As filed with the Securities and Exchange Commission on May 10, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
SOFTNET SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-1817252
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
650 Townsend Street, San Francisco, California 94103
(Address of principal executive offices) (Zip Code)
SOFTNET SYSTEMS, INC.
1998 STOCK INCENTIVE PLAN
(Full title of the Plans)
Dr. Lawrence B. Brilliant
Chairman of the Board and Chief Executive Officer
SOFTNET SYSTEMS, INC.
650 Townsend Street, San Francisco, California
94103 (Name and address of agent for
service)
(415) 365-2500
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================== ==================== ==================== ========================= ================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share Price Fee(2)
<S> <C> <C> <C> <C>
1998 Stock Incentive Plan
- -------------------------
Common Stock 2,000,000 shares $26.25(3) $52,500,000(3) $14,595.00
1998 Stock Incentive Plan
- -------------------------
Common Stock 1,350,688 shares $26.25 $35,455,560 $0.00
=============================================================================================================================
<FN>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the SoftNet Systems Inc. 1998
Stock 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 the outstanding shares of Registrant's Common Stock.
(2) Under General Instruction E, the Registration Fee with respect to the
Registrant's 1998 Stock Incentive Plan is calculated solely on the
basis of the additional 2,000,000 shares of Common Stock authorized for
issuance under the 1998 Stock Incentive Plan, which are in addition to
the shares that were incorporated from the Registrant's 1995 Long Term
Incentive Plan (the "Predecessor Plan"). The applicable filing fees
have been paid for the 1,350,688 shares incorporated from the
Predecessor Plan in connection with their registration on the Form S-8
Registration Statement covering Registrant's Predecessor Plan,
Registration No. 333-45589.
(3) Calculated solely for purposes of this offering under Rule 457(h) of
the Securities Act of 1933, as amended, (the "1933 Act"), on the basis
of the average of the high and low selling prices per share of
Registrant's Common Stock on May 5, 1999 as reported by the Nasdaq
National Market.
</FN>
</TABLE>
================================================================================
<PAGE>
PART II
Information Required in the Registration Statement
Item 3. Incorporation of Documents by Reference
SoftNet Systems, Inc. (the "Registrant") hereby incorporates by
reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "Commission"):
(a) The Registrant's Annual Report on Form 10-K/A for the
fiscal year ended September 30, 1998, filed with the
Commission on March 4, 1999;
(b) The Registrant's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1999, filed with the
Commission on February 16, 1999;
(c) The Registrant's Current Reports on Forms 8-K filed
with the Commission on January 26, 1999, February 24,
1999, February 26, 1999, March 5, 1999, April 14,
1999 and April 27, 1999 and the Registrant's Current
Reports on Forms 8-K/A filed with the Commission on
February 26, 1999 and March 12, 1999; and
(d) The Registrant's Registration Statement on Form 8-A,
filed with the Commission on April 14, 1999 and as
amended on Form 8-A/A, filed with the Commission on
April 22, 1999, pursuant to Section 12 of the
Securities and Exchange Act of 1934, as amended (the
"1934 Act"), in which there is described the terms,
rights and provisions applicable to the Registrant's
outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained 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
The Registrant's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law provides
that a director of a corporation will not be personally liable for monetary
damages for breach of such individual's fiduciary duties as a director except
for liability for (i) any breach of such director's duty of loyalty to the
corporation, (ii) any acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) any unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law, or (iv) any transaction
from which a director derives an improper personal benefit.
<PAGE>
The Registrant's Bylaws provide that the Registrant will indemnify its
directors and may indemnify its officers, employees and other agents to the full
extent permitted by law. The Registrant believes that indemnification under its
Bylaws covers at least negligence and gross negligence on the part of an
indemnified party and permits the Registrant to advance expenses incurred by an
indemnified party in connection with the defense of any action or proceeding
arising out of such party's status or service as a director, officer, employee
or other agent of the Registrant upon an undertaking by such party to repay such
advances if it is ultimately determined that such party is not entitled to
indemnification.
The Registrant has entered into separate indemnification agreements
with each of its directors and officers. These agreements require the
Registrant, among other things, to indemnify such director or officer against
expenses (including attorney fees), judgments, fines and settlements
(collectively, "Liabilities") paid by such individual in connection with any
action, suit or proceeding arising out of such individual's status or service as
a director or officer of the Registrant (other than Liabilities arising from
willful misconduct or conduct that is knowingly fraudulent or deliberately
dishonest) and to advance expenses incurred by such individual in connection
with any proceeding against such individual with respect to which such
individual may be entitled to indemnification by the Registrant. The Registrant
believes that its Certificate of Incorporation and Bylaw provisions and
indemnification agreements are necessary to attract and retain qualified persons
as directors and officers.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
Exhibit Number Exhibit
4 Instruments Defining Rights of Shareholders. Reference is
made to Registrant's Registration Statement on Form 8-A
and as amended on Form 8-A/A, which is incorporated herein
by reference pursuant to Item 3(c).
5 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of PricewaterhouseCoopers 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-4 of this
Registration Statement.
99.1 SoftNet Systems, Inc. 1998 Stock Incentive Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 Form of Addendum to Stock Option Agreement regarding
Involuntary Termination following Corporate
Transaction/Change in Control.
99.5 Form of Addendum to Stock Option Agreement regarding
Limited Stock Appreciation Right.
99.6 Form of Stock Issuance Agreement.
99.7 Form of Addendum to Stock Issuance Agreement regarding
Involuntary Termination following Corporate
Transaction/Change in Control.
99.8 Form of Notice of Grant of Non-Employee Director Automatic
Stock Option - Initial Grant.
99.9 Form of Notice of Grant of Non-Employee Director Automatic
Stock Option - Annual Grant.
99.10 Form of Automatic Stock Option Agreement.
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include any prospectus required
by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts
or events arising after the effective date of the Registration Statement (or the
<PAGE>
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; 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 the Registration Statement; (2) that for the purpose of determining any
liability under the 1933 Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and (3) to remove from registration by means
of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the Registrant's Supplemental Stock
Option/Stock Issuance 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 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.
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 indemnification provisions summarized in Item 6
above or otherwise, the Registrant has been informed that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
1933 Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Francisco, State of California, on this 7th
day of May, 1999.
SOFTNET SYSTEMS, INC.
By: /s/ Dr. Lawrence B. Brilliant
------------------------------------
Dr. Lawrence B. Brilliant
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned officers and directors of SoftNet
Systems, Inc., a Delaware corporation, do hereby constitute and appoint Dr.
Lawrence B. Brilliant and Douglas S. Sinclair, and each of them, the lawful
attorneys and agents, with full power and authority to do any and all acts and
things and to execute any and all instruments which said attorneys and agents,
and any one of them, determine may be necessary or advisable or required to
enable said corporation to comply with the Securities Act of 1933, as amended,
and any rules or regulations or requirements of the Securities and Exchange
Commission in connection with this Registration Statement. Without limiting the
generality of the foregoing power and authority, the powers granted include the
power and authority to sign the names of the undersigned officers and directors
in the capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
all that said attorneys and agents, or any 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.
Signatures Title Date
- ----------------------------- --------------------------- -------------
/s/Dr. Lawrence B. Brilliant
- -----------------------------
Dr. Lawrence B. Brilliant Chairman of the Board and May 7, 1999
Chief Executive Officer
/s/ Ronald I. Simon
- -----------------------------
Ronald I. Simon Vice Chairman of the Board May 7, 1999
/s/ Ian B. Aaron
- -----------------------------
Ian B. Aaron Director and President May 7, 1999
/s/ Douglas S. Sinclair
- -----------------------------
Douglas S. Sinclair Chief Financial Officer May 7, 1999
/s/ Edward A. Bennett
- -----------------------------
Edward A. Bennett Director May 7, 1999
/s/ Sean P. Doherty
- -----------------------------
Sean P. Doherty Director May 7, 1999
/s/ Robert C. Harris, Jr.
- -----------------------------
Robert C. Harris, Jr. Director May 7, 1999
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
SOFTNET SYSTEMS, INC.
<PAGE>
EXHIBIT INDEX
Exhibit Number Exhibit
4 Instruments Defining Rights of Shareholders. Reference is
made to Registrant's Registration Statement on Form 8-A
and as amended on Form 8-A/A, which is incorporated herein
by reference pursuant to Item 3(c).
5 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of PricewaterhouseCoopers 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-4 of this
Registration Statement.
99.1 SoftNet Systems, Inc. 1998 Stock Incentive Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 Form of Addendum to Stock Option Agreement regarding
Involuntary Termination following Corporate
Transaction/Change in Control.
99.5 Form of Addendum to Stock Option Agreement regarding
Limited Stock Appreciation Right.
99.6 Form of Stock Issuance Agreement.
99.7 Form of Addendum to Stock Issuance Agreement regarding
Involuntary Termination following Corporate
Transaction/Change in Control.
99.8 Form of Notice of Grant of Non-Employee Director Automatic
Stock Option - Initial Grant.
99.9 Form of Notice of Grant of Non-Employee Director Automatic
Stock Option - Annual Grant.
99.10 Form of Automatic Stock Option Agreement.
EXHIBIT 5
Opinion and Consent of Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER, & HARRISON LLP
Attorneys at Law
Two Embarcadero Place
220 Geng Road
Palo Alto, CA 94303-0913
650-424-0160 telephone
650-496-2777 facsimile
May 7, 1999
SOFTNET SYSTEMS, INC
650 Townsend Street
San Francisco, CA 94103
Re: SoftNet Systems, Inc.
Registration Statement for Registration
of 3,350,688 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to SoftNet Systems, Inc., a Delaware
corporation (the "Company"), in connection with the registration on Form S-8
(the "Registration Statement") under the Securities Act of 1933, as amended, of
3,350,688 shares of common stock and related stock options for issuance (the
"Shares") under the Company's Plan (the "Plan").
This opinion is being furnished in accordance with the
requirements of Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the
corporate proceedings taken by the Company in connection with the establishment
of the Plan. Based on such review, we are of the opinion that if, as and when
the Shares are issued and sold (and the consideration therefor received)
pursuant to (a) the provisions of option agreements duly authorized under the
Plan, and in accordance with the Registration Statement or (b) duly authorized
direct stock issuances in accordance with the provisions of the Plan and 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
to the Registration Statement.
This opinion letter is rendered as of the date first written
above and we disclaim any obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and which
may alter, affect or modify the opinion expressed herein. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters relating to the
Company, the Plan or the Shares.
Very truly yours,
/s/BROBECK, PHLEGER & HARRISON LLP
EXHIBIT 23.1
Consent of PricewaterhouseCoopers LLP, Independent Auditors
We consent to the incorporation by reference in the Registration
Statement on Form S-8 pertaining to the 1998 Stock Incentive Plan of SoftNet
Systems, Inc of our report dated December 1, 1998, except for Note 18 which is
dated January 13, 1999, with respect to the consolidated financial statements of
SoftNet Systems, Inc. incorporated by reference in its Annual Report on Form
10-K for the year ended September 30, 1999 and the related financial statement
schedule included therein, filed with the Securities and Exchange Commission. We
hereby further consent to the incorporation by reference of our report on
Intelligent Communications, Inc. Financial Statements dated February 9, 1999
which is incorporated by reference in SoftNet" Reports on Form 8-K/A filed with
the SEC on February 26, 1999 and March 12, 1999.
/s/PRICEWATERHOUSECOOPERS LLP
May 7, 1999
San Jose, California
EXHIBIT 99.1
SOFTNET SYSTEMS, INC.
1998 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1998 Stock Incentive Plan is intended to promote the
interests of SoftNet Systems, Inc., a New York corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into five separate equity
programs:
- the Discretionary Option Grant Program under which
eligible persons may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock,
- the Salary Investment Option Grant Program under
which eligible employees may elect to have a portion of their base salary
invested each year in special option grants,
- the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be issued shares of
Common Stock directly, either through the immediate purchase of such shares or
as a bonus for services rendered the Corporation (or any Parent or Subsidiary),
- the Automatic Option Grant Program under which
eligible non-employee Board members shall automatically receive option grants at
periodic intervals to purchase shares of Common Stock, and
- the Director Fee Option Grant Program under which
non-employee Board members may elect to have all or any portion of their annual
retainer fee otherwise payable in cash applied to a special option grant.
B. The provisions of Articles One and Seven shall apply to all
equity programs under the Plan and shall govern the interests of all persons
under the Plan.
<PAGE>
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive
authority to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to Section 16 Insiders. 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 Secondary Committee, or the
Board may retain the power to administer those programs with respect to all such
persons. However, any discretionary option grants or stock issuances made to
members of the Primary Committee shall require the approval of a disinterested
majority of the Board.
B. 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 reassume all powers and authority
previously delegated to such committee.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option grant or stock issuance thereunder.
D. The Primary Committee shall have the sole and exclusive
authority to determine which Section 16 Insiders and other highly compensated
Employees shall be eligible for participation in the Salary Investment Option
Grant Program for one or more calendar years. However, all option grants under
the Salary Investment Option Grant Program shall be made in accordance with the
express terms of that program, and the Primary Committee shall not exercise any
discretionary functions with respect to the option grants made under that
program.
