-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V8o4Pb/YrKq8YU+LUKnZizUydPRnL0amniLw5x3+eAUbG5E2l5eoJcfi7PHvd8mL p3KDzgMiRI50UpL9zxVx5w== 0000927016-98-001778.txt : 19980505 0000927016-98-001778.hdr.sgml : 19980505 ACCESSION NUMBER: 0000927016-98-001778 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19980504 EFFECTIVENESS DATE: 19980504 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXCEL SWITCHING CORP CENTRAL INDEX KEY: 0001036261 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 042992806 STATE OF INCORPORATION: MA FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-51711 FILM NUMBER: 98608959 BUSINESS ADDRESS: STREET 1: 255 INDEPENDENCE DR CITY: HYANNIS STATE: MA ZIP: 02601 BUSINESS PHONE: 5088623000 MAIL ADDRESS: STREET 1: 255 INDEPENDENCE DR CITY: HYANNIS STATE: MA ZIP: 02601 FORMER COMPANY: FORMER CONFORMED NAME: EXCEL INC DATE OF NAME CHANGE: 19970325 S-8 1 FORM S-8 As filed with the Securities and Exchange Commission on May 4, 1998. Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________________________________ FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ____________________________________ EXCEL SWITCHING CORPORATION (Exact name of registrant as specified in its charter) Massachusetts 04-2992806 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 255 Independence Drive Hyannis, Massachusetts 02601 (508) 862-3000 (Address of Principal Executive Offices) (Zip Code) ____________________________________ Stock Option Program 1997 Stock Option Plan 1997 Non-Employee Director Stock Option Plan 1997 Employee Stock Purchase Plan (Full title of the plans) ____________________________________ Robert P. Madonna Chief Executive Officer and President Excel Switching Corporation 255 Independence Drive Hyannis, Massachusetts 02601 (508) 862-3000 (Name, address and telephone number, including area code, of agent for service) ____________________________________ Copy to: CHRISTOPHER STAVROS, ESQ. JOHN HESSION, ESQ. EXCEL SWITCHING CORPORATION TESTA, HURWITZ & THIBEAULT, LLP 255 INDEPENDENCE DRIVE HIGH STREET TOWER, 125 HIGH STREET HYANNIS, MASSACHUSETTS 02601 BOSTON, MASSACHUSETTS 02110 (508) 862-3000 (617) 248-7000 ================================================================================ CALCULATION OF REGISTRATION FEE
Proposed Proposed Maximum Maximum Amount of Amount to Offering Price Aggregate Registration Title of Securities to be Registered be Registered Per Share Offering Price Fee STOCK OPTION PROGRAM Common Stock (Par Value $.01 Per Share) 5,014,840 $0.0017 (1) $ 8,525 $ 2.51 Common Stock (Par Value $.01 Per Share) 930,000 $ 0.17 (1) $ 158,100 $ 46.64 Common Stock (Par Value $.01 Per Share) 1,272,200 $ 0.33 (1) $ 419,826 $ 123.85 Common Stock (Par Value $.01 Per Share) 21,600 $ 1.00 (1) $ 21,600 $ 6.37 Common Stock (Par Value $.01 Per Share) 300,000 $ 2.33 (1) $ 699,000 $ 206.21 Common Stock (Par Value $.01 Per Share) 920,700 $ 4.50 (1) $ 4,143,150 $ 1,222.23 Common Stock (Par Value $.01 Per Share) 600,000 $ 5.00 (1) $ 3,000,000 $ 885.00 Common Stock (Par Value $.01 Per Share) 651,440 $ 6.00 (1) $ 3,908,640 $ 1,153.05 Common Stock (Par Value $.01 Per Share) 291,600 $ 7.00 (1) $ 2,041,200 $ 602.15 Common Stock (Par Value $.01 Per Share) 21,600 $ 7.50 (1) $ 162,000 $ 47.79 Common Stock (Par Value $.01 Per Share) 42,500 $ 8.50 (1) $ 361,250 $ 106.57 Common Stock (Par Value $.01 Per Share) 10,800 $ 9.50 (1) $ 102,600 $ 30.27 Common Stock (Par Value $.01 Per Share) 24,800 $ 10.50 (1) $ 260,400 $ 76.82 Common Stock (Par Value $.01 Per Share) 52,600 $ 11.50 (1) $ 604,900 $ 178.45 Common Stock (Par Value $.01 Per Share) 6,200 $ 12.50 (1) $ 77,500 $ 22.86 Common Stock (Par Value $.01 Per Share) 283,000 $ 14.50 (1) $ 4,103,500 $ 1,210.53 Common Stock (Par Value $.01 Per Share) 63,200 $ 15.50 (1) $ 979,600 $ 288.98 Common Stock (Par Value $.01 Per Share) 7,400 $ 18.00 (1) $ 133,200 $ 39.29 1997 STOCK OPTION PLAN Common Stock (Par Value $.01 Per Share) 10,000 $ 16.38 (1) $ 163,800 $ 48.32 Common Stock (Par Value $.01 Per Share) 300 $ 16.69 (1) $ 5,007 $ 1.48 Common Stock (Par Value $.01 Per Share) 13,000 $ 16.75 (1) $ 217,750 $ 64.24 Common Stock (Par Value $.01 Per Share) 1,300 $ 17.25 (1) $ 22,425 $ 6.62 Common Stock (Par Value $.01 Per Share) 24,500 $ 18.13 (1) $ 444,185 $ 131.03 Common Stock (Par Value $.01 Per Share) 5,000 $ 18.16 (1) $ 90,800 $ 26.79 Common Stock (Par Value $.01 Per Share) 16,300 $ 19.00 (1) $ 309,700 $ 91.36 Common Stock (Par Value $.01 Per Share) 1,000 $ 19.75 (1) $ 19,750 $ 5.83 Common Stock (Par Value $.01 Per Share) 1,600 $ 20.13 (1) $ 32,208 $ 9.50 Common Stock (Par Value $.01 Per Share) 9,000 $ 20.25 (1) $ 182,250 $ 53.76 Common Stock (Par Value $.01 Per Share) 23,800 $ 20.88 (1) $ 496,944 $ 146.60 Common Stock (Par Value $.01 Per Share) 16,300 $ 20.75 (1) $ 338,225 $ 99.78 Common Stock (Par Value $.01 Per Share) 2,000 $ 21.00 (1) $ 42,000 $ 12.39 Common Stock (Par Value $.01 Per Share) 12,200 $ 25.25 (1) $ 308,050 $ 90.87 Common Stock (Par Value $.01 Per Share) 2,863,700 $ 21.31 (2) $61,025,447 $18,002.51 1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN Common Stock (Par Value $.01 Per Share) 70,000 $ 21.00 (1) $ 1,470,000 $ 433.65 Common Stock (Par Value $.01 Per Share) 155,000 $ 21.31 (2) $ 3,303,050 $ 974.40 1997 EMPLOYEE STOCK PURCHASE PLAN Common Stock (Par Value $.01 Per Share) 400,000 $ 21.31 (2) $ 8,524,000 $ 2,514.58 TOTAL: 14,139,480 $98,180,582 $28,963.27
________________________________________________________________________________ (1) All such shares are issuable upon exercise of outstanding options with fixed exercise prices. Pursuant to Regulation C, Rule 457(h)(1) under the Securities Act of 1933, as amended, the aggregate offering price and the fee have been computed upon the basis of the price at which the options may be exercised. (2) The price of $21.31 per share, which is the average of the high and low prices of the common stock of the registrant reported on the Nasdaq National Market on April 29, 1998, is set forth solely for purposes of calculating the filing fee pursuant to Rule 457(c) and (h) and has been used only for those shares without a fixed exercise price. -1- PART I INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS Item 1. Plan Information. ---------------- The documents containing the information specified in this Item 1 will be sent or given to employees, directors or others as specified by Rule 428(b)(1). In accordance with the rules and regulations of the Securities and Exchange Commission (the "Commission") and the instructions to Form S-8, such documents are not being filed with the Commission either as part of this Registration Statement or as prospectuses or prospectus supplements pursuant to Rule 424. Item 2. Registrant Information and Employee Plan Annual Information. ----------------------------------------------------------- The documents containing the information specified in this Item 2 will be sent or given to employees as specified by Rule 428(b)(1). In accordance with the rules and regulations of the Commission and the instructions to Form S- 8, such documents are not being filed with the Commission either as part of this Registration Statement or as prospectuses or prospectus supplements pursuant to Rule 424. PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 3. Incorporation of Documents by Reference. --------------------------------------- The following documents filed with the Commission are incorporated by reference in this Registration Statement: (a) Registrant's Annual Report on Form 10-K for the fiscal year ended December 27, 1997; (b) The section entitled "Description of Registrant's Securities to be Registered," contained in the Registrant's Registration Statement on Form 8-A, filed on October 23, 1997 pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All documents subsequently filed with the Commission by the Registrant 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 securities offered herein have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of filing of such documents. Item 4. Description of Securities. ------------------------- Not applicable. Item 5. Interests of Named Experts and Counsel. -------------------------------------- Not applicable. -2- Item 6. Indemnification of Directors and Officers. ----------------------------------------- The Company is required by its Restated By-laws and the Restated Articles or Organization generally to indemnify any director, officer or employee against all expenses and liabilities reasonably incurred by or imposed upon such person in connection with any legal action in which such person is involved by reason of such person's position with the Company unless such person shall have been finally adjudicated in any action, suit or proceeding not to have acted in good faith in the reasonable belief that such person's action was in the best interests of the Company. The Company may pay expenses incurred by any such person in defending a civil or criminal action or proceeding in advance of the final disposition of such action upon the Company's receipt of the undertaking of such person to repay such amount if such person shall be adjudicated not to be entitled to indemnification. The Company's Restated Articles of Incorporation include a provision limiting the personal liability of a director of the Company to its stockholders for monetary damages for breaches of their fiduciary duty except (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under section sixty-one or sixty-two of Chapter 156B of the Massachusetts General Laws, or (iv) for any transaction from which the director derived an improper benefit. The Company maintains directors and officers liability insurance of the benefit of its directors and certain of its officers. Item 7. Exemption From Registration Claimed. ----------------------------------- Not applicable. Item 8. Exhibits. -------- Exhibit No. Description of Exhibit ----------- ---------------------- Exhibit 4.1 Specimen certificate representing the Common Stock of the Registrant (filed as Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-35791) and incorporated herein by reference). Exhibit 4.2 Restated Articles of Organization of the Registrant (filed as Exhibit 3.2 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-35791) and incorporated herein by reference). Exhibit 4.3 Restated By-laws of the Registrant (filed as Exhibit 3.2 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-35791) and incorporated herein by reference). Exhibit 4.4 Form of Stock Option Agreement under the Registrant's Stock Option Program (filed as Exhibit 10.4 to the Registration Statement on Form S-1 (Registration No. 333- 35791) and incorporated herein by reference). Exhibit 4.5 1997 Stock Option Plan (filed herewith). -3- Exhibit 4.6 1997 Non-Employee Director Stock Option Plan (filed as Exhibit 10.2 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-35791) and incorporated herein by reference). Exhibit 4.7 1997 Employee Stock Purchase Plan (filed as Exhibit 10.3 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-35791) and incorporated herein by reference). Exhibit 4.8 Form of Non-Qualified Stock Option Agreement under the Registrant's 1997 Stock Option Plan (filed herewith). Exhibit 4.9 Form of Incentive Stock Option Agreement under the Registrant's 1997 Stock Option Plan (filed herewith). Exhibit 4.10 Form of Non-Qualified Stock Option Agreement under the Registrant's 1997 Non-Employee Director Stock Option Plan (filed herewith). Exhibit 5.1 Opinion of Testa, Hurwitz & Thibeault, LLP (filed herewith). Exhibit 23.1 Consent of Testa, Hurwitz & Thibeault, LLP (contained in Exhibit 5.1). Exhibit 23.2 Consent of Arthur Andersen LLP (filed herewith). Exhibit 24.1 Power of Attorney (included as part of the signature page to this Registration Statement). Item 9. Undertakings. ------------ (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the Registration Statement; -4- (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. -5- SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant, Excel Switching Corporation, certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Hyannis, Massachusetts, on this 1st day of May, 1998. EXCEL SWITCHING CORPORATION By: /s/ Robert P. Madonna --------------------- Robert P. Madonna Chief Executive Officer and President POWER OF ATTORNEY We, the undersigned officers and directors of Excel Switching Corporation, hereby severally constitute and appoint Christopher Stavros and Stephen S. Galliker, and each of them singly, our true and lawful attorneys, with full power to them and each of them singly, to sign for us in our names in the capacities indicated below, any amendments to this Registration Statement on Form S-8 (including post-effective amendments), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and generally to do all things in our names and on our behalf in our capacities as officers and directors to enable Excel Switching Corporation, to comply with the provisions of the Securities Act of 1933, as amended, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Registration Statement and all amendments thereto. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE(S) DATE --------- ------- ----- /s/ Robert P. Madonna Chief Executive Officer, President and May 1, 1998 - -------------------------------------- Director (Principal Executive Officer) Robert P. Madonna /s/ Stephen S. Galliker Chief Financial Officer May 1, 1998 - -------------------------------------- (Principal Financial and Accounting Stephen S. Galliker Officer) /s/ Christopher Stavros Director, Vice President and General May 1, 1998 - -------------------------------------- Counsel Christopher Stavros /s/ Edward Breslow Director May 1, 1998 - -------------------------------------- Edward Breslow /s/ John Loughlin Director May 1, 1998 - -------------------------------------- John Loughlin
-6- Exhibit Index -------------
