-----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, K4XQ3uA5dvynsPEkkPny+QvbxixWF00lPizBQUtWLmw4879WRlpnvDfGEd6bd6H/ LGoPaC06sMVBWR5d8z1PkA== 0001047469-98-044642.txt : 19981222 0001047469-98-044642.hdr.sgml : 19981222 ACCESSION NUMBER: 0001047469-98-044642 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19981221 EFFECTIVENESS DATE: 19981221 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXAR CORP CENTRAL INDEX KEY: 0000753568 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 941741481 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-69381 FILM NUMBER: 98773134 BUSINESS ADDRESS: STREET 1: 2222 QUME DR STREET 2: PO BOX 49007 CITY: SAN JOSE STATE: CA ZIP: 95131 BUSINESS PHONE: 4084346400 MAIL ADDRESS: STREET 1: 48720 KATO RD CITY: FREMONT STATE: CA ZIP: 94538-1167 S-8 1 FORM S-8 As filed with the Securities and Exchange Commission on December 21, 1998 Registration No. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------ Exar Corporation ---------------- (Exact name of registrant as specified in its charter) ------------------ Delaware 941741981 - ----------------------- ------------------------------------ (State of Incorporation) (I.R.S. Employer Identification No.) ------------------ 48720 Kato Road Fremont, CA 94538-1167 ---------------------------------------- (Address of principal executive offices) ------------------ 1997 Equity Incentive Plan -------------------------- 1996 Non-Employee Directors' Stock Option Plan ---------------------------------------------- (Full title of the plans) Donald L. Ciffone, Jr. Exar Corporation 48720 Kato Road Fremont, CA 94538-1167 ---------------------- (Name, address, including zip code, and telephone number, including area code, of agent for service) 510/668-7000 ------------------ Copies to: Robert L. Jones, Esq. Cooley Godward LLP FIVE PALO ALTO SQUARE 3000 EL CAMINO REAL PALO ALTO, CA 94306-2155 650/843-5000 ------------------ CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF SECURITIES TO AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING PRICE AMOUNT OF REGISTRATION BE REGISTERED REGISTERED SHARE (1) (1) FEE - -------------------------- ---------------------- ------------------------- -------------------------- ------------------------- Stock Options and Common Stock (par value $.001) 550,000 $15.813 $8,697,150.00 $2,417.81 - -------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(h)(1). The price per share and aggregate offering price are based upon the average of the high and low price of Registrant's Common Stock on December 16, 1998 as reported on the NASDAQ National Market System. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INCORPORATION BY REFERENCE OF CONTENTS OF REGISTRATION STATEMENT ON FORM S-8 NO. 333-37369 The contents of Registration Statement on Form S-8 No. 333-37369 filed with the Securities and Exchange Commission on October 7, 1997 are incorporated by reference herein. EXHIBITS
EXHIBIT NUMBER - ------- 5.1 Opinion of Cooley Godward LLP. 23.1 Consent of Deloitte & Touche LLP. 23.2 Consent of KPMG Peat Marwick LLP. 23.3 Consent of Cooley Godward LLP is contained in Exhibit 5.1 to this Registration Statement 24.1 Power of Attorney is contained on the signature pages. 99.1 1997 Equity Incentive Plan, as amended as of September 10, 1998. 99.2 1996 Non-Employee Directors' Stock Option Plan, as amended as of September 10, 1998. 99.3* Form of Incentive Stock Option Agreement and Supplemental Stock Option Agreement. 99.4* Form of Irrevocable Notice of Option Exercise / Payment Authorization.
* Documents incorporated by reference from the Registrant's Registration Statement on Form S-8 (No. 333-37369), filed with the Commission on October 7, 1997. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fremont, State of California, on December 21, 1998. EXAR CORPORATION By: /s/ Donald L. Ciffone, Jr. ------------------------------------------- Donald L. Ciffone, Jr. Title: Chief Executive Officer, President and Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ronald W. Guire and Donald L. Ciffone, Jr., and each or any one of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE /s/ Donald L. Ciffone, Jr. Chief Executive Officer, President and December 21, 1998 - -------------------------------------------- Director (Donald L. Ciffone, Jr.) /s/ Ronald W. Guire Executive Vice President, Chief December 21, 1998 - -------------------------------------------- Financial Officer and Director (Ronald W. Guire) (Principal Financial and Accounting Officer) /s/ Raimon L. Conlisk Director and Chairman of the Board December 21, 1998 - -------------------------------------------- (Raimon L. Conlisk) /s/ Frank P. Carrubba Director December 21, 1998 - -------------------------------------------- (Frank P. Carrubba) /s/ James E. Dykes Director December 21, 1998 - -------------------------------------------- (James E. Dykes)
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION 5.1 Opinion of Cooley Godward. 23.1 Consent of Deloitte & Touche LLP. 23.2 Consent of KPMG Peat Marwick LLP. 23.3 Consent of Cooley Godward LLP is contained in Exhibit 5.1 to this Registration Statement. 24.1 Power of Attorney is contained on the signature pages. 99.1 1997 Equity Incentive Plan, as amended as of September 10, 1998. 99.2 1996 Non-Employee Directors' Stock Option Plan, as amended as of September 10, 1998. 99.3* Form of Incentive Stock Option Agreement and Supplemental Stock Option Agreement. 99.4* Irrevocable Notice of Option Exercise / Payment Authorization.
