As filed with the Securities and Exchange Commission on March 30, 1999
Registration No. 333 -
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CASTELLE
(Exact name of registrant as specified in its charter)
California 77-0164056
(State of Incorporation) (I.R.S. Employer Identification No.)
3255-3 Scott Boulevard, Santa Clara, CA 95054
(Address of principal executive offices)
1988 Equity Incentive Plan
(Full title of the plans)
Laurie Gee
Vice President of Finance
Castelle
3255-3 Scott Boulevard
Santa Clara, California 95054
(408) 496-0474
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Samuel M. Livermore, Esq.
Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
(415) 693-2000
CALCULATION OF REGISTRATION FEE
========================== ---------------------- ------------------------- -------------------------- =========================
Proposed Maximum Proposed Maximum
Title of Securities to Offering Price Per Aggregate Offering Price
be Registered Amount to be Share (1) (1) Amount of Registration
Registered Fee
========================== ====================== ========================= ========================== =========================
Stock Options and Common
Stock (par value $.001) 981,935 $.5925-$2.04 $1,680,269.50 $467.11
========================== ====================== ========================= ========================== =========================
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) and (h)(1) under the
Securities Act of 1933, as amended (the "Act"). The offering price per
share and aggregate offering price are based upon (a) the weighted
average exercise price, for shares subject to outstanding options
granted under Castelle ("Registrant" or "Company") under the Company's
1988 Equity Incentive Plan (the "Incentive Plan")(pursuant to Rule
457(h) under the Act) or (b) the average of the high and low prices of
Registrant's Common Stock as reported on the Nasdaq National Market on
March 25, 1999, for shares reserved for future grant pursuant to the
Incentive (pursuant to Rule 457(c) under the Act). The following chart
illustrates the calculation of the registration fee:
- ----------------------------------------------------------- ------------------- --------------------- ==========================
Title of Shares Number of Shares Offering Price Per Aggregate Offering Price
Share
- ----------------------------------------------------------- ------------------- --------------------- ==========================
- ----------------------------------------------------------- ------------------- --------------------- ==========================
Shares issuable pursuant to outstanding stock options 758,876 $2.04 $1,548,107.04
pursuant to 1988 Equity Incentive Plan
- ----------------------------------------------------------- ------------------- --------------------- ==========================
Shares issuable pursuant to unissued stock options 223,059 $.5925 $132,162.46
pursuant to 1988 Equity Incentive Plan
- ----------------------------------------------------------- ------------------- --------------------- ==========================
Proposed Maximum Aggregate Offering Price $1,680,269.50
- ----------------------------------------------------------- ------------------- --------------------- ==========================
Registration Fee $467.11
- ----------------------------------------------------------- ------------------- --------------------- ==========================
2
INCORPORATION BY REFERENCE OF CONTENTS OF
REGISTRATION STATEMENT ON FORM S-8 NO. 333-06083
The contents of Registration Statement on Form S-8 No. 333-06083 filed
with the Securities and Exchange Commission on June 14, 1996 are incorporated by
reference herein.
Amendments to the 1988 Equity Incentive Plan (the "Incentive Plan") by
the Board in April 1997, approved by the shareholders on April 29, 1998
increased the number of shares of the Company's Common Stock authorized for
issuance from 945,582 shares to 1,927,517 and made changes to the Incentive Plan
in response to the requirements of Code Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code").
EXHIBITS
Exhibit
Number
5.1 Opinion of Cooley Godward LLP
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Cooley Godward LLP is contained in Exhibit 5.1 to
this Registration Statement
24 Power of Attorney is contained on the signature pages.
99.1 1988 Equity Incentive Plan, as amended as of April 29, 1998.
3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Santa Clara, State of California, on March
29, 1999.
CASTELLE
By: /s/ Laurie Gee
Laurie Gee
Vice President, Finance
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Donald Rich and Laurie Gee, and each or
any one of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.