Exhibit No. Description of Exhibit ----------- ----------------------- 4.1 Specimen certificate representing the Common Stock of the Registrant (filed as Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-35791) and incorporated herein by reference). 4.2 Restated Articles of Organization of the Registrant (filed as Exhibit 3.2 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-35791) and incorporated herein by reference). 4.3 Restated By-laws of the Registrant (filed as Exhibit 3.2 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-35791) and incorporated herein by reference). 4.4 Form of Stock Option Agreement under the Registrant's Stock Option Program (filed as Exhibit 10.4 to the Registration Statement on Form S-1 (Registration No. 333-35791) and incorporated herein by reference). 4.5 1997 Stock Option Plan (filed herewith). 4.6 1997 Non-Employee Director Stock Option Plan (filed as Exhibit 10.2 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-35791) and incorporated herein by reference). 4.7 1997 Employee Stock Purchase Plan (filed as Exhibit 10.3 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-35791) and incorporated herein by reference). 4.8 Form of Non-Qualified Stock Option Agreement under the Registrant's 1997 Stock Option Plan (filed herewith). 4.9 Form of Incentive Stock Option Agreement under the Registrant's 1997 Stock Option Plan (filed herewith). 4.10 Form of Non-Qualified Stock Option Agreement under the Registrant's 1997 Non-Employee Director Stock Option Plan (filed herewith). 5.1 Opinion of Testa, Hurwitz & Thibeault, LLP (filed herewith). 23.1 Consent of Testa, Hurwitz & Thibeault, LLP (contained in Exhibit 5.1). 23.2 Consent of Arthur Andersen LLP (filed herewith). 24.1 Power of Attorney (included as part of the signature page to this Registration Statement).
EX-4.5 2 STOCK OPTION PLAN Exhibit 4.5 EXCEL SWITCHING CORPORATION 1997 STOCK OPTION PLAN ---------------------- 1. PURPOSE. This 1997 Stock Option Plan (the "Plan") is intended to ------- provide incentives: (a) to the officers and other employees of Excel Switching Corporation (the "Company"), any present or future parent and any present or future subsidiaries of the Company (collectively, "Related Corporations") by providing them with opportunities to purchase stock in the Company pursuant to options granted hereunder which qualify as "incentive stock options" ("ISO" or "ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code"); (b) to directors, officers, employees and consultants of the Company and Related Corporations by providing them with opportunities to purchase stock in the Company pursuant to options granted hereunder which do not qualify as ISOs ("Non-Qualified Option" or "Non-Qualified Options"); (c) to directors, officers, employees and consultants of the Company and Related Corporations by providing them with awards of stock in the Company ("Awards"); and (d) to directors, officers, employees and consultants of the Company and Related Corporations by providing them with opportunities to make direct purchases of stock in the Company ("Purchases"). Both ISOs and Non-Qualified Options are referred to hereafter individually as an "Option" and collectively as "Options". Options, Awards and authorizations to make Purchases are referred to hereafter collectively as "Stock Rights". As used herein, the terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary corporation", respectively, as those terms are defined in Section 424 of the Code. 2. ADMINISTRATION OF THE PLAN. --------------------------- A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered by --------------------------------- the Board of Directors of the Company (the "Board") or, subject to paragraph 2(d) (relating to compliance with Section 162(m) of the Code), by a committee appointed by the Board (the "Committee"). Hereinafter, all references in this Plan to the "Committee" shall mean the Board if no Committee has been appointed. Subject to ratification of the grant or authorization of each Stock Right by the Board (if so required by applicable state law), and subject to the terms of the Plan, the Committee shall have the authority to (i) determine the employees of the Company and Related Corporations (from among the class of employees eligible under paragraph 3 to receive ISOs) to whom ISOs may be granted, and to determine (from among the class of individuals and entities eligible under paragraph 3 to receive Non-Qualified Options and Awards and to make Purchases) to whom Non-Qualified Options, Awards and authorizations to make Purchases may be granted; (ii) determine the time or times at which Options or Awards may be granted or Purchases made; (iii) determine the exercise price per share subject to each Option, which price shall not be less than the minimum price specified in paragraph 6, and the purchase price of shares subject to each Purchase; (iv) determine whether each Option granted shall be an ISO or a Non-Qualified Option; (v) determine (subject to paragraph 7) the time or times when each Option shall become exercisable and the duration of the exercise period; (vi) extend the period during which outstanding Options may be exercised; (vii) determine whether restrictions such as repurchase options are to be imposed on shares subject to Options, Awards and Purchases and the nature of such restrictions, if any; (viii) interpret the Plan and prescribe and rescind rules and regulations relating to it; and (ix) authorize executive officers of the Company to (a) execute option agreements with individuals hired as employees of the Company during the periods between Comittee meetings, not including individuals hired as executive officers, as of the date of hire of each individual employee, and (b) determine the number of Options to be issued to such employee, subject to the specific limitations set forth by the Committee in its grant of authority to such executive officer. If the Committee determines to issue a Non-Qualified Option, it shall take whatever actions it deems necessary, under Section 422 of the Code and the regulations promulgated thereunder, to ensure that such Option is not treated as an ISO. The interpretation and construction by the Committee of any provisions of the Plan or of any Stock Right granted under it shall be final unless otherwise determined by the Board. The Committee may from time to time adopt such rules and regulations for carrying out the Plan as it may deem best. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Stock Right granted under it. B. COMMITTEE ACTION. The Committee may select one of its members as its ---------------- chairman, and shall hold meetings at such time and places as it may determine. Acts by a majority of the Committee, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer the Plan. C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock Rights may be granted to -------------------------------------- members of the Board. All grants of Stock Rights to members of the Board shall in all other respects be made in accordance with the provisions of this Plan applicable to other eligible persons. Members of the Board who are either (i) eligible for Stock Rights pursuant to the Plan or (ii) have been granted Stock Rights may vote on any matters affecting the administration of the Plan or the grant of any Stock Rights pursuant to the Plan, except that no such member shall act upon the granting to himself of Stock Rights, but any such member may be counted in determining the existence of a quorum at any meeting of the Board during which action is taken with respect to the granting to him of Stock Rights. D. PERFORMANCE-BASED COMPENSATION. The Board, in its discretion, may take ------------------------------ such action as may be necessary to ensure that Stock Rights granted under the Plan qualify as "qualified performance-based compensation" within the meaning of Section 162(m) of the Code and applicable regulations promulgated thereunder ("Performance-Based Compensation"). Such action may include, in the Board's discretion, some or all of the following (i) if the Board determines that Stock Rights granted under the Plan generally shall constitute Performance-Based Compensation, by a committee consisting solely of two or more "outside directors (as defined in applicable regulations promulgated under Section 162(m) of the Code), (ii) if any Non-Qualified Options with an exercise price less than the fair market value per share of Common Stock are granted under the Plan and the Board determines that such Options should constitute Performance-Based Compensation, such options shall be made exercisable only upon the attainment of a pre-established, objective performance goal established by the Committee, and such grant shall be submitted for, and shall be contingent upon shareholder approval and (iii) Stock Rights granted under the Plan may be subject to such other terms and conditions as are necessary for compensation recognized in connection with the exercise or disposition of such Stock Right or the disposition of Common Stock acquired pursuant to such Stock Right, to constitute Performance-Based Compensation. 3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees ----------------------------- of the Company or any Related Corporation. Non-Qualified Options, Awards and authorizations to make Purchases may be granted to any director (whether or not an employee), officer, employee or consultant of the Company or any Related Corporation. Notwithstanding the foregoing, effective only on and after the date of the Company's initial public offering, non-employee directors shall no longer be eligible to participate in this Plan. The Committee may take into consideration a recipient's individual circumstances in determining whether to grant an ISO, a Non-Qualified Option or an authorization to make a Purchase. Granting of any Stock Right to any individual or entity shall neither entitle that individual or entity to, nor disqualify him from, participation in any other grant of Stock Rights. 4. STOCK. The stock subject to Options, Awards and Purchases shall be ----- authorized but unissued shares of Common Stock of the Company, par value $.01 per share (the "Common Stock"), or shares of Common Stock reacquired by the Company in any manner. The aggregate number of shares which may be issued pursuant to the Plan is 3,000,000 shares, subject to adjustment as provided in paragraph 13. If any Option granted under the Plan shall expire or terminate for any reason without having been exercised in full or shall cease for any reason to be exercisable in whole or in part, the shares subject to such Options shall again be available for grants of Stock Rights under the Plan. The following provision shall be effective only on and after the date of the initial public offering of shares of Common Stock of the Company pursuant to the Securities Act of 1933, as amended. If any Option granted under the Plan shall expire or terminate for any reason without having been exercised in full or shall cease for any reason to be exercisable in whole or in part or shall be repurchased by the Company, the shares subject to such Option shall be included in the determination of the aggregate number of shares of Common Stock deemed to have been granted to such employee under the Plan. 5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan ------------------------ at any time on or after September 16, 1997 and prior to September 15, 2007. The date of grant of a Stock Right under the Plan will be the date specified by the Committee at the time it grants the Stock Right; provided, however, that such date shall not be prior to the date on which the Committee acts to approve the grant. 