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Exhibit 10.4
AMENDED AND RESTATED
BAY NETWORKS, INC.
1994 OUTSIDE DIRECTORS STOCK OPTION PLAN
1. ESTABLISHMENT AND PURPOSE.
(a) ESTABLISHMENT. The Wellfleet Communications, Inc. 1991 Director
Stock Option Plan was adopted on May 16, 1991 and was amended on June 29, 1993
(the "Prior Plan"). In connection with the combination of Wellfleet
Communications, Inc. ("Wellfleet") and SynOptics Communications, Inc.
("SynOptics") pursuant to the Agreement and Plan of Merger dated as of July 4,
1994, as amended, by and among Wellfleet, SynOptics and a wholly owned
subsidiary of Wellfleet (the "Merger Agreement"), Wellfleet changed its name to
Bay Networks, Inc. Wellfleet terminated the Prior Plan and adopted the Bay
Networks, Inc. 1994 Outside Directors Stock Option Plan (the "Plan") which was
approved by the stockholders on October 20, 1994. Amendment of the Plan was
approved by the stockholders on October 19, 1995. The Plan was amended by action
of the Board of Directors of the Company (the "Board") effective August 15,
1996.
(b) EFFECTIVE TIME AND PURPOSE. The Plan was established effective as
of the Effective Time (as defined in the Merger Agreement) to create additional
incentive for the outside directors of Bay Networks, Inc. and any successor
corporation thereto (collectively referred to as the "Company") to promote the
financial success and progress of the Company and its subsidiaries.
2. ADMINISTRATION. The Plan shall be administered by the Board and/or by a
duly appointed committee of the Board having such powers as shall be specified
by the Board. Any subsequent references herein to the Board shall also mean the
committee if such committee has been appointed and, unless the powers of the
committee have been specifically limited, the committee shall have all of the
powers of the Board granted herein, including, without limitation, the power to
terminate or amend the Plan at any time, subject to the terms of the Plan and
any applicable limitations imposed by law. All questions of interpretation of
the Plan or of any options granted under the Plan (an "Option") shall be
determined by the Board, and such determinations shall be final and binding upon
all persons having an interest in the Plan and/or any Option. Any officer of the
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, or election.
3. ELIGIBILITY AND TYPE OF OPTION. Options may be granted only to directors
of the Company who are not employees of the Company or any present or future
parent and/or subsidiary corporations of the Company. Options granted to
eligible
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directors of the Company ("Outside Directors") shall be nonqualified stock
options; that is, options which are not treated as having been granted under
section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code").
For purposes of the Plan, a parent corporation and a subsidiary corporation
shall be as defined in sections 424(e) and 424(f) of the Code.
4. SHARES SUBJECT TO OPTION. Options shall be options for the purchase of
the authorized but unissued common stock of the Company (the "Stock"), subject
to adjustment as provided in paragraph 8 below. The maximum number of shares of
Stock which may be issued under the Plan shall be 750,000 shares. In the event
that any outstanding Option for any reason expires or is terminated or canceled
and/or shares of Stock subject to repurchase are repurchased by the Company, the
shares allocable to the unexercised portion of such Option, or such repurchased
shares, may again be subjected to an Option.
5. TIME FOR GRANTING OPTIONS. All Options shall be granted, if at all,
within ten (10) years from the Effective Time.
6. TERMS, CONDITIONS AND FORM OF OPTIONS. Options granted pursuant to the
Plan shall be evidenced by written agreements specifying the number of shares of
Stock covered thereby, in substantially the form attached hereto as EXHIBIT A
for initial grants and in substantially the form attached hereto as EXHIBIT B
for subsequent grants, and incorporated herein by reference (the "Option
Agreements"), and shall comply with and be subject to the following terms and
conditions:
(a) AUTOMATIC GRANT OF OPTIONS. Subject to execution by each Outside
Director of the appropriate Option Agreement:
(i) At the Effective Time, each Outside Director who was on the
Board immediately prior to the Effective Time and continues to serve on the
Board at the Effective Time shall be granted an Option to purchase 45,000 shares
of Stock. Each Outside Director who is first elected or appointed to serve on
the Board at or after the Effective Time shall be granted an Option to purchase
52,500 shares of Stock upon such election or appointment.