4
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Donald L. Rich Chief Executive Officer, March 29, 1999
Donald L. Rich President and Director
(Principal Executive Officer)
/s/ Laurie Gee Vice President, Finance March 29, 1999
Laurie Gee (Principal Financial and
Accounting Officer)
/s/ John Freidenrich Director March 29, 1999
John Freidenrich
Director ________, 1999
Robert Hambrecht
/s/ Alan Kessman Director March 29, 1999
Alan Kessman
/s/ Arthur Bruno Director March 29, 1999
Arthur Bruno
5
EXHIBIT INDEX
Exhibit Sequential
Number Description Page Number
5.1 Opinion of Cooley Godward LLP
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Cooley Godward LLP is contained in Exhibit 5.1
to this Registration Statement
24 Power of Attorney is contained on the signature pages.
99.1 1988 Equity Incentive Plan, as amended as of April 29, 1998.
6
5.1
March 29, 1999
Castelle
3255-3 Scott Boulevard
Santa Clara, CA 95054
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Castelle (the "Company") of a Registration Statement on Form
S-8 (the "Registration Statement") with the Securities and Exchange Commission
covering the offering of up to 981,935 shares of the Company's Common Stock, no
par value, (the "Shares") pursuant to its 1988 Equity Incentive Plan (the
"Plan").
In connection with this opinion, we have examined the Registration Statement and
related Prospectus, your Articles of Incorporation and By-laws, as amended, and
such other documents, records, certificates, memoranda and other instruments as
we deem necessary as a basis for this opinion. We have assumed the genuineness
and authenticity of all documents submitted to us as originals, the conformity
to originals of all documents submitted to us as copies thereof, and the due
execution and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Plan, the
Registration Statement and related Prospectus, will be validly issued, fully
paid, and nonassessable (except as to shares issued pursuant to certain deferred
payment arrangements, which will be fully paid and nonassessable when such
deferred payments are made in full).
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
Cooley Godward LLP
By: /s/ Samuel M. Livermore
Samuel M. Livermore
23.1
Consent of PricewaterhouseCoopers LLP
Independent Accountants
We consent to the incorporation by reference in the registration statement of
Castelle and subsidiaries on Form S-8 (File No. 333- ) of our report dated
February 5, 1999, on our audits of the consolidated financial statements of
Castelle and subsidiaries as of December 31, 1998 and 1997, and for each of the
three years in the period ended December 31, 1998, and our report dated February
5, 1999, on our audit of the financial statement schedule, which report is
included in Form 10-K.
San Jose, California
March 26, 1999
99.1
1988 EQUITY INCENTIVE PLAN, AS AMENDED APRIL 29, 1998
CASTELLE
1988 EQUITY INCENTIVE PLAN
Adopted: April 29, 1988
Amended: June 22, 1995
Amended: November 15, 1995
Amended: April 30, 1997
Approved: April 29, 1998
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected Employees of
and Consultants or Directors to the Company, and its Affiliates, may be given an
opportunity to benefit from increases in value of the stock of the Company
through the granting of (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses, and (iv) rights to purchase restricted stock, all
as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of persons
who are now Employees of or Consultants or Directors to the Company or its
Affiliates, to secure and retain the services of new Employees, Directors and
Consultants, and to provide incentives for such persons to exert maximum efforts
for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and in such form as issued pursuant to Section 6,
and a separate certificate or certificates will be issued for shares purchased
on exercise of each type of Option.
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary corporation, whether
now or hereafter existing, as those terms are defined in Sections 424(e) and (f)
respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
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(e) "Company" means Castelle, a California corporation.
(f) "Consultant" means any person, including an advisor, engaged by the Company
or an Affiliate to render consulting services and who is compensated for such
services, provided that the term "Consultant" shall not include Directors who
are paid only a director's fee by the Company or who are not compensated by the
Company for their services as Directors.
(g) "Continuous Status as an Employee, Director or Consultant" means the
Optionee's service with the Company, whether as an Employee, Director or
Consultant is not interrupted or terminated. The Board, in its sole discretion,
may determine whether Continuous Status as an Employee, Director or Consultant
shall be considered interrupted in the case of: (i) any leave of absence
approved by the Board, including sick leave, military leave, or any other
personal leave; or (ii) transfers between the Company, Affiliates or their
successors.
(h) "Covered Employee" means the chief executive officer and the four (4) other
highest compensated officers of the Company for whom total compensation is
required to be reported to shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(i) "Director" means a member of the Board.