* Documents incorporated by reference from the Registrant's Registration Statement on Form S-8 (No. 333-37369), filed with the Commission on October 7, 1997. EX-5.1 2 EXHIBIT 5.1 [COOLEY GODWARD LLP LETTERHEAD] December 21, 1998 Exar Corporation 48720 Kato Road Fremont, CA 94538 Ladies and Gentlemen: You have requested our opinion with respect to certain matters in connection with the filing by Exar Corporation (the "Company") of a Registration Statement on Form S-8 (the "Registration Statement") with the Securities and Exchange Commission covering the offering of up to 550,000 shares of the Company's Common Stock, $.0001 par value, (the "Shares") pursuant to its 1997 Equity Incentive Plan and 1996 Non-Employee Directors' Stock Option Plan (the "Plans"). In connection with this opinion, we have examined the Registration Statement and related Prospectus, your Certificate of Incorporation and By-laws, as amended, and such other documents, records, certificates, memoranda and other instruments as we deem necessary as a basis for this opinion. We have assumed the genuineness and authenticity of all documents submitted to us as originals, the conformity to originals of all documents submitted to us as copies thereof, and the due execution and delivery of all documents where due execution and delivery are a prerequisite to the effectiveness thereof. On the basis of the foregoing, and in reliance thereon, we are of the opinion that the Shares, when sold and issued in accordance with the Plans, the Registration Statement and related Prospectus, will be validly issued, fully paid, and nonassessable (except as to shares issued pursuant to certain deferred payment arrangements, which will be fully paid and nonassessable when such deferred payments are made in full). We consent to the filing of this opinion as an exhibit to the Registration Statement. Very truly yours, Cooley Godward LLP By: /s/ Robert L. Jones ---------------------------- Robert L. Jones, Esq. EX-23.1 3 EX-23.1 Consent of Deloitte & Touche LLP We consent to the incorporation by reference in this Registration Statement of Exar Corporation on Form S-8 of our report dated April 23, 1998, appearing in the Annual Report on Form 10-K of Exar Corporation for the year ended March 31, 1998. /s/ Deloitte & Touche LLP San Jose, California December 17, 1998 EX-23.2 4 EX-23.2 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Exar Corporation: We consent to the incorporation by reference in the registration statement on Form S-8 of Exar Corporation of our report dated May 2, 1996, relating to the consolidated statements of operations, stockholders' equity, and cash flows of Exar Corporation and subsidiaries for the year ended March 31, 1996, and the related consolidated financial statement schedule, which report appears in the March 31, 1998, annual report on Form 10-K of Exar Corporation. /s/ KPMG Peat Marwick LLP Mountain View, California December 17, 1998 EX-99.1 5 EX-99.1 EXHIBIT 99.1 EXAR CORPORATION 1997 EQUITY INCENTIVE PLAN ADOPTED BY THE BOARD JUNE 12, 1997 APPROVED BY THE STOCKHOLDERS SEPTEMBER 18, 1997 AMENDED BY THE BOARD SEPTEMBER 18, 1997 AMENDED AND RESTATED SEPTEMBER 10, 1998 1. PURPOSE. (a) The purpose of the 1997 Equity Incentive Plan (the "Plan") is to provide a means by which selected employees and directors of and consultants to Exar Corporation, a Delaware corporation (the "Company"), and its Affiliates, as defined in subparagraph 1(b), may be given an opportunity to benefit from increases in value of the stock of the Company through the granting of (i) incentive stock options, (ii) nonstatutory stock options, and (iii) stock bonuses, all as defined below and collectively referred to as "Stock Awards". (b) The word "Affiliate" as used in the Plan means any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended (the "Code"). (c) The Company, by means of the Plan, seeks to retain the services of persons now employed by or serving as consultants or directors to the Company, to secure and retain the services of persons capable of filling such positions, and to provide incentives for such persons to exert maximum efforts for the success of the Company. (d) The Company intends that the Stock Awards issued under the Plan shall, in the discretion of the Board of Directors of the Company (the "Board") or any committee to which responsibility for administration of the Plan has been delegated pursuant to subparagraph 2(c), be either incentive stock options as that term is used in Section 422 of the Code ("Incentive Stock Options"), options which do not qualify as Incentive Stock Options ("Nonstatutory Stock Options") or stock bonuses as described in paragraph 6 hereof ("Stock Bonuses"). All options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and in such form as issued pursuant to paragraph 5, and a separate certificate or certificates will be issued for shares purchased on exercise of each type of option. An option designated as a Nonstatutory Stock Option shall not be treated as an Incentive Stock Option. 2. ADMINISTRATION. (a) The Plan shall be administered by the Board unless and until the Board delegates administration to a committee, as provided in subparagraph 2(c). 