(ii) Each Outside Director shall be granted an additional Option
to purchase 15,000 shares of Stock upon the second though seventh Anniversary
Dates of the initial option grant to such Outside Director.
(iii) The Anniversary Date of an Outside Director who was on the
Board at the Effective Time shall be the date which is 12 months after the
Effective Time and successive anniversaries thereof. The Anniversary Date of an
Outside Director who is elected or appointed to the Board after the Effective
Time shall be the date which is 12 months after such election or appointment and
successive anniversaries thereof.
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(iv) Notwithstanding the foregoing, any Outside Director may
elect not to receive an Option granted pursuant to this paragraph 6(a) by
delivering written notice of such election to the Board (1) in the case of an
initial Option grant, no later than the Effective Time or the date upon which
such Outside Director commences service on the Board, or (2) in the case of an
anniversary Option grant, no later than six (6) months prior to the applicable
Anniversary Date.
(v) Notwithstanding any other provision of the Plan, no Option
shall be granted to any individual who is no longer serving as an Outside
Director of the Company on an Anniversary Date which would otherwise be a date
of grant.
(b) PERIODIC GRANT OF OPTIONS. Subject to execution by the Outside
Director of the appropriate Option Agreement, the Board may grant additional
Options to purchase a number of shares to be determined by the Board in
recognition of services provided by an Outside Director in his or her capacity
as a director provided such grants are in compliance with the requirement of
Rule 16b-3, as promulgated under the Exchange Act and amended from time to time
or any successor rule or regulation ("Rule 16b-3").
(c) OPTION PRICE. The option price per share for an Option shall be
the fair market value of the common stock of the Company, as determined by the
closing price of a share of Stock on the New York Stock Exchange or other
national securities exchange on the date immediately preceding the date of the
granting of the Option. If the date immediately preceding the date of the
granting of the Option does not fall on a day on which the common stock of the
Company is trading on the New York Stock Exchange or other national securities
exchange, the date on which the option price per share shall be established
shall be the last day on which the common stock of the Company was so traded
prior to the date of the granting of the Option. Notwithstanding the foregoing,
an Option may be granted with an exercise price lower than the minimum exercise
price set forth above if such Option is granted pursuant to an assumption or
substitution for another option in a manner qualifying with the provisions of
section 424(a) of the Code.
(d) EXERCISE PERIOD OF OPTIONS. Any Option granted hereunder shall be
exercisable for a term of ten years.
(e) VESTING. Options granted pursuant to the Plan shall first become
vested on the day (the "Initial Vesting Date") which is one year from the date
on which the Option was granted. The Option shall be vested on and after the
Initial Vesting Date as follows:
Vested Ratio
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Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the 1/3
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the Optionee has continuously
served as a director of the
Company from the date the
Option was granted until the
Initial Vesting Date.
PLUS
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For each full month of the 1/36
Optionee's continuous service as
a director of the Company from
the Initial Vesting Date.
In the event of a Transfer of Control, as defined in paragraph
9 below, if the Option is assumed or substituted for by the surviving,
continuing, successor or purchaser corporation, the Option shall continue to
vest according to the provisions of this paragraph 6(e), in addition to the
acceleration of vesting described in paragraph 9 below.
(f) PAYMENT OF OPTION PRICE. Payment of the option price for
the number of shares of Stock being purchased pursuant to any Option shall be
made (i) in cash, by check, in cash equivalent, (ii) by the assignment of the
proceeds of a sale of some or all of the shares being acquired upon the exercise
of an Option (including, without limitation, through an exercise complying with
the provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System) or (iii) by the Optionee's full
recourse promissory note. No promissory note shall be permitted if an exercise
using a promissory note would be a violation of any law. Any permitted
promissory note shall be due and payable not more than five years after the
Option is exercised, and interest shall be payable at least annually and be at
least equal to the minimum interest rate necessary to avoid imputed interest
pursuant to all applicable sections of the Code. The Board shall have the
authority to permit or require the Optionee to secure any promissory note used
to exercise an Option with the shares of Stock acquired on exercise of the
Option and/or with other collateral acceptable to the Company.
