Exhibit 99.1
MELTRONIX, INC.
1993 STOCK OPTION/STOCK ISSUANCE PLAN
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(As Amended and Restated through May 17, 1999)
ARTICLE ONE
GENERAL
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I. PURPOSE OF THE PLAN.
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A. This 1993 Stock/Option Stock Issuance Plan (the "Plan"), is
intended to promote the interests of Meltronix, Inc., a California corporation
(the "Corporation"), by providing eligible individuals with the opportunity to
acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Corporation as an incentive for them to remain in the service
of the Corporation (or its parent or subsidiary corporations).
B. The Discretionary Option Grant and Stock Issuance Programs
under this Plan became effective on April 12, 1994, the date on which the shares
of the Corporation's Common Stock were first registered under Section 12(g) of
the Securities Exchange Act of 1934, as amended (the "1943 Act"). Such date is
hereby designated as the Plan Effective Date. The Automatic Option Grant Program
under this Plan became effective immediately upon the execution and final
pricing of the Underwriting Agreement for the initial public offering of the
Corporation's Common Stock. The execution date of such Underwriting Agreement is
hereby designated as the Automatic Grant Program Effective Date.
C. This May, 1999 restatement of the Plan shall become effective
immediately upon its adoption by the Board of Directors, subject, however, to
shareholder approval. The Plan shall be administered in compliance with the
applicable requirements of SEC Rule 16b-3, as in effect from time to time.
D. This Plan serves as the successor to the Corporation's 1988
Stock Option Plan (the "Predecessor Plan"), and no further option grants or
share issuances shall be made under the Predecessor Plan from and after the Plan
Effective Date. All outstanding stock options and unvested share issuances under
the Predecessor Plan on such Plan Effective Date are hereby incorporated into
this Plan and shall accordingly be treated as outstanding stock options and
unvested share issuances under this Plan. However, each outstanding option grant
so incorporated shall continue to be governed solely by the express terms and
conditions of the instrument evidencing such grant, and no provision of this
Plan shall be deemed to affect or otherwise modify the rights or obligations of
the holders of such incorporated options with respect to their acquisition of
shares of the Corporation's Common Stock thereunder. All unvested shares of
Common Stock outstanding under the Predecessor Plan on the Plan Effective Date
shall continue to be governed solely by the express terms and conditions of the
instruments evidencing such issuances, and no provision of this Plan shall be
deemed to affect or modify the rights or obligations of the holders of such
unvested shares.
II. DEFINITIONS.
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A. For purposes of the Plan, the following definitions shall be
in effect:
Board: the Corporation's Board of Directors.
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Change in Control: a change in ownership or control of the
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Corporation effected through either of the following
transactions:
(i) the acquisition directly or indirectly by any
person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3
of the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities pursuant
to a tender or exchange offer made directly to the Corporation's shareholders
which the Board does not recommend such shareholders to accept; or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either: (A) have been Board
members continuously since the beginning of such period; or (B) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (A) who were still in
office at the time such election or nomination was approved by the Board.
Code: the Internal Revenue Code of 1986, as amended.
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Common Stock: shares of the Corporation's common stock.
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Corporate Transaction: any of the following shareholder-
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approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which the Corporation is
not the surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Corporation is incorporated;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete liquidation or
dissolution of the Corporation; or
(iii) any reverse merger in which the Corporation is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's outstanding
securities are transferred to a person or persons different from those who held
such securities immediately prior to such merger.
Employee: an individual who performs services while in the
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employ of the Corporation or one or more parent or subsidiary corporations,
subject to the control and direction
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of the employer entity not only as to the work to be performed but also as to
the manner and method of performance.
Fair Market Value: the Fair Market Value per share of Common
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Stock determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq Electronic Bulletin Board, the Fair Market Value shall be the average of
the highest bid price and the lowest asked price per share on the date in
question, as such prices are reported by the National Association of Securities
Dealers through the Nasdaq Electronic Bulletin Board or any successor system. If
there are no reported bid or asked prices for the Common Stock on the date in
question, then the average of the highest bid price and the lowest asked price
on the last preceding date for which such quotations exist shall be
determinative of the Fair Market Value.
(ii) If the Common Stock is at the time listed or
admitted to trading on any national stock exchange, then the Fair Market Value
shall be the closing selling price per share on the date in question, as such
price is reported by the National Association of Securities Dealers through the
Nasdaq National Market or any successor system. If there is no reported closing
selling price for the Common Stock on the date in question, then the closing
selling price on the last preceding date for which such quotation exists shall
be determinative of Fair Market Value
(iii) If the Common Stock is at the time listed or
admitted to trading on any national stock exchange, then the Fair Market Value
shall be the closing selling price per share on the date in question on the
exchange determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of Common Stock on
such exchange on the date in question, then the Fair Market Value shall be the
closing selling price on the exchange on the last preceding date for which such
quotation exists.
Optionee: a person to whom an option is granted under the
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Discretionary Option Grant or Automatic Option Grant Program.
Participant: a person who is issued Common Stock under the Stock
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Issuance Program.
Permanent Disability or Permanently Disabled: the inability of the
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Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
Plan Administrator: the particular entity, whether the Primary
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Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes or eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
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Primary Committee: the committee of two (2) or more non-employee
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Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to Section 16 Insiders.
Secondary Committee: a committee of two (2) or more Board members
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appointed by the Board to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to eligible persons other than Section 16
Insiders.
Section 16 Insider: an officer or director of the Corporation
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subject to the short-swing profit liabilities of Section 16 of the 1934 Act.
Service: the performance of services on a periodic basis for the
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Corporation (or any parent subsidiary corporation) in the capacity of an
Employee, a non-employee member of the board of directors or an independent
consultant or advisor, except to the extent otherwise specifically provided in
the applicable stock option or stock issuance agreement.
