last reported bid and asked
prices per share of Common Stock of the Company, as reported in THE WALL
STREET JOURNAL (or, if not so reported, as otherwise reported by the National
Association of Securities Dealers Automated Quotation (NASDAQ) System) or, in
the event the Common Stock is listed on a national securities exchange or on
the NASDAQ National Market System (or any successor national market system),
the closing price of Common Stock of the Company on such exchange as reported
in THE WALL STREET JOURNAL, for the day on which the notice of exercise is
sent or delivered;
(ii) Fractional shares shall be disregarded and the Optionee
shall pay in cash an amount equal to such fraction multiplied by the price
determined under subparagraph (i) above;
(iii) The written notice shall be accompanied by a duly
endorsed blank stock power with respect to the number of Shares set forth in
the notice, and the certificate(s) representing said Shares shall be
delivered to the Company at its principal offices within three (3) working
days from the date of the notice of exercise;
(iv) The Optionee hereby authorizes and directs the Secretary
of the Company to transfer so many of the Shares represented by such
certificate(s) as are necessary to pay the purchase price in accordance with
the provisions herein;
(v) If any such transfer of Shares requires the consent of
the California Commissioner of Corporations or of some other agency under the
securities laws of any other state, or an opinion of counsel for the Company
or Optionee that such
3
<PAGE>
transfer may be effected under applicable Federal and state securities laws,
the time periods specified herein shall be extended for such periods as the
necessary request for consent to transfer is pending before said Commissioner
or other agency, or until counsel renders such an opinion, as the case may
be. All parties agree to cooperate in making such request for transfer, or
in obtaining such opinion of counsel, and no transfer shall be effected
without such consent or opinion if required by law; and
(vi) Notwithstanding any other provision herein, the Optionee
shall only be permitted to pay the purchase price with shares of the
Company's Common Stock owned by him as of the exercise date in the manner and
within the time periods allowed under 17 CFR Section 240.16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as such regulation is presently constituted, as it is amended from time to
time, and as it is interpreted now or hereafter by the Securities and
Exchange Commission.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number of
Shares covered by this Option shall be adjusted in accordance with the
provisions of Section 4.3 of the Plan in the event of changes in the
capitalization or organization of the Company, or if the Company is a party
to a merger or other corporate reorganization.
7. TERM OF OPTION. This Option may not be exercised more than seven
(7) years from the date of grant of this Option, as set forth below, and may
be exercised during such term only in accordance with the Plan and the terms
of this Option.
8. NOT EMPLOYMENT CONTRACT. NOTHING IN THIS AGREEMENT OR IN the Plan
shall confer upon the Optionee any right to continue in the employ of the
Company or shall interfere with or restrict in any way the rights of the
Company, which are hereby expressly reserved, to discharge the Optionee at
any time for any reason whatsoever, with or without cause, subject to the
provisions of applicable law. This is not an employment contract.
9. INCOME TAX WITHHOLDING.
(a) The Optionee authorizes the Company to withhold in accordance
with applicable law from any compensation payable to him or her any taxes
required to be withheld by Federal, state or local laws as a result of the
exercise of this Option. Furthermore, in the event of any determination that
the Company has failed to withhold a sum sufficient to pay all withholding
taxes due in connection with the exercise of this Option, the Optionee agrees
to pay the Company the amount of any such deficiency in cash within five (5)
days after receiving a written demand from the Company to do so, whether or
not Optionee is an employee of the Company at that time.
