FILENET CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
AS AMENDED AND RESTATED MAY 15, 1998
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the interests of
FileNet Corporation by providing eligible employees with the opportunity to
acquire a proprietary interest in the Corporation through participation in a
payroll-deduction based employee stock purchase plan designed to qualify under
Section 423 of the Code.
This Plan shall serve as the successor to the Corporation's existing 1988
Employee Stock Purchase Plan (the "Predecessor Plan"), and no further shares of
Common Stock will be issued under the Predecessor Plan from and after the
Effective Date.
Capitalized terms herein shall have the meanings assigned to such terms in
the attached Appendix.
All share numbers in this Plan reflect the 2-for-1 split of the Common
Stock effective on June 12, 1998
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and construe
any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares of Common Stock purchased
on the open market. The maximum number of shares of Common Stock which may be
issued over the term of the Plan and the International Plan shall not exceed
Four Hundred Thousand (400,000) shares and shall be limited to the following
components: (i) the actual number of shares of Common Stock remaining for
issuance under the Predecessor Plan on the Effective Date (estimated at One
Hundred Thousand (100,000 shares) plus (ii) an additional Three Hundred Thousand
(300,000) shares of Common Stock.
B. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and class of securities issuable under the Plan
and the International Plan, (ii) the maximum number and class of securities
purchasable per Participant on any one Purchase Date, (iii) the maximum number
and class of securities purchasable by all Participants in the aggregate on any
one Purchase Date and (iv) the number and class of securities and the price per
share in effect under each outstanding purchase right in order to prevent the
dilution or enlargement of benefits thereunder.
IV. PURCHASE PERIODS
A. Shares of Common Stock shall be offered for purchase under the Plan
through a series of successive purchase periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
B. Each purchase period shall have a duration of six (6) months. Purchase
periods shall run from the first business day in May to the last business day in
October each year and from the first business day in November each year to the
last business day in April of the following year. However, the initial purchase
period under the Plan shall begin on October 1, 1998 and end on the last
business day in April 1999.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date of any
purchase period shall be eligible to participate in the Plan for that purchase
period.
B. To participate in the Plan for a particular purchase period, the
Eligible Employee must complete the enrollment form prescribed by the Plan
Administrator and file such form with the Plan Administrator (or its designate)
on or before the start date of the purchase period.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for purposes of
acquiring shares of Common Stock under the Plan may be any multiple of one
percent (1%) of the Cash Earnings paid to the Participant during each purchase
period, up to a maximum of ten percent (10%). The deduction rate so authorized
shall continue in effect for the entire purchase period and for each subsequent
purchase period the Participant remains in the Plan. The Participant may not
increase his or her rate of payroll deduction during a purchase period, but may
effect such increase as of the start date of any subsequent purchase period
following the filing of a new payroll deduction authorization with the Plan
Administrator. However, the Participant may, at any time during the purchase
period, reduce his or her rate of payroll deduction to become effective as soon
as possible after filing the appropriate form with the Plan Administrator. The
Participant may not, however, effect more than one (1) such reduction per
purchase period.
B. Payroll deductions shall begin on the first pay day following the start
date of the purchase period and shall (unless sooner terminated by the
Participant) continue through the pay day ending with or immediately prior to
the last day of the purchase period. The amounts so collected shall be credited
to the Participant's book account under the Plan, but no interest shall be paid
on the balance from time to time outstanding in such account. The amounts
collected from the Participant shall not be required to be held in any
segregated account or trust fund and may be commingled with the general assets
of the Corporation and used for general corporate purposes. C. Payroll
deductions shall automatically cease upon the termination of the Participant's
purchase right in accordance with the provisions of the Plan. D. The
Participant's acquisition of Common Stock under the Plan on any Purchase Date
shall neither limit nor require the Participant's acquisition of Common Stock on
any subsequent Purchase Date.
VII. PURCHASE RIGHTS
A. Grant of Purchase Right. A Participant shall be granted a separate
purchase right on the start date of each purchase period in which he or she
participates. The purchase right shall provide the Participant with the right to
purchase shares of Common Stock on the Purchase Date upon the terms set forth
below. The Participant shall execute a stock purchase agreement embodying such
terms and such other provisions (not inconsistent with the Plan) as the Plan
Administrator may deem advisable.