B. The following provisions shall be applicable in determining the
parent and subsidiary corporations of the Corporation:
(i) Any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation shall be considered to be a
parent of the Corporation, provided each such corporation in the unbroken chain
(other than the Corporation) owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(ii) Each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation shall be considered to be a
subsidiary of the Corporation, provided each such corporation (other than the
last corporation) in the unbroken chain owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
III. STRUCTURE OF THE PLAN.
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A. Stock Programs. The Plan shall be divided into three (3) separate
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components: (i) the Discretionary Option Grant Program specified in Article Two;
(ii) the Automatic Option Grant Program specified in Article Three; and (iii)
the Stock Issuance Program specified in Article Four. Under the Discretionary
Option Grant Program, eligible individuals may, at the discretion of the Plan
Administrator, be granted options to purchase shares of Common Stock in
accordance with the provisions of Article Two. Under the Automatic Option Grant
Program, each individual serving as an eligible non-employee Board member on the
Automatic Grant Program Effective Date and each individual who first joins the
Board as an eligible non-employee director after the Automatic Grant Program
Effective Date will at periodic intervals receive option grants to purchase
shares of Common Stock in accordance with the provisions of Article Three, with
the first such grants to be made on the Automatic Grant Program Effective Date.
Under the Stock Issuance Program, eligible individuals may be issued shares of
Common Stock directly, either through the immediate purchase of such shares at a
price not less than eighty-five percent (85%) of the fair
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market value of the shares at the time of issuance or as a bonus for past
services rendered the Corporation.
B. General Provisions. Unless the context clearly indicates
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otherwise, the provisions of Articles One and Five shall apply to the
Discretionary Option Grant Program, the Automatic Option Grant Program and the
Stock Issuance Program and shall accordingly govern the interest of all
individuals under the Plan.
IV. ADMINISTRATION OF THE PLAN.
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A. The Primary Committee shall have the sole and exclusive authority
to administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders, other than to those Section 16 Insiders who are
serving on the Primary Committee. The Board shall retain sole and exclusive
authority to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to members of the Primary Committee.
B. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to such persons. The members of the
Secondary Committee may be individuals who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan or any
stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any parent or subsidiary).
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions
of any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant or Stock Issuance Program under its jurisdiction or
any option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
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F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the express terms and conditions of Article
Three, and the Plan Administrator shall exercise no discretionary functions with
respect to option grants made pursuant to that program.
V. OPTION GRANTS AND STOCK ISSUANCES.
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A. The persons eligible to participate in the Discretionary Option
Grant Program under Article Two and the Stock Issuance Program under Article
Four shall be limited to the following:
(i) officers and other key employees of the Corporation (or its
parent or subsidiary corporations) who render services which contribute to the
management, growth and financial success of the Corporation (or its parent or
subsidiary corporations);
(ii) non-employee Board members; and
(iii) those consultants or other independent contractors who
provide valuable services to the Corporation (or its parent or subsidiary
corporations).
B. The Plan Administrator shall have full authority to determine: (i)
with respect to the option grants made under the Discretionary Option Grant
Program, which eligible individuals are to receive option grants, the number of
shares to be covered by each such grant, the status of the granted option as
either an incentive stock option ("Incentive Option") that satisfies the
requirements of Section 422 of the Code or a non-statutory option not intended
to meet such requirements, the time or times at which each granted option is to
become exercisable and the maximum term for which the option may remain
outstanding; and (ii) with respect to stock issuances under the Stock Issuance
Program, the number of shares to be issued to each Participant, the vesting
schedule (if any) to be applicable to the issued shares, and the consideration
to be paid by the individual for such shares.
C. Approval by the Plan Administrator of an option grant under the
Discretionary Option Grant Program shall constitute approval by such Plan
Administrator of the subsequent exercise, and payment of the exercise price of,
such option in accordance with the terms and conditions thereof.
VI. STOCK SUBJECT TO THE PLAN.
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A. Shares of Common Stock shall be available for issuance under the
Plan and shall be drawn from either the Corporation's authorized but unissued
shares of Common Stock or from reacquired shares of Common Stock, including
shares repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock which may be issued over the term of the Plan shall not
exceed seven million (7,000,000) shares, subject to adjustment from time to time
in accordance with the provisions of this Section VI. Such authorized share
reserve includes the two million two hundred thousand (2,200,000)-share increase
authorized by the Board on November 21, 1996,the one million eight hundred
thousand (1,800,00)-share increase authorized
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by the Board on April 10, 1997, and the two million three hundred nine thousand
three hundred sixty-eight (2,309,368)-share increase authorized by the Board on
May 17, 1999. To the extent one or more outstanding options under the
Predecessor Plan incorporated into this Plan are subsequently exercised, the
number of shares issued with respect to such option shall reduce, on a
share-for-share basis, the number of shares available for issuance under this
Plan.
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than two million (2,000,000) shares of Common Stock in the aggregate per
calendar year, beginning at any time after May 17, 1999.
C. Should one or more outstanding options under this Plan (including
outstanding options under the Predecessor Plan incorporated into this Plan)
expire or terminate for any reason prior to exercise in full (including any
option canceled in accordance with the cancellation-regrant provisions of
Section IV of Article Two of the Plan), then the shares subject to the portion
of each option not so exercised shall be available for subsequent option grants
under the Plan. Unvested shares issued under the Plan and subsequently
repurchased by the Corporation at the original option or issue price paid per
share shall be added back to the share reserve and shall accordingly be made
available for subsequent issuance under the Plan. However, should the exercise
price of an outstanding option under the Plan (including any option incorporated
from the Predecessor Plan) be paid with shares of Common Stock or should shares
of Common Stock otherwise issuable under the Plan be withheld by the Corporation
in satisfaction of the withholding taxes incurred in connection with the
exercise of an outstanding option under the Plan or the vesting of a direct
share issuance made under the Plan, then the number of shares of Common Stock
available for issuance under the Plan shall be reduced by the gross number of
shares for which the option is exercised or which vest under the share issuance,
and not by the net number of shares of Common Stock actually issued to the
holder of such option or share issuance.
