EXHIBIT 10.2
EXCEL SWITCHING CORPORATION
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE. This Non-Qualified Stock Option Plan, to be known as the
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1997 Non-Employee Director Stock Option Plan (hereinafter, the "Plan") is
intended to promote the interests of Excel Switching Corporation (hereinafter,
the "Company") by providing an inducement to obtain and retain the services of
qualified persons who are not employees or officers of the Company to serve as
members of its Board of Directors (the "Board").
2. AVAILABLE SHARES. The total number of shares of Common Stock, par
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value $.01 per share, of the Company (the "Common Stock") for which options may
be granted under this Plan shall not exceed 225,000 shares, subject to
adjustment in accordance with paragraph 10 of this Plan. Shares subject to this
Plan are authorized but unissued shares or shares that were once issued and
subsequently reacquired by the Company. If any options granted under this Plan
are surrendered before exercise or lapse without exercise, in whole or in part,
the shares reserved therefor shall continue to be available under this Plan.
3. ADMINISTRATION. This Plan shall be administered by the Board or by a
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committee appointed by the Board (the "Committee"). In the event the Board fails
to appoint or refrains from appointing a Committee, the Board shall have all
power and authority to administer this Plan. In such event, the word "Committee"
wherever used herein shall be deemed to mean the Board. The Committee shall,
subject to the provisions of the Plan, have the power to construe this Plan, to
determine all questions hereunder, and to adopt and amend such rules and
regulations for the administration of this Plan as it may deem desirable. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to this Plan or any option granted
under it.
4. AUTOMATIC GRANT OF OPTIONS. Subject to the availability of shares
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under this Plan, (a) each person who is or becomes a member of the Board and who
is not an employee or officer of the Company (a "Non-Employee Director") shall
be automatically granted on either (i) the date such person is first elected to
the Board or (ii) SEPTEMBER 16, 1997 (the "Approval Date") ((i) and (ii)
collectively referred to as the "Grant Date"), without further action by the
Board, an option to purchase 30,000 shares of the Common Stock ( the "Initial
Options") and (b) each person receiving an option pursuant to clause (a) hereof
who remains a Non-Employee Director through the anniversary of such person's
Grant Date shall be automatically granted on the anniversary of such person's
Grant Date an option to purchase 15,000 shares of Common Stock on each of the
two years following such person's Grant Date until December 1999 (the
"Additional Options").
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The options to be granted under this paragraph 4 shall be the only options ever
to be granted at any time to such member under this Plan. Notwithstanding
anything to the contrary set forth herein, if this Plan is not approved by a
majority of the Company's stockholders present, or represented, and voting on
such matter at the first meeting of Stockholders of the Company following the
Approval Date, then the Plan and the options granted pursuant to this Section 4
shall terminate and become void, and no further options shall be granted under
this Plan.
5. OPTION PRICE. The purchase price of the stock covered by an option
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granted pursuant to this Plan shall be 100% of the fair market value of such
shares on the day the option is granted. The option price will be subject to
adjustment in accordance with the provisions of paragraph 10 of this Plan. For
purposes of this Plan, if, at the time an option is granted under the Plan, the
Company's Common Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the date such option is granted and
shall mean (i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of the Common
Stock on the Nasdaq National Market, if the Common Stock is not then traded on a
national securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the Nasdaq
National Market List. If the Common Stock is not publicly traded at the time an
option is granted under the Plan, "fair market value" shall be deemed to be the
fair value of the Common Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length. Notwithstanding the foregoing, the fair
market value of the Common Stock for the grant of an option on the date of the
Company's Prospectus in connection with its initial public offering (the
"Offering") shall be equal to the price per share at which the Common Stock is
sold to the underwriters upon the Offering, without regard to any applicable
discounts or commissions provided to such underwriters.
6. PERIOD OF OPTION. Unless sooner terminated in accordance with the
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provisions of paragraph 8 of this Plan, an option granted hereunder shall expire
on the date which is ten (10) years after the date of grant of the option.