(1) The Company reserves, at any and all times, the
right, in the Company's sole and absolute discretion, to establish, decline to
approve and/or terminate any program and/or procedures for the exercise of
Options by means of an assignment of the proceeds of a sale of some or all of
the shares of Stock to be acquired upon such exercise.
(2) Unless otherwise provided by the Board, in the
event the Company at any time becomes subject to the regulations promulgated by
the Board of Governors of the Federal Reserve System or any other governmental
entity affecting the extension of credit in connection with the Company's
securities, any promissory note shall comply with such applicable regulations,
and the Optionee
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shall pay the unpaid principal and accrued interest, if any, to the extent
necessary to comply with such applicable regulations.
7. AUTHORITY TO VARY TERMS. The Board shall have the authority from time to
time to vary the terms of the Option Agreements set forth as EXHIBIT A and
EXHIBIT B, respectively, either in connection with the grant of an individual
Option or in connection with the authorization of a new standard form or forms;
provided, however, that the terms and conditions of such revised or amended form
or forms of stock option agreement shall be in accordance with the terms of the
Plan. Such authority shall include, but not by way of limitation, the authority
to grant Options which are immediately exercisable subject to the Company's
right to repurchase any unvested shares of stock acquired by the Optionee on
exercise of an Option in the event such Optionee's service as a director of the
Company is terminated for any reason.
8. EFFECT OF CHANGE IN STOCK SUBJECT TO PLAN. Appropriate adjustments shall
be made in the number and class of shares of Stock subject to the Plan and to
any outstanding Options and in the option price of any outstanding Options in
the event of a stock dividend, stock split, reverse stock split, combination,
reclassification, or like change in the capital structure of the Company.
9. TRANSFER OF CONTROL. A "Transfer of Control" shall be deemed to have
occurred in the event any of the following occurs with respect to the Company.
(a) the sale or exchange by the stockholders of the Company of
all or substantially all of the stock of the Company where the stockholders of
the Company before such sale or exchange do not retain, directly or indirectly,
at least a majority of the beneficial interest in the voting stock of the
Company;
(b) a merger in which the stockholders of the Company before
such merger do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company; or
(c) the sale or exchange of all or substantially all of the
Company's assets (other than a sale or transfer to a subsidiary corporation of
the Company).
In the event of a Transfer of Control, then for purposes of calculating the
number of Vested Shares, Optionee shall be deemed to have completed twelve full
months of continuous service as an Outside Director of the Company more than
such Optionee had actually completed at the time of the Transfer of Control and
the remainder of the vesting schedule for the Option shall be accelerated by
twelve full months as of 30 days prior to the Transfer of Control. The exercise
and/or vesting of any Option that was permissible solely by reason of this
paragraph 9 shall be conditioned upon the consummation of the Transfer of
Control. Any Options which are not exercised as of the date of the Transfer of
Control shall terminate effective as of the date of the Transfer of Control
except, however, if the Options are
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assumed or substituted for by the surviving, continuing, successor or purchaser
corporation, they shall continue in effect in accordance with their terms.
10. OPTIONS NON-TRANSFERABLE. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee. No Option shall be assignable
or transferable by the Optionee, except by will or by the laws of descent and
distribution.
11. TERMINATION OR AMENDMENT OF PLAN AND OPTIONS. The Board, including any
duly appointed committee of the Board, may terminate or amend the Plan and/or
any Option at any time; provided, however, that without the approval of the
stockholders of the Company, there shall be (a) no increase in the total number
of shares of Stock covered by the Plan (except by operation of the provisions of
paragraph 8 above) and (b) no expansion in the class of person eligible to
receive Options. In addition to the foregoing, the approval of the Company's
stockholders shall be sought for any amendment to the Plan for which the Board
deems stockholder approval necessary in order to comply with Rule 16b-3. In any
event, no termination or amendment may adversely affect any then outstanding
Option, or any unexercised portion thereof, without the consent of the Optionee.