D. Should any change be made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to: (i) the maximum number and/or class of
securities issuable under the Plan; (ii) the number and/or class of securities
for which any one person may be granted options, separately exercisable stock
appreciation rights and direct stock issuances per calendar year; (iii) the
number and/or class of securities for which automatic option grants are to be
subsequently made per eligible non-employee Board member under the Automatic
Option Gant Program; (iv) the number and/or class of securities and price per
share in effect under each option outstanding under either the Discretionary
Option Grant or Automatic Option Grant Program; and (v) the number and/or class
of securities and price per share in effect under each outstanding option
incorporated into this Plan from the Predecessor Plan. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
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I. TERMS AND CONDITIONS OF OPTIONS.
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Options granted pursuant to the Discretionary Option Grant Program
shall be authorized by the action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or non-statutory
options. Individuals who are not Employees of the Corporation or its parent or
subsidiary corporations may only be granted non-statutory options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; provided, however, that each such instrument shall comply
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with the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
A. Option Price.
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1. The option price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The option price per share of Common Stock subject to
an Incentive Option shall in no event be less than one hundred percent (100%) of
the Fair Market Value of such Common Stock on the grant date.
(ii) The option price per share of Common Stock subject to a
non-statutory stock option shall in no event be less than eighty-five percent
(85%) of the Fair Market Value of such Common Stock on the grant date.
2. The option price shall become immediately due upon the exercise
of the option and, subject to the provisions of Section I of Article Five and
the instrument evidencing the grant, shall be payable in one of the following
alternative forms specified below:
(i) full payment in cash or check drawn to the
Corporation's order; (ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the Exercise
Date (as such term is defined below);
(iii) full payment in a combination of shares of Common Stock
held for the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market Value on the
Exercise Date and cash or check drawn to the Corporation's order; or
(iv) full payment through a broker-dealer sale and
remittance procedure pursuant to which the Optionee shall provide irrevocable
written instructions to: (I) a
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Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate option
price payable for the purchased shares plus all applicable Federal and state
income and employment taxes required to be withheld by the Corporation in
connection with such purchase; and (II) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in order
to complete the sale transaction.
For purposes of this subparagraph 2, the Exercise Date shall be the
date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent the sale and remittance procedure is used in
connection with the exercise of the option, payment of the option price for the
purchased shares must accompany such notice.
B. Term and Exercise of Options. Each option granted under this
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Discretionary Option Grant Program shall be exercisable at such time or times
and during such period as is determined by the Plan Administrator and set forth
in the instrument evidencing the grant. No such option, however, shall have a
maximum term in excess of ten (10) years from the grant date. During the
lifetime of the Optionee, the option shall be exercisable only by the Optionee
and shall not be assignable or transferable by the Optionee other than by will
or by the laws of descent and distribution following Optionee's death.
C. Termination of Service.
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1. The following provisions shall govern the exercise period
applicable to any outstanding options held by the Optionee at the time of
cessation of Service or death.
(i) Should an Optionee cease Service for any reason (other than
death) while holding one or more outstanding options under this Article Two,
then none of those options shall remain exercisable for more than a ninety (90)-
day period (or such shorter period determined by the Plan Administrator and set
forth in the instrument evidencing the grant) measured from the date of such
cessation of Service.
(ii) Any option held by the Optionee under this Article Two and
exercisable in whole or in part on the date of his or her death may be
subsequently exercised by the personal representative of the Optionee's estate
or by the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution.
Such exercise, however, must occur prior to the earlier of: (A) six (6) months
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measured from the date of the Optionee's death; or (B) the specified expiration
date of the option term. Upon the occurrence of the earlier event, the option
shall terminate.
(iii) Under no circumstance shall any such option be exercisable
after the specified expiration date of the option term.
(iv) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of shares
(if any) in which the Optionee is vested at the time of his or her cessation of
Service. Upon the expiration of the limited post-Service exercise period or (if
earlier) upon the specified expiration date of the option term, each
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such option shall terminate and cease to be outstanding with respect to any
vested shares for which the option has not otherwise been exercised. However,
each outstanding option shall immediately terminate and cease to be outstanding,
at the time of the Optionee's cessation of Service, with respect to any shares
for which the option is not otherwise at that time exercisable or in which the
Optionee is not otherwise vested.
(v) Should: (A) the Optionee's Service be terminated for
misconduct (including, but not limited to, any act of dishonesty, willful
misconduct, fraud or embezzlement); or (B) the Optionee makes any unauthorized
use or disclosure of confidential information or trade secrets of the
Corporation or its parent or subsidiary corporations, then in any such event all
outstanding options held by the Optionee under this Article Two shall terminate
immediately and cease to be outstanding.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to permit one or more options held by the Optionee
under this Article Two to be exercised, during the limited post-Service exercise
period applicable under subparagraph 1 above, not only with respect to the
number of vested shares of Common Stock for which each such option is
exercisable at the time of the Optionee's cessation of Service but also with
respect to one or more subsequent installments in which Optionee would have
otherwise vested had such cessation of Service not occurred.
D. Shareholder Rights. An Optionee shall have no shareholder rights
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with respect to any shares covered by the option until such individual shall
have exercised the option and paid the option price for the purchased shares.