7. VESTING OF SHARES AND NON-TRANSFERABILITY OF OPTIONS. (a) Options
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granted under this Plan shall not be exercisable until they become vested.
(i) Initial Options granted under paragraph 4(a) of this Plan
shall vest in the optionee and thus become exercisable in accordance with the
following schedule, provided that the optionee has continuously served as a
member of the Board through such vesting date, and subject also to subsection
(b) of this paragraph 7:
Number of Option Shares for which
Option Will be Exercisable Date of Vesting
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1/3 Immediately upon Grant Date
1/3 One year from Grant Date
1/3 Two years from Grant Date
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(ii) Additional Options granted under paragraph 4(b) of this
Plan shall vest in the optionee and thus become exercisable in accordance with
the following schedule, provided that the optionee has continuously served as a
member of the Board through such vesting date, and subject also to subsection
(b) of this Paragraph 7.
Number of Option Shares for which
Option Will be Exercisable Date of Vesting
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1/3 One year from Grant Date
1/3 Two years from Grant Date
1/3 Three years from Grant Date
The number of shares as to which options may be exercised shall be
cumulative, so that once the option shall become exercisable as to any shares it
shall continue to be exercisable as to said shares, until expiration or
termination of the option as provided in this Plan.
(b) Notwithstanding subsection (a) of this paragraph 7, if an
optionee attends less than 75% of the Board meetings held in any fiscal year (a
"Default Year"), then (i) the optionee shall forfeit his exercise rights with
respect to the option installment which vested on the preceding annual vesting
date, in proportion to the percentage of Board meetings actually attended by
such optionee during the Default Year, and (ii) in the event that the optionee
does not own a sufficient number of exercisable options to satisfy the
forfeiture obligation described above, the optionee shall forfeit his right to
receive the next succeeding annual installment of the option, in proportion to
the percentage of Board meetings which the optionee actually attended in the
Default Year. By way of illustration, if an optionee attends only 50% of the
actual meetings of the Board of Directors (whether regular or special) held in
any fiscal year, then the optionee shall forfeit the right to exercise 50% of
the option installment which became exercisable on the preceding annual vesting
date. If, however, the optionee had already exercised 75% of the preceding
option installment, and did not own any additional unexercised options available
to satisfy the forfeiture obligation, the optionee would forfeit the remaining
25% of the prior installment, and would also forfeit the right to receive or
exercise 25% of the next succeeding annual option installment.
(c) Transferability. Any option granted pursuant to this
Plan shall be assignable or transferable by will, the laws of descent and
distribution, pursuant to a domestic relations order or in accordance with
the terms of the optionee's option agreement and only in compliance with the
provisions of the Securities Act of 1933, as amended.
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8. TERMINATION OF OPTION RIGHTS.
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(a) Except as otherwise specified in the agreement relating to
an option, in the event an optionee ceases to be a member of the Board for any
reason other than death or permanent disability, any then unexercised portion of
options granted to such optionee shall, to the extent not then vested,
immediately terminate and become void; any portion of an option which is then
vested but has not been exercised at the time the optionee so ceases to be a
member of the Board may be exercised, to the extent it is then vested, by the
optionee at any time prior to the scheduled expiration date of the option.
(b) In the event that an optionee ceases to be a member of the
Board by reason of his or her death or permanent disability, any option granted
to such optionee shall be immediately and automatically accelerated and become
fully vested and all such unexercised options shall be exercisable by the
optionee (or by the optionee's personal representative, heir or legatee, in the
event of death) for a period of one year thereafter. Any options which are then
exercisable but have not been exercised at the time the Optionee so ceases to be
a member of the Board of Directors may be exercised, to the extent any portion
of such options are then exercisable, by the Optionee at any time prior to the
scheduled expiration date of the option.