E. 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.
F. Administration of the Automatic Option Grant and Director
Fee Option Grant Programs shall be self-executing in accordance with the terms
of those programs, and no Plan Administrator shall exercise any discretionary
functions with respect to any option grants or stock issuances made under those
programs.
2
<PAGE>
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board
of directors of any Parent or Subsidiary, and
(iii) consultants who provide services to the
Corporation (or any Parent or
Subsidiary).
B. Only Employees who are Section 16 Insiders or other highly
compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.
C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants made under the Discretionary Option Grant
Program, which eligible persons are to receive such grants, the time or times
when those grants are to be made, the number of shares to be covered by each
such grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances made under the Stock Issuance Program, which eligible
persons are to receive such issuances, the time or times when those issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.
D. 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.
E. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals who
first become non-employee Board members after the Plan Effective Date, whether
through appointment by the Board or election by the Corporation's stockholders,
and (ii) those individuals who continue to serve as non-employee Board members
at one or more Annual Stockholders Meetings held after the 1999 Annual
Stockholders Meeting. A non-employee Board member who has previously been in the
employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to
receive an option grant under the Automatic Option Grant Program at the time he
or she first becomes a non-employee Board member, but shall be eligible to
receive periodic option grants under the Automatic Option Grant Program while he
or she continues to serve as a non-employee Board member.
F. All non-employee Board members shall be eligible to
participate in the Director Fee Option Grant Program.
3
<PAGE>
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock initially reserved for issuance over the term of the Plan shall not exceed
3,350,668 shares, which shall consist of (i) the estimated number of shares to
remain available for issuance, as of the 1999 Annual Stockholders Meeting, under
the Predecessor Plan as last approved by the Corporation's stockholders,
including the shares subject to outstanding options under that Predecessor Plan
and (ii) an additional increase of approximately 2,000,000 shares authorized by
the Board, subject to stockholder approval at the 1999 Annual Meeting.
B. The number of shares of Common Stock available for issuance
under the Plan shall automatically be increased on the first trading day in
January each calendar year during the term of the Plan, beginning in calendar
year 2000, by an amount equal to four percent (4%) of the total number of shares
of Common Stock outstanding on the last trading day in December of the
immediately preceding calendar year, but in no event shall any such annual
increase exceed 2,000,000 shares (subject to adjustment in accordance with
Section V.E. of this Article One).
C. No one person participating in the Plan may receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than 500,000 shares of Common Stock in the aggregate per
calendar year, beginning with the 1998 calendar year.
D. Shares of Common Stock subject to outstanding options
(including options incorporated into this Plan from the Predecessor Plan) shall
be available for subsequent issuance under the Plan to the extent (i) those
options expire or terminate for any reason prior to exercise in full or (ii) the
options are cancelled in accordance with the cancellation-regrant provisions of
Article Two. Unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Corporation, at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan. Should the
exercise price of an 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 option or the vesting of a stock issuance
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 or which vest under the stock issuance, and not by the net
number of shares of Common Stock issued to the holder of such option or stock
issuance. Shares of Common Stock underlying one or more stock appreciation
rights exercised pursuant to the provisions of Section IV of Article Two,
Section III of Article Three, Section II of Article Five and Section III of
Article Six shall not be available for subsequent issuance under the Plan.
E. If any change is made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
4
<PAGE>
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the maximum number and/or class of securities by which the
share reserve is to increase automatically each calendar year pursuant to the
provisions of Section V.B of this Article One, (iii) the number and/or class of
securities for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances under the Plan
per calendar year, (iv) the number and/or class of securities for which grants
are subsequently to be made under the Automatic Option Grant Program to new and
continuing non-employee Board members, (v) the number and/or class of securities
and the exercise price per share in effect under each outstanding option under
the Plan and (vi) the number and/or class of securities and price per share in
effect under each outstanding option incorporated into this Plan from the
Predecessor Plan. 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.
5
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by
the Plan Administrator but shall not be less than one hundred percent (100%) of
the Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section I of
Article Seven and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date, or
(iii)to the extent the option is exercised for vested
shares, through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide
irrevocable instructions to (a) a Corporation-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 exercise price payable for the
purchased shares plus all applicable Federal, state and
local income and employment taxes required to be withheld by
the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete
the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. Exercise and Term of Options. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.
6
<PAGE>
C. Effect of Termination of Service.
1. The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of Service
or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be
determined by the Plan Administrator and set forth in the
documents evidencing the option, but no such option shall be
exercisable after the expiration of the option term.
(ii) Any option held by the Optionee at the time of
death and exercisable in whole or in part at that time may
subsequently be exercised by the personal representative of
the Optionee's estate or by the person or persons to whom
the option is transferred pursuant to the Optionee's will or
in accordance with the laws of descent and distribution or
by the Optionee's designated beneficiary or beneficiaries of
that option.
(iii) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the
Optionee shall terminate immediately and cease to be
outstanding.
(iv) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option
is exercisable on the date of the Optionee's cessation of
Service. Upon the expiration of the applicable exercise
period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be outstanding
for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be
outstanding to the extent the option is not otherwise at
that time exercisable for vested shares.
2. The Plan Administrator shall have complete
discretion, exercisable either at the time an option is
granted or at any time while the option remains outstanding, to:
(i) extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of
Service from the limited exercise period otherwise in effect
for that option to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event beyond
the expiration of the option term, and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with
respect to the number of vested shares of Common Stock for
which such option is exercisable at the time of the
Optionee's cessation of Service but also with respect to one
or more additional installments in which the Optionee would
have vested had the Optionee continued in Service.
7
<PAGE>
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. Non-Statutory Options
shall be subject to the same restrictions, except that a Non-Statutory Option
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. 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. Notwithstanding the foregoing, the Optionee may also designate
one or more persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Two, and those options shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the limited time
period during which the option may be exercised following the Optionee's death.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Seven shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to
Employees.
B. Exercise Price. The exercise price per share shall not be
less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date.
8
<PAGE>
C. Dollar Limitation. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) 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 shall be applied on the
basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the exercise price per share shall
not be less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the option grant date, and the option term shall not
exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for the total number of shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully vested shares of Common Stock. However, an outstanding option shall not
become exercisable on such an accelerated basis if and to the extent: (i) such
option is, in connection with the Corporate Transaction, to be assumed by the
successor corporation (or parent thereof) or (ii) such option is to be replaced
with a cash incentive program of the successor corporation which preserves the
spread existing at the time of the Corporate Transaction on any shares for which
the option is not otherwise at that time exercisable and provides for subsequent
payout in accordance with the same exercise/vesting schedule applicable to those
option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
B. All outstanding repurchase rights shall automatically
terminate, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such
9
<PAGE>
Corporate Transaction. Appropriate adjustments to reflect such Corporate
Transaction shall also be made to (i) the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same, (ii) the maximum number and/or class of
securities available for issuance over the remaining term of the Plan, (iii) the
maximum number and/or class of securities by which the share reserve is to
increase automatically each calendar year and (iv) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year.
E. The Plan Administrator shall have the discretionary
authority to structure one or more outstanding options under the Discretionary
Option Grant Program so that those options shall, immediately prior to the
effect date of such Corporate Transaction, become fully exercisable for the
total number of shares of Common Stock at the time subject to those options and
may be exercised for any or all of those shares as fully vested shares of Common
Stock, whether or not those options are to be assumed in the Corporate
Transaction. In addition, the Plan Administrator shall have the discretionary
authority to structure one or more of the Corporation's repurchase rights under
the Discretionary Option Grant Program so that those rights shall not be
assignable in connection with such Corporate Transaction and shall accordingly
terminate upon the consummation of such Corporate Transaction, and the shares
subject to those terminated rights shall thereupon vest in full.
F. The Plan Administrator shall have full power and authority
to structure one or more outstanding options under the Discretionary Option
Grant Program so that those options shall become fully exercisable for the total
number of shares of Common Stock at the time subject to those options in the
event the Optionee's Service is subsequently terminated by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of any Corporate Transaction in which those
options are assumed and do not otherwise accelerate. Any options so accelerated
shall remain exercisable for fully vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1) year period
measured from the effective date of the Involuntary Termination. In addition,
the Plan Administrator may structure one or more of the Corporation's repurchase
rights so that those rights shall immediately terminate with respect to any
shares held by the Optionee at the time of his or her Involuntary Termination,
and the shares subject to those terminated repurchase rights shall accordingly
vest in full at that time.
G. The Plan Administrator shall have the discretionary
authority to structure one or more outstanding options under the Discretionary
Option Grant Program so that those options shall, immediately prior to the
effect date of a Change in Control, become fully exercisable for the total
number of shares of Common Stock at the time subject to those options and may be
exercised for any or all of those shares as fully vested shares of Common Stock.
In addition, the Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the
Discretionary Option Grant Program so that those rights shall terminate
automatically upon the consummation of such Change in Control, and the shares
subject to those terminated rights shall thereupon vest in full. Alternatively,
the Plan Administrator may condition the automatic acceleration of one or more
outstanding options
10
<PAGE>
under the Discretionary Option Grant Program and the termination of one or more
of the Corporation's outstanding repurchase rights under such program upon the
subsequent termination of the Optionee's Service by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of such Change in Control. Each option so
accelerated shall remain exercisable for fully vested shares until the earlier
of (i) the expiration of the option term or (ii) the expiration of the one (1)
year period measured from the effective date of Optionee's cessation of Service.
H. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Nonstatutory Option under the Federal tax laws.
I. The outstanding options shall in no 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.
IV. 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 option holders,
the cancellation of any or all outstanding options under the Discretionary
Option Grant Program (including outstanding options incorporated from the
Predecessor Plan) and to grant in substitution new options covering the same or
different number of shares of Common Stock but with an exercise price per share
based on the Fair Market Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority
to grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of
tandem stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may
establish, to elect between the exercise of the underlying
option for shares of Common Stock and the surrender of that
option in exchange for a distribution from the Corporation
in an amount equal to the excess of (a) 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 (b)
the aggregate exercise price payable for such shares.
11
<PAGE>
(ii) No such option surrender shall be effective unless
it is approved by the Plan Administrator, either at the time
of the actual option surrender or at any earlier time. If
the surrender is so approved, then the distribution to which
the Optionee shall be entitled may be made in shares 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.
(iii) If the surrender of an option is not approved 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 (a) five (5) business days after the
receipt of the rejection notice or (b) the last day on which
the option is otherwise exercisable in accordance with the
terms of the documents evidencing such option, but in no
event may such rights be exercised more than ten (10) years
after the option grant date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their
outstanding options.
(ii) Each individual holding one or more options with
such a limited stock appreciation right shall have the
unconditional right, exercisable for a thirty (30)-day
period immediately following a Hostile Take-Over, to
surrender each such option to the Corporation for a cash
distribution in an amount equal to the excess of (A) the
Take-Over Price of the shares of Common Stock which are at
the time subject to each surrendered option (whether or not
the option is otherwise vested and exercisable for those
shares) over (B) the aggregate exercise price payable for
such shares. Such cash distribution shall be paid within
five (5) days following the option surrender date.
(iii) At the time such limited stock appreciation right
is granted, the Plan Administrator shall automatically
pre-approve any subsequent exercise of that right in
accordance with the terms of this Paragraph C. Accordingly,
no further approval of the Plan Administrator or the Board
shall be required at the time of the actual option surrender
and cash distribution.
(iv) The balance of the option (if any) shall remain
outstanding and exercisable in accordance with the documents
evidencing such option.
12
<PAGE>
ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive
authority to determine the calendar year or years (if any) for which the Salary
Investment Option Grant Program is to be in effect and to select the Section 16
Insiders and other highly compensated Employees eligible to participate in the
Salary Investment Option Grant Program for such calendar year or years. Each
selected individual who elects to participate in the Salary Investment Option
Grant Program must, prior to the start of each calendar year of participation,
file with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00). Each individual who files such a timely
authorization shall automatically be granted an option under the Salary
Investment Grant Program on the first trading day in January of the calendar
year for which the salary reduction is to be in effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one
or more documents in the form approved by the Plan Administrator; provided,
however, that each such document shall comply with the terms specified below.
A. Exercise Price.
1. The exercise price per share shall be thirty-three
and one-third percent (33-1/3%) of the Fair Market Value per share of Common
Stock on the option grant date.
2. The exercise price shall become immediately due
upon exercise of the option and shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. Number of Option Shares. The number of shares of Common
Stock subject to the option shall be determined pursuant to the following
formula (rounded down to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
A is the dollar amount of the reduction in the
Optionee's base salary for the calendar year to be in effect
pursuant to this program, and
13
<PAGE>
B is the Fair Market Value per share of Common Stock
on the option grant date.
C. Exercise and Term of Options. The option shall become
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Service in the calendar
year for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years measured from the option grant date.