E. Repurchase Rights. The shares of Common Stock acquired upon the
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exercise of any Article Two option grant may be subject to repurchase by the
Corporation in accordance with the following provisions:
(i) The Plan Administrator shall have the discretion to
authorize the issuance of unvested shares of Common Stock under this Article
Two. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase any or all of those unvested
shares at the option price paid per share. The terms and conditions upon which
such repurchase right shall be exercisable (including the period and procedure
for exercise and the appropriate vesting schedule for the purchased shares)
shall be established by the Plan Administrator and set forth in the instrument
evidencing such repurchase right.
(ii) All of the Corporation's outstanding repurchase rights under
this Article Two shall automatically terminate, and all shares subject to such
terminated rights shall immediately vest in full, upon the occurrence of a
Corporate Transaction, except to the extent: (A) any such repurchase right is
expressly assigned to the successor corporation (or parent thereof) in
connection with the Corporate Transaction; or (B) such termination is precluded
by other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.
(iii) The Plan Administrator shall have the discretionary
authority, exercisable either before or after the Optionee's cessation of
Service, to cancel the Corporation's
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outstanding repurchase rights with respect to one or more shares purchased or
purchasable by the Optionee under this Article Two and thereby accelerate the
vesting of such shares in whole or in part at any time.
II INCENTIVE OPTIONS.
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The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Article Two. Incentive Options may only be
granted to individuals who are Employees. Options which are specifically
designed as "non-statutory" options when issued under the Plan shall not be
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subject to such terms and conditions.
A. Dollar Limitation. The aggregate Fair Market (determined as of
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the respective date or dates of grant) of the Common Stock for which one or more
options granted to any Employee after December 31, 1986, under this Plan (or any
other option plan of the Corporation or its parent or subsidiary corporations)
may for the first time become exercisable as incentive stock options under the
Federal tax laws during any one calendar year shall not exceed the sum of One
Hundred Thousand Dollars ($100,000.00). To the extent the Employee holds two
(2) or more such options which become exercisable for the first time in the same
calendar year, the foregoing limitation on the exercisability of such options as
incentive stock options under the Federal tax laws shall be applied on the basis
of the order in which such options are granted. Should the number of shares of
Common Stock for which any Incentive Option first becomes exercisable in any
calendar year exceed the applicable One Hundred Thousand Dollar ($100,000.00)
limitation, then that option may nevertheless be exercised in that calendar year
for the excess number of shares as a non-statutory option under the Federal tax
laws.
B. Ten Percent (10%) Shareholder. If any individual to whom an
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Incentive Option is granted is the owner of stock (as determined under Section
424(d) of the Code) possessing ten percent (10%) or more of the total combined
voting power of all classes of stock of the Corporation or any one of is parent
or subsidiary corporations, then the option price per share shall not be less
than one hundred ten percent (110%) of the Fair Market Value per share of Common
Stock on the grant date, and the option term shall not exceed five (5) years,
measured from the grant date.
Except as modified by the preceding provisions of this Section II, the
provisions of Articles One, Two and Five of the Plan shall apply to all
Incentive Options granted hereunder.
III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL.
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A. In the event of any Corporate Transaction, each option which is at
the time outstanding under this Article Two shall automatically accelerate so
that each such option shall, immediately prior to the specified effective date
for the Corporate Transaction, become fully exercisable with respect to the
total number of shares of Common Stock at the time subject to such option and
may be exercised for all or any portion of such shares. However, an outstanding
option under this Article Two shall not so accelerate if and to the extent: (i)
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such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporations or parent thereof or to be replaced with a
comparable option to purchase shares of the capital stock of the successor
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corporation or parent thereof; (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the option spread
existing at the time of the Corporate Transaction and provides for subsequent
payout in accordance with the same vesting schedule applicable to such option;
or (iii) the acceleration of such option is subject to other limitations imposed
by the Plan Administrator at the time of the option grant. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.
B. Immediately following the consummation of the Corporate
Transaction, all outstanding options under this Article Two shall terminate and
cease to be outstanding, except to the extent assumed by the successor
corporation or its parent company.
C. Each outstanding option under this Article Two which is assumed in
connection with the Corporate Transaction or is otherwise to continue in effect
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply and pertain to the number and class of securities which would have been
issued to the option holder, in consummation of such Corporate Transaction, had
such person exercised the option immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the option price
payable per share, provided the aggregate option price payable for such
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securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
D. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to provide (upon such terms as it may deem appropriate) for the
automatic acceleration of one or more outstanding options granted under the Plan
that are assumed or replaced in a Corporate Transaction and do not otherwise
accelerate at that time, in the event the Optionee's Service should subsequently
terminate within a designated period following the effective date of such
Corporate Transaction.
E. The grant of options under this Article Two shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
F. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under this Article Two (and the termination of one or
more of the Corporation's outstanding repurchase rights under this Article Two)
upon the occurrence of a Change in Control. The Plan Administrator shall also
have full power and authority to condition any such option acceleration (and the
termination of any outstanding repurchase rights) upon the subsequent
termination of the Optionee's Service within a specified period following the
Change in Control.
G. Any options accelerated in connection with the Change in Control
shall remain fully exercisable until the expiration or sooner termination of the
option term.
-12-
H. The exercisability as incentive stock option under the Federal
tax laws of any options accelerated under this Section III in connection with a
Corporation Transaction or Change in Control shall remain subject to the dollar
limitation of Section II of this Article Two. To the extent such dollar
limitation is exceeded, the accelerated option shall be exercisable as a
non-statutory option under the Federal tax laws.