6. MINIMUM OPTION PRICE; ISO LIMITATIONS. ------------------------------------- A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS, AND PURCHASES. Subject to ------------------------------------------------------ paragraph 2(D) (relating to compliance with Section 162(m) of the Code), the exercise price per share specified in the agreement relating to each Non- Qualified Option granted and the purchase price per share of stock granted in any Award or authorized as a Purchase under the Plan shall in no event be less than the minimum legal consideration required therefor under the laws of any jurisdiction in which the Company or its successors in interest may be organized. B. PRICE FOR ISOS. The exercise price per share specified in the -------------- agreement relating to each ISO granted under the Plan shall not be less than the fair market value per share of Common Stock on the date of such grant. In the case of an ISO to be granted to an employee owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Related Corporation, the price per share specified in the agreement relating to such ISO shall not be less than one hundred ten percent (110%) of the fair market value per share of Common Stock on the date of grant. For purposes of determining stock ownership under this paragraph, the rules of Section 424(d) of the Code shall apply. C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee may ----------------------------------------- be granted options treated as ISOs only to the extent that, in the aggregate under this Plan and all incentive stock option plans of the Company and any Related Corporation, such ISOs do not become exercisable for the first time by such employee during any calendar year in a manner which would entitle the employee to purchase more than $100,000 in fair market value (determined at the time the ISOs were granted) of Common Stock in that year. Any options granted to an employee in excess of such amount will be granted as Non- Qualified Options, and the Company shall issue separate certificates to the optionee with respect to options that are Non-Qualified Options and Options that are ISOs. D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is ---------------------------------- granted under the Plan, the Company's Common Stock is publicly traded, "fair market value" shall be determined as of the date of grant or, if the prices or quotes discussed in this sentence are unavailable for such date, the last business day for which such prices or quotes are available prior to the date such Option is granted and shall mean (i) the average (on that date) of the high and low prices of the Common Stock on the principal national securities exchange on which the Common Stock is traded, if the Common Stock is then traded on a national securities exchange; or (ii) the last reported sale price (on that date) of the Common Stock on the Nasdaq National Market, if the Common Stock is not then traded on a national securities exchange; or (iii) the average of the closing bid and asked prices last quoted (on that date) by an established quotation service for over-the-counter securities, if the Common Stock is not reported on the Nasdaq National Market. However, if the Common Stock is not publicly traded at the time an Option is granted under the Plan, "fair market value" shall be deemed to be the fair value of the Common Stock as determined by the Committee after taking into consideration all factors which it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm's length. 7. OPTION DURATION. Subject to earlier termination as provided in --------------- paragraphs 9 and 10 or in the agreement relating to such Option, each Option shall expire on the date specified by the Committee, but not more than (i) ten years and one day from the date of grant in the case of Non-Qualified Options, (ii) ten years from the date of grant in the case of ISOs generally, and (iii) five years from the date of grant in the case of ISOs granted to an employee owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Related Corporation, as determined under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9 and 10, the term of each ISO shall be the term set forth in the original instrument granting such ISO, except with respect to any part of such ISO that is converted into a Non-Qualified Option pursuant to paragraph 16. 8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through ------------------ 12, 21 and 22 each Option granted under the Plan shall be exercisable as follows: A. FULL VESTING OR PARTIAL VESTING. The Option shall either be fully ------------------------------- exercisable on the date of grant or shall become exercisable thereafter in such installments as the Committee may specify. B. FULL VESTING OF INSTALLMENTS. Once an installment becomes exercisable ---------------------------- it shall remain exercisable until expiration or termination of the Option, unless otherwise specified by the Committee or as otherwise provided in this Plan. C. PARTIAL EXERCISE. Each Option or installment may be exercised at any ---------------- time or from time to time, in whole or in part, for up to the total number of shares with respect to which it is then exercisable. D. ACCELERATION OF VESTING. Subject to any accounting considerations with ----------------------- respect to "Accounting for Business Combinations" pursuant to Accounting Principles Board Opinion No. 16, The Committee shall have the right to accelerate the date of exercise of any installment of any Option; provided that the Committee shall not accelerate the exercise date of any installment of any Option granted to any employee as an ISO (and not previously converted into a Non-Qualified Option pursuant to paragraph 16) if such acceleration would violate the annual vesting limitation contained in Section 422(d) of the Code, as described in paragraph 6(C). 9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the ------------------------- Agreement relating to such ISO, if an ISO Optionee ceases to be employed by the Company and all Related Corporations other than by reason of death or disability as defined in paragraph 10, no further installments of his ISOs shall become exercisable, and his ISOs shall terminate after the passage of ninety (90) days from the date of termination of his employment, but in no event later than on their specified expiration dates, except to the extent that such ISOs (or unexercised installments thereof) have been converted into Non-Qualified Options pursuant to paragraph 16. Employment shall be considered as continuing uninterrupted during any bona fide leave of absence (such as those attributable to illness, military obligations or governmental service) provided that the period of such leave does not exceed ninety (90) days or, if longer, any period during which such Optionee's right to reemployment is guaranteed by statute or by contract. A bona fide leave of absence with the written approval of the Committee shall not be considered an interruption of employment under the Plan, provided that such written approval contractually obligates the Company or any Related Corporation to continue the employment of the Optionee after the approved period of absence. ISOs granted under the Plan shall not be affected by any change of employment within or among the Company and Related Corporations, so long as the Optionee continues to be an employee of the Company or any Related Corporation. Nothing in the Plan shall be deemed to give any grantee of any Stock Right the right to be retained in employment or other service by the Company or any Related Corporation for any period of time. 10. DEATH; DISABILITY. ----------------- A. DEATH. If an ISO Optionee ceases to be employed by the Company and all ----- Related Corporations by reason of his or her death, any ISO owned by such Optionee may be exercised, to the extent of the number of shares with respect to which he or she could have exercised it on the date of his or her death, by the estate, personal representative or beneficiary who has acquired the ISO by will or by the laws of descent and distribution, at any time prior to the earlier of (i) the specified expiration date of the ISO or (ii) 180 days from the date of the Optionee's death. B. DISABILITY. If an ISO Optionee ceases to be employed by the Company ---------- and all Related Corporations by reason of his or her disability, such Optionee shall have the right to exercise any ISO held by him or her on the date of termination of employment, to the extent of the number of shares with respect to which he or she could have exercised it on that date, until the earlier of (i) the specified expiration date of the ISO or (ii) 180 days from the date of the termination of the Optionee's employment. For the purposes of the Plan, the term "disability" shall mean "permanent and total disability" as defined in Section 22(e)(3) of the Code or successor statute. 11. ASSIGNABILITY. No Option shall be assignable or transferable by the ------------- Optionee except by will or by the laws of descent and distribution or in case of Non-Qualified Options only, pursuant to a valid domestic relations order, and during the lifetime of the Optionee each Option shall be exercisable only by him or her. 12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by ------------------------------- instruments (which need not be identical) in such forms as the Committee may from time to time approve. Such instruments shall conform to the terms and conditions set forth in paragraphs 6 through 11 hereof and may contain such other provisions as the Committee deems advisable which are not inconsistent with the Plan, including restrictions applicable to shares of Common Stock issuable upon exercise of Options. In granting any Non-Qualified Option, the Committee may specify that such Non-Qualified Option shall be subject to the restrictions set forth herein with respect to ISOs, or to such other termination and cancellation provisions as the Committee may determine. The Committee may from time to time confer authority and responsibility on one or more of its own members and/or one or more officers of the Company to execute and deliver such instruments. The proper officers of the Company are authorized and directed to take any and all action necessary or advisable from time to time to carry out the terms of such instruments. 13. ADJUSTMENTS. Upon the occurrence of any of the following events, an ----------- Optionee's rights with respect to Options granted to him hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in the written agreement between the Optionee and the Company relating to such Option: A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock shall -------------------------------- be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of Common Stock deliverable upon the exercise of Options shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or stock dividend. B. CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated with ------------------------- or acquired by another entity in a merger or other reorganization in which the holders of the outstanding voting stock of the Company immediately preceding the consummation of such event, shall, immediately following such event, hold as a group, less than a majority of the voting securities of the surviving or successor entity, or in the event of a sale of all or substantially all of the Company's assets or otherwise (an "Acquisition"), the Committee or the board of directors of any entity assuming the obligations of the Company hereunder (the "Successor Board"), shall, as to outstanding Options, take one or more of the following actions: (i) make appropriate provision for the continuation of such Options by substituting on an equitable basis for the shares then subject to such Options the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition; or (ii) make appropriate provision for the continuation of such Options by substituting on an equitable basis for the shares then subject to such Options any equity securities of the successor corporation or such other securities as the Successor Board deems appropriate, the fair market value of which shall not materially exceed the fair market value of the shares of Common Stock subject to such Options immediately preceding the Acquisition; or (iii) upon written notice to the Optionees, provide that all Options must be exercised, to the extent then exercisable, within a specified number of days of the date of such notice, at the end of which period the Options shall terminate; or (iv) terminate all Options in exchange for a cash payment equal to the excess of the fair market value of the shares subject to such Options (to the extent then exercisable) over the exercise price thereof; or (v) accelerate the date of exercise of