D. Effect of Termination of Service. Should the Optionee cease
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the earlier of (i) the expiration of the ten (10)-year option
term or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by
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
or by the designated beneficiary or beneficiaries of such option. Such right of
exercise shall lapse, and the option shall terminate, upon the earlier of (i)
the expiration of the ten (10)-year option term or (ii) the three (3)-year
period measured from the date of the Optionee's cessation of Service. However,
the option shall, immediately upon the Optionee's cessation of Service for any
reason, terminate and cease to remain outstanding with respect to any and all
shares of Common Stock for which the option is not otherwise at that time
exercisable.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the
Optionee remains in Service, each outstanding option held by such Optionee under
this Salary Investment Option Grant Program shall automatically accelerate so
that each such option shall, immediately prior to the effective date of the
Corporate Transaction, become fully exercisable for the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. Each such
outstanding option shall terminate immediately following the Corporate
Transaction, except to the extent assumed by the successor corporation (or
parent thereof) in such Corporate Transaction. Any option so assumed and shall
remain exercisable for the fully-vested shares until the earlier of (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the three
(3)-year period measured from the date of the Optionee's cessation of Service.
B. In the event of a Change in Control while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall immediately become fully exercisable for the total number
of shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
14
<PAGE>
The option shall remain so exercisable until the earliest to occur of (i) the
expiration of the ten (10)-year option term, (ii) the expiration of the three
(3)-year period measured from the date of the Optionee's cessation of Service,
(iii) the termination of the option in connection with a Corporate Transaction
or (iv) the surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee
shall have a thirty (30)-day period in which to surrender to the Corporation
each outstanding option granted him or her under the Salary Investment Option
Grant Program. 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 shares of Common Stock at the time subject to the surrendered option
(whether or not the Optionee is otherwise at the time vested in those shares)
over (ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation. The Primary Committee shall, at the time the option
with such limited stock appreciation right is granted under the Salary
Investment Option Grant Program, pre-approve any subsequent exercise of that
right in accordance with the terms of this Paragraph C. Accordingly, no further
approval of the Primary Committee or the Board shall be required at the time of
the actual option surrender and cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.
E. The grant of options under the Salary Investment Option
Grant Program shall in no 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.
VI. REMAINING TERMS
The remaining terms of each option granted under the Salary
Investment Option Grant Program shall be the same as the terms in effect for
option grants made under the Discretionary Option Grant Program.
15
<PAGE>
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below. Shares of Common Stock
may also be issued under the Stock Issuance Program pursuant to share right
awards which entitle the recipients to receive those shares upon the attainment
of designated performance goals.
A. Purchase Price.
1. The purchase price per share shall be fixed by the
Plan Administrator, but shall not be less than one hundred percent (100%) of the
Fair Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article
Seven, shares of Common Stock may be issued under the Stock Issuance Program for
any of the following items of consideration which the Plan Administrator may
deem appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. Vesting Provisions.
1. Shares of Common Stock issued under the Stock
Issuance Program may, in the 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 or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program shall be
determined by the Plan Administrator and incorporated into the Stock Issuance
Agreement. Shares of Common Stock may also be issued under the Stock Issuance
Program pursuant to share right awards which entitle the recipients to receive
those shares upon the attainment of designated performance goals.
2. Any new, substituted or additional securities 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 the Participant's unvested shares of Common Stock by reason of
any stock dividend, stock split, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration shall be issued subject
to (i) the same vesting requirements applicable to the Participant's unvested
shares of Common Stock and (ii) such escrow arrangements as the Plan
Administrator shall deem appropriate.
16
<PAGE>
3. The Participant shall have full stockholder rights
with respect to any shares of Common Stock issued to the Participant under the
Stock Issuance Program, whether or not the Participant's 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.
4. Should the Participant cease to remain in Service
while holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive
the surrender and cancellation of one or more unvested shares of Common Stock
which would otherwise occur upon the cessation of the Participant's Service or
the non-attainment of the performance objectives applicable to those 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.
6. Outstanding share right awards under the Stock
Issuance Program shall automatically terminate, and no shares of Common Stock
shall actually be issued in satisfaction of those awards, if the performance
goals established for such awards are not attained. The Plan Administrator,
however, shall have the discretionary authority to issue shares of Common Stock
under one or more outstanding share right awards as to which the designated
performance goals have not been attained.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights
under the Stock Issuance Program shall terminate automatically, and all the
shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of any Corporate Transaction, except to the extent (i)
those repurchase rights are to be assigned to the successor corporation (or
parent thereof) in connection with such Corporate Transaction or (ii) such
accelerated vesting is precluded by other limitations imposed in the Stock
Issuance Agreement.
17
<PAGE>
B. The Plan Administrator shall have the discretionary
authority to structure one or more of the Corporation's repurchase rights under
the Stock Issuance Program so that those rights shall automatically terminate in
whole or in part, and the shares of Common Stock subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase rights are assigned
to the successor corporation (or parent thereof).
C. The Plan Administrator shall also have the discretionary
authority to structure one or more of the Corporation's repurchase rights under
the Stock Issuance Program so that those rights shall automatically terminate in
whole or in part, and the shares of Common Stock subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares 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 those unvested shares.
18
<PAGE>
ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the dates
specified below:
1. Each individual serving as a non-employee Board
member on the Plan Effective Date shall automatically be granted a Non-Statutory
Option to purchase 20,000 shares of Common Stock at the Annual Stockholders
Meeting held in calendar year 2001, provided he or she continues in Board
service, and each such individual shall, over his or her period of continued
Board service, automatically be granted an additional Non-Statutory Option to
purchase 20,000 shares of Common Stock at every third Annual Stockholders
Meeting thereafter at which he or she continues to serve as a non-employee Board
member.
2. Each individual who is first elected or appointed
as a non-employee Board member at any time on or after the Plan Effective Date
shall automatically be granted, on the date of such initial election or
appointment, a Non-Statutory Option to purchase 20,000 shares of Common Stock,
provided that individual has not previously been in the employ of the
Corporation or any Parent or Subsidiary. In addition, each such individual
shall, over his or her period of continued Board service, automatically be
granted one or more additional Non-Statutory Options to purchase 20,000 shares
of Common Stock, with the first such additional 20,000-share grant to be made at
the Annual Stockholders Meeting held in the third calendar year following the
calendar year in which he or she received the initial 20,000-share grant and
each such additional 20,000-share grants to be made at every third Annual
Stockholders Meeting held thereafter during such individual's period of
continued service as a non-employee Board member.
3. There shall be no limit on the number of such
additional 20,000-share option grants any one Eligible Director may receive over
his or her period of Board service, and non-employee Board members who have
previously been in the employ of the Corporation (or any Parent or Subsidiary)
shall be eligible to receive one or more such additional 20,000-share option
grants over their period of continued Board service.
4. Stockholder approval of this Plan at the 1999
Annual Stockholders Meeting shall constitute pre-approval of each option grant
made under this Automatic Option Grant Program on or after the date of such
Annual Meeting and the subsequent exercise of that option in accordance with the
terms and conditions of this Article Five and the stock option agreement
evidencing such grant.
B. Exercise Price.
1. The exercise price per share shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.
19
<PAGE>
2. The exercise price shall be payable in one or more
of the alternative forms authorized under the
Discretionary Option Grant Program. Except to the extent the sale and remittance
procedure specified thereunder is utilized, payment of the exercise price for
the purchased shares must be made on the Exercise Date.
C. Option Term. Each option shall have a term of ten (10)
years measured from the option grant date.
D. Exercise and Vesting of Options. Each option shall be
immediately exercisable for any or all of the option shares. However, any shares
purchased under the option shall be subject to repurchase by the Corporation, at
the exercise price paid per share, upon the Optionee's cessation of Board
service prior to vesting in those shares. Each automatic option grant shall
vest, and the Corporation's repurchase right shall lapse, in a series of six (6)
successive equal semi-annual installments upon the Optionee's completion of each
six (6) month period of Board service over the thirty-six (36)-month period
measured from the option grant date.
E. Limited Transferability of Options. Each option under this
Article Five may, in connection with the Optionee's estate plan, be assigned in
whole or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. 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. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this
Article Five, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.
F. Termination of Board Service. The following provisions
shall govern the exercise of any options held by the Optionee at the time the
Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death,
the personal representative of the Optionee's estate or the
person or persons to whom the option is transferred pursuant
to the Optionee's will or in accordance with the laws of
descent and distribution or by the designated beneficiary or
beneficiaries of such option) shall have a twelve (12)-month
period following the date of such cessation of Board service
in which to exercise each such option.
20
<PAGE>
(ii) During the twelve (12)-month exercise period, the
option may not be exercised in the aggregate for more than
the number of vested shares of Common Stock for which the
option is exercisable at the time of the Optionee's
cessation of Board service.
(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all
shares at the time subject to the option shall immediately
vest so that such option may, during the twelve (12)-month
exercise period following such cessation of Board service,
be exercised for all or any portion of those shares as
fully-vested shares of Common Stock.
(iv) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration
of the twelve (12)-month exercise period or (if earlier)
upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any vested shares
for which the option has not been exercised. However, the
option shall, immediately upon the Optionee's cessation of
Board service for any reason other than death or Permanent
Disability, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable
for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each automatic option grant shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Change in Control, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Each such option shall remain exercisable
for such fully-vested option shares until the expiration or sooner termination
of the option term or the surrender of the option in connection with a Hostile
Take-Over.
21
<PAGE>
C. All outstanding repurchase rights shall automatically
terminate, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction or
Change in Control.
D. Upon the occurrence of a Hostile Take-Over, the Optionee
shall have a thirty (30)-day period in which to surrender to the Corporation
each of his or her outstanding automatic option grants. 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 shares of Common Stock at
the time subject to each surrendered option (whether or not the Optionee is
otherwise at the time vested in those shares) over (ii) the aggregate exercise
price payable for such shares. Such cash distribution shall be paid within five
(5) days following the surrender of the option to the Corporation. Stockholder
approval of the Plan shall constitute pre-approval of the grant of each such
limited cash-out right and the subsequent exercise of that right in accordance
with the terms of this Paragraph D. Accordingly, no approval or consent of the
Board or any Plan Administrator shall be required at the time of the actual
option surrender and cash distribution.
E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.
F. The grant of options under the Automatic Option Grant
Program shall in no 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.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
22
<PAGE>
ARTICLE SIX
DIRECTOR FEE OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive
authority to determine the calendar year or years for which the Director Fee
Option Grant Program is to be in effect. For each such calendar year the program
is in effect, each non-employee Board member may elect to apply all or any
portion of the annual retainer fee otherwise payable in cash for his or her
service on the Board to the acquisition of a special option grant under this
Director Fee Option Grant Program. Such election must be filed with the
Corporation's Chief Financial Officer prior to first day of the calendar year
for which the annual retainer fee which is the subject of that election is
otherwise payable. Each non-employee Board member who files such a timely
election shall automatically be granted an option under this Director Fee Option
Grant Program on the first trading day in January in the calendar year for which
the annual retainer fee which is the subject of that election would otherwise be
payable in cash.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the
terms and conditions specified below.
A. Exercise Price.
1. The exercise price per share shall be thirty-three
and one-third percent (33-1/3%) of the Fair Market Value per share of Common
Stock on the option grant date.
2. The exercise price shall become immediately due
upon exercise of the option and shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. Number of Option Shares. The number of shares of Common
Stock subject to the option shall be determined pursuant to the following
formula (rounded down to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee subject
to the non-employee Board member's election, and
B is the Fair Market Value per share of Common Stock
on the option grant date.
23
<PAGE>
C. Exercise and Term of Options. The option shall become
exercisable in a series of twelve (12) equal monthly installments upon the
Optionee's completion of each month of Board service over the twelve (12)-month
period measured from the grant date. Each option shall have a maximum term of
ten (10) years measured from the option grant date.
D. Limited Transferability of Options. Each option under this
Article Six may, in connection with the Optionee's estate plan, be assigned in
whole or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. 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. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this
Article Six, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.
E. Termination of Board Service. Should the Optionee cease
Board service for any reason (other than death or Permanent Disability) while
holding one or more options under this Director Fee Option Grant Program, then
each such option shall remain exercisable, for any or all of the shares for
which the option is exercisable at the time of such cessation of Board service,
until the earlier of (i) the expiration of the ten (10)-year option term or (ii)
the expiration of the three (3)-year period measured from the date of such
cessation of Board service. However, each option held by the Optionee under this
Director Fee Option Grant Program at the time of his or her cessation of Board
service shall immediately terminate and cease to remain outstanding with respect
to any and all shares of Common Stock for which the option is not otherwise at
that time exercisable.
F. Death or Permanent Disability. Should the Optionee's
service as a Board member cease by reason of death or Permanent Disability, then
each option held by such Optionee under this Director Fee Option Grant Program
shall immediately become exercisable for all the shares of Common Stock at the
time subject to that option, and the option may be exercised for any or all of
those shares as fully-vested shares until the earlier of (i) the expiration of
the ten (10)-year option term or (ii) the expiration of the three (3)-year
period measured from the date of such cessation of Board service.