Under no circumstances shall purchase rights be granted under the Plan to
any Eligible Employee if such individual would, immediately after the grant, own
(within the meaning of Code Section 424(d)) or hold outstanding options or other
rights to purchase, stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Corporation or any
Corporate Affiliate.
B. Exercise of the Purchase Right. Each purchase right shall be
automatically exercised on the Purchase Date, and shares of Common Stock shall
accordingly be purchased on behalf of each Participant on such date. The
purchase shall be effected by applying the Participant's payroll deductions for
the purchase period ending on such Purchase Date to the purchase of shares of
Common Stock at the purchase price in effect for that purchase period.
C. Purchase Price. The purchase price per share at which Common Stock will
be purchased on the Participant's behalf on each Purchase Date shall be equal to
eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of
Common Stock on the start date of the purchase period or (ii) the Fair Market
Value per share of Common Stock on that Purchase Date.
D. Number of Purchasable Shares. The number of shares of Common Stock
purchasable by a Participant on each Purchase Date shall be the number of whole
shares obtained by dividing the amount collected from the Participant through
payroll deductions during the purchase period ending with that Purchase Date by
the purchase price in effect for that period. However, the maximum number of
shares of Common Stock purchasable per Participant on any one Purchase Date
shall not exceed eight hundred (800) shares, subject to periodic adjustments in
the event of certain changes in the Corporation's capitalization. In addition,
the maximum number of shares of Common Stock purchasable by all Participants in
the aggregate on any one Purchase Date under the Plan and the International Plan
shall not exceed One Hundred Seventy Thousand (170,000) shares, subject to
periodic adjustments in the event of certain changes in the Corporation's
capitalization.
E. Excess Payroll Deductions. Any payroll deductions not applied to the
purchase of shares of Common Stock on any Purchase Date because they are not
sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable by the Participant on the
Purchase Date or the limitation on the maximum number of shares purchasable in
the aggregate on the Purchase Date by all Participants shall be promptly
refunded.
F. Termination of Purchase Right. The following provisions shall govern the
termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the last fifteen (15) days
of the purchase period, terminate his or her outstanding purchase right by
filing the appropriate form with the Plan Administrator (or its designate),
and no further payroll deductions shall be collected from the Participant
with respect to the terminated purchase right. Any payroll deductions
collected during the purchase period in which such termination occurs
shall, at the Participant's election, be immediately refunded or held for
the purchase of shares on the next Purchase Date. If no such election is
made at the time the purchase right is terminated, then the payroll
deductions collected with respect to the terminated right shall be refunded
as soon as possible.
(ii) The termination of such purchase right shall be irrevocable, and
the Participant may not subsequently rejoin the purchase period for
which the terminated purchase right was granted. In order to resume
participation in any subsequent purchase period, such individual must
re-enroll in the Plan (by making a timely filing of the prescribed
enrollment forms) before the start date of the new purchase period.
(iii) Should the Participant cease to remain an Eligible Employee for
any reason including death, disability or change in status) while his
or her purchase right remains outstanding, then that purchase right shall
immediately terminate, and all of the Participant's payroll deductions
for the purchase period in which the purchase right so terminates shall be
immediately refunded. However, should the Participant cease to remain in
active service by reason of an approved unpaid leave of absence, then the
Participant shall have the right, exercisable up until the last business
day of the purchase period in which such leave commences, to (a) withdraw
all the payroll deductions collected to date on his or her behalf during
such purchase period or (b) have such funds held for the purchase of
shares on the next scheduled Purchase Date. In no event, however, shall
any further payroll deductions be collected on the Participant's behalf
during such leave. Upon the Participant's return to active service
(i) within ninety (90) days after the start of the leave or (ii) prior
to the expiration of any longer period during his or her re-employment
rights are guaranteed by law or contract, his or her payroll deductions
under the Plan shall automatically resume at the rate in effect at the time
the leave began.