12. CONTINUATION OF PRIOR PLAN AS TO OUTSTANDING OPTIONS. Notwithstanding
any other provision to the contrary, the Prior Plan shall remain in effect in
accordance with its terms and apply to Options granted pursuant to the Prior
Plan.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing Bay Networks, Inc. 1994 Outside Directors Stock Option Plan was
duly adopted by the Board of Directors of the Company on the 17th day of August,
1994, amended with approval of the stockholders on the 19th day of October 1995,
and amended by the Board effective on the 15th of August 1996.
-----------------------------------------
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BAY NETWORKS, INC.
1994 OUTSIDE DIRECTORS STOCK OPTION PLAN
PLAN HISTORY
August 17, 1994 Board of Directors approves the plan with a share reserve
of 500,000 shares.
October 20, 1994 Stockholders approve the plan with a share reserve of
500,000 shares.
October 19, 1995 Stockholders approve amendment to the 1994 Outside Directors
Stock Option Plan to provide that shares subject to
outstanding and new grants will vest over a period of three
years (rather than four years), and to increase the number
of shares each non-employee director is granted on the
second through seventh anniversary date of his or her
initial grant from 7,500 shares to 10,000 shares.
November 24, 1995 3:2 common stock split effective, bringing the total share
reserve to 750,000 shares.
July 25, 1996 Board of Directors approves amendment to the 1994 Outside
Directors Stock Option Plan to provide for Periodic Grant
of Options.
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PROSPECTUS
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BAY NETWORKS, INC.
4401 Great America Parkway, P.O. Box 58185
Santa Clara, California 95052-8185
Telephone: (408) 988-2400
750,000 SHARES OF COMMON STOCK
($.01 par value per share)
AMENDED AND RESTATED
1994 OUTSIDE DIRECTORS STOCK OPTION PLAN
The shares of common stock, $.01 par value per share (the "Common
Stock"), of Bay Networks, Inc. (the "Company") covered by this Prospectus are
offered as set forth under the heading "DESCRIPTION OF THE 1994 OUTSIDE
DIRECTORS STOCK OPTION PLAN" to certain directors of the Company who are not
employees of the Company or any of its subsidiaries under the Company's 1994
Outside Directors Stock Option Plan ("Plan"). This Prospectus also covers such
additional shares that may be issuable under the Plan in the event of any stock
dividend, stock split, reverse stock split, combination, reclassification or
other similar change in the Common Stock.
Members of the Board of Directors are deemed to be "affiliates" of the
Company and may resell shares of the Company's Common Stock purchased under the
Plan only in accordance with certain restrictions imposed by the Securities Act
of 1933, as amended (the "Securities Act") and Rule 144 promulgated thereunder.
Any Director acquiring shares under the Plan should consult with legal counsel
prior to reselling shares of Common Stock. See "RESALE OF SHARES BY DIRECTORS".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This document constitutes part of a prospectus covering securities that
have been registered under the Securities Act. The date of this Prospectus is
September 12, 1996.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information concerning the Company may be inspected at the
Commission's Public Reference Room, Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549. Copies of such material, or any portion thereof,
may be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, at prescribed rates. The
Company's Common Stock is traded on the New York Stock Exchange under the symbol
"BAY". Reports, proxy statements and other information concerning the Registrant
may also be inspected and copied at the offices of the Company.
The Company has filed with the Commission a Registration Statement on
Form S-8 under the Securities Act with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto, as certain
items are omitted in accordance with the rules and regulations of the
Commission. Statements contained in this Prospectus concerning the contents of
any agreement or other document referred to are not necessarily complete. Where
such agreement or other document is an exhibit to the Registration Statement
registering the shares offered under the Plan, each such statement is qualified
in all respects by the provisions of such exhibit, to which reference is hereby
made for a full statement of the provisions thereof. For further information
pertaining to the Company and the shares of Common Stock offered hereby,
reference is made to such Registration Statement and the exhibits and schedules
thereto, which may be inspected without charge at the office of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of which may be
obtained from the Commission at prescribed rates.