Should the Optionee die after cessation of Board service but
while holding one or more options under this Director Fee Option Grant Program,
then each such option may be exercised, for any or all of the shares for which
the option is exercisable at the time of the Optionee's cessation of Board
service (less any shares subsequently purchased by Optionee prior to death), by
the personal representative of the Optionee's estate or by the person or persons
to
24
<PAGE>
whom the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution or by the designated beneficiary or
beneficiaries of such option. Such right of exercise shall lapse, and the option
shall terminate, upon the earlier of (i) the expiration of the ten (10)-year
option term or (ii) the three (3)-year period measured from the date of the
Optionee's cessation of Board service.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the
Optionee remains a Board member, each outstanding option held by such Optionee
under this Director Fee Option Grant Program shall automatically accelerate so
that each such option shall, immediately prior to the effective date of the
Corporate Transaction, become fully exercisable for the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. Each such
outstanding option shall terminate immediately following the Corporate
Transaction, except to the extent assumed by the successor corporation (or
parent thereof) in such Corporate Transaction. Any option so assumed and shall
remain exercisable for the fully-vested shares until the earlier of (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the three
(3)-year period measured from the date of the Optionee's cessation of Board
service.
B. In the event of a Change in Control while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so that each
such option shall immediately become fully exercisable for the total number of
shares of Common Stock at the time subject to such option and may be exercised
for any or all of those shares as fully-vested shares of Common Stock. The
option shall remain so exercisable until the earliest to occur of (i) the
expiration of the ten (10)-year option term, (ii) the expiration of the three
(3)-year period measured from the date of the Optionee's cessation of Board
service, (iii) the termination of the option in connection with a Corporate
Transaction or (iv) the surrender of the option in connection with a Hostile
Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee
shall have a thirty (30)-day period in which to surrender to the Corporation
each outstanding option granted him or her under the Director Fee Option Grant
Program. 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 shares of Common Stock at the time subject to each surrendered option
(whether or not the Optionee is otherwise at the time vested in those shares)
over (ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation. Stockholder approval of the Plan shall constitute
pre-approval of the grant of each such limited cash-out right and the subsequent
exercise of that right in accordance with the terms of this Paragraph C.
Accordingly, no approval or consent of the Board or any Plan Administrator shall
be required at the time of the actual option surrender and cash distribution.
25
<PAGE>
D. The grant of options under the Director Fee Option Grant
Program shall in no 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.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director
Fee Option Grant Program shall be the same as the terms in effect for option
grants made under the Discretionary Option Grant Program.
26
<PAGE>
ARTICLE SEVEN
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant
to pay the option exercise price under the Discretionary Option Grant Program or
the purchase price of shares issued under the Stock Issuance Program by
delivering a full-recourse, interest bearing promissory note payable in one or
more installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of options or the issuance or vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any
or all holders of Non-Statutory Options or unvested shares of Common Stock under
the Plan (other than the options granted or the shares issued under the
Automatic Option Grant or Director Fee Option Grant Program) with the right to
use shares of Common Stock in satisfaction of all or part of the Taxes incurred
by such holders in connection with the exercise of their options or the vesting
of their shares. Such right may be provided to any such holder in either or both
of the following formats:
Stock Withholding: The election to have the
Corporation withhold, from the shares of Common Stock otherwise issuable upon
the exercise of such Non-Statutory Option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%)) designated by
the holder.
Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised or the shares
vest, one or more shares of Common Stock previously acquired by such holder
(other than in connection with the option exercise or share vesting triggering
the Taxes) with an aggregate Fair Market Value equal to the percentage of the
Taxes (not to exceed one hundred percent (100%)) designated by the holder.
27
<PAGE>
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately at the Plan
Effective Date. However, the Salary Investment Option Grant Program and the
Director Fee Option Grant Program shall not be implemented until such time as
the Primary Committee may deem appropriate. Options may be granted under the
Discretionary Option Grant Program at any time on or after the Plan Effective
Date. However, no options granted under the Plan may be exercised, and no shares
shall be issued under the Plan, until the Plan is approved by the Corporation's
stockholders. If such stockholder approval is not obtained within twelve (12)
months after the Plan Effective Date, then all options previously granted under
this Plan shall terminate and cease to be outstanding, and no further options
shall be granted and no shares shall be issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor
Plan, and no further option grants or direct stock issuances shall be made under
the Predecessor Plan after the date of the 1999 Annual Stockholders Meeting. All
options outstanding under the Predecessor Plan on the date of the 1999 Annual
Stockholders Meeting shall be incorporated into the Plan at that time and shall
be treated as outstanding options under the Plan. However, each outstanding
option so incorporated shall continue to be governed solely by the terms of the
documents evidencing such option, and no provision of the Plan shall be deemed
to affect or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest to occur of (i)
October 7, 2008, (ii) the date on which all shares available for issuance under
the Plan shall have been issued as fully-vested shares or (iii) the termination
of all outstanding options in connection with a Corporate Transaction. Should
the Plan terminate on October 7, 2008, then all option grants and unvested stock
issuances outstanding at that time shall continue to have force and effect in
accordance with the provisions of the documents evidencing such grants or
issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations with
respect to stock options or unvested stock issuances at the time outstanding
under the Plan unless the Optionee or the Participant consents to such amendment
or modification. In addition, certain amendments may require stockholder
approval pursuant to applicable laws or regulations.
28
<PAGE>
B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant and Salary Investment Option Grant Programs
and shares of Common Stock may be issued under the Stock Issuance Program that
are in each instance in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under those
programs shall be held in escrow until there is obtained stockholder approval of
an amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan. If such stockholder approval is not
obtained within twelve (12) months after the date the first such excess
issuances are made, then (i) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise or purchase price paid for any excess shares issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock
option under the Plan and the issuance of any shares of Common Stock (i) upon
the exercise of any granted option or (ii) under the Stock Issuance Program
shall be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the stock
options granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued
or delivered under the 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 stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
29
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic
option grant program in effect under the Plan.
B. Board shall mean the Corporation's Board of Directors.
C. Change in Control shall mean a change in ownership or
control of the Corporation effected through either of the following
transactions:
(i) the acquisition, directly or indirectly by 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), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) 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 stockholders, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, 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 the Board approved such election or nomination.
D. Code shall mean the Internal Revenue Code of 1986, as
amended.
E. Common Stock shall mean the Corporation's common stock.
F. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
A-1
<PAGE>
G. Corporation shall mean SoftNet Systems, Inc., a New York
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of SoftNet Systems, Inc. which shall by appropriate
action adopt the Plan.
H. Director Fee Option Grant Program shall mean the special
stock option grant in effect for non-employee Board members under Article Six of
the Plan.
I. Discretionary Option Grant Program shall mean the
discretionary option grant program in effect under the Plan.
J. Eligible Director shall mean a non-employee Board member
eligible to participate in the Automatic Option Grant Program in accordance with
the eligibility provisions of Articles One and Five.
K. Employee shall mean an individual who is in the employ of
the Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.
L. Exercise Date shall mean the date on which the Corporation
shall have received written notice of the option exercise.
M. Fair Market Value per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market. If there is no closing selling
price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding
date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock 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 officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
N. Hostile Take-Over shall mean the acquisition, directly or
indirectly, by 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) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) 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 stockholders which the Board does not recommend such
stockholders to accept.
A-2
<PAGE>
O. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
P. Involuntary Termination shall mean the termination of the
Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or
discharge by the Corporation for reasons other than
Misconduct, or
(ii) such individual's voluntary resignation following
(A) a change in his or her position with the Corporation
which materially reduces his or her duties and
responsibilities or the level of management to which he or
she reports, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and
target bonus under any corporate-performance based bonus or
incentive programs) by more than fifteen percent (15%) or
(C) a relocation of such individual's place of employment by
more than fifty (50) miles, provided and only if such
change, reduction or relocation is effected by the
Corporation without the individual's consent.
Q. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
R. 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
S. Non-Statutory Option shall mean an option not intended to
satisfy the requirements of Code Section 422.
T. Optionee shall mean any person to whom an option is granted
under the Discretionary Option Grant, Salary Investment Option Grant, Automatic
Option Grant or Director Fee Option Grant Program.
U. Parent shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the Corporation,
provided each 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.
V. Participant shall mean any person who is issued shares of
Common Stock under the Stock Issuance Program.
A-3
<PAGE>
W. Permanent Disability or Permanently Disabled shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
and Director Fee Option Grant Programs, Permanent Disability or Permanently
Disabled shall mean the inability of the non-employee Board member to perform
his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.
X. Plan shall mean the Corporation's 1998 Stock Incentive
Plan, as set forth in this document.
Y. Plan Administrator shall mean the particular entity,
whether the Primary Committee, the Board or the Secondary Committee, which is
authorized to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to one or more classes of eligible persons, to the extent
such entity is carrying out its administrative functions under those programs
with respect to the persons under its jurisdiction.
Z. Plan Effective Date shall mean October 8, 1998, the date
the Plan was adopted by the Board.
AA. Predecessor Plan shall mean the Corporation's pre-existing
1995 Long Term Incentive Plan.
BB. Primary Committee shall mean 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 and to administer the Salary Investment Option Grant Program solely
with respect to the selection of the eligible individuals who may participate in
such program.
CC. Salary Investment Option Grant Program shall mean the
salary investment option grant program in effect under the Plan.
DD. Secondary Committee shall mean a committee of one or more
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.
EE. Section 16 Insider shall mean an officer or director of
the Corporation subject to the short-swing profit liabilities of Section 16 of
the 1934 Act.
FF. Service shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.
A-4
<PAGE>
GG. Stock Exchange shall mean either the American Stock
Exchange or the New York Stock Exchange.
HH. Stock Issuance Agreement shall mean the agreement entered
into by the Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.
II. Stock Issuance Program shall mean the stock issuance
program in effect under the Plan.
JJ. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each 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.
KK. Take-Over Price shall mean the greater of (i) the Fair
Market Value per share of Common Stock on the date the option is surrendered to
the Corporation in connection with a Hostile Take-Over or (ii) the highest
reported price per share of Common Stock paid by the tender offeror in effecting
such Hostile Take-Over. However, if the surrendered option is an Incentive
Option, the Take-Over Price shall not exceed the clause (i) price per share.
LL. Taxes shall mean the Federal, state and local income and
employment withholding taxes incurred by the holder of Non-Statutory Options or
unvested shares of Common Stock in connection with the exercise of those options
or the vesting of those shares.
MM. 10% Stockholder shall mean the owner of stock (as
determined under Code Section 424(d)) possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Corporation (or
any Parent or Subsidiary).
A-5
EXHIBIT 99.2
SOFTNET SYSTEMS, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of SoftNet Systems, Inc. (the
"Corporation"):
Optionee:_____________________________________________________
Grant Date:___________________________________________________
Vesting Commencement Date:____________________________________
Exercise Price: $___________________________________per share
Number of Option Shares:________________________________shares
Expiration Date:______________________________________________
Type of Option: ______ Incentive Stock Option
______ Non-Statutory Stock Option
Exercise Schedule: The Option shall become exercisable for
twenty-five percent (25%) of the Option Shares upon Optionee's
completion of one (1) year of Service measured from the
Vesting Commencement Date and shall become exercisable for the
balance of the Option Shares in thirty-six (36) successive
equal monthly installments upon Optionee's completion of each
additional month of Service over the thirty-six (36) month
period measured from the first anniversary of the Vesting
Commencement Date. In no event shall the Option become
exercisable for any additional Option Shares after Optionee's
cessation of Service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the SoftNet Systems, Inc. 1998
Stock Incentive Plan (the "Plan"). Optionee further agrees to be bound by the
terms of the Plan and the terms of the Option as set forth in the Stock Option
Agreement attached hereto as Exhibit A. Optionee hereby acknowledges the receipt
of a copy of the official prospectus for the Plan in the form attached hereto as
Exhibit B. A copy of the Plan is available upon request made to the Corporate
Secretary at the Corporation's principal offices.
<PAGE>
Employment at Will. Nothing in this Notice or in the attached
Stock Option Agreement or in the Plan shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have
the meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
DATED:_____________________________ , 1999
SOFTNET SYSTEMS, INC.
By:__________________________________
Title:_______________________________
_____________________________________
OPTIONEE
Address:_____________________________
_____________________________________
ATTACHMENTS
Exhibit A - Stock Option Agreement
Exhibit B - Plan Summary and Prospectus
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
<PAGE>
EXHIBIT B
PLAN SUMMARY AND PROSPECTUS
EXHIBIT 99.3
SOFTNET SYSTEMS, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or of the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee,
as of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. Option Term. This option shall have a maximum term of ten
(10) years measured from the Grant Date and shall accordingly expire at the
close of business on the Expiration Date, unless sooner terminated in accordance
with Paragraph 5 or 6.
3. Limited Transferability.
(a) This option shall be neither transferable nor assignable
by Optionee other than by will or by the laws of descent and distribution
following Optionee's death and may be exercised, during Optionee's lifetime,
only by Optionee. However, Optionee may designate one or more persons as the
beneficiary or beneficiaries of this option, and this option shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding such
option. Such beneficiary or beneficiaries shall take the transferred option
subject to all the terms and conditions of this Agreement, including (without
limitation) the limited time period during which this option may, pursuant to
Paragraph 5, be exercised following Optionee's death.