IV. CANCELLATION AND REGRANT OF OPTIONS.
-----------------------------------
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under this Article Two (including
outstanding options under the Predecessor Plan incorporated into this Plan) and
to grant in substitution new options under the Plan covering the same or
different numbers or shares of Common Stock but with an option price per share
not less than: (i) one hundred percent (100%) of the Fair Market Value on the
new grant date in the case of a grant of an Incentive Option; (ii) one hundred
ten percent (110%) of such Fair Market Value in the case of a grant of an
Incentive Option to a ten percent (10%) Shareholder; or (iii) eighty-five
percent (85%) of such Fair Market Value in the case of all other grants.
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. ELIGIBILITY.
-----------
The individuals eligible to receive automatic option grants pursuant
to the provisions of this Article Three program shall be limited to those
individuals who are serving as non-employee Board members on the Automatic Grant
Program Effective Date or who are first elected or appointed as non-employee
Board members on or after such Effective Date, whether through appointment by
the Board or election by the Corporation's shareholders. Each non-employee Board
member eligible to participate in the Automatic Option Grant Program pursuant to
the foregoing criteria shall be designated an Eligible Director for purposes of
the Plan.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS.
------------------------------------------------
A. Grant Dates. Subject to shareholder approval of the amendments to
-----------
the Plan adopted by the Board on November 21, 1996 and May 17, 1999, option
grants shall be made under this Article Three on the dates specified below:
1. Initial Grant. Each Eligible Director who is first elected
-------------
or appointed as a non-employee Board member on or after May 17, 1999, shall
automatically be granted, on the date of such initial election or appointment
(as the case may be), a Non-Statutory Option to purchase forty thousand (40,000)
shares of Common Stock upon the terms and conditions of this Article Three.
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2. Annual Grant. On the date of each Annual Shareholders
------------
Meeting, beginning with the 2000 Annual Meeting, each individual who is to
continue to serve as an Eligible Director shall automatically be granted,
whether or not such individual is standing for re-election as a Board member at
that Annual Meeting, a Non-Statutory Option to purchase an additional thirty
thousand (30,000) shares of Common Stock upon the terms and conditions of this
Article Three. There shall be no limit on the number of such thirty thousand
(30,000)-share option grants any one Eligible Director may receive over his or
her period of Board service.
B. Exercise Price. The exercise price per share of Common Stock
--------------
subject to each automatic option grant made under this Article Three shall be
equal to one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the automatic grant date.
C. Payment. The exercise price shall be payable in one of the
-------
alternative forms specified below:
(i) full payment in cash or check drawn to the Corporation's
order;
(ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the Exercise
Date (as such term is defined below);
(iii) full payment in a combination of shares of Common Stock
held for the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market Value on the
Exercise Date and cash or check drawn to the Corporation's order; or
(iv) full payment through a sale and remittance procedure
pursuant to which the Optionee shall provide irrevocable written instructions
to: (I) a Corporation-designated brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares; and (II) the Corporation to
deliver the certificates for the purchased shares directly to such brokerage
firm in order to complete the sale transaction.
For purposes of this subparagraph C, the Exercise Date shall be the
date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent the sale and remittance procedure specified
above is used for the exercise of the option for vested shares, payment of the
exercise price for the purchased shares must accompany the exercise notice.
D. Option Term. Each automatic grant under this Article Three shall
-----------
have a maximum term of ten (10) years measured from the automatic grant date.
E. Exercisability. Each automatic grant shall become exercisable in
--------------
a series of four (4) equal and successive annual installments over the
Optionee's period of continued service as a Board member, with the first such
installment to become exercisable one (1) year after the automatic grant date.
The exercisability of each automatic grant outstanding under this Article Three
shall be accelerated as provided in Section II.G and Section III of this Article
Three.
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F. Non-Transferability. During the lifetime of the Optionee, each
-------------------
automatic option grant shall be exercisable only by the Optionee and shall not
be assignable or transferable by the Optionee other than by will or by the laws
of descent and distribution following Optionee's death.
G. Effect of Termination of Board Membership.
-----------------------------------------
1. Should the Optionee cease to serve as a Board member for any
reason (other than death or Permanent Disability) while holding one or more
automatic option grants under this Article Three, then such individual shall
have a ninety (90)-day period following the date of such cessation of Board
membership in which to exercise each such option for any or all of the shares of
Common Stock for which that option is exercisable at the time of such cessation
of Board service. Each such option shall immediately terminate and cease to be
outstanding, at the time of such cessation of Board service, with respect to any
shares for which the option is not otherwise at that time exercisable.
2. Should the Optionee die within ninety (90) days after the
cessation of Board service, than any automatic option grant held by the Optionee
at the time of death may subsequently be exercised, for any or all of the shares
of Common Stock for which such option is exercisable at the time of the
Optionee's cessation of Board membership (less any option shares subsequently
purchased by the Optionee prior to death), by the personal representative of the
Optionee's estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent and
distribution. Any such exercise must occur within six (6) months after the date
of the Optionee's death.
3. Should the Optionee die or become Permanently Disabled while
serving as a Board member, then any automatic option grant held by such Optionee
under this Article Three shall accelerate in full, and the Optionee (or the
representative of the Optionee's estate or the person or persons to whom the
option is transferred upon the Optionee's death) shall have a six (6)-month
period following the date of the Optionee's cessation of Board membership in
which to exercise such option for any or all of the shares of Common Stock
subject to the option at the time of such cessation of Board membership.
4. In no event shall any automatic grant under this Article
Three remain exercisable after the expiration date of the ten (10)-year option
term. Upon the expiration of the applicable post-service exercise period under
subparagraph 1, 2 or 3 above or (if earlier) upon the expiration of the ten
(10)-year option term, the automatic grant shall terminate and cease to be
outstanding for any unexercised shares for which the option was otherwise
exercisable at the time of the Optionee's cessation of Board membership.