(j) "Employee" means any person, including Officers and Directors, employed by
the Company or any Affiliate of the Company. Neither service as a Director nor
payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(l) "Fair Market Value" means, as of any date, the value of the common stock of
the Company determined as follows:
(1) If the common stock is listed on any established stock exchange or
traded on the Nasdaq National Market or The Nasdaq SmallCap Market, the Fair
Market Value of a share of common stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in common stock) on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable; or
(2) In the absence of an established market for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
(m) "Incentive Stock Option" means an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.
(n) "Non-Employee Director" means a Director of the Company who either (i) is
not a current Employee or Officer of the Company or its parent or a subsidiary,
does not receive compensation (directly or indirectly) from the Company or its
parent or a subsidiary for services rendered as a consultant or in any capacity
other than as a Director (except for an amount as to which disclosure would not
be required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
2
(o) "Nonstatutory Stock Option" means an Option not intended to qualify as an
Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within the meaning
of Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Option Agreement" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. Each
Option Agreement shall be subject to the terms and conditions of the Plan.
(s) "Optionee" means an Employee, Director or Consultant who holds an
outstanding Option.
(t) "Outside Director" means a Director who either (i) is not a current employee
of the Company or an "affiliated corporation" (within the meaning of Treasury
regulations promulgated under Section 162(m) of the Code), is not a former
employee of the Company or an "affiliated corporation" receiving compensation
for prior services (other than benefits under a tax qualified pension plan), was
not an officer of the Company or an "affiliated corporation" at any time, and is
not currently receiving direct or indirect remuneration from the Company or an
"affiliated corporation" for services in any capacity other than as a Director,
or (ii) is otherwise considered an "outside director" for purposes of Section
162(m) of the Code.
(u) "Plan" means this Castelle 1988 Equity Incentive Plan.
(v) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule
16b-3, as in effect when discretion is being exercised with respect to the Plan.
(w) "Stock Award" means any right granted under the Plan, including any Option,
any stock bonus or any right to purchase restricted stock.
(x) "Stock Award Agreement" means a written agreement between the Company and a
holder of a Stock Award evidencing the terms and conditions of an individual
Stock Award grant. Each Stock Award Agreement shall be subject to the terms and
conditions of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
3
(b) The Board shall have the power, subject to, and within the limitations of,
the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible under the Plan
shall be granted Stock Awards; when and how each Stock Award shall be granted;
whether a Stock Award will be an Incentive Stock Option, a Nonstatutory Stock
Option, a stock bonus, a right to purchase restricted stock, or a combination of
the foregoing; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; and the number of shares with respect
to which a Stock Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards granted under it, and to
establish, amend and revoke rules and regulations for its administration. The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement, in a manner and to
the extent it shall deem necessary or expedient to make the Plan fully
effective.
(3) To amend the Plan or a Stock Award as provided in Section 13.
(4) Generally, to exercise such powers and to perform such acts as the Board
deems necessary or expedient to promote the best interests of the Company which
are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a Committee or
Committees of one or more members of the Board, and the term "Committee" shall
apply to any person or persons to whom such authority has been delegated. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or subcommittee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan.
In the discretion of the Board, a Committee may consist solely
of two or more Outside Directors, in accordance with Section 162(m) of the Code,
and/or solely of two or more Non-Employee Directors, in accordance with Rule
16b-3. Within the scope of such authority, the Board or the Committee may (i)
delegate to a committee of one or more members of the Board who are not Outside
Directors, the authority to grant Stock Awards to eligible persons who are
either (A) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Stock Award
or (B) not persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code and/or (ii) delegate to a committee of one or more
members of the Board who are not Non-Employee Directors the authority to grant
Stock Awards to eligible persons who are not then subject to Section 16 of the
Exchange Act.