The Company hereby undertakes to provide, without charge, upon written
or oral request of any person to whom this Prospectus is delivered, a copy of
any and all documents incorporated by reference in this Prospectus. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Any other documents required
to be delivered to participants pursuant to Rule 428(b) under the Securities Act
shall also be provided, without charge, upon written or oral request of any
participant in the Plan. Requests for such information or for additional
information about the Plan or its administrators should be addressed to Bay
Networks, Inc., Attention: Chief Financial Officer, 4401 Great America Parkway,
Santa Clara, California 95054, telephone (408) 988-2400.
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OTHER
PERSON DEEMED TO BE AN UNDERWRITER. NEITHER DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THE DATES AS OF WHICH INFORMATION IS SET FORTH HEREIN. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES
COVERED BY THIS PROSPECTUS BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
Page
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THE COMPANY 1
DESCRIPTION OF THE 1994 OUTSIDE DIRECTORS STOCK
OPTION PLAN 1
Shares Subject to the Plan 1
Administration of the Plan 1
Terms, Conditions and Forms of Options 2
Eligibility 3
Effective Date, Termination and Amendment 3
Transfer of Control 3
Federal Income Tax Consequences 4
Employee Retirement Income Security Act of 1974 5
RESALE OF SHARES BY DIRECTORS 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 5
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THE COMPANY
Bay Networks, Inc., a Delaware corporation (the "Company"), is the
issuer of the shares of Common Stock covered by this Prospectus. Its principal
offices are located at 4401 Great America Parkway, Santa Clara, California and
its telephone number is (408) 988-2400.
DESCRIPTION OF THE 1994 OUTSIDE DIRECTORS STOCK OPTION PLAN
On August 17, 1994, the Board of Directors adopted, and on October 20,
1994 the stockholders approved, the 1994 Outside Directors Stock Option Plan
(the "Plan"). On October 19, 1995 the stockholders approved an amendment to the
Plan. The Plan was further amended by action of the Board of Directors of the
Company effective August 15, 1996. The Plan provides for the grant of
nonstatutory options not intended to meet the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). The purpose of the Plan
is to create additional incentive for the outside directors of the Company to
promote the financial success and progress of the Company and its subsidiaries.
The following is a brief summary of the provisions of the Plan. This
summary is qualified in all respects by reference to the full text of the Plan,
which the Company will provide, without charge, upon written or oral request of
any person to whom this Prospectus is delivered. Each person granted an option
under the Plan should also carefully review his or her option agreement.
SHARES SUBJECT TO THE PLAN
The original version of the Plan reserved a total of 500,000 shares of
the Company's Common Stock (subject to adjustment for any dividend, stock split,
reverse stock split, combination, reclassification or other relevant changes in
the Company's capitalization) for issuance pursuant to the Plan. A three-for-two
stock split effective on November 24, 1995 resulted in an adjusted reserve of
750,000 Shares. Shares issued under the Plan consist of authorized but unissued
shares or treasury shares. In the event that any outstanding option expires or
is terminated or cancelled or shares subject to repurchase are repurchased by
the Company, the shares allocable to the unexercised portion of such option, or
such repurchased shares, may again be subjected to an option.
ADMINISTRATION OF THE PLAN
The Plan is administered by the Board of Directors of the Company (the
"Board") or by a committee appointed by the Board (the "Committee"). Any
subsequent reference to the Board shall also mean the Committee, if one has been
appointed. The directors are elected by the stockholders of the Company in
accordance with the provisions of the Certificate of Incorporation and the
By-Laws of the Company. None of the members of the Board of Directors receives
any
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additional compensation for services in connection with the administration of
the Plan. The Board of Directors is authorized to interpret the provisions of
the Plan.