such Options or of any installment of any such Options; or (vi) terminate all Options in exchange for the right to participate in any stock option or other employee benefit plan of any successor corporation. The foregoing actions are subject in all instances to the approval of the Board of Directors and any accounting considerations for any acquisition which is treated as a "pooling of interests" transaction pursuant to the Accounting Principles Board (APB) Opinion No. 16, if any discretionary action by the Board of Directors would otherwise violate the accounting rules for treatment of the Acquisition as a "pooling of interests" under APB No. 16. C. RECAPITALIZATION OR REORGANIZATION. In the event of a recapitalization ---------------------------------- or reorganization of the Company (other than a transaction described in subparagraph B above) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, an Optionee upon exercising an Option shall be entitled to receive for the purchase price paid upon such exercise the securities he or she would have received if he or she had exercised his or her Option prior to such recapitalization or reorganization. D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any adjustments -------------------- made pursuant to subparagraphs A, B or C with respect to ISOs shall be made only after the Committee, after consulting with counsel for the Company, determines whether such adjustments would constitute a "modification" of such ISOs (as that term is defined in Section 424 of the Code) or would cause any adverse tax consequences for the holders of such ISOs. If the Committee determines that such adjustments made with respect to ISOs would constitute a modification of such ISOs, or would cause adverse tax consequences to the holders, it may refrain from making such adjustments. E. DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution -------------------------- or liquidation of the Company, each Option will terminate immediately prior to the consummation of such proposed action or at such other time and subject to such other conditions as shall be determined by the Committee. F. ISSUANCES OF SECURITIES. Except as expressly provided herein, no ----------------------- issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to Options. No adjustments shall be made for dividends paid in cash or in property other than securities of the Company. G. FRACTIONAL SHARES. No fractional shares shall be issued under the Plan ----------------- and the Optionee shall receive from the Company cash in lieu of such fractional shares. H. ADJUSTMENTS. Upon the happening of any of the foregoing events ----------- described in subparagraphs A, B or C above, the class and aggregate number of shares set forth in paragraph 4 hereof that are subject to Stock Rights which previously have been or subsequently may be granted under the Plan shall also be appropriately adjusted to reflect the events described in such subparagraphs. The Committee or the Successor Board shall determine the specific adjustments to be made under this paragraph 13 and, subject to paragraph 2, its determination shall be conclusive. If any person or entity owning restricted Common Stock obtained by exercise of a Stock Right made hereunder receives shares or securities or cash in connection with a corporate transaction described in subparagraphs A, B or C above as a result of owning such restricted Common Stock, such shares or securities or cash shall be subject to all of the conditions and restrictions applicable to the restricted Common Stock with respect to which such shares or securities or cash were issued, unless otherwise determined by the Committee or the Successor Board. 14. MEANS OF EXERCISING STOCK RIGHTS. A Stock Right (or any part or -------------------------------- installment thereof) shall be exercised by giving written notice to the Company at its principal office address. Such notice shall identify the Stock Right being exercised and specify the number of shares as to which such Stock Right is being exercised, accompanied by full payment of the purchase price therefor either (a) in United States dollars in cash or by check, or (b) at the discretion of the Committee, through delivery of shares of Common Stock having a fair market value equal as of the date of the exercise to the cash exercise price of the Stock Right, or (c) at the discretion of the Committee, by delivery of the grantee's personal recourse note bearing interest payable not less than annually at no less than 100% of the lowest applicable Federal rate, as defined in Section 1274(d) of the Code, or (d) at the discretion of the Committee and consistent with applicable law, through the delivery of an assignment to the Company of a sufficient amount of the proceeds from the sale of the Common Stock acquired upon exercise of the Option and an authorization to the broker or selling agent to pay that amount to the Company, which sale shall be at the participant's direction at the time of exercise, or (e) at the discretion of the Committee, by any combination of (a), (b), (c) and (d) above. If the Committee exercises its discretion to permit payment of the exercise price of an ISO by means of the methods set forth in clauses (b), (c), (d) or (e) of the preceding sentence, such discretion shall be exercised in writing at the time of the grant of the ISO in question. The holder of a Stock Right shall not have the rights of a shareholder with respect to the shares covered by his Stock Right until the date of issuance of a stock certificate to him for such shares. Except as expressly provided above in paragraph 13 with respect to changes in capitalization and stock dividends, no adjustment shall be made for dividends or similar rights for which the record date is before the date such stock certificate is issued. 15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board as of -------------------------- September 16, 1997, subject (with respect to the validation of ISOs granted under the Plan) to approval of the Plan by the stockholders of the Company at the next Meeting of Stockholders or, in lieu thereof, by unanimous written consent. If the approval of stockholders is not obtained by September 16, 1998, any grants of Options under the Plan made prior to that date will be rescinded. The Plan shall expire at the end of the day on September 15, 2007 (except as to Options outstanding on that date). Subject to the provisions of paragraph 5 above, Stock Rights may be granted under the Plan prior to the date of stockholder approval of the Plan. The Board may terminate or amend the Plan in any respect at any time, except that, without the approval of the stockholders obtained within 12 months before or after the Board adopts a resolution authorizing any of the following actions: (a) the total number of shares that may be issued under the Plan may not be increased (except by adjustment pursuant to paragraph 13); (b) the benefits accruing to participants under the Plan may not be materially increased; (c) the requirements as to eligibility for participation in the Plan may not be materially modified; (d) the provisions of paragraph 3 regarding eligibility for grants of ISOs may not be modified; (e) the provisions of paragraph 6(B) regarding the exercise price at which shares may be offered pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph 13); (f) the expiration date of the Plan may not be extended; and (g) the Board may not take any action which would cause the Plan to fail to comply with Rule 16b-3. Except as otherwise provided in this paragraph 15, in no event may action of the Board or stockholders alter or impair the rights of a grantee, without his consent, under any Stock Right previously granted to him. 16. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOS. ------------------------------------------------------------------ Subject to paragraph 13(D), without the prior written consent of the holder of an ISO, the Committee shall not alter the terms of such ISO (including the means of exercising such ISO) if such alteration would constitute a modification (within the meaning of Section 424(h)(3) of the Code). The Committee, at the written request or with the written consent of any Optionee, may in its discretion take such actions as may be necessary to convert such Optionee's ISOs (or any installments or portions of installments thereof) that have not been exercised on the date of conversion into Non-Qualified Options at any time prior to the expiration of such ISOs, regardless of whether the Optionee is an employee of the Company or a Related Corporation at the time of such conversion. Such actions may include, but shall not be limited to, extending the exercise period or reducing the exercise price of the appropriate installments of such ISOs. At the time of such conversion, the Committee (with the consent of the Optionee) may impose such conditions on the exercise of the resulting Non-Qualified Options as the Committee in its discretion may determine, provided that such conditions shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to give any Optionee the right to have such Optionee's ISOs converted into Non-Qualified Options, and no such conversion shall occur until and unless the Committee takes appropriate action. Upon the taking of such action, the Company shall issue separate certificates to the Optionee with respect to Options that are Non-Qualified Options and Options that are ISOs. 17. APPLICATION OF FUNDS. The proceeds received by the Company from the -------------------- sale of shares pursuant to Options granted and Purchases authorized under the Plan shall be used for general corporate purposes. 18. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver ----------------------- shares of the Common Stock under this Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance or sale of such shares. 19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a Non- -------------------------------------- Qualified Option, the grant of an Award, the making of a Purchase of Common Stock for less than its fair market value, the making of a Disqualifying Disposition (as defined in paragraph 20), the making of a distribution or other payment with respect to such stock or securities, or the vesting or transfer of restricted Common Stock acquired on the exercise of a Stock Right hereunder, the Company may withhold income and/or employment taxes in respect of amounts that constitute compensation includible in gross income, or otherwise treated by law as wages for withholding for income or employment tax purposes. The Committee in its discretion may condition (i) the exercise of an Option, (ii) the grant of an Award, (iii) the making of a Purchase of Common Stock for less than its fair market value, or (iv) the vesting or transferability of restricted Common Stock acquired by exercising a Stock Right, on the grantee's making satisfactory arrangement for such withholding. Such arrangement may include payment by the grantee in cash or by check of the amount of the withholding taxes or, at the discretion of the Company, by the grantee's delivery of previously held shares of Common Stock or the withholding from the shares of Common Stock otherwise deliverable upon exercise of Option shares having an aggregate fair market value equal to the amount of such withholding taxes. The use of any method of payment other than by cash or check in some cases may require or cause additional withholding obligations. 20. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO ---------------------------------------------- granted under the Plan, each ISO Optionee thereby agrees to notify the Company in writing immediately after such Optionee makes a Disqualifying Disposition of any Common Stock acquired pursuant to the exercise of an ISO. Generally, a Disqualifying Disposition is any disposition (including any sale) of such Common Stock occurring on or before the later of the date (a) two years after the date the employee was granted the ISO, or (b) one year after the date the employee acquired Common Stock by exercising the ISO. 21. NO EXERCISE OF OPTION IF ENGAGEMENT OR EMPLOYMENT TERMINATED FOR ---------------------------------------------------------------- CAUSE. If the employment of the Optionee is terminated for "Cause," this option shall terminate on the date of such termination and the Option shall thereupon not be exercisable to any extent whatsoever. "Cause" is conduct, as determined by the Board of Directors, involving one or more of the following: (i) gross misconduct by the employee which is materially injurious to the Company; or (ii) the commission of an act of embezzlement, fraud or deliberate disregard of the rules or policies of the Company which results in material economic loss, damage or injury to the Company; or (iii) the unauthorized disclosure of any trade secret or confidential information of the Company or any third party who has a business relationship with the Company or the violation of any noncompetition covenant or assignment of inventions obligation with the Company; or (iv) the commission of an act which induces any customer or prospective customer of the Company to break a contract with the Company or to decline to do business with the Company; or (v) the conviction of the employee of a felony involving any financial impropriety or which would materially interfere with the employee's ability to perform his or her services or otherwise be injurious to the Company; or (vi) the failure of the employee to perform in a material respect his or her employment obligations without proper cause. In making such determination, the Board shall act fairly and in utmost good faith. For the purposes of this Section 21, termination of employment shall be deemed to occur when the employee receives notice that his employment is terminated. 