4
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 12 relating to adjustments upon changes
in stock, the stock that may be issued pursuant to Stock Awards shall not exceed
in the aggregate one million nine hundred twenty-seven thousand five hundred
seventeen (1,927,517) shares of the Company's common stock. If any Option shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the stock not acquired under such Option shall
revert to and again become available for issuance under the Plan. If any shares
of the Company's common stock which are subject to a repurchase or reacquisition
right in favor of the Company, any such shares which are repurchased or
reacquired by the Company pursuant to the terms of such rights shall revert to
and again become available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired shares,
bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Stock Awards other
than Incentive Stock Options may be granted only to Employees, Directors or
Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock Option if,
at the time of grant, such person owns (or is deemed to own pursuant to Section
424(d) of the Code) stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any of its
Affiliates unless the exercise price of such Incentive Stock Option is at least
one hundred ten percent (110%) of the Fair Market Value of such stock at the
date of grant and the Incentive Stock Option is not exercisable after the
expiration of five (5) years from the date of grant, or in the case of a
restricted stock purchase award, the purchase price is at least one hundred
percent (100%) of the Fair Market Value of such stock at the date of grant.
(c) Subject to the provisions of Section 12 relating to adjustments upon changes
in stock, no employee shall be eligible to be granted Options covering more than
four hundred thousand (400,000) shares of the Common Stock during any calendar
year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten (10) years
from the date it was granted.
(b) Price. The exercise price of each Incentive Stock Option shall be not less
than one hundred percent (100%) of the Fair Market Value of the stock subject to
the Option on the date the Option is granted (one hundred and ten percent (110%)
in the case of a 10% shareholder as described in Section 5(b)); the exercise
price of each Nonstatutory Stock Option shall be not less than eighty-five
percent (85%) percent of the Fair Market Value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
5
(c) Consideration. The purchase price of stock acquired pursuant to an Option
shall be paid, to the extent permitted by applicable statutes and regulations,
either (i) in cash at the time the Option is exercised, or (ii) at the
discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board. In the case of any deferred
payment arrangement, interest shall be payable at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any amounts other than
amounts stated to be interest under the deferred payment arrangement. The
principal amount of any deferred payment arrangement shall not exceed the amount
permitted by law, including but not limited to any state corporate law
requirements requiring the immediate payment of the par value of stock.
(d) Transferability. An Incentive Stock Option shall not be transferable except
by will or by the laws of descent and distribution, and shall be exercisable
during the lifetime of the person to whom the Incentive Stock Option is granted
only by such person. A Nonstatutory Stock Option shall be transferable to the
extent provided in the Option Agreement; provided, however, that if the Option
Agreement does not specifically provide for transferability, then such
Nonstatutory Stock Option shall be not be transferable except by will or by the
laws of descent and distribution. Notwithstanding the foregoing, the person to
whom the Option is granted may, by delivering written notice to the Company, in
a form satisfactory to the Company, designate a third party who, in the event of
the death of the Optionee, shall thereafter be entitled to exercise the Option.
(e) Vesting. The total number of shares of stock subject to an Option may, but
need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual options may vary. The provisions of this subsection 6(e) are subject
to any Option provisions governing the minimum number of shares as to which an
Option may be exercised.
6
(f) Termination of Employment or Relationship as a Consultant. In the event an
Optionee's Continuous Status as an Employee, Director or Consultant terminates
(other than upon the Optionee's death or disability), the Optionee may exercise
his or her Option (to the extent that the Optionee was entitled to exercise it
at the date of termination) but only within such period of time ending on the
earlier of (i) the date three (3) months after the termination of the Optionee's
Continuous Status as an Employee, Director or Consultant (or such longer or
shorter period specified in the Option Agreement, or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, after termination,
the Optionee does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(g) Disability of Optionee. In the event an Optionee's Continuous Status as an
Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement, or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) Death of Optionee. In the event of the death of an Optionee during, or
within a period specified in the Option after the termination of, the Optionee's
Continuous Status as an Employee, Director or Consultant, the Option may be
exercised (to the extent the Optionee was entitled to exercise the Option at the
date of death) by the Optionee's estate, by a person who acquired the right to
exercise the Option by bequest or inheritance or by a person designated to
exercise the option upon the Optionee's death pursuant to subsection 6(d), but
only within the period ending on the earlier of (i) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement, or (ii) the expiration of the term of such Option as
set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.