G. Corporate Transaction. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Corporate Transaction, by applying the payroll deductions of each Participant
for the purchase period in which such Corporate Transaction occurs to the
purchase of whole shares of Common Stock at a purchase price per share equal to
eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of
Common Stock on the start date of the purchase period in which such Corporate
Transaction occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Corporate Transaction. However,
the applicable limitation on the number of shares of Common Stock purchasable
per Participant shall continue to apply to any such purchase, but not the
limitation on the aggregate number of shares purchasable by all Participants.
The Corporation shall use its best efforts to provide at least ten (10)
days prior written notice of the occurrence of any Corporate Transaction, and
Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Corporate Transaction.
H. Proration of Purchase Rights. Should the total number of shares of
Common Stock which are to be purchased pursuant to outstanding purchase rights
on any particular date exceed either (i) the number of shares then available for
issuance under the Plan or (ii) the maximum number of shares purchasable by all
Participants (and all participants in the International Plan) in the aggregate
on that Purchase Date, then the Plan Administrator shall make a pro-rata
allocation of the available shares on a uniform and nondiscriminatory basis, and
the payroll deductions of each Participant (and each participant in the
International Plan), to the extent in excess of the aggregate purchase price
payable for the Common Stock pro-rated to such individual, shall be refunded.
I. Assignability. The purchase right shall be exercisable only by the
Participant and shall not be assignable or transferable by the Participant.
J. Stockholder Rights. A Participant shall have no stockholder rights with
respect to the shares subject to his or her outstanding purchase right until the
shares are purchased on the Participant's behalf in accordance with the
provisions of the Plan and the Participant has become a holder of record of the
purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire Common
Stock pursuant to any purchase right outstanding under this Plan if and to the
extent such accrual, when aggregated with (i) rights to purchase Common Stock
accrued under any other purchase right granted under this Plan and (ii) similar
rights accrued under other employee stock purchase plans (within the meaning of
Code Section 423) of the Corporation or any Corporate Affiliate, would otherwise
permit such Participant to purchase more than Twenty-Five Thousand Dollars
($25,000) worth of stock of the Corporation or any Corporate Affiliate
(determined on the basis of the Fair Market Value of such stock on the date or
dates such rights are granted) for each calendar year such rights are at any
time outstanding.
B. For purposes of applying such accrual limitations, the following
provisions shall be in effect:
(i) The right to acquire Common Stock under each outstanding purchase
right shall accrue on the Purchase Date in effect for the purchase
period for which such right is granted.
(ii) No right to acquire Common Stock under any outstanding purchase
right shall accrue to the extent the Participant has already accrued
in the same calendar year the right to acquire Common Stock under one
(1) or more other purchase rights at a rate equal to Twenty-Five
Thousand Dollars ($25,000) worth of Common Stock (determined on the
basis of the Fair Market Value per share on the date or dates of grant)
for each calendar year such rights were at any time outstanding.
C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular purchase period, then the payroll
deductions which the Participant made during that purchase period with respect
to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on March 17, 1998 and approved by the
Corporation's stockholders at the 1998 Annual Meeting held on May 15, 1998. The
Plan .shall become effective on the Effective Date. However, no purchase rights
granted under the Plan shall be exercised, and no shares of Common Stock shall
be issued hereunder, until the Corporation shall have complied with all
applicable requirements of the 1933 Act (including the registration of the
shares of Common Stock issuable under the Plan on a Form S-8 registration
statement filed with the Securities and Exchange Commission), all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is listed for trading and all other
applicable requirements established by law or regulation.
B. Unless sooner terminated by the Board, the Plan shall terminate upon the
earliest to occur of (i) the last business day in October 2008, (ii) the date on
which all shares available for issuance under the Plan (and the International
Plan) shall have been sold pursuant to purchase rights exercised under the Plan
(and the International Plan) or (iii) the date on which all purchase rights are
exercised in connection with a Corporate Transaction. No further purchase rights
shall be granted or exercised, and no further payroll deductions shall be
collected, under the Plan following such termination.
X. AMENDMENT OF THE PLAN
The Board may alter, amend, suspend or discontinue the Plan at any time to
become effective immediately following the close of any purchase period.