(c) No portion of an option may be exercised if the Optionee
is removed from the Board of Directors for any one of the following reasons: (i)
disloyalty, gross negligence, dishonesty or breach of fiduciary duty to the
Company; or (ii) the commission of an act of embezzlement, fraud or deliberate
disregard of the rules or policies of the Company which results in loss, damage
or injury to the Company, whether directly or indirectly; or (iii) the
unauthorized disclosure of any trade secret or confidential information of the
Company; or (iv) the commission of an act which constitutes unfair competition
with the Company or which induces any customer of the Company to break a
contract with the Company; or (v) the conduct of any activity on behalf of any
organization or entity which is a competitor of the Company or competitive or
injurious to the business or goodwill of the Company.
9. EXERCISE OF OPTION. Subject to the terms and conditions of this Plan
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and the option agreements, an option granted hereunder shall, to the extent then
exercisable, be exercisable in whole or in part by giving written notice to the
Company by mail, facsimile or in person addressed to Excel Switching
Corporation, at its principal executive offices, stating the number of shares
with respect to which the option is being exercised, accompanied by payment in
full for such shares. Payment may be (a) in United States dollars in cash or by
check, (b) in whole or in part in shares of the Common Stock of the Company
already owned by the person or persons exercising the option or shares subject
to the option being exercised (subject to such restrictions and guidelines as
the Board may adopt from time to time), valued at fair market value determined
in accordance with the provisions of paragraph 5 or (c) consistent with
applicable law, through the delivery of an assignment to the Company of a
sufficient amount of the
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proceeds from the sale of the Common Stock acquired upon exercise of the option
and an authorization to the broker or selling agent to pay that amount to the
Company, which sale shall be at the participant's direction at the time of
exercise. There shall be no such exercise at any one time as to fewer than one
hundred (100) shares or all of the remaining shares then purchasable by the
person or persons exercising the option if fewer than one hundred (100) shares.
The Company's transfer agent shall, on behalf of the Company, prepare a
certificate or certificates representing such shares acquired pursuant to
exercise of the option, shall register the optionee as the owner of such shares
on the books of the Company and shall cause the fully executed certificate(s)
representing such shares to be delivered to the optionee as soon as practicable
after payment of the option price in full. The holder of an option shall not
have any rights of a stockholder with respect to the shares covered by the
option, except to the extent that one or more certificates for such shares shall
be delivered to him or her upon the due exercise of the option.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION AND OTHER EVENTS. Upon
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the occurrence of any of the following events, an optionee's rights with respect
to options granted to him or her hereunder shall be adjusted as hereinafter
provided:
(a) Stock Dividends and Stock Splits. If the shares of Common Stock
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shall be subdivided or combined into a greater or smaller number of shares
or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common
Stock deliverable upon the exercise of options shall be appropriately
increased or decreased proportionately, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision,
combination or stock dividend.
(b) Recapitalization Adjustments. If the Company is to be consolidated
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with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or other business combination
involving the sale or transfer of all (or substantially all) of the
capital stock or assets of the Company in which the Company is not the
surviving entity, or if it is the surviving entity, does not survive as a
going concern in substantially the same line of business, each option
granted under this plan which is outstanding but unvested as of the
effective date of such event shall become exercisable in full immediately
prior to the effective date of such event. In the event of a
reorganization, recapitalization, merger, consolidation, or any other
change in the corporate structure or shares of the Company, to the extent
permitted by Rule 16b-3 under the Securities Exchange Act of 1934,
adjustments in the number and kind of shares authorized by this Plan and
in the number and kind of shares covered by, and in the option price of
outstanding options under this Plan necessary to maintain the
proportionate interest of the optionee and preserve, without exceeding,
the value of such option, shall be made. Notwithstanding the foregoing, no
such adjustment shall be made which would, within the meaning of any
applicable provisions of the Internal Revenue Code of 1986, as amended,
constitute a modification, extension or renewal of any Option or a grant
of additional benefits to the holder of an Option.
