As filed with the Securities and Exchange Commission on March 23, 2000
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.
AMENDED 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 3,866,505 shares $29.34(3) $113,443,257 (3) $29,949
1998 Stock Incentive Plan
Common Stock 3,350,688 shares $29.34 $98,309,186 $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 3,866,505 shares of Common Stock authorized for
issuance under the 1998 Stock Incentive Plan, which are in addition to
the 3,350,688 shares that were registered previously under the 1998
Stock Incentive Plan (Registration Statement No. 333-78177). The
applicable filing fees have been paid for the 3,350,688 shares
registered previously.
(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 March 16, 2000 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 for the
fiscal year ended September 30, 1999, filed with the
Commission on December 29, 1999;
(b) The Registrant's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1999, filed with the
Commission on February 14, 2000;
(c) The Registrant's Current Reports on Forms 8-K filed
with the Commission on October 15, 1999, October 21,
1999, December 30, 1999 and March 17, 2000; 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
5.1 Opinion and Consent of Assistant General Counsel to the Company.
23.1 Consent of Assistant General Counsel to the Company is contained in
Exhibit 5.
23.2 Consent of KPMG LLP, Independent Auditors.
23.3 Consent of PricewaterhouseCoopers LLP, Independent Auditors.
24 Power of Attorney (see signature page).
99.1 SoftNet Systems, Inc. Amended 1998 Stock Incentive Plan.
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include any prospectus required
by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts
or events arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement, and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement; 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.
<PAGE>
C. Insofar as indemnification for liabilities arising under
the 1933 Act may be permitted to directors, officers or controlling persons of
the Registrant pursuant to the 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, we certify that we have reasonable grounds to believe that we meet all
of the requirements for filing on Form S-8 and have duly caused this
registration statement to be signed on our behalf by the undersigned, thereunto
duly authorized, in the City of San Francisco, State of California, on this 23rd
day of March, 2000.
SOFTNET SYSTEMS, INC.
/s/ Dr. Lawrence B. Brilliant
By: -------------------------------------------------
Dr. Lawrence B. Brilliant
Chairman of the Board 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.
Signature Title Date
/s/Dr. Lawrence B. Brilliant March 23, 2000
- --------------------------- Chairman of the Board and
Dr. Lawrence B. Brilliant Chief Executive Officer
/s/Ronald I. Simon Vice Chairman of the Board March 23, 2000
- ---------------------------
Ronald I. Simon
/s/Ian B. Aaron Director and President March 23, 2000
- ---------------------------
Ian B. Aaron
/s/Douglas S. Sinclair Chief Financial Officer March 23, 2000
- ---------------------------
Douglas S. Sinclair
/s/Edward A. Bennett Director March 23, 2000
- ---------------------------
Edward A. Bennett
/s/George C. Chan Director March 23, 2000
- ---------------------------
George C. Chan
/s/Rocco B. Commisso Director March 23, 2000
- ---------------------------
Rocco B. Commisso
/s/Robert C. Harris, Jr. Director March 23, 2000
- ---------------------------
Robert C. Harris, Jr.
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Exhibit
5.1 Opinion and Consent of Assistant General Counsel to the Company.
23.1 Consent of Assistant General Counsel to the Company is contained in
Exhibit 5.
23.2 Consent of KPMG LLP, Independent Auditors.
23.3 Consent of PricewaterhouseCoopers LLP, Independent Auditors.
24 Power of Attorney (see signature page).
99.1 SoftNet Systems, Inc. Amended 1998 Stock Incentive Plan.
<PAGE>
Exhibit 5.1
SoftNet Systems, Inc.
650 Townsend Street, Suite 225
San Francisco, California 94103
March 23, 2000
SoftNet Systems, Inc.
650 Townsend Street, Suite 225
San Francisco, California 94103
Re: Registration Statement No. 333- ; 3,866,505 shares of Common Stock
Ladies and Gentlemen:
The undersigned is Assistant General Counsel to SoftNet
Systems, Inc., a Delaware corporation (the "Company"), and has acted as counsel
to the Company in connection with the registration of 3,866,505 shares of the
Company's common stock, par value $0.01 per share (the "Shares"), available for
issuance under the Company's Amended 1998 Stock Incentive Plan (the "Plan"),
under the Securities Act of 1933, as amended, by the Company on Form S-8 filed
with the Securities and Exchange Commission on March 23, 2000 (the
"Registration Statement").