(b) If this option is designated a Non-Statutory Option in the
Grant Notice, then this option may, in connection with the Optionee's estate
plan, be assigned in whole or in part during Optionee's lifetime to one or more
members of Optionee's immediate family or to a trust established for the
exclusive benefit of one or more such family members. The assigned portion shall
be exercisable only by the person or persons who acquire a proprietary interest
in the option pursuant to such assignment. The terms applicable to the assigned
portion shall be the same as those in effect for this option immediately prior
to such assignment.
<PAGE>
4. Dates of Exercise. This option shall become exercisable for
the Option Shares in one or more installments as specified in the Grant Notice.
As the option becomes exercisable for such installments, those installments
shall accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. Cessation of Service. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date should any of the following provisions become
applicable:
(a) Should Optionee cease to remain in Service for any reason
(other than death, Permanent Disability or Misconduct) while holding this
option, then Optionee shall have a period of three (3) months (commencing with
the date of such cessation of Service) during which to exercise this option, but
in no event shall this option be exercisable at any time after the Expiration
Date.
(b) Should Optionee die while holding this option, then the
personal representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance with the
laws of inheritance shall have the right to exercise this option. However, if
Optionee has designated one or more beneficiaries of this option, then those
persons shall have the exclusive right to exercise this option following
Optionee's death. Such right shall lapse, and this option shall cease to be
outstanding, upon the earlier of (i) the expiration of the twelve (12)-month
period measured from the date of Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Permanent
Disability while holding this option, then Optionee shall have a period of
twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the number of
Option Shares for which the option is exercisable at the time of Optionee's
cessation of Service. Upon the expiration of such limited exercise period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to be
outstanding for any exercisable Option Shares for which the option has not been
exercised. However, this option shall, immediately upon Optionee's cessation of
Service for any reason, terminate and cease to be outstanding with respect to
any Option Shares for which this option is not otherwise at that time
exercisable.
(e) Should Optionee's Service be terminated for Misconduct,
then this option shall terminate immediately and cease to remain outstanding.
2
<PAGE>
6. Special Acceleration of Option.
(a) This option, to the extent outstanding at the time of a
Corporate Transaction, but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
such Corporate Transaction, become exercisable for all of the Option Shares at
the time subject to this option and may be exercised for any or all of those
Option Shares as fully vested shares of Common Stock. No such acceleration of
this option shall occur, however, if and to the extent: (i) this option is, in
connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof) or (ii) this option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing at the time of the Corporate Transaction on the Option Shares for which
this option is not otherwise at that time exercisable (the excess of the Fair
Market Value of those Option Shares over the aggregate Exercise Price payable
for such shares) and provides for subsequent payout in accordance with the same
option exercise/vesting schedule set forth in the Grant Notice.
(b) Immediately following the Corporate Transaction, this
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with the
Corporate Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
(d) This Agreement shall not 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.
7. Adjustment in Option Shares. Should any change be made to
the Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. Stockholder Rights. The holder of this option shall not
have any stockholder rights with respect to the Option Shares until such person
shall have exercised the option, paid the Exercise Price and become a holder of
record of the purchased shares.
3
<PAGE>
9. Manner of Exercising Option.
(a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased shares
in one or more of the following forms:
(A) cash or check made payable to the Corporation;
(B) a promissory note payable to the Corporation, but
only to the extent authorized by the Plan Administrator in
accordance with Paragraph 13;
(C) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the
requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date; or
(D) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons
exercising the option) shall concurrently provide
irrevocable instructions (I) to a Corporation-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 Exercise Price payable for the
purchased shares plus all applicable Federal, state and
local income and employment taxes required to be withheld by
the Corporation by reason of such exercise and (II) to the
Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete
the sale.
Except to the extent the sale and remittance
procedure is utilized in connection with the option
exercise, payment of the Exercise Price must accompany the
Notice of Exercise delivered to the Corporation in
connection with the option exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee) have
the right to exercise this option.
4
<PAGE>
(iv) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction of
all Federal, state and local income and employment tax withholding requirements
applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any
fractional shares.
10. Compliance with Laws and Regulations.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the non-issuance
or sale of the Common Stock as to which such approval shall not have been
obtained. The Corporation, however, shall use its best efforts to obtain all
such approvals.
11. Successors and Assigns. Except to the extent otherwise
provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns, the legal representatives, heirs and
legatees of Optionee's estate and any beneficiaries of this option designated by
Optionee.
12. Notices. Any notice required to be given or delivered to
the Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation at its principal corporate offices. Any notice
required to be given or delivered to Optionee shall be in writing and addressed
to Optionee at the address indicated below Optionee's signature line on the
Grant Notice. All notices shall be deemed effective upon personal delivery or
upon deposit in the U.S. mail, postage prepaid and properly addressed to the
party to be notified.
13. Financing. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.
5
<PAGE>
14. Construction. This Agreement and the option evidenced
hereby are made and granted pursuant to the Plan and are in all respects limited
by and subject to the terms of the Plan. All decisions of the Plan Administrator
with respect to any question or issue arising under the Plan or this Agreement
shall be conclusive and binding on all persons having an interest in this
option.
15. Governing Law. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules.
16. Excess Shares. If the Option Shares covered by this
Agreement exceed, as of the Grant Date, the number of shares of Common Stock
which may without stockholder approval be issued under the Plan, then this
option shall be void with respect to those excess shares, unless stockholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of
the Plan.
17. Additional Terms Applicable to an Incentive Option. In the
event this option is designated an Incentive Option in the Grant Notice, the
following terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (A) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or Permanent
Disability or (B) more than twelve (12) months after the date Optionee ceases to
be an Employee by reason of Permanent Disability.
(b) No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent) the
aggregate Fair Market Value (determined at the Grant Date) of the Common Stock
for which such installment first becomes exercisable hereunder would, when added
to the aggregate value (determined as of the respective date or dates of grant)
of the Common Stock or other securities for which this option or any other
Incentive Options granted to Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One Hundred
Thousand Dollars ($100,000) in the aggregate. Should such One Hundred Thousand
Dollar ($100,000) limitation be exceeded in any calendar year, this option shall
nevertheless become exercisable for the excess shares in such calendar year as a
Non-Statutory Option.
(c) Should the exercisability of this option be accelerated
upon a Corporate Transaction, then this option shall qualify for favorable tax
treatment as an Incentive Option only to the extent the aggregate Fair Market
Value (determined at the Grant Date) of the Common Stock for which this option
first becomes exercisable in the calendar year in which the Corporate
Transaction occurs does not, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock or other securities
for which this option
6
<PAGE>
or one or more other Incentive Options granted to Optionee prior to the Grant
Date (whether under the Plan or any other option plan of the Corporation or any
Parent or Subsidiary) first become exercisable during the same calendar year,
exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should the
applicable One Hundred Thousand Dollar ($100,000) limitation be exceeded in the
calendar year of such Corporate Transaction, the option may nevertheless be
exercised for the excess shares in such calendar year as a Non-Statutory Option.
(d) Should Optionee hold, in addition to this option, one or
more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
7
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify SoftNet Systems, Inc. (the "Corporation") that
I elect to purchase __________ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $_____ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to me
under the Corporation's 1998 Stock Incentive Plan on
_______________________,________.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
______________________________ , ________
Date
_______________________________________
Optionee
Address: ______________________________
_______________________________________
Print name in exact manner it is
to appear on the stock certificate: _______________________________________
Address to which certificate is to
be sent, if different from
address above: _______________________________________
_______________________________________
Social Security Number: _______________________________________
<PAGE>
APPENDIX
The following definitions shall be in effect under the
Agreement:
A. Agreement shall mean this Stock Option Agreement.
B. Board shall mean the Corporation's Board of Directors.
C. Common Stock shall mean shares of the Corporation's common
stock.
D. Code shall mean the Internal Revenue Code of 1986, as
amended.
E. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding
securities are transferred to a person or persons different
from the persons holding those securities immediately prior
to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. Corporation shall mean SoftNet Systems, Inc., a New York
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of SoftNet Systems, Inc. which shall by appropriate
action adopt the Plan.
G. Employee shall mean an individual who is in the employ of the Corporation (or
any Parent or Subsidiary), subject to the control and
direction of the employer
entity as to both the work to be performed and the manner and method of
performance.
H. Exercise Date shall mean the date on which the option shall
have been exercised in accordance with Paragraph 9 of the Agreement.
I. Exercise Price shall mean the exercise price per Option
Share as specified in the Grant Notice.
J. Expiration Date shall mean the date on which the option
expires as specified in the Grant Notice.
K. Fair Market Value per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
A-1
<PAGE>
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be
deemed equal to the closing selling price per share of
Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers
on the Nasdaq National Market. If there is no closing
selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation
exists, or
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be deemed
equal to the closing selling price per share of Common Stock
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 officially quoted in the
composite tape of transactions on such exchange. If there is
no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such
quotation exists.
L. Grant Date shall mean the date of grant of the option as
specified in the Grant Notice.
M. Grant Notice shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
N. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
O. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).
P. Non-Statutory Option shall mean an option not intended to
satisfy the requirements of Code Section 422.
Q. Notice of Exercise shall mean the notice of exercise in the
form attached hereto as Exhibit I.
R. Option Shares shall mean the number of shares of Common
Stock subject to the option as specified in the Grant Notice.
A-2
<PAGE>
S. Optionee shall mean the person to whom the option is
granted as specified in the Grant Notice.
T. Parent shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the Corporation,
provided each 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.
U. Permanent Disability shall mean the inability of Optionee
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.
V. Plan shall mean the Corporation's 1998 Stock Incentive
Plan.
W. Plan Administrator shall mean either the Board or a
committee of the Board acting in its capacity as administrator of the Plan.
X. Service shall mean the Optionee's performance of services
for the Corporation (or any Parent or Subsidiary) in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor.
Y. Stock Exchange shall mean the American Stock Exchange or
the New York Stock Exchange.
Z. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each 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.
A-3
EXHIBIT 99.4
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Option Agreement (the "Option
Agreement") by and between SoftNet Systems, Inc. (the "Corporation") and
_________________________("Optionee") evidencing the stock option (the "Option")
granted this day to Optionee under the terms of the Corporation's 1998 Stock
Incentive Plan, and such provisions are effective immediately. All capitalized
terms in this Addendum, to the extent not otherwise defined herein, shall have
the meanings assigned to them in the Option Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION/CHANGE IN CONTROL
1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed in accordance with Paragraph 6 of the Option
Agreement, the Option shall not accelerate upon the occurrence of that Corporate
Transaction, and the Option shall accordingly continue, over Optionee's period
of Service after the Corporate Transaction, to become exercisable for the Option
Shares in one or more installments in accordance with the provisions of the
Option Agreement. However, immediately upon an Involuntary Termination of
Optionee's Service within eighteen (18) months following such Corporate
Transaction, the assumed Option, to the extent outstanding at the time but not
otherwise fully exercisable, shall automatically accelerate so that the Option
shall become immediately exercisable for all the Option Shares at the time
subject to the Option and may be exercised for any or all of those Option Shares
as fully vested shares.
2. The Option shall not accelerate upon the occurrence of a
Change in Control, and the Option shall, over Optionee's period of Service
following such Change in Control, continue to become exercisable for the Option
Shares in one or more installments in accordance with the provisions of the
Option Agreement. However, immediately upon an Involuntary Termination of
Optionee's Service within eighteen (18) months following the Change in Control,
the Option, to the extent outstanding at the time but not otherwise fully
exercisable, shall automatically accelerate so that the Option shall become
immediately exercisable for all the Option Shares at the time subject to the
Option and may be exercised for any or all of those Option Shares as fully
vested shares.
3. The Option as accelerated pursuant to this Addendum shall
remain so exercisable until the earlier of (i) the Expiration Date or (ii) the
expiration of the one (1)-year period measured from the date of the Optionee's
Involuntary Termination.
<PAGE>
4. For purposes of this Addendum the following definitions
shall be in effect:
(i) An Involuntary Termination shall mean the
termination of Optionee's Service by reason of:
(A) Optionee's involuntary dismissal
or discharge by the
Corporation for reasons other than Misconduct, or
(B) Optionee's voluntary resignation
following (A) a change in Optionee's position with the
Corporation (or Parent or Subsidiary employing Optionee) which
materially reduces Optionee's duties and responsibilities or
the level of management to which Optionee reports, (B) a
reduction in Optionee's level of compensation (including base
salary, fringe benefits and target bonus under any corporate
performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of Optionee's place
of employment by more than fifty (50) miles, provided and only
if such change, reduction or relocation is effected by the
Corporation without Optionee's consent.
(ii) A Change in Control shall be deemed to occur in
the event of a change in ownership or control of the Corporation
effected through either of the following transactions:
(A) the acquisition, directly or indirectly,
by 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) of 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 stockholders, or
(B) a change in the composition of the Board
over a period of thirty-six (36) consecutive months or less
such that a majority of the Board members ceases, by reason of
one or more contested elections for Board membership, to be
comprised of individuals who either (i) have been Board
members continuously since the beginning of such period or
(ii) 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 (i) who were still in office at
the time the Board approved such election or nomination.
<PAGE>
5. The provisions of Paragraph 1 of this Addendum shall govern
the period for which the Option is to remain exercisable following the
Involuntary Termination of Optionee's Service within eighteen (18) months after
the Corporate Transaction or Change in Control and shall supersede any
provisions to the contrary in Paragraph 5 of the Option Agreement.