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(c) Issuances of Securities. Except as expressly provided herein, no
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issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the
Company.
(d) Adjustments. Upon the happening of any of the foregoing events, the
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class and aggregate number of shares set forth in paragraph 2 of this Plan
that are subject to options which previously have been or subsequently may
be granted under this Plan shall also be appropriately adjusted to reflect
such events. The Board shall determine the specific adjustments to be made
under this paragraph 10 and its determination shall be conclusive.
11. RESTRICTIONS ON ISSUANCE OF SHARES. Notwithstanding the provisions
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of paragraphs 4 and 9 of this Plan, the Company shall have no obligation to
deliver any certificate or certificates upon exercise of an option until one of
the following conditions shall be satisfied:
(i) The issuance of shares with respect to which the option has been
exercised is at the time of the issue of such shares effectively
registered under applicable Federal and state securities laws as now in
force or hereafter amended; or
(ii) Counsel for the Company shall have given an opinion that the
issuance of such shares is exempt from registration under Federal and
state securities laws as now in force or hereafter amended; and the
Company has complied with all applicable laws and regulations with respect
thereto, including without limitation all regulations required by any
stock exchange upon which the Company's outstanding Common Stock is then
listed.
12. LEGEND ON CERTIFICATES. The certificates representing shares issued
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pursuant to the exercise of an option granted hereunder shall carry such
appropriate legend, and such written instructions shall be given to the
Company's transfer agent, as may be deemed necessary or advisable by counsel to
the Company in order to comply with the requirements of the Securities Act of
1933, as amended, or any state securities laws.
13. REPRESENTATION OF OPTIONEE. If requested by the Company, the
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optionee shall deliver to the Company written representations and warranties
upon exercise of the option that are necessary to show compliance with Federal
and state securities laws, including representations and warranties to the
effect that a purchase of shares under the option is made for investment and not
with a view to their distribution (as that term is used in the Securities Act of
1933, as amended).
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14. OPTION AGREEMENT. Each option granted under the provisions of this
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Plan shall be evidenced by an option agreement, which agreement shall be duly
executed and delivered on behalf of the Company and by the optionee to whom such
option is granted. The option agreement shall contain such terms, provisions and
conditions not inconsistent with this Plan as may be determined by the officer
executing it.
15. TERMINATION AND AMENDMENT OF PLAN. Options may no longer be granted
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under this Plan after 10 years from the Approval Date, and this Plan shall
terminate when all options granted or to be granted hereunder are no longer
outstanding. The Board may at any time terminate this Plan or make such
modification or amendment thereof as it deems advisable; provided, however, that
the Board may not, without approval by the affirmative vote of the holders of a
majority of the shares of Common Stock present in person or by proxy and voting
on such matter at a meeting, (a) increase the maximum number of shares for which
options may be granted under this Plan (except by adjustment pursuant to Section
10), (b) materially modify the requirements as to eligibility to participate in
this Plan, or (c) materially increase benefits accruing to option holders under
this Plan. Termination or any modification or amendment of this Plan shall not,
without consent of a participant, affect his or her rights under an option
previously granted to him or her.
16. WITHHOLDING OF INCOME TAXES. Upon the exercise of an option, the
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Company, in accordance with Section 3402(a) of the Internal Revenue Code, may
require the optionee to pay withholding taxes in respect of amounts considered
to be compensation includible in the optionee's gross income.
17. COMPLIANCE WITH REGULATIONS. It is the Company's intent that the
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Plan comply in all respects with Rule 16b-3 under the Securities Exchange Act of
1934 (or any successor or amended provision thereof) and any applicable
Securities and Exchange Commission interpretations thereof. If any provision of
this Plan is deemed not to be in compliance with Rule 16b-3, the provision shall
be null and void.
18. GOVERNING LAW. The validity and construction of this Plan and the
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instruments evidencing options shall be governed by the laws of the Commonwealth
of Massachusetts, without giving effect to the principles of conflicts of law
thereof.