22. ACCELERATION AND VESTING OF OPTION FOR BUSINESS COMBINATIONS. Upon ------------------------------------------------------------ any merger, consolidation, sale of all (or substantially all) of the assets of the Company, or other business combination involving the sale or transfer of all (or substantially all) of the capital stock or assets of the Company in which the Company is not the surviving entity, or, if it is the surviving entity, does not survive as an operating going concern in substantially the same line of business (an "Acquisition"), then the remaining unvested portions of any Option outstanding to any Optionee shall, immediately prior to the consummation of any of the foregoing events, become vested and immediately exercisable by the Optionee according to the following formula and dependent upon the length of the Optionee's continuous months of employment or engagement by the Company prior to the consummation of the Acquisition, provided, however, that this Section shall ----------------- not apply to any reincorporation of the Company in a different State pursuant to a migratory merger: For an Optionee: (i) If the Optionee has been employed by the Company for 36 months or more, then the remaining unvested portion of any Option held by such Optionee shall become fully vested and exercisable. (ii) If the Optionee has been employed by the Company for more than 30 but less than 36 months, then 80% of the remaining unvested portion of any Option held by such Optionee shall become fully vested and exercisable. (iii) If the Optionee has been employed by the Company for more than 24 but less than 30 months, then 50% of the remaining unvested portion of any Option held by such Optionee shall become fully vested and exercisable. (iv) If the Optionee has been employed by the Company for more than 18 but less than 24 months, then 40% of the remaining unvested portion of any Option held by such Optionee shall become fully vested and exercisable. (v) If the Optionee has been employed by the Company for more than 12 but less than 18 months, then 30% of the remaining unvested portion of any Option held by such Optionee shall become fully vested and exercisable. (vi) If the Optionee has been employed by the Company for more than 6 but less than 12 months, then 20% of the remaining unvested portion of any Option held by such Optionee shall become fully vested and exercisable. (vii) If the Optionee has been employed by the Company for more than 1 but less than 6 months, then 10% of the remaining unvested portion of any Option held by such Optionee shall become fully vested and exercisable. 23. GOVERNING LAW; CONSTRUCTION. The validity and construction of the --------------------------- Plan and the instruments evidencing Stock Rights shall be governed by the laws of the Commonwealth of Massachusetts or the laws of any jurisdiction in which the Company or its successors in interest may be organized. In construing this Plan, the singular shall include the plural and the masculine gender shall include the feminine and neuter, unless the context otherwise requires. EX-4.8 3 NON QUALIFIED STOCK OPTION AGREEMENT Exhibit 4.8 EXCEL SWITCHING CORPORATION --------------------------- NON-QUALIFIED STOCK OPTION AGREEMENT ------------------------------------ Excel Switching Corporation, a Massachusetts corporation (the "Company"), hereby grants as of [DATE] to [NAME OF OPTIONEE] (the "Optionee"), an option to purchase a maximum of [NUMBER] shares (the "Option Shares") of its Common Stock, $.01 par value ("Common Stock"), at the price of $[PRICE] per share, on the following terms and conditions: 1. GRANT UNDER 1997 STOCK OPTION PLAN. This option is granted ---------------------------------- pursuant to and is governed by the Company's 1997 Stock Option Plan (the "Plan") and, unless the context otherwise requires, terms used herein shall have the same meaning as in the Plan. Determinations made in connection with this option pursuant to the Plan shall be governed by the Plan as it exists on this date. 2. GRANT AS NON-QUALIFIED OPTION; OTHER OPTIONS. This option -------------------------------------------- shall be treated for federal income tax purposes as a Non-Qualified Option (rather than an incentive stock option). This option is in addition to any other options heretofore or hereafter granted to the Optionee by the Company or any Related Corporation (as defined in the Plan), but a duplicate original of this instrument shall not effect the grant of another option. 3. VESTING OF OPTION IF BUSINESS RELATIONSHIP CONTINUES. If ---------------------------------------------------- the Optionee has continued to serve the Company or any Related Corporation in the capacity of an employee, officer, director or consultant (such service is described herein as maintaining or being involved in a "Business Relationship with the Company") on the following dates, the Optionee may exercise this option for the number of shares of Common Stock set opposite the applicable date: Less than one year from the date hereof - 0 shares One year but less than two years from the - 20% of the Option Shares date hereof Two years but less than three years from - an additional 20% of the the date hereof Option Shares Three years but less than four years from - an additional 20% of the the date hereof Option Shares Four years but less than five years from - an additional 20% of the the date hereof Option Shares Five years or more from the date hereof - an additional 20% of the Option Shares Notwithstanding the foregoing, in accordance with and subject to the provisions of the Plan, the Committee may, in its discretion, accelerate the date that any installment of this Option becomes exercisable. The foregoing rights are cumulative and (subject to Sections 4 or 5 hereof if the Employee ceases to be employed by the Company and all Related Corporations) may be exercised up to and including the date which is ten years from the date this option is granted. 4. TERMINATION OF BUSINESS RELATIONSHIP. ------------------------------------ (A) TERMINATION OTHER THAN FOR CAUSE. If the Optionee's Business ----------------- ---- --- ----- Relationship with the Company and all Related Corporations is terminated, other than by reason of death or disability as defined in Section 5 or termination for Cause as defined in Section 4(c), no further installments of this option shall become exercisable, and this option shall terminate (and may no longer be exercised) after the passage of 60 days from the date the Business Relationship ceases, but in no event later than the scheduled expiration date. In such a case, the Optionee's only rights hereunder shall be those which are properly exercised before the termination of this option. (B) TERMINATION FOR CAUSE. If the Optionee's Business Relationship --------------------- with the Company is terminated for Cause (as defined in Section 4(c)), this option shall terminate upon the Optionee's receipt of written notice of such termination and shall thereafter not be exercisable to any extent whatsoever. (C) DEFINITION OF CAUSE. "Cause" shall mean conduct involving one or ------------------- more of the following: (i) gross misconduct by the employee which is materially injurious to the Company; or (ii) the commission of an act of embezzlement, fraud or deliberate disregard of the rules or policies of the Company which results in material economic loss, damage or injury to the Company; or (iii) the unauthorized disclosure of any trade secret or confidential information of the Company or any third party who has a business relationship with the Company or the violation of any noncompetition covenant or assignment of inventions obligation with the Company; or (iv) the commission of an act which induces any customer or prospective customer of the Company to break a contract with the Company or to decline to do business with the Company; or (v) the conviction of the employee of a felony involving any financial impropriety or which would materially interfere with the employee's ability to perform his or her services or otherwise be injurious to the Company; or (vi) the failure of the employee to perform in a material respect his or her employment obligations without proper cause. In making such determination, the Board shall act fairly and in utmost good faith. 5. DEATH; DISABILITY; DISSOLUTION. ------------------------------ (A) DEATH. If the Optionee is a natural person who dies while ----- involved in a Business Relationship with the Company, this option may be exercised, to the extent otherwise exercisable on the date of his or her death, by the Optionee's estate, personal representative or beneficiary to whom this option has been assigned pursuant to Section 9, at any time within 60 days after the date of death, but not later than the scheduled expiration date. (B) DISABILITY. If the Optionee is a natural person whose Business ---------- Relationship with the Company is terminated by reason of his or her disability (as defined in the Plan), this option may be exercised, to the extent otherwise exercisable on the date the Business Relationship was terminated, at any time within 60 days after such termination, but not later than the scheduled expiration date. (C) EFFECT OF TERMINATION. At the expiration of such 60-day period --------------------- provided in paragraphs (a) or (b) of this Section 5 or the scheduled expiration date, whichever is the earlier, this option shall terminate (and shall no longer be exercisable) and the only rights hereunder shall be those as to which the option was properly exercised before such termination. (D) DISSOLUTION. If the Optionee is a corporation, partnership, trust ----------- or other entity that is dissolved, is liquidated, becomes insolvent or enters into a merger or acquisition with respect to which the Optionee is not the surviving entity, at a time when the Optionee is involved in a Business Relationship with the Company, this option shall immediately terminate as of the date of such event (and shall thereafter not be exercisable to any extent whatsoever), and the only rights hereunder shall be those as to which this option was properly exercised before such dissolution or other event. 6. PARTIAL EXERCISE. This option may be exercised in part at any time ---------------- and from time to time within the above limits, except that this option may not be exercised for a fraction of a share unless such exercise is with respect to the final installment of stock subject to this option and cash in lieu of a fractional share must be paid, in accordance with Paragraph 13(G) of the Plan, to permit the Optionee to exercise completely such final installment. Any fractional share with respect to which an installment of this option cannot be exercised because of the limitation contained in the preceding sentence shall remain subject to this option and shall be available for later purchase by the Optionee in accordance with the terms hereof. 7. PAYMENT OF PRICE. ---------------- (A) FORM OF PAYMENT. The option price shall be paid in the --------------- following manner: (i) in cash or by check; (ii) subject to Section 7(b) below, by delivery of shares of the Company's Common Stock having a fair market value (as determined by the Committee) equal as of the date of exercise to the option price; (iii) by delivery of an assignment satisfactory in form and substance to the Company of a sufficient amount of the proceeds from the sale of the Option Shares and an instruction to the broker or selling agent to pay that amount to the Company; or (iv) by any combination of the foregoing. (B) LIMITATIONS ON PAYMENT BY DELIVERY OF COMMON STOCK. If the -------------------------------------------------- Optionee delivers Common Stock held by the Optionee ("Old Stock") to the Company in full or partial payment of the option price, and the Old Stock so delivered is subject to restrictions or limitations imposed by agreement between the Optionee and the Company, an equivalent number of Option Shares shall be subject to all restrictions and limitations applicable to the Old Stock to the extent that the Optionee paid for the Option Shares by delivery of Old Stock, in addition to any restrictions or limitations imposed by this Agreement. Notwithstanding the foregoing, the Optionee may not pay any part of the exercise price hereof by transferring Common Stock to the Company unless such Common Stock has been owned by the Optionee free of any substantial risk of forfeiture for at least six months. 