(i) Early Exercise. The Option may, but need not, include a provision whereby
the Optionee may elect at any time while an Employee, Director or Consultant to
exercise the Option as to any part or all of the shares subject to the Option
prior to the full vesting of the Option. Any unvested shares so purchased may be
subject to a repurchase right in favor of the Company or to any other
restriction the Board determines to be appropriate.
7
(j) Re-Load Options. Without in any way limiting the authority of the Board or
Committee to make or not to make grants of Options hereunder, the Board or
Committee shall have the authority (but not an obligation) to include as part of
any Option Agreement a provision entitling the Optionee to a further Option (a
"Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option Agreement, in whole or in part, by surrendering other shares of
common stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the common stock subject to the
Re-Load Option on the date of exercise of the original Option. Notwithstanding
the foregoing, a Re-Load Option which is an Incentive Stock Option and which is
granted to a 10% shareholder (as described in subsection 5(b)), shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option and shall have a term which is no longer than five (5)
years.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option; provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollar ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subsection 11(d) of the Plan and in Section
422(d) of the Code. There shall be no Re-Load Options on a Re-Load Option. Any
such Re-Load Option shall be subject to the availability of sufficient shares
under subsection 4(a) and shall be subject to such other terms and conditions as
the Board or Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
(a) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement. In any event, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit.
(b) Transferability. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or pursuant to a domestic relations order, so long as stock
awarded under such agreement remains subject to the terms of the agreement.
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(c) Consideration. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in their discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(d) Vesting. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) Termination of Employment or Relationship as a Director or
Consultant. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire, subject to the limitations described in subsection 7(d), any or all
of the shares of stock held by that person which have not vested as of the date
of termination under the terms of the stock bonus or restricted stock purchase
agreement between the Company and such person.
8. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at any time
and from time to time, (i) the repricing of any outstanding Options under the
Plan and/or (ii) with the consent of the affected holders of Options, the
cancellation of any outstanding Options under the Plan and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of stock, but having an exercise price per share not
less than eighty-five percent (85%) of the Fair Market Value (one hundred
percent (100%) of the Fair Market Value in the case of an Incentive Stock
Option) or, in the case of an Option granted to a 10% shareholder (as described
in subsection 5(b)), not less than one hundred ten percent (110%) of the Fair
Market Value) per share of stock on the new grant date. Notwithstanding the
foregoing, the Board or the Committee may grant an Option with an exercise price
lower than that set forth above if such Option is granted as part of a
transaction to which section 424(a) of the Code applies.
(b) Shares subject to an Option which is amended or canceled under this Section
8 in order to set a lower exercise price per share shall continue to be counted
against the maximum award of Options permitted to be granted pursuant to
subsection 5(c). The repricing of an Option under this Section 8, resulting in a
reduction of the exercise price, shall be deemed to be a cancellation of the
original Option and the grant of a substitute Option in the event of such
repricing, both the original and the substituted Options shall be counted
against any such maximum awards of Options. The provisions of this subsection
8(b) shall be applicable only to the extent required by Section 162(m) of the
Code.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep available at
all times the number of shares of stock required to satisfy such Stock Awards.
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(b) The Company shall seek to obtain from each regulatory commission or agency
having jurisdiction over the Plan such authority as may be required to issue and
sell shares of stock upon exercise of the Stock Award; provided, however, that
this undertaking shall not require the Company to register under the Securities
Act of 1933, as amended (the "Securities Act") either the Plan, any Stock Award
or any stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such Stock Awards unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
11. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a Stock Award
may first be exercised or the time during which a Stock Award or any part
thereof will vest pursuant to subsection 6(e) or 7(d), notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) No Employee, Director or Consultant or any person to whom a Stock Award is
transferred under subsection 6(d) or 7(b), shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares subject to
such Stock Award unless and until such person has satisfied all requirements for
exercise of the Stock Award pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate (or to continue acting as a Director or Consultant) or shall affect
(i) the right of the Company or any Affiliate to terminate the employment of any
Employee with or without cause, (ii) the right of the Company's Board of
Directors and/or the Company's shareholders to remove any Director pursuant to
the terms of the Company's By-Laws and the provisions of the California
Corporations Code, or (iii) the right to terminate the relationship of any
Consultant pursuant to the terms of such Consultant's agreement with the Company
or Affiliate.