TERMS, CONDITIONS AND FORMS OF OPTIONS
The Plan provides for automatic and discretionary option grants by the
Company to eligible directors. Each director who is serving on the Board
immediately prior to the Effective Time (as defined in the Agreement and Plan of
Merger dated as of July 4, 1994, as amended, by and between Wellfleet
Communications, Inc., SynOptics Communications, Inc. and Spoke Merger Co., Inc.)
and continues to serve on the Board at or after the Effective Time will be
granted, at the Effective Time, an option to purchase 45,000 shares of Common
Stock (adjusted for November 1995 stock split). Each director who is first
elected or appointed to serve on the Board at or after the Effective Time will
be granted, on the date of his or her election or appointment, an option to
purchase 52,500 shares of Common Stock (adjusted for November 1995 stock split).
The Plan also provides for the grant of an option to purchase 15,000 shares of
Common Stock (adjusted for November 1995 stock split) to each eligible director
on the second through seventh anniversary of his or her initial option grant
under the Plan. The Plan also provides for the discretionary grant of an option
to purchase a number of shares of Common Stock determined by the Board to
Outside Directors in recognition of services provided by an Outside Director in
his or her capacity as a director. The option exercise price per share for each
option granted under the Plan is the last reported sale price per share of the
Company's Common Stock on the New York Stock Exchange on the date immediately
preceding the date of grant (or if no such price is reported on such date, such
price as reported on the nearest preceding date). An option may be granted with
an exercise price that is lower than the price as determined above if such
option is granted pursuant to an assumption of or substitution for another
option in a manner qualifying with the provisions of Section 424(a) of the Code.
Each option grant shall be evidenced by a written agreement specifying
the number of shares covered by the option. An option granted under the Plan is
not transferable by the optionee otherwise than by will or by the laws of
descent and distribution and may be exercised during the lifetime of the
optionee only by such optionee.
Each option vests 1/3 on the first anniversary of grant and in 1/36 per
month beginning one year after the date of grant, provided that the optionee has
continuously served as a director of the Company from the date the option was
granted. No option is exercisable after the expiration of ten years from the
date of the grant.
Options may be exercised only by written notice to the Company at its
principal office accompanied (i) by payment in cash or cash equivalent or by
check, (ii) by assignment of the proceeds of a sale of some or all of the shares
being acquired
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by the exercise of the option or (iii) by the optionee's recourse promissory
note when authorized by the Board.
A director may elect not to receive an option granted under the Plan by
delivering written notice to the Board, in the case of an initial grant, no
later than the date such director would receive such grant, and in the case of
subsequent option grants, six months prior to such grants.
ELIGIBILITY
Only directors of the Company who are not employees of the Company or
any present or future parent or subsidiary of the Company are eligible to be
granted options under the Plan.
EFFECTIVE DATE, TERMINATION AND AMENDMENT
The Plan was adopted by the Board of Directors on August 17, 1994 and
approved by the stockholders on October 20, 1994. Pursuant to its terms, the
Plan became effective on October 21, 1994. On October 19, 1995 the stockholders
approved an amendment to the Plan to provide that shares subject to outstanding
and new grants will vest over a period of three years, and to increase the
number of shares each non-employee director is granted on the second through
seventh anniversary date of his or her initial grant to 15,000 shares. The Board
approved an amendment to the Plan effective August 15, 1996 to provide for
Periodic Grant of Options.
The Board of Directors may terminate or amend the Plan or any option
granted under the Plan in any respect whatsoever; provided, however, that
without approval of the stockholders of the Company no revision or amendment may
change the number of shares subject to the Plan or expand the class of persons
eligible to receive options. The approval of the Company's stockholders shall be
sought for any amendment to the Plan for which the Board deems stockholder
approval necessary in order to comply with Rule 16b-3. No termination or
amendment of the Plan may adversely affect any then outstanding option, or any
unexercised portion thereof, without the consent of the optionee.