IN WITNESS WHEREOF, SoftNet Systems, Inc. has caused this
Addendum to be executed by its duly-authorized officer as of the Effective Date
specified below.
SOFTNET SYSTEMS, INC.
By: ____________________________________
Title: ____________________________________
EFFECTIVE DATE:
EXHIBIT 99.5
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Option Agreement (the "Option
Agreement") by and between SoftNet Systems, Inc. (the "Corporation") and
___________________("Optionee") evidencing the stock option (the "Option")
granted this day to Optionee under the terms of the Corporation's 1998 Stock
Incentive Plan, and such provisions are effective immediately. All capitalized
terms in this Addendum, to the extent not otherwise defined herein, shall have
the meanings assigned to them in the Option Agreement.
LIMITED STOCK APPRECIATION RIGHT
1. Optionee is hereby granted a limited stock appreciation right
exercisable upon the following terms and conditions:
(i) Optionee shall have the unconditionaright, exercisable at any time
during the thirty (30)-day period immediately following a Hostile
Take-Over, to surrender the Option to the Corporation. In return for
the surrendered Option, Optionee shall receive a cash distribution
from the Corporation in an amount equal to the excess of (A) the
Take-Over Price of the shares of Common Stock which are the time
subject to the surrendered option (whether or not the Option is
otherwise at the time exercisable for those shares) over (B) the
aggregate Exercise Price payable for such shares.
(ii) To exercise this limited stock appreciation right, Optionee must,
during the applicable thirty (30)-day exercise period, provide the
Corporation with written notice of the option surrender in which there
is specified the number of Option Shares as to which the Option is
being surrendered. Such notice must be accompanied by the return of
Optionee's copy of the Option Agreement, together with any written
amendments to such Agreement. The cash distribution shall be paid to
Optionee within five (5) business days following such delivery date.
The exercise of the limited stock appreciation right in accordance
with the terms of this Addendum is hereby pre-approved by the Plan
Administrator in advance of such exercise, and no further approval of
the Plan Administrator or the Board shall be required at the time of
the actual option surrender and cash distribution. Upon receipt of
such cash distribution, the Option shall be cancelled with respect to
the Option Shares for which the Option has been surrendered, and
Optionee shall cease to have any further right to acquire those Option
Shares under the Option Agreement. The Option shall, however, remain
outstanding for the balance of the Option Shares (if any) in
accordance with the terms of the Option Agreement, and the Corporation
shall issue a replacement stock option agreement (substantially in the
same form of the surrendered Option Agreement) for those remaining
Option Shares.
<PAGE>
(iii) In no event may this limited stock appreciation right be exercised
when there is not a positive spread between the Fair Market Value of
the Option Shares subject to the surrendered option and the aggregate
Exercise Price payable for such shares. This limited stock
appreciation right shall in all events terminate upon the expiration
or sooner termination of the option term and may not be assigned or
transferred by Optionee, except to the extent the Option is
transferable in accordance with the provisions of the Option
Agreement.
2. For purposes of this Addendum, the following definitions shall be
in effect:
(i) A Hostile Take-Over shall be deemed to occur upon the acquisition,
directly or indirectly, by 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) of 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 stockholders
which the Board does not recommend such stockholders to accept.
(ii) The Take-Over Price per share shall be deemed to be equal to the
greater of (A) the Fair Market Value per Option Share on the option
surrender date or (B) the highest reported price per share of Common
Stock paid by the tender offeror in effecting the Hostile Take-Over.
However, if the surrendered Option is designated as an Incentive
Option in the Grant Notice, then the Take-Over Price shall not exceed
the clause (A) price per share.
IN WITNESS WHEREOF, SoftNet Systems, Inc. has caused this Addendum to be
executed by its duly-authorized officer.
SOFTNET SYSTEMS, INC.
By: _______________________________________
Title:_____________________________________
EFFECTIVE DATE:_____________________________________
EXHIBIT 99.6
SOFTNET SYSTEMS, INC.
STOCK ISSUANCE AGREEMENT
AGREEMENT made this ______day of ________________ ______, by
and between SoftNet Systems, Inc., a New York corporation, and
____________________________, a Participant in the Corporation's 1998 Stock
Incentive Plan.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
A. PURCHASE OF SHARES
1. Purchase. Participant hereby purchases shares of Common
Stock (the "Purchased Shares") pursuant to the provisions of the Stock Issuance
Program at the purchase price of $______ per share (the "Purchase Price").
2. Payment. Concurrently with the delivery of this Agreement
to the Corporation, Participant shall pay the Purchase Price for the Purchased
Shares in cash or check payable to the Corporation and shall deliver a
duly-executed blank Assignment Separate from Certificate (in the form attached
hereto as Exhibit I) with respect to the Purchased Shares.
3. Stockholder Rights. Until such time as the Corporation
exercises the Repurchase Right, Participant (or any successor in interest) shall
have all the rights of a stockholder (including voting, dividend and liquidation
rights) with respect to the Purchased Shares, subject, however, to the transfer
restrictions of this Agreement.
4. Escrow. The Corporation shall have the right to hold the
Purchased Shares in escrow until those shares have vested in accordance with the
Vesting Schedule.
5. Compliance with Law. Under no circumstances shall shares of
Common Stock or other assets be issued or delivered to Participant pursuant to
the provisions of this Agreement unless, in the opinion of counsel for the
Corporation or its successors, there shall have been compliance with all
applicable requirements of Federal and state securities laws, all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is at the time listed for trading and all
other requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery.
B. TRANSFER RESTRICTIONS
1. Restriction on Transfer. Except for any Permitted Transfer,
Participant shall not transfer, assign, encumber or otherwise dispose of any of
the Purchased Shares which are subject to the Repurchase Right.
<PAGE>
2. Restrictive Legend. The stock certificate for the Purchased
Shares shall be endorsed with the following restrictive legend:
"The shares represented by this certificate are
unvested and subject to certain repurchase rights granted to
the Corporation and accordingly may not be sold, assigned,
transferred, encumbered, or in any manner disposed of except
in conformity with the terms of a written agreement dated
____________, ______ between the Corporation and the
registered holder of the shares (or the predecessor in
interest to the shares). A copy of such agreement is
maintained at the Corporation's principal corporate offices."
3. Transferee Obligations. Each person (other than the
Corporation) to whom the Purchased Shares are transferred by means of a
Permitted Transfer must, as a condition precedent to the validity of such
transfer, acknowledge in writing to the Corporation that such person is bound by
the provisions of this Agreement and that the transferred shares are subject to
the Repurchase Right to the same extent such shares would be so subject if
retained by Participant.
C. REPURCHASE RIGHT
1. Grant. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the ninety (90)-day period
following the date Participant ceases for any reason to remain in Service, to
repurchase at the Purchase Price all or any portion of the Purchased Shares in
which Participant is not, at the time of his or her cessation of Service, vested
in accordance with the Vesting Schedule set forth in Paragraph C.3 of this
Agreement or the special vesting acceleration provisions of Paragraph C.5 of
this Agreement (such shares to be hereinafter referred to as the "Unvested
Shares").
2. Exercise of the Repurchase Right. The Repurchase Right
shall be exercisable by written notice delivered to each Owner of the Unvested
Shares prior to the expiration of the ninety (90)-day exercise period. The
notice shall indicate the number of Unvested Shares to be repurchased and the
date on which the repurchase is to be effected, such date to be not more than
thirty (30) days after the date of such notice. The certificates representing
the Unvested Shares to be repurchased shall be delivered to the Corporation on
or before the close of business on the date specified for the repurchase.
Concurrently with the receipt of such stock certificates, the Corporation shall
pay to Owner, in cash or cash equivalent (including the cancellation of any
purchase-money indebtedness), an amount equal to the Purchase Price previously
paid for the Unvested Shares to be repurchased from Owner.
3. Termination of the Repurchase Right. The Repurchase Right
shall terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph C.2. In addition, the Repurchase Right shall terminate
and cease to be exercisable with respect to any and all Purchased Shares in
which Participant vests in accordance with the following Vesting Schedule:
<PAGE>
(i) Upon Participant's completion of one (1)
year of Service measured from ______________, _______, Participant
shall acquire a vested interest in, and the Repurchase Right shall
lapse with respect to, twenty-five percent (25%) of the Purchased
Shares.
(ii) Participant shall acquire a vested interest
in, and the Repurchase Right shall lapse with respect to, the remaining
Purchased Shares in a series of thirty six (36) successive equal
monthly installments upon Participant's completion of each additional
month of Service over the thirty-six (36)-month period measured from
the initial vesting date under subparagraph (i) above.
4. Recapitalization. Any new, substituted or additional
securities or other property (including cash paid other than as a regular cash
dividend) which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the Repurchase Right and
any escrow requirements hereunder, but only to the extent the Purchased Shares
are at the time covered by such right or escrow requirements. Appropriate
adjustments to reflect such distribution shall be made to the number and/or
class of securities subject to this Agreement and to the price per share to be
paid upon the exercise of the Repurchase Right in order to reflect the effect of
any such Recapitalization upon the Corporation's capital structure; provided,
however, that the aggregate purchase price shall remain the same.
5. Corporate Transaction.
(a) Immediately prior to the consummation of any Corporate
Transaction, the Repurchase Right shall automatically lapse in its entirety and
the Purchased Shares shall vest in full, except to the extent the Repurchase
Right is to be assigned to the successor corporation (or parent thereof) in
connection with the Corporate Transaction.
(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payments) received in exchange for
the Purchased Shares in consummation of the Corporate Transaction, but only to
the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Corporation's capital structure; provided, however, that
the aggregate purchase price shall remain the same. The new securities or other
property (including cash payments) issued or distributed with respect to the
Purchased Shares in consummation of the Corporate Transaction shall immediately
be deposited in escrow with the Corporation (or the successor entity) and shall
not be released from escrow until Participant vests in such securities or other
property in accordance with the same Vesting Schedule in effect for the
Purchased Shares.
<PAGE>
D. SPECIAL TAX ELECTION
1. Section 83(b) Election . Under Code Section 83, the excess
of the fair market value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date. For this
purpose, the term "forfeiture restrictions" includes the right of the
Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right.
Participant may elect under Code Section 83(b) to be taxed at the time the
Purchased Shares are acquired, rather than when and as such Purchased Shares
cease to be subject to such forfeiture restrictions. Such election must be filed
with the Internal Revenue Service within thirty (30) days after the date of this
Agreement. Even if the fair market value of the Purchased Shares on the date of
this Agreement equals the Purchase Price paid (and thus no tax is payable), the
election must be made to avoid adverse tax consequences in the future. THE FORM
FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT II HERETO. PARTICIPANT
UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY
(30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE
FORFEITURE RESTRICTIONS LAPSE.
2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS
PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE CORPORATION
OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
E. GENERAL PROVISIONS
1. Assignment. The Corporation may assign the Repurchase Right
to any person or entity selected by the Board, including (without limitation)
one or more stockholders of the Corporation.
2. At Will Employment. Nothing in this Agreement or in the
Plan shall confer upon Participant any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Participant) or of Participant, which rights are hereby expressly
reserved by each, to terminate Participant's Service at any time for any reason,
with or without cause.
3. Notices. Any notice required to be given under this
Agreement shall be in writing and shall be deemed effective upon personal
delivery or upon deposit in the U.S. mail, registered or certified, postage
prepaid and properly addressed to the party entitled to such notice at the
address indicated below such party's signature line on this Agreement or at such
other address as such party may designate by ten (10) days advance written
notice under this paragraph to all other parties to this Agreement.
<PAGE>
4. No Waiver. The failure of the Corporation in any instance
to exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights that may subsequently arise under the provisions of this
Agreement or any other agreement between the Corporation and Participant. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
different nature.
5. Cancellation of Shares. If the Corporation shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time,
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such shares shall be
deemed purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
6. Participant Undertaking. Participant hereby agrees to take
whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either Participant or the
Purchased Shares pursuant to the provisions of this Agreement.
7. Agreement is Entire Contract. This Agreement constitutes
the entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.
8. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California without resort
to that State's conflict-of-laws rules.
9. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10. Successors and Assigns. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Corporation and its
successors and assigns and upon Participant, Participant's assigns and the legal
representatives, heirs and legatees of Participant's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first indicated above.
SOFTNET SYSTEMS, INC.
By: ______________________________________
Title:_____________________________________
Address: __________________________________
___________________________________________
PARTICIPANT
Signature:________________________________
Address:__________________________________
__________________________________________
<PAGE>
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of the Participant has read and hereby
approves the foregoing Stock Issuance Agreement. In consideration of the
Corporation's granting the Participant the right to acquire the Purchased Shares
in accordance with the terms of such Agreement, the undersigned hereby agrees to
be irrevocably bound by all the terms of such Agreement, including (without
limitation) the right of the Corporation (or its assigns) to purchase any
Purchased Shares in which the Participant is not vested at the time of his or
her termination of Service.