(d) To the extent that the aggregate Fair Market Value (determined at the time
of grant) of stock with respect to which Incentive Stock Options are exercisable
for the first time by any Optionee during any calendar year under all plans of
the Company and its Affiliates exceeds one hundred thousand dollars ($100,000),
the Options or portions thereof which exceed such limit (according to the order
in which they were granted) shall be treated as Nonstatutory Stock Options.
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(e) The Company may require any person to whom a Stock Award is granted, or any
person to whom a Stock Award is transferred pursuant to subsection 6(d) or 7(b),
as a condition of exercising or acquiring stock under any Stock Award, (1) to
give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may require the Optionee to provide
such other representations, written assurances or information which the Company
shall determine is necessary, desirable or appropriate to comply with applicable
securities and other laws as a condition of granting an Option to such Optionee
or permitting the Optionee to exercise such Option. The Company may, upon advice
of counsel to the Company, place legends on stock certificates issued under the
Plan as such counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to, legends restricting
the transfer of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the person
to whom a Stock Award is granted may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under a
Stock Award by any of the following means or by a combination of such means: (1)
tendering a cash payment; (2) authorizing the Company to withhold shares from
the shares of the common stock otherwise issuable to the participant as a result
of the exercise or acquisition of stock under the Stock Award; or (3) delivering
to the Company owned and unencumbered shares of the common stock of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to any
Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a), the maximum
annual award pursuant to subsection 5(c), and the outstanding Stock Awards will
be appropriately adjusted in the class(es) and number of shares and price per
share of stock subject to such outstanding Stock Awards. Such adjustments shall
be made by the Board or the Committee, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
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(b) In the event of: (1) a dissolution, liquidation or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any Affiliate of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then to the extent permitted by applicable
law: (i) any surviving or acquiring corporation shall assume any Options
outstanding under the Plan or shall substitute similar Options (including an
option to acquire the same consideration paid to the shareholders in the
transaction described in this subsection 12(b)) for those outstanding under the
Plan, or (ii) such Options shall continue in full force and effect. In the event
any surviving or acquiring corporation refuses to assume such Options, or to
substitute similar options for those outstanding under the Plan, then, with
respect to Options held by persons then performing services as Employees,
Directors or Consultants, the time during which such Options may be exercised
shall be accelerated prior to such event and the Options terminated if not
exercised after such acceleration and at or prior to such event. An Optionee's
Option Agreement may include additional provisions which address the handling of
such option upon the occurrence of a transaction described in this subsection
12(b); provided, however, that any such additional provisions shall not impair
or reduce the rights of the Optionee under this subsection 12(b).
13. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan. However,
except as provided in Section 12 relating to adjustments upon changes in stock,
no amendment shall be effective unless approved by the shareholders of the
Company within twelve (12) months before or after the adoption of the amendment,
where the amendment will:
(i) Increase the number of shares reserved for Stock Awards under the Plan;
(ii) Modify the requirements as to eligibility for participation in the Plan (to
the extent such modification requires shareholder approval in order for the Plan
to satisfy the requirements of Section 422 of the Code); or
(iii) Modify the Plan in any other way if such modification requires shareholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code, comply with the requirements of Rule 16b-3, or any Nasdaq or securities
exchange requirements.
(b) The Board may in its sole discretion submit any other amendment to the Plan
for shareholder approval, including, but not limited to, amendments to the Plan
intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
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(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees or
Consultants with the maximum benefits provided or to be provided under the
provisions of the Code and the regulations promulgated thereunder relating to
Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options
granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before amendment of the
Plan shall not be impaired by any amendment of the Plan unless (i) the Company
requests the consent of the person to whom the Stock Award was granted and (ii)
such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of any one
or more Stock Award; provided, however, that the rights and obligations under
any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on November 14, 2005, which shall be within
ten (10) years from the date the Plan is adopted by the Board or approved by the
shareholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Stock Award was granted.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon adoption by the Board, but no
Stock Awards granted under the Plan shall be exercised unless and until the Plan
has been approved by the shareholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board.
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