However, the Board may not, without the approval of the Corporation's
stockholders, (i) increase the number of shares of Common Stock issuable under
the Plan, except for permissible adjustments in the event of certain changes in
the Corporation's capitalization, (ii) alter the purchase price formula so as to
reduce the purchase price payable for the shares of Common Stock purchasable
under the Plan, or (iii) modify the requirements for eligibility to participate
in the Plan.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the Plan shall
be paid by the Corporation.
B. Nothing in the Plan shall confer upon the Participant any right to
continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.
C. The provisions of the Plan shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules.
Schedule A
Corporations Participating in
Employee Stock Purchase Plan
As of October 1, 1998
FileNet Corporation, a Delaware corporation
APPENDIX
The following definitions shall be in effect under the Plan:
A. Board shall mean the Corporation's Board of Directors.
B. Cash Earnings shall mean the (i) base salary payable to a Participant
by one or more Participating Companies during such individual's period
of participation in one or more purchase periods under the Plan plus
(ii) all overtime payments, bonuses, commissions and other
incentive-type payments Such Cash Earnings shall be calculated before
deduction of (A) any income or employment tax withholdings or (B) any
pre-tax contributions made by the Participant to any Code Section
401(k) salary deferral plan or any Code Section 125 cafeteria benefit
program now or hereafter established by the Corporation or any
Corporate Affiliate. However, Cash Earnings shall not include any
contributions (other than Code Section 401(k) or Code Section 125
contributions) made on the Participant's behalf by the Corporation or
any Corporate Affiliate to any employee benefit or welfare plan now or
hereafter established.
C. Code shall mean the Internal Revenue Code of 1986, as amended.
D. Common Stock shall mean the Corporation's common stock.
E. Corporate Affiliate shall mean any parent or subsidiary corporation of
the Corporation (as determined in accordance with Code Section 424),
whether now existing or subsequently established.
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 fifty
percent (50%) or more 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 assets of the Corporation in complete liquidation or
dissolution of the Corporation.
G. Corporation shall mean FileNet Corporation, a Delaware corporation and
any corporate successor to all or substantially all of the assets or
voting stock of FileNet Corporation which shall by appropriate action
adopt the Plan.
H. Effective Date shall mean the October 1, 1998 effective date of the
Plan.
I. Eligible Employee shall mean any person who is employed by a
Participating Corporation on a basis under which he or she is
regularly expected to render more than twenty (20) hours of service
per week for more than five (5) months per calendar year for earnings
considered wages under Code Section 3401(a).
J. 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 average of the
high and low selling prices per share of Common Stock on the date
in question, as those prices are reported by the National
Association of Securities Dealers on the Nasdaq National Market.
If there are no selling prices for the Common Stock on the date
in question, then the Fair Market Value shall be the average of
the high and low selling prices on the last preceding date for
which such quotations exist.
(ii) If the Common Stock is at the time listed on any Stock Exchange
then the Fair Market Value shall be the average of the high and
low selling prices 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
those prices are officially quoted in the composite tape of
transactions on such exchange. If there are no selling prices for
the Common Stock on the date in question, then the Fair Market
Value shall be the average of the high and low selling prices on
the last preceding date for which such quotations exist.
K. International Plan shall mean the FileNet Corporation International
Employee Stock Purchase Plan.
L. 1933 Act shall mean the Securities Act of 1933, as amended.
M. Participant shall mean any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.
N. Participating Corporation shall mean the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to
time by the Board to extend the benefits of the Plan to their Eligible
Employees. The Participating Corporations in the Plan as of the
Effective Date are listed in attached Schedule A.
O. Plan shall mean the Corporation's Employee Stock Purchase Plan, as set
forth in this document.
P. Plan Administrator shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Plan.
Q. Predecessor Plan shall mean the Corporation's 1988 Employee Stock
Purchase Plan.
R. Purchase Date shall mean the last business day of each purchase
period. The initial Purchase Date shall be April 30, 1999.
S. Stock Exchange shall mean either the American Stock Exchange or the
New York Stock Exchange.