8. METHOD OF EXERCISING OPTION. Subject to the terms and conditions --------------------------- of this Agreement, this option may be exercised by written notice to the Company, at the principal executive office of the Company, or to such transfer agent as the Company shall designate. Such notice shall state the election to exercise this option and the number of Option Shares for which it is being exercised and shall be signed by the person or persons so exercising this option. Such notice shall be accompanied by payment of the full purchase price of such shares, and the Company shall deliver a certificate or certificates representing such shares as soon as practicable after the notice shall be received. Such certificate or certificates shall be registered in the name of the person or persons so exercising this option (or, if this option shall be exercised by the Optionee and if the Optionee shall so request in the notice exercising this option, shall be registered in the name of the Optionee and another person jointly, with right of survivorship). In the event this option shall be exercised, pursuant to Section 5 hereof, by any person or persons other than the Optionee, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise this option. 9. OPTION NOT TRANSFERABLE. This option is not transferable or ----------------------- assignable except by will or by the laws of descent and distribution or pursuant to a valid domestic relations order. Except as set forth in the preceding sentence, during the Optionee's lifetime, only the Optionee can exercise this option. 10. NO OBLIGATION TO EXERCISE OPTION. The grant and acceptance of this -------------------------------- option imposes no obligation on the Optionee to exercise it. 11. NO OBLIGATION TO CONTINUE BUSINESS RELATIONSHIP. Neither the Plan, ----------------------------------------------- this Agreement, nor the grant of this option imposes any obligation on the Company or any Related Corporation to continue to maintain a Business Relationship with the Optionee. 12. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. The Optionee shall have --------------------------------------- no rights as a stockholder with respect to the Option Shares until such time as the Optionee has exercised this option by delivering a notice of exercise and has paid in full the purchase price for the number of shares for which this option is to be so exercised in accordance with Section 8. Except as is expressly provided in the Plan with respect to certain changes in the capitalization of the Company, no adjustment shall be made for dividends or similar rights for which the record date is prior to such date of exercise. 13. CAPITAL CHANGES AND BUSINESS SUCCESSIONS. The Plan contains ---------------------------------------- provisions covering the treatment of options in a number of contingencies such as stock splits and mergers. Provisions in the Plan for adjustment with respect to stock subject to options and the related provisions with respect to successors to the business of the Company are hereby made applicable hereunder and are incorporated herein by reference. 14. WITHHOLDING TAXES. If the Company or any Related Corporation in its ----------------- discretion determines that it is obligated to withhold any tax in connection with the exercise of this option, or in connection with the transfer of, or the lapse of restrictions on, any Common Stock or other property acquired pursuant to this option, the Optionee hereby agrees that the Company or any Related Corporation may withhold from the Optionee's wages or other remuneration the appropriate amount of tax. At the discretion of the Company or Related Corporation, the amount required to be withheld may be withheld in cash from such wages or other remuneration or in kind from the Common Stock or other property otherwise deliverable to the Optionee on exercise of this option. The Optionee further agrees that, if the Company or Related Corporation does not withhold an amount from the Optionee's wages or other remuneration sufficient to satisfy the withholding obligation of the Company or Related Corporation, the Optionee will make reimbursement on demand, in cash, for the amount underwithheld. 15. PROVISION OF DOCUMENTATION TO EMPLOYEE. By signing this -------------------------------------- Agreement the Optionee acknowledges receipt of a copy of this Agreement and a copy of the Plan. 16. MISCELLANEOUS. ------------- (A) ENTIRE AGREEMENT; MODIFICATION. This Agreement constitutes the ------------------------------ entire agreement between the parties relative to the subject matter hereof, and supersedes all proposals, written or oral, and all other communications between the parties relating to the subject matter of this Agreement. This Agreement may be modified, amended or rescinded only by a written agreement executed by both parties. (B) SEVERABILITY. The invalidity, illegality or unenforceability of ------------ any provision of this Agreement shall in no way affect the validity, legality or enforceability of any other provision. (C) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties hereto and their respective successors and assigns, subject to the limitations set forth in Section 9 hereof. (D) GOVERNING LAW. This Agreement shall be governed by and ------------- interpreted in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to the principles of the conflicts of laws thereof. The preceding choice of law provision shall apply to all claims, under any theory whatsoever, arising out of the relationship of the parties contemplated herein. 17. ACCELERATION OF VESTING OF OPTION FOR BUSINESS COMBINATIONS. ----------------------------------------------------------- Subject to and in accordance with Section 22 of the Plan, upon the merger, consolidation, sale of all or substantially all of the Company's stock or assets or other business combination involving the Company as otherwise set forth in Section 22 of the Plan (an "Acquisition"), this option shall, immediately prior to the consummation of such Acquisition, become vested and exercisable by the Optionee as set forth in Section 22 of the Plan. IN WITNESS WHEREOF, the Company and the Optionee have caused this instrument to be executed as of the date first above written. EXCEL SWITCHING CORPORATION 255 INDEPENDENCE DRIVE ______________________________________ HYANNIS, MA 02601 OPTIONEE ______________________________________ BY:___________________________________ PRINT NAME OF OPTIONEE ROBERT P. MADONNA ______________________________________ ______________________________________ STREET ADDRESS TITLE ______________________________________ CITY STATE ZIP CODE EX-4.9 4 INCENTIVE STOCK OPTION AGREEMENT Exhibit 4.9 EXCEL SWITCHING CORPORATION INCENTIVE STOCK OPTION AGREEMENT -------------------------------- Excel Switching Corporation, a Massachusetts corporation (the "Company"), hereby grants as of [DATE] to [NAME OF EMPLOYEE] (the "Employee"), an option to purchase a maximum of [NUMBER] shares (the "Option Shares") of its Common Stock, $.01 par value ("Common Stock"), at the price of $[PRICE] per share, on the following terms and conditions: 1. GRANT UNDER 1997 STOCK OPTION PLAN. This option is granted ---------------------------------- pursuant to and is governed by the Company's 1997 Stock Option Plan (the "Plan") and, unless the context otherwise requires, terms used herein shall have the same meaning as in the Plan. Determinations made in connection with this option pursuant to the Plan shall be governed by the Plan as it exists on this date. 2. GRANT AS INCENTIVE STOCK OPTION; OTHER OPTIONS. This option is ---------------------------------------------- intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). This option is in addition to any other options heretofore or hereafter granted to the Employee by the Company or any Related Corporation (as defined in the Plan), but a duplicate original of this instrument shall not effect the grant of another option. 3. VESTING OF OPTION IF EMPLOYMENT CONTINUES. If the Employee has ----------------------------------------- continued to be employed by the Company or any Related Corporation on the following dates, the Employee may exercise this option for the number of shares of Common Stock set opposite the applicable date: Less than one year from the date hereof - 0 shares One year but less than two years from the - 20% of the Option Shares date hereof Two years but less than three years from - an additional 20% of the the date hereof Option Shares Three years but less than four years from - an additional 20% of the the date hereof Option Shares Four years or more from the date hereof - an additional 20% of the Option Shares Notwithstanding the foregoing, in accordance with and subject to the provisions of the Plan, the Committee may, in its discretion, accelerate the date that any installment of this Option becomes exercisable. The foregoing rights are cumulative and (subject to Sections 4 or 5 hereof if the Employee ceases to be employed by the Company and all Related Corporations) may be exercised on or before the date which is ten years from the date this option is granted. 4. TERMINATION OF EMPLOYMENT. ------------------------- (A) TERMINATION OTHER THAN FOR CAUSE. If the Employee ceases to be -------------------------------- employed by the Company and all Related Corporations, other than by reason of death or disability as defined in Section 5 or termination for Cause as defined in Section 4(c), no further installments of this option shall become exercisable, and this option shall terminate (and may no longer be exercised) after the passage of ninety days from the Employee's last day of employment, but in no event later than the scheduled expiration date. In such a case, the Employee's only rights hereunder shall be those which are properly exercised before the termination of this option. (B) TERMINATION FOR CAUSE. If the employment of the Employee is --------------------- terminated for Cause (as defined in Section 4(c)), this option shall terminate upon the Employee's receipt of written notice of such termination and shall thereafter not be exercisable to any extent whatsoever. (C) DEFINITION OF CAUSE. "Cause" shall mean conduct involving one or ------------------- more of the following: (i) gross misconduct by the employee which is materially injurious to the Company; or (ii) the commission of an act of embezzlement, fraud or deliberate disregard of the rules or policies of the Company which results in material economic loss, damage or injury to the Company; or (iii) the unauthorized disclosure of any trade secret or confidential information of the Company or any third party who has a business relationship with the Company or the violation of any noncompetition covenant or assignment of inventions obligation with the Company; or (iv) the commission of an act which induces any customer or prospective customer of the Company to break a contract with the Company or to decline to do business with the Company; or (v) the conviction of the employee of a felony involving any financial impropriety or which would materially interfere with the employee's ability to perform his or her services or otherwise be injurious to the Company; or (vi) the failure of the employee to perform in a material respect his or her employment obligations without proper cause. In making such determination, the Board shall act fairly and in utmost good faith. 