1 (b) The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan: (1) To determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and how Stock Awards shall be granted; whether a Stock Award will be an Incentive Stock Option, a Nonstatutory Stock Option, a Stock Bonus or a combination of the foregoing; the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive stock pursuant to a Stock Award; and the number of shares with respect to which Stock Awards shall be granted to each such person. (2) To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective. "Stock Award Agreement" means a written agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan. (3) To amend the Plan as provided in paragraph 12. (4) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company. (c) The Board may delegate administration of the Plan to one or more committees, provided, however, that if such a committee is authorized to administer Stock Awards with respect to officers and directors of the Company, such committee shall be composed of not fewer than two (2) members of the Board, all of whom may be, in the discretion of the Board, non-employee directors as defined in subparagraph 2(d) or outside directors as defined in subparagraph 2(e). These committees are referred to herein as the "Committee," as applicable. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan or the administration of Stock Awards with respect to officers and directors, as the case may be, the powers theretofore possessed by the Board, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. Notwithstanding anything in this paragraph to the contrary, the Board or the Committee may delegate to a committee of one or more members of the Board the authority to grant options to eligible persons who (1) are not then subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and/or (2) are either (i) not then covered employees (as defined in subparagraph 2(f)) and are not expected to be covered employees at the time of recognition of income resulting from such option, or (ii) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code. 2 (d) The term "non-employee director," as used in this Plan, shall mean a director who either (i) is not a current employee or officer of the Company or its parent or subsidiary, does not receive compensation (directly or indirectly) from the Company or its parent or subsidiary for services rendered as a consultant or in any capacity other than as director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act ("Regulation S-K")), does not possess an interest in any other transaction as to which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship as to which disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-employee director" for purposes of Rule 16b-3 promulgated under the Exchange Act. (e) The term "outside director," as used in this Plan, shall mean a director who either (i) is not a current employee of the Company or an "affiliated corporation" (as defined in the Treasury regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an affiliated corporation receiving compensation for prior services (other than benefits under a tax qualified pension plan), was not an officer of the Company or an affiliated corporation at any time, and is not currently receiving direct or indirect enumeration from the Company or an affiliated corporation for personal services in any capacity other than as a director, or (ii) is otherwise considered an "outside director" for purposes of Section 162(m) of the Code. (f) The term "covered employee," as used in this Plan, shall mean the chief executive officer and the four (4) other highest compensated officers of the Company. 3. SHARES SUBJECT TO THE PLAN. (a) Subject to the provisions of paragraph 11 relating to adjustments upon changes in stock, the stock that may be sold pursuant to Stock Awards granted under the Plan shall not exceed in the aggregate One Million Two Hundred Seventy-Five Thousand (1,275,000) shares of the Company's $.0001 par value common stock, plus any shares of such common stock that would have become available under the Company's 1991 Stock Option Plan due to the expiration or other termination of any stock award thereunder. If any Stock Award granted under the Plan shall for any reason expire or otherwise terminate prior to the issuance of the stock subject to such Stock Award (or fail to vest in the case of a Stock Bonus), the stock not issued pursuant to such Stock Award shall again become available for the Plan. (b) The stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 4. ELIGIBILITY. (a) Incentive Stock Options may be granted only to employees (including officers) of the Company or its Affiliates. A director of the Company shall not be eligible to receive Incentive Stock Options unless such director is also an employee (including an officer) of the 3 Company or any Affiliate. Nonstatutory Stock Options and Stock Bonuses may be granted only to employees (including officers) of, directors of or consultants to the Company or its Affiliates. (b) No person shall be eligible for the grant of an Incentive Stock Option under the Plan if, at the time of grant, such person owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Affiliates unless the exercise price of such Incentive Stock Option is at least one hundred ten percent (110%) of the fair market value of such stock at the date of grant and the option is not exercisable after the expiration of five (5) years from the date of grant. (c) Subject to the provisions of paragraph 11 relating to adjustments upon changes in stock, no person shall be eligible to be granted options covering more than Three Hundred Thousand (300,000) shares of the Company's common stock in any calendar year. 5. OPTION PROVISIONS. Each option shall be in such form and shall contain such terms and conditions as the Board or the Committee shall deem appropriate. The provisions of separate options need not be identical, but each option shall include (through incorporation of provisions hereof by reference