TRANSFER OF CONTROL
In the event of a Transfer of Control, as defined below, then for
purposes of calculating the number of Vested Shares, Optionee shall be deemed to
have completed twelve full months of continuous service as an Outside Director
of the Company more than such Optionee had actually completed at the time of the
Transfer of Control and the remainder of the vesting schedule for the Option
shall be accelerated by twelve full months, as of 30 days prior to the Transfer
of Control. Such vesting and exercise of an option is conditioned upon the
consummation of the Transfer of Control.
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A Transfer of Control shall be deemed to have occurred in a event of
(i) the sale or exchange by the stockholders of the Company of all or
substantially all of the stock of the Company, or a merger, whereby the
stockholders of the Company immediately before such sale or exchange or merger
do not retain at least a majority of the beneficial interest in the voting stock
of the Company or (ii) the sale or exchange of all or substantially all of the
Company's assets (other than a sale or transfer to a subsidiary corporation of
the Company).
Any options which are not exercised as of the date of the Transfer of
Control shall terminate effective as of such date provided, however, that if the
options are assumed or substituted by the surviving, continuing, successor or
purchaser corporation, they shall continue in effect in accordance with their
terms.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax treatment of
nonstatutory stock options. The tax consequences recognized by an optionee may
vary; therefore, an optionee should consult his or her tax advisor for advice
concerning any specific transaction.
No taxable income is recognized by the optionee upon the grant of a
nonstatutory option.
Upon exercise more than six months after the grant, the optionee must
recognize as ordinary income the difference between the exercise price and the
fair market value at the time of exercise.
The Company will be entitled to a business expense deduction equal to
the amount of ordinary income recognized by the optionee. Any gain or any loss
recognized upon the subsequent disposition of the purchased shares will be a
capital gain or loss, and will be a long-term gain or loss if the shares are
held for more than one year.
At the time the option is exercised, in whole or in part, or at any
time thereafter as requested by the Company, the Optionee shall make adequate
provision for foreign, federal and state tax withholding obligations of the
Company, if any, which arise in connection with the option including, without
limitation, obligations arising upon (i) the exercise, in whole or in part, of
the option, or (ii) the transfer, in whole or in part, of any shares of stock
acquired on exercise of the option.
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
The Plan is not qualified under Section 401(a) of the Code and the
Company believes that the Plan is not subject to the Employee Retirement Income
Security Act of 1974.
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RESALE OF SHARES BY DIRECTORS
Shares of Common Stock purchased upon exercise of options granted under
the Plan may be resold freely, except that any participant deemed to be an
"affiliate" of the Company, within the meaning of the Securities Act and the
rules and regulations promulgated thereunder, may not sell shares acquired upon
exercise of options granted under the Plan unless such shares have been
registered by the Company under the Securities Act for resale by such affiliate
or an exemption from registration under the Securities Act is available. Rule
144 under the Securities Act provides an exemption from registration provided
certain limitations on the manner of sale and the amount of shares sold are
observed (holding period limitations will not apply). All directors of the
Company are deemed to be "affiliates" and, accordingly, any director intending
to sell shares acquired upon exercise of options granted under the Plan should
consult with legal counsel before making any sales. Such sale may implicate
securities laws other than Rule 144, including Rule 10b-5 and Section 16 under
the Exchange Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which are filed with the Commission, are
incorporated in this Prospectus by reference:
(1) The Company's latest annual report filed pursuant to
Sections 13(a) or 15(d) of the Exchange Act, or the latest prospectus filed
pursuant to Rule 424(b) under the Securities Act that contains audited financial
statements for the registrant's latest fiscal year for which such statements
have been filed.
(2) All other reports filed pursuant to Sections 13(a) or
15(d) of the Exchange Act since the end of the fiscal year covered by the annual
reports or the prospectus referred to in (1) above.
(3) The description of the Common Stock of the Company
contained in a Registration Statement filed under the Exchange Act, including
any amendment or report filed for the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all shares of Common Stock offered
hereby have been sold or which deregisters all shares of Common Stock then
remaining unsold, shall be deemed to be incorporated by reference herein and to
be part hereof from the date of the filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such
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statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
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