5. DEATH; DISABILITY. ----------------- (A) DEATH. If the Employee dies while in the employ of the Company or ----- any Related Corporation, this option may be exercised, to the extent otherwise exercisable on the date of his or her death, by the Employee's estate, personal representative or beneficiary to whom this option has been assigned pursuant to Section 10, at any time within 180 days after the date of death, but not later than the scheduled expiration date. (B) DISABILITY. If the Employee ceases to be employed by the Company ---------- and all Related Corporations by reason of his or her disability (as defined in the Plan), this option may be exercised, to the extent otherwise exercisable on the date of the termination of his or her employment, at any time within 180 days after such termination, but not later than the scheduled expiration date. (C) EFFECT OF TERMINATION. At the expiration of the 180-day period --------------------- provided in paragraphs (a) or (b) of this Section 5 or the scheduled expiration date, whichever is the earlier, this option shall terminate (and shall no longer be exercisable) and the only rights hereunder shall be those as to which the option was properly exercised before such termination. 6. PARTIAL EXERCISE. This option may be exercised in part at any ---------------- time and from time to time within the above limits, except that this option may not be exercised for a fraction of a share unless such exercise is with respect to the final installment of stock subject to this option and cash in lieu of a fractional share must be paid, in accordance with Paragraph 13(G) of the Plan, to permit the Employee to exercise completely such final installment. Any fractional share with respect to which an installment of this option cannot be exercised because of the limitation contained in the preceding sentence shall remain subject to this option and shall be available for later purchase by the Employee in accordance with the terms hereof. 7. PAYMENT OF PRICE. (a) The option price shall be paid in the ---------------- following manner: (i) in cash or by check; (ii) subject to Section 7(b) below, by delivery of shares of the Company's Common Stock having a fair market value (as determined by the Committee) equal as of the date of exercise to the option price; (iii) by delivery of an assignment satisfactory in form and substance to the Company of a sufficient amount of the proceeds from the sale of the Option Shares and an instruction to the broker or selling agent to pay that amount to the Company; or (iv) by any combination of the foregoing. (B) LIMITATIONS ON PAYMENT BY DELIVERY OF COMMON STOCK. If the -------------------------------------------------- Employee delivers Common Stock held by the Employee ("Old Stock") to the Company in full or partial payment of the option price, and the Old Stock so delivered is subject to restrictions or limitations imposed by agreement between the Employee and the Company, an equivalent number of Option Shares shall be subject to all restrictions and limitations applicable to the Old Stock to the extent that the Employee paid for the Option Shares by delivery of Old Stock, in addition to any restrictions or limitations imposed by this Agreement. Notwithstanding the foregoing, the Employee may not pay any part of the exercise price hereof by transferring Common Stock to the Company unless such Common Stock has been owned by the Employee free of any substantial risk of forfeiture for at least six months. (C) PERMITTED PAYMENT BY RECOURSE NOTE. In addition, if this ---------------------------------- paragraph is initialed below by the person signing this Agreement on behalf of the Company, the option price may be paid by delivery of the Employee's personal recourse promissory note bearing interest payable not less than annually at the applicable Federal rate, as defined in Section 1274(d) of the Code. __________ (initials) 8. METHOD OF EXERCISING OPTION. Subject to the terms and conditions --------------------------- of this Agreement, this option may be exercised by written notice to the Company at its principal executive office, or to such transfer agent as the Company shall designate. Such notice shall state the election to exercise this option and the number of Option Shares for which it is being exercised and shall be signed by the person or persons so exercising this option. Such notice shall be accompanied by payment of the full purchase price of such shares, and the Company shall deliver a certificate or certificates representing such shares as soon as practicable after the notice shall be received. Such certificate or certificates shall be registered in the name of the person or persons so exercising this option (or, if this option shall be exercised by the Employee and if the Employee shall so request in the notice exercising this option, shall be registered in the name of the Employee and another person jointly, with right of survivorship). In the event this option shall be exercised, pursuant to Section 5 hereof, by any person or persons other than the Employee, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise this option. 9. OPTION NOT TRANSFERABLE. This option is not transferable or ----------------------- assignable except by will or by the laws of descent and distribution. During the Employee's lifetime only the Employee can exercise this option. 10. NO OBLIGATION TO EXERCISE OPTION. The grant and acceptance of -------------------------------- this option imposes no obligation on the Employee to exercise it. 11. NO OBLIGATION TO CONTINUE EMPLOYMENT. Neither the Plan, this ------------------------------------ Agreement, nor the grant of this option imposes any obligation on the Company or any Related Corporation to continue the Employee in employment. 12. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. The Employee shall have --------------------------------------- no rights as a stockholder with respect to the Option Shares until such time as the Employee has exercised this option by delivering a notice of exercise and has paid in full the purchase price for the shares so exercised in accordance with Section 9. Except as is expressly provided in the Plan with respect to certain changes in the capitalization of the Company, no adjustment shall be made for dividends or similar rights for which the record date is prior to such date of exercise. 13. CAPITAL CHANGES AND BUSINESS SUCCESSIONS. The Plan contains ---------------------------------------- provisions covering the treatment of options in a number of contingencies such as stock splits and mergers. Provisions in the Plan for adjustment with respect to stock subject to options and the related provisions with respect to successors to the business of the Company are hereby made applicable hereunder and are incorporated herein by reference. 14. EARLY DISPOSITION. The Employee agrees to notify the Company in ----------------- writing immediately after the Employee transfers any Option Shares, if such transfer occurs on or before the later of (a) the date two years after the date of this Agreement or (b) the date one year after the date the Employee acquired such Option Shares. The Employee also agrees to provide the Company with any information concerning any such transfer required by the Company for tax purposes. 15. WITHHOLDING TAXES. If the Company or any Related Corporation in its ----------------- discretion determines that it is obligated to withhold any tax in connection with the exercise of this option, or in connection with the transfer of, or the lapse of restrictions on, any Common Stock or other property acquired pursuant to this option, the Employee hereby agrees that the Company or any Related Corporation may withhold from the Employee's wages or other remuneration the appropriate amount of tax. At the discretion of the Company or Related Corporation, the amount required to be withheld may be withheld in cash from such wages or other remuneration or in kind from the Common Stock or other property otherwise deliverable to the Employee on exercise of this option. The Employee further agrees that, if the Company or any Related Corporation does not withhold an amount from the Employee's wages or other remuneration sufficient to satisfy the withholding obligation of the Company or Related Corporation, the Employee will make reimbursement on demand, in cash, for the amount underwithheld. 16. PROVISION OF DOCUMENTATION TO EMPLOYEE. By signing this --------------------------------------- Agreement the Employee acknowledges receipt of a copy of this Agreement and a copy of the Plan. 17. MISCELLANEOUS. ------------- (A) NOTICES. All notices hereunder shall be in writing and shall be ------- deemed given when sent by certified or registered mail, postage prepaid, return receipt requested, to the address set forth below. The addresses for such notices may be changed from time to time by written notice given in the manner provided for herein. (B) ENTIRE AGREEMENT; MODIFICATION. This Agreement constitutes the ------------------------------ entire agreement between the parties relative to the subject matter hereof, and supersedes all proposals, written or oral, and all other communications between the parties relating to the subject matter of this Agreement. This Agreement may be modified, amended or rescinded only by a written agreement executed by both parties. (C) SEVERABILITY. The invalidity, illegality or unenforceability of ------------ any provision of this Agreement shall in no way affect the validity, legality or enforceability of any other provision. (D) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties hereto and their respective successors and assigns, subject to the limitations set forth in Section 10 hereof. (E) GOVERNING LAW. This Agreement shall be governed by and ------------- interpreted in accordance with the laws of the [STATE], without giving effect to the principles of the conflicts of laws thereof. 18. ACCELERATION OF VESTING OF OPTION FOR BUSINESS COMBINATIONS. ------------------------------------------------------------ Subject to and in accordance with Section 22 of the Plan, upon the merger, consolidation, sale of all or substantially all of the Company's stock or assets or other business combination involving the Company as otherwise set forth in Section 22 of the Plan (an "Acquisition"), this option shall, immediately prior to the consummation of such Acquisition, become vested and exercisable by the Optionee as set forth in Section 22 of the Plan. IN WITNESS WHEREOF, the Company and the Employee have caused this instrument to be executed as of the date first above written. ____________________________________ EXCEL SWITCHING CORPORATION EMPLOYEE 255 Independence Drive Hyannis, MA 02601 ____________________________________ Print Name of Employee By:__________________________________ ____________________________________ Robert P. Madonna, President Street Address ____________________________________ City State Zip Code EX-4.10 5 NON-QUALIFIED STOCK OPTION AGREEMENT Exhibit 4.10 EXCEL SWITCHING CORPORATION Non-Qualified Stock Option Agreement for Non-Employee Directors --------------------------------------------------------------- Excel Switching Corporation, a Massachusetts corporation (the "Company"), hereby grants as of [Date] to [Optionee] (the "Optionee") an option to purchase a maximum of [#Shares] shares of its Common Stock, par value $.01 per share (the "Option Shares"), at the price of [Price] per share, on the following terms and conditions: 1. GRANT UNDER 1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. This option -------------------------------------------------------- is granted pursuant to and is governed by the Company's 1997 Non-Employee Director Stock Option Plan (the "Plan") and, unless the context otherwise requires, terms used herein shall have the meanings assigned to them in the Plan. Determinations made in connection with this option pursuant to the Plan shall be governed by the Plan as it exists on the date hereof. In the event of any conflict between this Agreement and the provisions of the Plan, the Plan shall govern. 2. GRANT AS NON-QUALIFIED OPTION; OTHER OPTIONS. This option is intended -------------------------------------------- to be a non-qualified option (rather than an incentive stock option) granted pursuant to Section 4 of the Plan, and the Board of Directors of the Company (the "Board") intends to take appropriate action, if necessary, to achieve this result. This option is in addition to any other options heretofore or hereafter granted to the Optionee by the Company, but a duplicate original of this instrument shall not effect the grant of another option. 