__________________________________________
PARTICIPANT'S SPOUSE
Address: _________________________________
__________________________________________
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED hereby sell(s), assign(s) and transfer(s)
unto SoftNet Systems, Inc. (the "Corporation"), _____________ ( ) shares of the
Common Stock of the Corporation standing in his or her name on the books of the
Corporation represented by Certificate No. herewith and do(es) hereby
irrevocably constitute and appoint ______________________________ Attorney to
transfer the said stock on the books of the Corporation with full power of
substitution in the premises.
Dated: _________________, ________.
Signature__________________________________
Instruction: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Participant.
<PAGE>
EXHIBIT II
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
______________ shares of the common stock of SoftNet Systems, Inc.
(3) The property was issued on _________________, _________.
(4) The taxable year in which the election is being made is the calendar year
_________.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's service with the issuer terminates. The issuer's
repurchase right lapses in a series of annual and monthly installments over
a four (4)-year period ending on .
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $ per share.
(7) The amount paid for such property is $__________ per share.
(8) A copy of this statement was furnished to SoftNet Systems, Inc. for whom
taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on ________________________, _______.
________________________________________________________________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Issuance Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Participant must retain two (2) copies of the completed form for filing with his
or her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE>
APPENDIX
The following definitions shall be in effect under the
Agreement:
A. Agreement shall mean this Stock Issuance Agreement.
B. Board shall mean the Corporation's Board of Directors.
C. Common Stock shall mean shares of the Corporation's common
stock.
D. Code shall mean the Internal Revenue Code of 1986, as
amended.
E. Corporate Transaction shall mean either of the following
stockholder-approved transactions:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding
securities are transferred to a person or persons different
from the persons holding those securities immediately prior
to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. Corporation shall mean SoftNet Systems, Inc., a New York
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of SoftNet Systems, Inc.
G. Owner shall mean Participant and all subsequent holders of
the Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Participant.
H. Parent shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the Corporation,
provided each 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.
I. Participant shall mean the person to whom the Purchased
Shares are issued under the Stock Issuance Program.
J. Permitted Transfer shall mean (i) a gratuitous transfer of
the Purchased Shares, provided and only if Participant obtains the Corporation's
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Participant's will or
<PAGE>
the laws of intestate succession following Participant's death
or (iii) a transfer to the Corporation in pledge as security for any
purchase-money indebtedness incurred by Participant in connection with the
acquisition of the Purchased Shares.
K. Plan shall mean the Corporation's 1998 Stock Incentive
Plan.
L. Plan Administrator shall mean either the Board or a
committee of the Board acting in its administrative capacity under the Plan.
M. Purchase Price shall have the meaning assigned to such term
in Paragraph A.1.
N. Purchased Shares shall have the meaning assigned to such
term in Paragraph A.1.
O. Recapitalization shall mean any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the Corporation's outstanding Common Stock as a class without
the Corporation's receipt of consideration.
P. Repurchase Right shall mean the right granted to the
Corporation in accordance with Article C.
Q. Service shall mean the Participant's performance of
services for the Corporation (or any Parent or Subsidiary) in the capacity of an
employee, subject to the control and direction of the employer entity as to both
the work to be performed and the manner and method of performance, a
non-employee member of the board of directors or a consultant.
R. Stock Issuance Program shall mean the Stock Issuance
Program under the Plan.
S. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each 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.
T. Vesting Schedule shall mean the vesting schedule specified
in Paragraph C.3, pursuant to which the Purchased Shares are to vest in a series
of installments over Participant's period of Service.
U. Unvested Shares shall have the meaning assigned to such
term in Paragraph C.1.
EXHIBIT 99.7
ADDENDUM
TO
STOCK ISSUANCE AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Issuance Agreement (the "Issuance
Agreement") by and between SoftNet Systems, Inc. (the "Corporation") and
("Participant") evidencing the stock issuance made this day to Participant under
the terms of the Corporation's 1998 Stock Incentive Plan, and such provisions
are effective immediately. All capitalized terms in this Addendum, to the extent
not otherwise defined herein, shall have the meanings assigned to such terms in
the Issuance Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION/CHANGE IN CONTROL
1. To the extent the Repurchase Right is assigned to the
successor corporation (or parent thereof) in connection with a Corporate
Transaction, no accelerated vesting of the Purchased Shares shall occur upon
such Corporate Transaction, and the Repurchase Right shall continue to remain in
full force and effect in accordance with the provisions of the Issuance
Agreement. The Participant shall, over Participant's period of Service following
the Corporate Transaction, continue to vest in the Purchased Shares in one or
more installments in accordance with the provisions of the Issuance Agreement.
2. No accelerated vesting of the Purchased Shares shall occur
upon a Change in Control, and the Repurchase Right shall continue to remain in
full force and effect in accordance with the provisions of the Issuance
Agreement. The Participant shall, over Participant's period of Service following
the Change in Control, continue to vest in the Purchased Shares in one or more
installments in accordance with the provisions of the Issuance Agreement.
3. Immediately upon an Involuntary Termination of
Participant's Service within eighteen (18) months following the Corporate
Transaction or Change in Control, the Repurchase Right shall terminate
automatically, and all the Purchased Shares shall vest in full at that time.
4. For purposes of this Addendum, the following definitions
shall be in effect:
An Involuntary Termination shall mean the termination
of Participant's Service by reason of:
(i) Participant's involuntary dismissal or discharge
by the Corporation for reasons other than Misconduct, or
<PAGE>
(ii) Participant's voluntary resignation following
(A) a change in Participant's position with the Corporation (or Parent
or Subsidiary employing Participant) which materially reduces
Participant's duties and responsibilities or the level of management to
which Participant reports, (B) a reduction in Participant's level of
compensation (including base salary, fringe benefits and target bonus
under any corporate performance based bonus or incentive programs) by
more than fifteen percent (15%) or (C) a relocation of Participant's
place of employment by more than fifty (50) miles, provided and only if
such change, reduction or relocation is effected by the Corporation
without Participant's consent.
A Change in Control shall be deemed to occur in the
event of a change in ownership or control of the Corporation effected through
either of the following transactions:
(i) the acquisition, directly or indirectly, by 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) of 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 stockholders, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, 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 the Board approved such election or nomination.
Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Participant, any unauthorized use or
disclosure by the Participant of confidential information or trade secrets of
the Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by the Participant adversely affecting the business or affairs of the
Corporation (or any Parent or Subsidiary) in a material manner. The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Corporation (or any Parent or Subsidiary) may consider as grounds for
the dismissal or discharge of the Participant or other person in the Service of
the Corporation (or any Parent or Subsidiary).
<PAGE>
IN WITNESS WHEREOF, SoftNet Systems, Inc. has caused this
Addendum to be executed by its duly-authorized officer, effective as of the
Effective Date specified below.
SOFTNET SYSTEMS, INC.
By:_______________________________________
Title: ___________________________________
EFFECTIVE DATE:_____________________________________
EXHIBIT 99.8
SOFTNET SYSTEMS, INC.
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
AUTOMATIC STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of SoftNet
Systems, Inc. (the "Corporation"):
Optionee: ____________________________________________________
Grant Date: __________________________________________________
Exercise Price: $__________________________ per share _______
Number of Option Shares: 20,000 shares
Expiration Date: _____________________________________________
Type of Option: Non-Statutory Stock Option
Date Exercisable: Immediately Exercisable
Vesting Schedule: The Option Shares shall initially be
unvested and subject to repurchase by the Corporation at the
Exercise Price paid per share. Optionee shall acquire a vested
interest in, and the Corporation's repurchase right shall
accordingly lapse with respect to, the Option Shares in a
series of six (6) successive equal semi-annual installments
upon Optionee's completion of each six (6)-month period of
service as a member of the Corporation's Board of Directors
(the "Board") over the thirty-six (36) month period measured
from the Grant Date. In no event shall any additional Option
Shares vest after Optionee's cessation of Board service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the automatic option grant
program under the SoftNet Systems, Inc. 1998 Stock Incentive Plan (the "Plan").
Optionee further agrees to be bound by the terms of the Plan and the terms of
the Option as set forth in the Automatic Stock Option Agreement attached hereto
as Exhibit A. Optionee hereby acknowledges receipt of a copy of the official
prospectus for the Plan in the form attached hereto as Exhibit B. A copy of the
Plan is available upon request made to the Corporate Secretary at the
Corporation's principal offices.
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED
OPTION SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO A
REPURCHASE RIGHT EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS. THE TERMS OF
SUCH RIGHT SHALL BE SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND
SUBSTANCE SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF
THE OPTION EXERCISE.
<PAGE>
No Impairment of Rights. Nothing in this Notice or the
attached Automatic Stock Option Agreement or in the Plan shall interfere with or
otherwise restrict in any way the rights of the Corporation and the
Corporation's stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
Definitions. All capitalized terms in this Notice shall have
the meaning assigned to them in this Notice or in the attached Automatic Stock
Option Agreement.
DATED: _________________, _______
SOFTNET SYSTEMS, INC.
By:_____________________________________
Title:__________________________________
________________________________________
OPTIONEE
Address:________________________________
________________________________________
ATTACHMENTS
- -----------
Exhibit A - Automatic Stock Option Agreement
Exhibit B - Plan Summary and Prospectus
<PAGE>
EXHIBIT A
AUTOMATIC STOCK OPTION AGREEMENT
<PAGE>
EXHIBIT B
PLAN SUMMARY AND PROSPECTUS
EXHIBIT 99.9
SOFTNET SYSTEMS, INC.
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
STOCK OPTION UNDER DIRECTOR FEE OPTION GRANT PROGRAM
Notice is hereby given of the following option grant (the
"Option") to purchase shares of Common Stock of SoftNet Systems, Inc. (the
"Corporation"):
Optionee: ____________________________________________________
Grant Date: __________________________________________________
Exercise Price: $__________________________________ per share
Number of Option Shares: _____________________________ shares
Expiration Date: _____________________________________________
Type of Option: _____ Non-Statutory Stock Option
Exercise Schedule: The Option shall become exercisable for the
Option Shares in a series of twelve (12) successive equal
monthly installments over Optionee's period of continued
service as a member of the Corporation's Board of Directors
(the "Board") during calendar year 200___, with the first such
installment to become exercisable upon Optionee's continuation
in Board service through January 31, 200___. In no event shall
the Option become exercisable for any additional Option Shares
after Optionee's cessation of Board service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the Director Fee Option Grant
Program under the SoftNet Systems Inc. 1998 Stock Incentive Plan (the "Plan").
Optionee further agrees to be bound by the terms of the Plan and the terms of
the Option as set forth in the Director Fee Stock Option Agreement attached
hereto as Exhibit A.
Optionee hereby acknowledge receipt of a copy of the official
prospectus for the Plan in the form attached hereto as Exhibit B. A copy of the
Plan is available upon request made to the Corporate Secretary at the
Corporation's principal offices.
<PAGE>
No Impairment of Rights. Nothing in this Notice or in the Plan
or in the attached Director Fee Stock Option Agreement shall interfere with or
otherwise restrict in any way the rights of the Corporation or the Corporation's
stockholders to remove Optionee form the Board at any time in accordance with
the provisions of applicable law.
Definitions. All capitalized terms in this Notice shall have
the meaning assigned to them in this Notice or in the attached Director Fee
Stock Option Agreement.
Dated: ______________________ , ______
SOFTNET SYSTEMS, INC.
By:____________________________________
Title: ________________________________
_______________________________________
OPTIONEE
Address:_______________________________
_______________________________________
ATTACHMENTS
- -----------
Exhibit A - Director Fee Stock Option Agreement
Exhibit B - Plan Summary and Prospectus
<PAGE>
EXHIBIT A
DIRECTOR FEE STOCK OPTION AGREEMENT
<PAGE>
EXHIBIT B
PLAN SUMMARY AND PROSPECTUS
EXHIBIT 99.10
SOFTNET SYSTEMS, INC.
AUTOMATIC STOCK OPTION AGREEMENT
RECITALS
A. The Corporation has implemented an automatic option grant
program under the Plan pursuant to which eligible non-employee members of the
Board will automatically receive special option grants at periodic intervals
over their period of Board service in order to provide such individuals with a
meaningful incentive to continue to serve as members of the Board.
B. Optionee is an eligible non-employee Board member, and this
Agreement is executed pursuant to, and is intended to carry out the purposes of,
the Plan in connection with the automatic grant of an option to purchase shares
of Common Stock under the Plan.
C. All capitalized terms in this Agreement shall have the
meaning assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee,
as of the Grant Date, a Non-Statutory Option to purchase up to the number of
Option Shares specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term specified in Paragraph 2 at
the Exercise Price.
2. Option Term. This option shall have a term of ten (10)
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5, 6 or 7.
3. Limited Transferability.
(a) This option may, in connection with the
Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established for the exclusive benefit of one or more such family members. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment.
(b) Should the Optionee die while holding this
option, then this option shall be transferred in accordance with Optionee's will
or the laws of descent and distribution. However, Optionee may designate one or
more persons as the beneficiary or beneficiaries of this option, and this option
shall, in accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding such
option. Such
<PAGE>
beneficiary or beneficiaries shall take the transferred option subject to all
the terms and conditions of this Agreement, including (without limitation) the
limited time period during which this option may, pursuant to Paragraph 5, be
exercised following Optionee's death. or by the Optionee's designated
beneficiary or beneficiaries of that option.