H. Shareholder Rights. The holder of an automatic option grant under
------------------
this Article Three shall have none of the rights of a shareholder with respect
to any shares subject to such option until such individual shall have exercised
the option and paid the exercise price for the purchased shares.
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I. Remaining Terms. The remaining terms and conditions of each
---------------
automatic option grant shall be as set forth in the form Director Automatic
Grant Agreement attached hereto as Exhibit "A" and incorporated herein by
reference.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL.
---------------------------------------
A. In the event of any Corporate Transaction, each automatic option
grant at the time outstanding under this Article Three shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for the Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of those shares as
fully-vested shares. Immediately after the consummation of the Corporate
Transaction, all automatic option grants under this Article Three shall
terminate and cease to be outstanding.
B. In connection with any Change in Control, each automatic option
grant at the time outstanding under this Article Three shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for the Change in Control, become fully exercisable with respect
to the total number of shares of Common Stock at the time subject to such option
and may be exercised for all or any portion of those shares as fully-vested
shares. Any option accelerated in connection with the Change in Control shall
remain fully exercisable until the expiration or sooner termination of the
option term.
C. The automatic option grants outstanding under this Article Three
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
----------------------
I. TERMS AND CONDITIONS OF STOCK ISSUANCES.
---------------------------------------
Shares may be issued under the Stock Issuance Program through direct
and immediate purchases without any intervening stock option grants. The issued
shares shall be evidenced by a Stock Issuance Agreement ("Issuance Agreement")
that complies with the terms and conditions of this Article Four.
A. Consideration.
-------------
1. Shares of Common Stock shall be issued under the Stock
Issuance Program for one or more of the following items of consideration which
the Plan Administrator may deem appropriate in each individual instance:
-16-
(i) cash or check drawn to the Corporation's order;
(ii) a promissory note payable to the Corporation's order
in one or more installments, which may be subject to cancellation in whole or in
part upon terms and conditions established by the Plan Administrator; or
(iii) past services rendered to the Corporation or any
parent or subsidiary corporation.
2. Shares of Common Stock may, in the absolute discretion of
the Plan Administrator be issued for consideration with a value less than one
hundred percent (100%) of the Fair Market Value of such shares at the time of
issuance, but in no event less than eight-five percent (85%) of such Fair Market
Value.
B. Vesting Provisions.
------------------
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the absolute discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service. The elements of the vesting schedule
applicable to any unvested shares of Common Stock issued under the Stock
Issuance Program, namely:
(i) the Service period to be completed by the Participant
or the performance objectives to be achieved by the Corporation;
(ii) the number of installments in which the shares are to
vest;
(iii) the interval or intervals (if any) which are to lapse
between installments; and
(iv) the effect which death, Permanent Disability or other
event designated by the Plan Administrator is to have upon the vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Issuance
Agreement executed by the Corporation and the Participant at the time such
unvested shares are issued.
2. The Participant shall have full shareholder rights with
respect to any shares of Common Stock issued to him or her under the Plan,
whether or not his or her interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends paid on such shares. Any new, additional or different shares of
stock or other property (including money paid other than as a regular cash
dividend) which the Participant may have the right to receive with respect to
his or her unvested shares by reason of any stock dividend, stock split,
reclassification of Common Stock or other similar change in the Corporation's
capital structure or by reason of any Corporate Transaction shall be issued,
subject to: (i) the same vesting requirements applicable to his or her unvested
shares; and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
-17-
3. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock under the Plan, then those
shares shall be immediately surrendered to the Corporation for cancellation, and
the Participant shall have no further shareholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money promissory note), the Corporation shall repay to
the Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to such surrendered shares.
4. The Plan Administrator may in its discretion elect to waive
the surrender and cancellation of one or more unvested shares of Common Stock
(or other assets attributable thereto) which would otherwise occur upon the non-
completion of the vesting schedule applicable to such shares. Such waiver shall
result in the immediate vesting of the Participant's interest in the shares of
Common Stock as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service.
II. CORPORATE TRANSACTIONS/CHANGE IN CONTROL.
----------------------------------------
A. Upon the occurrence of any Corporate Transaction, all unvested
shares of Common Stock at the time outstanding under the Stock Issuance Program
shall immediately vest in full, except to the extent the Plan Administrator
imposes limitations in the Issuance Agreement which preclude such accelerated
vesting in whole or in part.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the shares are issued under the Stock Issuance
Program or at any time while the issued shares remain unvested, to provide for
the immediate and automatic vesting of one or more of those shares at the time
of a Change in Control. The Plan Administrator shall also have full power and
authority to condition any such accelerated vesting upon the subsequent
termination of the Participant's Service within a specified period following the
Change in Control.
III. TRANSFER RESTRICTIONS/SHARE ESCROW.
----------------------------------
A. Unvested shares may, in the Plan Administrators' discretion, be
held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing such unvested shares. To the extent an
escrow arrangement is utilized, the unvested shares and any securities or other
assets issued with respect to such shares (other than regular cash dividends)
shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such shares (or other securities or assets) vests.
Alternatively, if the unvested shares are issued directly to the Participant,
the restrictive legend on the certificates for such shares shall read
substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND
ARE ACCORDINGLY SUBJECT TO: (I) CERTAIN TRANSFER
RESTRICTIONS; AND (II) CANCELLATION OR REPURCHASE IN THE
EVENT THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN
-18-
INTEREST) CEASES TO REMAIN IN THE CORPORATION'S SERVICE.
SUCH TRANSFER RESTRICTIONS AND THE TERMS AND CONDITIONS OF
SUCH CANCELLATION OR REPURCHASE ARE SET FORTH IN A STOCK
ISSUANCE AGREEMENT BETWEEN THE CORPORATION AND THE
REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) DATED
____________, ______, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE CORPORATION."
B. The Participant shall have no right to transfer any unvested
shares of Common Stock issued to him or her under the Stock Issuance Program.