3. EXERCISE OF OPTION IF SERVICE AS A DIRECTOR CONTINUES. Unless sooner ----------------------------------------------------- terminated pursuant to Section 4 hereof, this option shall vest in the Optionee and thus become exercisable in accordance with the vesting schedule set forth below, provided that the Optionee has continuously served as a member of the Board through such vesting date. This option shall expire on the date which is ten (10) years from the date this option is granted. (i) Subject to subsection (ii) below, this option shall vest as follows: NUMBER OF OPTION SHARES FOR WHICH OPTION WILL BE EXERCISABLE (CUMULATIVE) DATE OF VESTING ------------------------- --------------- 1/3 Immediately upon Grant Date 1/3 One year from Grant Date 1/3 Two years from Grant Date (ii) Notwithstanding subsection (i) of this Section, if the Optionee attends less than 75% of the Board meetings held in any fiscal year (a "Default Year"), then (i) the Optionee shall forfeit his or her exercise rights with respect to the option installment which vested on the preceding annual vesting date, in proportion to the percentage of Board meetings actually attended by such Optionee during the Default Year, and (ii) in the event that the Optionee does not own a sufficient number of exercisable options to satisfy the forfeiture obligation described above, the Optionee shall forfeit his right to receive the next succeeding annual installment of the option, in proportion to the percentage of Board meetings which the optionee actually attended in the Default Year. By way of illustration, if the Optionee attends only 50% of the actual meetings of the Board of Directors (whether regular or special) held in any fiscal year, then the Optionee shall forfeit the right to exercise 50% of the option installment which became exercisable on the preceding annual vesting date. If, however, the Optionee had already exercised 75% of the preceding option installment, and did not own any additional unexercised options available to satisfy the forfeiture obligation, the Optionee would forfeit the remaining 25% of the prior installment, and would also forfeit the right to receive or exercise 25% of the next succeeding annual option installment. 4. TERMINATION OF OPTION RIGHTS. ------------------------------- (A) In the event the Optionee ceases to be a member of the Board for any reason other than death or permanent disability, any then unexercised portion of this option shall, to the extent not then vested, immediately terminate and become void. Any portion of this option which is vested but has not been exercised at the time the Optionee so ceases to be a member of the Board may be exercised, to the extent it is then vested, by the Optionee at any time prior to the scheduled expiration date of the option. (B) In the event that the Optionee ceases to be a member of the Board by reason of his or her death or permanent disability, this option shall be immediately and automatically accelerated and become fully vested and the unexercised portion of this option shall be exercisable by the Optionee (or by the Optionee's personal representative, heir or legatee, in the event of death) for a period of one year thereafter. Any portion of this option which is then exercisable but has not been exercised at the time the Optionee so ceases to be a member of the Board of Directors may be exercised, to the extent then exercisable, by the Optionee at any time prior to the scheduled expiration date of the option. (C) No portion of this option may be exercised if the Optionee is removed from the Board of Directors for any one of the following reasons: (i) disloyalty, gross negligence, dishonesty or breach of fiduciary duty to the Company; or (ii) the commission of an act of embezzlement, fraud or deliberate disregard of the rules or policies of the Company which results in loss, damage or injury to the Company, whether directly or indirectly; or (iii) the unauthorized disclosure of any trade secret or confidential information of the Company; or (iv) the commission of an act which constitutes unfair competition with the Company or which induces any customer of the Company to break a contract with the Company; or (v) the conduct of any activity on behalf of any organization or entity which is a competitor of the Company (unless such conduct is approved by a majority of the members of the Board of Directors). 5. EXERCISE. To the extent then exercisable, the Optionee may exercise -------- this option in whole or in part at any time and from time to time as provided by the terms of this Agreement and the Plan, except that this option may not be exercised for a fraction of a share unless such exercise is with respect to the final installment of stock subject to this option and a fractional share (or cash in lieu thereof) would otherwise be required to be issued to permit the Optionee to exercise completely such final installment. Any fractional share with respect to which an installment of this option cannot be exercised because of the limitation contained in the preceding sentence shall remain subject to this option and shall be available for later purchase by the Optionee in accordance with the terms hereof. There shall be no such exercise at any one time as to fewer than one hundred (100) shares or all of the remaining shares then purchasable by the person or persons exercising the option, if fewer than one hundred (100) shares. 6. PAYMENT OF PRICE. The option price is payable in United States dollars and may be paid: (a) in cash or by check, or any combination of the foregoing, equal in amount to the option price; (b) in whole or in part in shares of the Common Stock of the Company already owned by the person or persons exercising the option or shares subject to the option being exercised (subject to such restrictions and guidelines as the Board may adopt from time to time), valued at fair market value determined in accordance with the provisions of Section 5 of the Plan; or (c) consistent with applicable law, through the delivery of an assignment to the Company of a sufficient amount of the proceeds from the sale of Option Shares acquired upon exercise of this option and an authorization to the broker or selling agent to pay that amount to the Company, which sale shall be at the Optionee's direction at the time of exercise. 7. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of the --------------------------- Plan and this Agreement, this option may be exercised by written notice to the Company by mail or in person, addressed to the Chief Financial Officer at 255 Independence Drive, Hyannis, Massachusetts 02601, its principal executive offices. Such notice shall state the election to exercise this option and the number of shares in respect of which it is being exercised and shall be signed by the person or persons so exercising this option. Such notice shall be accompanied by payment of the full purchase price of such shares. The Company's transfer agent shall, on behalf of the Company, prepare a certificate or certificates representing Option Shares acquired upon exercise of this option, shall register the Optionee (or the Optionee's personal representative, heir or legatee if this option is being exercised pursuant to Section 4 hereof) as the owner of the Option Shares on the books of the Company and shall cause the fully executed certificate(s) representing such shares to be delivered to the Optionee (or the Optionee's personal representative, heir or legatee if this option is being exercised pursuant to Section 4 hereof) as soon as practicable after payment of the option price in full. In the event this option shall be exercised, pursuant to Section 4 hereof, by any person or persons other than the Optionee, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise this option. All shares that shall be purchased upon the exercise of this option as provided herein shall be fully paid and non-assessable. 8. OPTION NOT TRANSFERABLE. This option is not transferable or assignable ----------------------- except by will or by the laws of descent and distribution or pursuant to a domestic relations order. During the Optionee's lifetime only the Optionee can exercise this option. 9. NO OBLIGATION TO EXERCISE OPTION. The grant and acceptance of this -------------------------------- option imposes no obligation on the Optionee to exercise it. 10. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. The Optionee shall have no --------------------------------------- rights as a stockholder with respect to any of the Option Shares until a stock certificate therefor has been issued to the Optionee and is fully paid for. Except as is expressly provided in Section 10 of the Plan with respect to certain changes in the capitalization of the Company, no adjustment shall be made for dividends or similar rights for which the record date is prior to the date such stock certificate is issued. 11. CAPITAL CHANGES AND BUSINESS SUCCESSIONS. The Plan contains extensive ---------------------------------------- provisions designed to preserve options at full value in a number of contingencies. Therefore, provisions in the Plan for adjustment with respect to stock subject to options and the related provisions with respect to successors to the business of the Company are hereby made applicable hereunder and are incorporated herein by reference. 12. WITHHOLDING TAXES. The Optionee hereby agrees that the Company may ----------------- withhold from the Optionee's wages or any other remuneration the appropriate amount of federal, state and local taxes attributable to the Optionee's exercise of any installment of this option. At the Company's discretion, the amount required to be withheld may be withheld in cash from such wages or other remuneration, or in kind from the Common Stock otherwise deliverable to the Optionee on exercise of this option. The Optionee further agrees that, if the Company does not withhold an amount from the Optionee's wages or other remuneration sufficient to satisfy the Company's withholding obligation, the Optionee will reimburse the Company on demand, in cash, for the amount underwithheld as determined by the Company in its sole discretion. 13. GOVERNING LAW. This Agreement shall be governed by and interpreted in ------------- accordance with the laws of the Commonwealth of Massachusetts, without giving effect to the principles of conflicts of law thereof. The preceding choice of law provision shall apply to all claims, under any theory whatsoever, arising out of the relationship of the parties contemplated herein. 14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of ---------------- the parties with respect to the subject matter hereof and supersedes any and all correspondence, discussions or agreements between the parties relating to the subject matter of this Agreement. IN WITNESS WHEREOF the Company and the Optionee have caused this instrument to be executed, and the Optionee whose signature appears below acknowledges receipt of a copy of the Plan and acceptance of an original copy of this Agreement. __________________________________ EXCEL SWITCHING CORPORATION Optionee 255 Independence Drive __________________________________ Hyannis, MA 02601 Street Address __________________________________ By:_________________________________ City State Zip Code Name: Title: EX-5.1 6 OPINION OF TESTA, HURWITZ & THIBEAULT Exhibit 5.1 May 1, 1998 Excel Switching Corporation 255 Independence Drive Hyannis, Massachusetts 02601 Re: Registration Statement on Form S-8 Relating to each of the Stock Option Program, the 1997 Stock Option Plan, the 1997 Non-Employee Director Stock Option Plan and the 1997 Employee Stock Purchase Plan of Excel Switching Corporation (all of the foregoing are hereinafter referred to collectively as the "Plans") Dear Sir or Madam: Reference is made to the above-captioned Registration Statement on Form S-8 (the "Registration Statement") to be filed by Excel Switching Corporation (the "Company") with the Securities and Exchange Commission under the Securities Act of 1933 relating to an aggregate of 14,139,480 shares of Common Stock, par value $.01 per share, of the Company issuable pursuant to the Plans (the "Shares"). We have examined, and are familiar with, and have relied as to factual matters solely upon, copies of the Plans, the Restated Articles of Organization and the Restated By-Laws of the Company, the minute books and stock records of the Company and originals of such other documents, certificates and proceedings as we have deemed necessary for the purpose of rendering this opinion. Based on the foregoing, we are of the opinion that the Shares have been duly authorized and, when issued and paid for in accordance with the terms of the related Plan and the terms of any agreement relating to any of the options granted thereunder, will be validly issued, fully paid and nonassessable. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement. Very truly yours, /s/ Testa, Hurwitz & Thibeault, LLP TESTA, HURWITZ & THIBEAULT, LLP EX-23.2 7 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS Exhibit 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement on Form S-8 of our reports dated January 21, 1998 included in Excel Switching Corporation's Annual Report on Form 10-K for the fiscal year ended December 27, 1997 and to all references to our Firm included in this Registration Statement. ARTHUR ANDERSEN LLP Boston, Massachusetts May 1, 1998 -----END PRIVACY-ENHANCED MESSAGE-----