4. Exercisability/Vesting.
(a) This option shall be immediately exercisable for
any or all of the Option Shares, whether or not the Option Shares are at the
time vested in accordance with the Vesting Schedule, and shall remain so
exercisable until the Expiration Date or sooner termination of the option term
under Paragraph 5, 6 or 7.
(b) Optionee shall, in accordance with the Vesting
Schedule set forth in the Grant Notice, vest in the Option Shares in one or more
installments over his or her period of Board service. Vesting in the Option
Shares may be accelerated pursuant to the provisions of Paragraph 5, 6 or 7. In
no event, however, shall any additional Option Shares vest following Optionee's
cessation of service as a Board member.
5. Cessation of Board Service. Should Optionee's service as a
Board member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
outstanding) prior to the Expiration Date in accordance with the following
provisions:
(a) Should Optionee cease to serve as a Board member
for any reason (other than death or Permanent Disability) while this option is
outstanding, then the period during which this option may be exercised shall be
reduced to a twelve (12)-month period measured from the date of such cessation
of Board service, but in no event shall this option be exercisable at any time
after the Expiration Date. During such limited period of exercisability, this
option may not be exercised in the aggregate for more than the number of Option
Shares (if any) in which Optionee is vested on the date of his or her cessation
of Board service. Upon the earlier of (i) the expiration of such twelve
(12)-month period or (ii) the specified Expiration Date, the option shall
terminate and cease to be exercisable with respect to any vested Option Shares
for which the option has not been exercised.
(b) Should Optionee die during the twelve (12)-month
period following his or her cessation of Board service and hold this option, at
the time of his or her death, then the personal representative of Optionee's
estate or the person or persons to whom the option is transferred pursuant to
Optionee's will or in accordance with the laws of descent and distribution or
the designated beneficiary or beneficiaries of this option (as the case may be)
shall have the right to exercise this option for any or all of the Option Shares
in which Optionee is vested at the time of Optionee's cessation of Board service
(less any Option Shares purchased by Optionee after such cessation of Board
service but prior to death). Such right of exercise shall terminate, and this
option shall accordingly cease to be exercisable for such vested Option Shares,
upon the earlier of (i) the expiration of the twelve (12)-month period measured
from the date of Optionee's cessation of Board service or (ii) the specified
Expiration Date.
2
<PAGE>
(c) Should Optionee cease service as a Board member
by reason of death or Permanent Disability, then all Option Shares at the time
subject to this option but not otherwise vested shall vest in full so that this
option may be exercised for any or all of the Option Shares as fully vested
shares of Common Stock at any time prior to the earlier of (i) the expiration of
the twelve (12)-month period measured from the date of Optionee's cessation of
Board service or (ii) the specified Expiration Date, whereupon this option shall
terminate and cease to be outstanding.
(d) Upon Optionee's cessation of Board service for
any reason other than death or Permanent Disability, this option shall
immediately terminate and cease to be outstanding with respect to any and all
Option Shares in which Optionee is not otherwise at that time vested in
accordance with the normal Vesting Schedule or the special vesting acceleration
provisions of Paragraphs 6 and 7 below.
6. Corporate Transaction.
(a) In the event of a Corporate Transaction, all the
Option Shares at the time subject to this option but not otherwise vested shall
automatically vest so that this option shall, immediately prior to the specified
effective date for the Corporate Transaction, become exercisable for all of the
Option Shares as fully-vested shares of Common Stock and may be exercised for
all or any portion of those vested shares. Immediately following the
consummation of the Corporate Transaction, this option shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation or
its parent company.
(b) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to such
Corporate Transaction, and appropriate adjustments shall also be made to the
Exercise Price, provided the aggregate Exercise Price shall remain the same.
7. Change in Control/Hostile Take-Over.
(a) All the Option Shares subject to this option at
the time of a Change in Control but not otherwise vested shall automatically
vest so that this option shall, immediately prior to the effective date of such
Change in Control, become exercisable for all of the Option Shares as
fully-vested shares of Common Stock and may be exercised for all or any portion
of those vested shares. This option shall remain exercisable for such
fully-vested Option Shares until the earliest to occur of (i) the specified
Expiration Date, (ii) the sooner termination of this option in accordance with
Paragraph 5 or 6 or (iii) the surrender of this option under Paragraph 7(b).
3
<PAGE>
(b) Optionee shall have an unconditional right,
exercisable at the time during the thirty (30)-day period immediately following
the consummation of a Hostile Take-Over to surrender this option to the
Corporation in exchange for a cash distribution from the Corporation in an
amount equal to the excess of (i) the Take-Over Price of the Option Shares at
the time subject to the surrendered option (whether or not those Option Shares
are otherwise at the time vested) over (ii) the aggregate Exercise Price payable
for such shares. This Paragraph 7(b) limited stock appreciation right shall in
all events terminate upon the expiration or sooner termination of the option
term and may not be assigned or transferred by Optionee.
(c) To exercise the Paragraph 7(b) limited stock
appreciation right, Optionee must, during the applicable thirty (30)-day
exercise period, provide the Corporation with written notice of the option
surrender in which there is specified the number of Option Shares as to which
the option is being surrendered. Such notice must be accompanied by the return
of Optionee's copy of this Agreement, together with any written amendments to
such Agreement. The cash distribution shall be paid to Optionee within five (5)
business days following such delivery date. The exercise of such limited stock
appreciation right in accordance with the terms of this Paragraph 7 has been
pre-approved pursuant to the express provisions of the Automatic Option Grant
Program, and neither the approval of the Plan Administrator nor the consent of
the Board shall be required at the time of the actual option surrender and cash
distribution. Upon receipt of the cash distribution, this option shall be
cancelled with respect to the shares subject to the surrendered option (or the
surrendered portion), and Optionee shall cease to have any further right to
acquire those Option Shares under this Agreement. The option shall, however,
remain outstanding for the balance of the Option Shares (if any) in accordance
with the terms and provisions of this Agreement, and the Corporation shall
accordingly issue a replacement stock option agreement (substantially in the
same form as this Agreement) for those remaining Option Shares.
8. Adjustment in Option Shares. Should any change be made to
the Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
9. Stockholder Rights. The holder of this option shall not
have any stockholder rights with respect to the Option Shares until such person
shall have exercised the option, paid the Exercise Price and become a holder of
record of the purchased shares.
10. Manner of Exercising Option.
(a) In order to exercise this option with respect to
all or any part of the Option Shares for which this option is at the time
exercisable, Optionee (or any other person or persons exercising the option)
must take the following actions:
4
<PAGE>
(i) To the extent the option is
exercised for vested Option Shares, execute and deliver to the
Corporation a Notice of Exercise for the Option Shares for which the
option is exercised. To the extent this option is exercised for
unvested Option Shares, execute and deliver to the Corporation a
Purchase Agreement for those unvested Option Shares.
(ii) Pay the aggregate Exercise Price
for the purchased shares in one or more of the following forms:
(A) cash or check made payable to
the Corporation,
(B) shares of Common Stock held by
Optionee (or any other person or persons exercising the
option) for the requisite period necessary to avoid a charge
to the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date, or
(C) to the extent the option is
exercised for vested Option Shares, through a special sale and
remittance procedure pursuant to which Optionee (or any other
person or persons exercising the option) shall concurrently
provide irrevocable instructions (I) to a Corporation-
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 Exercise Price payable for the
purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (II) to the
Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete
the sale.
(iii) Furnish to the Corporation
appropriate documentation that the person or persons exercising the
option (if other than Optionee) have the right to exercise this option.
(b) Except to the extent the sale and remittance
procedure is utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise (or the Purchase Agreement)
delivered to the Corporation in connection with the option exercise.
(c) As soon after the Exercise Date as practical, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto. To the extent any such Option
Shares are unvested, the certificates for those Option Shares shall be endorsed
with an appropriate legend evidencing the Corporation's repurchase rights and
may be held in escrow with the Corporation until such shares vest.
5
<PAGE>
(d) In no event may this option be exercised for any
fractional shares.
11. No Impairment of Rights. This Agreement shall not in any
way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. In addition, this Agreement shall not in any way be
construed or interpreted so as to affect adversely or otherwise impair the right
of the Corporation or the stockholders to remove Optionee from the Board at any
time in accordance with the provisions of applicable law.
12. Compliance with Laws and Regulations.
(a) The exercise of this option and the issuance of
the Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain
approval from any regulatory body having authority deemed by the Corporation to
be necessary to the lawful issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. The Corporation, however, shall use its best efforts to
obtain all such approvals.
13. Successors and Assigns. Except to the extent otherwise
provided in Paragraph 3 or 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns, the legal representatives, heirs and
legatees of Optionee's estate and any beneficiaries of this option designated by
Optionee.
14. Notices. Any notice required to be given or delivered to
the Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation at its principal corporate offices. Any notice
required to be given or delivered to Optionee shall be in writing and addressed
to Optionee at the address indicated below Optionee's signature line on the
Grant Notice. All notices shall be deemed effective upon personal delivery or
upon deposit in the U.S. mail, postage prepaid and properly addressed to the
party to be notified.
15. Construction. This Agreement and the option evidenced
hereby are made and granted pursuant to the Plan and are in all respects limited
by and subject to the terms of the Plan.
16. Governing Law. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules.
6
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify SoftNet Systems, Inc. (the "Corporation") that
I elect to purchase _____________ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's 1998 Stock Incentive Plan on _________________, ________.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price for any Purchased Shares in which I am vested at the time of exercise of
the Option.
________________________________ , ______
Date
_________________________________________
Optionee
Address: ________________________________
_________________________________________
Print name in exact manner
it is to appear on the
stock certificate: _________________________________________
Address to which certificate
is to be sent, if different
from address above: _________________________________________
_________________________________________
Social Security Number: _________________________________________
<PAGE>
APPENDIX
The following definitions shall be in effect under the
Agreement:
A. Agreement shall mean this Automatic Stock Option Agreement.
B. Board shall mean the Corporation's Board of Directors.
C. Change in Control shall mean a change in ownership or
control of the Corporation effected through either of the following
transactions:
(i) the acquisition, directly or indirectly, by 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) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) 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 stockholders, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, 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 the Board approved such election or nomination.
D. Common Stock shall mean shares of the Corporation's common
stock.
E. Code shall mean the Internal Revenue Code of 1986, as
amended.
F. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all
or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
A-1
<PAGE>
G. Corporation shall mean SoftNet Systems, Inc., a New York
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of Rhythms NetConnections Inc.
which shall by appropriate action adopt the Plan.
H. Exercise Date shall mean the date on which the option shall
have been exercised in accordance with Paragraph 10 of the Agreement.
I. Exercise Price shall mean the exercise price per share as
specified in the Grant Notice.
J. Expiration Date shall mean the date on which the option
expires as specified in the Grant Notice.
K. Fair Market Value per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as the
price is reported by the National Association of Securities Dealers on
the Nasdaq National Market. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which
such quotation exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange which serves as the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions
on such exchange. If there is no closing selling price for the Common
Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
L. Grant Date shall mean the date of grant of the option as
specified in the Grant Notice.
M. Grant Notice shall mean the Notice of Grant of Automatic
Stock Option accompanying the Agreement, pursuant to which Optionee has been
informed of the basic terms of the option evidenced hereby.
N. Hostile Takeover shall mean the acquisition, directly or
indirectly, by 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) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) 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 stockholders which the Board does not recommend such
stockholders to accept.
A-2
<PAGE>
O. 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
P. Non-Statutory Option shall mean an option not intended to
satisfy the requirements of Code Section 422.
Q. Notice of Exercise shall mean the notice of exercise in the
form of Exhibit I.
R. Option Shares shall mean the number of shares of Common
Stock subject to the option.
S. Optionee shall mean the person to whom the option is
granted as specified in the Grant Notice.
T. Permanent Disability shall mean the inability of Optionee
to perform his or her usual duties as a member of the Board by reason of any
medically determinable physical or mental impairment which is expected to result
in death or has lasted or can be expected to last for a continuous period of
twelve (12) months or more.
U. Plan shall mean the Corporation's 1998 Stock Incentive
Plan.
V. Purchase Agreement shall mean the stock purchase agreement
(in form and substance satisfactory to the Corporation) which grants the
Corporation the right to repurchase, at the Exercise Price, any and all unvested
Option Shares held by Optionee at the time of Optionee's cessation of Board
service and which precludes the sale, transfer or other disposition of any
purchased Option Shares while those shares are unvested and subject to such
repurchase right.
W. Stock Exchange shall mean the American Stock Exchange or
the New York Stock Exchange.
X. Take-Over Price shall mean the greater of (i) the Fair
Market Value per share of Common Stock on the date the option is surrendered to
the Corporation in connection with a Hostile Take-Over or (ii) the highest
reported price per share of Common Stock paid by the tender offeror in effecting
the Hostile Take-Over.
Y. Vesting Schedule shall mean the vesting schedule specified
in the Grant Notice, pursuant to which the Option Shares will vest in one or
more installments over the Optionee's period of Board service, subject to
acceleration in accordance with the provisions of the Agreement.
A-3