In my capacity as counsel in connection with such
registration, I am familiar with the proceedings taken and proposed to be taken
by the Company in connection with the authorization, issuance and sale of the
Shares. In addition, I have made such legal and factual examinations and
inquiries, including an examination of originals or copies certified or
otherwise identified to my satisfaction of such documents, corporate records and
instruments, as I have deemed necessary or appropriate for purposes of this
opinion.
In my examination, I have assumed the genuineness of all
signatures, the authenticity of all documents submitted to me as originals, and
the conformity to authentic original documents of all documents submitted to me
as copies.
I am opining herein as to the effect on the subject
transaction only of the General Corporation Law of the State of Delaware,
including statutory and reported decisional law thereunder, and I express no
opinion with respect to the applicability thereto, or the effect thereon, of any
other laws.
Subject to the foregoing and in reliance thereon, it is my
opinion that the Shares have been duly authorized and, upon the issuance and
sale of the Shares, each in the manner contemplated by the Registration
Statement and in accordance with the terms of the Plan, the Shares will be
legally and validly issued, fully paid and nonassessable.
I consent to your filing this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Jason G. Wilson
-----------------------------
Jason G. Wilson
Assistant General Counsel
Exhibit 23.2
CONSENT OF KPMG LLP, INDEPENDENT AUDITORS
We consent to incorporation herein by reference of our report dated November 30,
1999, relating to the consolidated balance sheet of SoftNet Systems, Inc. and
Subsidiaries as of September 30, 1999 and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the year then
ended, and the related schedule, which reports appear in the September 30, 1999
annual report on Form 10-K of SoftNet Systems, Inc.
KPMG LLP
Mountain View, California
March 21, 2000
Exhibit 23.3
CONSENT OF PRICEWATERHOUSECOOPERS LLP, INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated December 1, 1998, except for Note 9
regarding the Senior Subordinated Convertible Notes for which the date is
January 13, 1999 and Note 5 regarding the discontinuance of the document
management segment for which the date is April 13, 1999, relating to the
financial statements and financial statement schedule as of September 30, 1997
and 1998 and for the two years in the period ended September 30, 1998, which
report appears in the September 30, 1999 annual report on Form 10-K of SoftNet
Systems, Inc.
PricewaterhouseCoopers LLP
San Jose, California
March 21, 2000
Exhibit 99.1
SOFTNET SYSTEMS, INC.
AMENDED 1998 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This Amended 1998 Stock Incentive Plan is intended to promote
the interests of SoftNet Systems, Inc., a Delaware 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.
<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.
<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
5,350,668 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,
(ii) an additional increase of approximately 2,000,000 shares authorized by the
Board, subject to stockholder approval at the 1999 Annual Meeting, and (iii) an
additional increase of approximately 2,000,000 shares authorized by the Board,
subject to stockholder approval at the 2000 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.G. of this Article One). Upon stockholder approval at the 2000 Annual
Meeting, this Section V.B. will be superseded by Section V.C. of this Article
One.
C. Subject to approval at the 2000 Annual Meeting, 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 2001, by an amount
equal to four percent (7%) 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 4,000,000
shares (subject to adjustment in accordance with Section V.G. of this Article
One). Upon stockholder approval at the 2000 Annual Meeting, this Section V.C.
will supersede Section V.B. of this Article One.
D. Subject to approval at the 2000 Annual Meeting, the number
of shares of Common Stock available for issuance under the Plan shall
automatically be increased on the day after the 2000 Annual Meeting, by an
amount equal to three percent (3%) of the total number of shares of Common Stock
outstanding on the last trading day in December 1999, but in no event shall such
increase exceed 2,000,000 shares (subject to adjustment in accordance with
Section V.G. of this Article One).
E. 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.
F. 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
<PAGE>
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.
G. 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
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, Section V.C. and Section V.D. 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.
<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.
<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.
<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.
<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
<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
<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.
<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.
<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
B is the Fair Market Value per share of Common Stock
on the option grant date.
<PAGE>
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.
<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.
<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.
<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.
<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.
<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.
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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.
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(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.
<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.
<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.
<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
<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.
<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.
<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.
<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.
<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.
<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.
<PAGE>
G. Corporation shall mean SoftNet Systems, Inc., a Delaware
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.
<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.
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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.
GG. Stock Exchange shall mean either the American Stock
Exchange or the New York Stock Exchange.
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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).