For purposes of this restriction, the term "transfer" shall include (without
limitation) any sale, pledge, assignment, encumbrance, gift, or other
disposition of such shares, whether voluntary or involuntary. Upon any such
attempted transfer, the unvested shares shall immediately be canceled, and
neither the Participant nor the proposed transferee shall have any rights with
respect to those shares. However, the Participant shall have the right to make
a gift of unvested shares acquired under the Stock Issuance Program to his or
her spouse or issue, including adopted children, or to a trust established for
such spouse or issue, provided the donee of such shares delivers to the
Corporation a written agreement to be bound by all the provisions of the Stock
Issuance Program and the Issuance Agreement applicable to the gifted shares.
ARTICLE FIVE
MISCELLANEOUS
-------------
I. LOANS OR INSTALLMENT PAYMENTS.
-----------------------------
A. The Plan Administrator may, in its discretion, assist any
Optionee or Participant (including an Optionee or Participant who is an officer
of the Corporation) in the exercise of one or more options granted to such
Optionee under the Discretionary Option Grant Program or the purchase of one or
more shares issued to such Participant under the Stock Issuance Program,
including the satisfaction of any Federal and state income and employment tax
obligations arising therefrom, by: (i) authorizing the extension of a loan from
the Corporation to such Optionee or Participant; or (ii) permitting the Optionee
or Participant to pay the option price or purchase price for the purchased
Common Stock in installments over a period of years. The terms of any loan or
installment method of payment (including the interest rate and terms of
repayment) shall be upon such terms as the Plan Administrator specifies in the
applicable option or issuance agreement or otherwise deems appropriate under the
circumstances. Loans or installment payments may be authorized with or without
security or collateral. However, any loan made to a consultant or other non-
employee advisor must be secured by property other than the purchased shares of
Common Stock. In all events, the maximum credit available to the Optionee or
Participant may not exceed the option or purchase price of the acquired shares
plus any Federal and state income and
-19-
employment tax liability incurred by the Optionee or Participant in connection
with the acquisition of such shares.
B. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this financial assistance program shall
be subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Plan Administrator may deem appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS.
--------------------------------
A. The Board has complete and exclusive power and authority to amend
or modify the Plan (or any component thereof) in any or all respects whatsoever.
However, no such amendment or modification shall adversely affect rights and
obligations with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any Participant with respect to Common Stock
issued under the Stock Issuance Program prior to such action, unless the
Optionee or Participant consents to such amendment. In addition, amendments to
the Plan shall be subject to shareholder approval to the extent required under
applicable law or regulation.
B. (i) Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program; and (ii) shares of Common Stock
may be issued under the Stock Issuance Program, which are in both instances in
excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under the Discretionary Option Grant
Program or the Stock Issuance Program are held in escrow until shareholder
approval is obtained for a sufficient increase in the number of shares available
for issuance under the Plan. If such shareholder approval is not obtained
within twelve (12) months after the date the first such excess option grants or
excess share issuances are made, then: (I) any unexercised excess options shall
terminate and cease to be exercisable; and (II) the Corporation shall promptly
refund the purchase price paid for any excess shares actually issued under the
Plan and held in escrow, together with interest (at the applicable Short Term
Federal Rate) for the period the shares were held in escrow.
III. TAX WITHHOLDING.
---------------
The Corporation's obligation to deliver shares of Common Stock upon
the exercise of stock options for such shares or the vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income tax and employment tax withholding requirements.
The Plan Administrator may, in its discretion and in accordance with
the provisions of this Section III of Article Five and such supplemental rules
as the Plan Administrator may from time to time adopt (including the applicable
safe-harbor provisions of Rule 16b-3 of the Securities and Exchange Commission),
provide any or all holders of non-statutory options (other than the automatic
grants made pursuant to Article Three of the Plan) or unvested shares under the
Plan with the right to use shares of Common Stock in satisfaction of all or part
of the Federal, state and local income and employment tax liabilities incurred
by such holders in connection with the exercise of
-20-
their options or the vesting of their shares (the "Taxes"). Such right may be
provided to any such holder in either or both of the following formats:
(i) Stock Withholding. The holder of the non-statutory option
-----------------
or unvested shares may be provided with the election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such non-statutory option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the
applicable Taxes (not to exceed one hundred percent (100%)) designated by the
holder.
(ii) Stock Delivery. The Plan Administrator may, in its
--------------
discretion, provide the holder of the non-statutory option or the unvested
shares with the election to deliver to the Corporation, at the time the non-
statutory option is exercised or the shares vest, one or more shares of Common
Stock previously acquired by such individual (other than in connection with the
option exercise of share vesting triggering the Taxes) with an aggregate Fair
Market Value equal to the percentage of the Taxes incurred in connection with
such option exercise or share vesting (not to exceed one hundred percent (100%))
designated by the holder.
IV. EFFECTIVE DATE AND TERM OF PLAN.
-------------------------------
A. This Plan, as successor to the Predecessor Plan, became effective
as of the Plan Effective Date, and no further option grants or stock issuances
shall be made under the Predecessor Plan from and after the Plan Effective Date.
B. Each stock option grant outstanding under the Predecessor Plan
immediately prior to the Plan Effective Date was incorporated into this Plan and
is treated as an outstanding option under this Plan, but each such option shall
continue to be governed solely by the terms and conditions of the instrument
evidencing such grant, and nothing in this Plan shall be deemed to affect or
otherwise modify the rights or obligations of the holders of such options with
respect to their acquisition of shares of Common Stock thereunder. Each
unvested share of Common Stock outstanding under the Predecessor Plan on the
Plan Effective Date shall continue to be governed solely by the terms and
conditions of the instrument evidencing such share issuance, and nothing in this
Plan shall be deemed to affect or otherwise modify the rights or obligations of
the holder of such unvested shares.