(b) At such time as the Optionee is required to pay to the Company
an amount with respect to tax withholding obligations as set forth in
paragraph (a), the
4
<PAGE>
Optionee may elect prior to the date the amount of such withholding tax
is determined (the "Tax Date") to make such payment, or such increased payment
as the Optionee elects to make up to the maximum federal, state and local
marginal tax rates (including any related FICA obligation) applicable to the
Optionee and the particular transaction, by: (i) delivering cash; (ii)
delivering part or all of the payment in previously owned shares of Common Stock
(whether or not acquired through the prior exercise of an Option); and/or (iii)
irrevocably directing the Company to withhold from the Shares that would
otherwise be issued upon exercise of the Option that number of whole Shares
having a fair market value equal to the amount of tax required or elected to be
withheld (a "Withholding Election"). If an Optionee's Tax Date is deferred
beyond the date of exercise and the Optionee makes a Withholding Election, the
Optionee will initially receive the full amount of Shares otherwise issuable
upon exercise of the Option, but will be unconditionally obligated to surrender
to the Company on the Tax Date the number of Shares necessary to satisfy his or
her minimum withholding requirements, or such higher payment as he or she may
have elected to make, with adjustments to be made in cash after the Tax Date.
Any withholding of Shares with respect to taxes arising in connection
with the exercise of this Option at such time as the Optionee is subject to
short-swing trading liability under Section 16(b) of the Exchange Act shall
comply with the relevant requirements of 17 CFR Section 240.16b-1 et seq.
promulgated under the Exchange Act.
Any adverse consequences incurred by the Optionee with respect to the
use of shares of Common Stock to pay any part of the Option Price or of any tax
in connection with the exercise of the Option shall be the sole responsibility
of the Optionee.
DATE OF GRANT: _______________, 19___
ONTRAK SYSTEMS, INC.
By:__________________
Its:__________________
5
<PAGE>
The Optionee acknowledges receipt of a copy of the Plan and represents
that he or she is familiar with the terms and provisions thereof, and hereby
accepts this Option subject to all of the terms and provisions thereof. The
Optionee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Committee upon any questions arising
under the Plan.
Dated: ________________, 19____ _______________________________
CONSENT OF SPOUSE
I, ___________________________, spouse of the Optionee who executed the
foregoing Agreement, hereby agree that my spouse's interest in the shares of
Common Stock subject to said Agreement shall be irrevocably bound by the
Agreement's terms. I further agree that my community property interest in
such shares, if any, shall similarly be bound by said Agreement and that such
consent is binding upon my executors, administrators, heirs and assigns. I
agree to execute and deliver such documents as may be necessary to carry out
the intent of said Agreement and this consent.
Dated: _________________, 19____ ______________________________
6
<PAGE>
EXHIBIT 5
GRAHAM & JAMES LLP
600 HANSEN WAY
PALO ALTO, CA 94304
(415) 856-6500
January 16, 1997
OnTrak Systems, Inc.
1010 Rincon Circle
San Jose, CA 95131
RE: REGISTRATION STATEMENT ON FORM S-8
Ladies and Gentlemen:
This opinion accompanies the Registration Statement on Form S-8 (the
"Registration Statement") of OnTrak Systems, Inc. (the "Company") to be filed
with the Securities and Exchange Commission on January 17, 1997 relating to
2,000,000 shares of the Company's Common Stock, $.0001 par value per share
(the "Shares"), reserved for issuance under the Company's 1996 Equity
Incentive Plan (the "Plan"). As counsel for the Company, we advise you as
follows:
We are of the opinion that when the steps mentioned below shall have been
taken, the Shares will be legally and validly issued, fully paid and
non-assessable. The steps to be taken as indicated in the foregoing sentence
are:
(a) Compliance with the Securities Act of 1933, as amended; and
(b) Issuance and sale of the Shares in accordance with the Company's
Certificate of Incorporation and in the manner described in the Plan
and pursuant to the agreements which accompany the Plan.
We hereby consent to be named in the Registration Statement and in any
amendments thereto as counsel for the Company, to the statements with
reference to our firm made in the Registration Statement, and to the filing
and use of this opinion as an exhibit to the Registration Statement.
Very truly yours,
GRAHAM & JAMES LLP
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated July 25, 1996 appearing on page 25
of the OnTrak Systems, Inc. Annual Report on Form 10-K for the year ended
June 30, 1996.
PRICE WATERHOUSE LLP
San Jose, California
January 13, 1997