C. The option/vesting acceleration provisions of Section III of
Article Two and Section II of Article Four relating to Corporate Transactions
and Changes in Control may, in the Plan Administrator's discretion, be extended
to one or more stock options or unvested share issuances which are outstanding
under the Predecessor Plan on the Plan Effective Date but which do not otherwise
provide for such acceleration.
D. The Plan was amended by the Board on June 5, 1995, to increase
the number of shares of Common Stock authorized for issuance under the Plan by
an additional one hundred ten thousand (110,000) shares, and the Plan was
further amended by the Board on February 29, 1996, to: (i) increase the number
of shares of Common Stock authorized for issuance under the Plan by an
additional one hundred ninety thousand (190,000) shares; and (ii) establish a
five hundred thousand (500,000)-share limit on the aggregate number of shares of
Common Stock for which any one
-21-
participant may be issued stock options and direct stock issuances over the
remaining term of the Plan. Each of the above amendments was approved by the
shareholders at the 1996 Annual Meeting.
E. The Plan was amended on November 21, 1996, to effect the
following changes: (i) increase the number of shares of Common Stock authorized
for issuance over the term of the Plan by an additional two million two hundred
thousand (2,200,000) shares; (ii) render the non-employee Board members eligible
to receive option grants under the Discretionary Option Grant Program; (iii)
provide for administration of the Plan by either a Primary Committee, Secondary
Committee or the Board; (iv) allow unvested shares issued under the Plan and
subsequently repurchased by the Company at the option exercise price or issue
price paid per share to be reissued under the Plan; (v) amend the Automatic
Option Grant Program to: (a) provide for special option grants to be made to
eligible Board members on November 21, 1996; (b) increase the number of shares
of Common Stock for which Options are to be granted to non-employee Board
members on their initial election or appointment; and (c) increase the number of
shares of Common Stock for which options are to be granted on an annual basis to
non-employee Board members upon their re-election to the Board at each Annual
Shareholders Meeting, beginning with the 1997 Annual Meeting; and (v) effect a
series of technical changes to the provisions of the Plan in order to take
advantage of the recent amendments to Rule 16b-3 of the Securities Exchange Act
of 1934 which exempts certain officer and director transactions under the Plan
from the short-swing liability provisions of the federal securities laws.
F. On April 10, 1997, the Board again amended and restated the Plan
to increase the number of shares of Common Stock reserved for issuance over the
term of the Plan by an additional one million eight hundred thousand (1,800,000)
shares.
G. Both the November 21, 1996 and the April 10, 1997 amendments were
approved by the shareholders at the 1997 Annual Meeting.
H. The Plan was also amended on May 17, 1999 to effect the following
changes: (i) increase the maximum number of shares of Common Stock authorized
for issuance over the term of the 1993 Plan from 4,690,632 to 7,000,000 shares;
(ii) increase the maximum number of options, stock appreciation rights and
direct stock issuances to any one person per calendar year to 2,000,000 shares
of Common Stock from 500,000 shares of Common Stock; and (iii) amend the
Automatic Option Grant Program to increase the number of shares of Common Stock
for which option grants are to be made to each new non-employee Board member
from 15,000 to 40,000 shares and to increase the number of shares for which
option grants are to be made annually to each continuing non-employee Board
member from 10,000 to 30,000 shares.
I. The May 17, 1999 amendments were approved by the shareholders on
October 15, 1999.
J. All option grants made prior to the May 17, 1999, amendments
shall remain outstanding in accordance with the terms and conditions of the
respective instruments evidencing those options, and nothing in the May 17,
1999, amendments shall be deemed to modify or in any way affect those
outstanding options. Subject to the foregoing limitations, the Plan
Administrator
-22-
may make option grants under the Plan at any time before the date fixed herein
for the termination of the Plan.
K. The Plan shall terminate upon the earlier of: (i) December 8,
-------
2003; or (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options granted under the
Plan or the issuance of shares (whether vested or unvested) under the Stock
Issuance Program. If the date of termination is determined under clause (i)
above, then all option grants and unvested share issuances outstanding on such
date shall thereafter continue to have force and effect in accordance with the
provisions of the instruments evidencing such grants or issuances.
V. USE OF PROCEEDS.
---------------
Any such proceeds received by the Corporation from the sale of shares
pursuant to option grants or share issuances under the Plan shall be used for
general corporate purposes.
VI. REGULATORY APPROVALS.
--------------------
A. The implementation of the Plan, the granting of any option under
the Plan, the issuance of any shares under the Stock Issuance Program, and the
issuance of Common Stock upon the exercise or surrender of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which stock of the same class is then listed.
VII. NO EMPLOYMENT/SERVICE RIGHTS.
----------------------------
Neither the action of the Corporation in establishing the Plan, nor
any action taken by the Plan Administrator hereunder, nor any provision of the
Plan shall be construed so as to grant any individual the right to remain in the
employ or service of the Corporation (or any parent or subsidiary corporation)
for any period of specific duration, and the Corporation (or any parent or
subsidiary corporation retaining the services of such individual) may terminate
such individual's employment or service at any time and for any reason, with or
without cause.
VIII. MISCELLANEOUS PROVISIONS.
------------------------
A. The right to acquire Common Stock or other assets under the Plan
may not be assigned, encumbered or otherwise transferred by any Optionee or
Participant.
-23-
B. The provisions of the Plan relating to the exercise of options
and the vesting of shares shall be governed by the laws of the State of
California, as such laws are applied to contracts entered into and performed in
such State.
C. The provisions of the Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
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