in the option or otherwise) the substance of each of the following provisions: (a) No option shall be exercisable after the expiration of a date specified in the option (which date shall be no more than ten (10) years from the date the option was granted). (b) The exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the fair market value of the stock subject to the option on the date the option is granted. Except as provided with respect to Deferred Salary Grants under paragraph 7. The exercise price of each Nonstatutory Stock Option shall be not less than fifty percent (50%) of the fair market value of the stock subject to the option on the date the option is granted. Notwithstanding the foregoing, an option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price lower than that set forth in the preceding sentence if such option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code. (c) The purchase price of stock acquired pursuant to an option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the option is exercised, or (ii) at the discretion of the Board or the Committee, either at the time of the grant or exercise of the option, (A) by delivery to the Company of other common stock of the Company, (B) according to a deferred payment or other arrangement (which may include, without limiting the generality of the foregoing, the use of other common stock of the Company) with the person to whom the option is granted or to whom the option is transferred pursuant to subparagraph 5(d), or (C) in any other form of legal consideration that may be acceptable to the Board or the Committee. 4 In the case of any deferred payment arrangement, interest shall be payable at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement. (d) An option shall not be transferable except by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the person to whom the option is granted only by such person; provided, however, that a Nonstatutory Stock Option may be transferred to the extent provided in the option agreement. The person to whom the option is granted may designate, by delivering written notice of the same to the Company (in a form acceptable to the Company) during such person's lifetime, a third party who, in the event of the death of the optionee, shall thereafter be entitled to exercise the option and receive any and all proceeds thereof. (e) The total number of shares of stock subject to an option may, but need not, be allotted in periodic installments (which may, but need not, be equal). From time to time during each of such installment periods, the option may become exercisable ("vest") with respect to some or all of the shares allotted to that period, and may be exercised with respect to some or all of the shares allotted to such period and/or any prior period as to which the option was not fully exercised. During the remainder of the term of the option (if its term extends beyond the end of the installment periods), the option may be exercised from time to time with respect to any shares then remaining subject to the option. The provisions of this subparagraph 5(e) are subject to any option provisions governing the minimum number of shares as to which an option may be exercised. (f) The Company may require any optionee, or any person to whom an option is transferred under subparagraph 5(d), as a condition of exercising any such option, (1) to give written assurances satisfactory to the Company as to the optionee's knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters, and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the option; and (2) to give written assurances satisfactory to the Company stating that such person is acquiring the stock subject to the option for such person's own account and not with any present intention of selling or otherwise distributing the stock. These requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise of the option has been registered under a then currently effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), or (ii) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. (g) An option shall terminate three (3) months after termination of the optionee's employment or relationship as a consultant or director with the Company or an Affiliate, unless (i) such termination is due to such person's permanent and total disability, within the meaning of 5 Section 422(c)(6) of the Code, in which case the option may, but need not, provide that it may be exercised at any time within one (1) year following such termination of employment or relationship as a consultant or director; or (ii) the optionee dies while in the employ of or while serving as a consultant or director to the Company or an Affiliate, or within not more than three (3) months after termination of such relationship, in which case the option may, but need not, provide that it may be exercised at any time within eighteen (18) months following the death of the optionee by the person or persons entitled to exercise the option pursuant to subparagraph 5(d) hereof; or (iii) the option by its terms specifies either (A) that it shall terminate sooner than three (3) months after termination of the optionee's employment or relationship as a consultant or director, or (B) that it may be exercised more than three (3) months after termination of such relationship with the Company or an Affiliate. This subparagraph 5(g) shall not be construed to extend the term of any option or to permit anyone to exercise the option after expiration of its term, nor shall it be construed to increase the number of shares as to which any option is exercisable from the amount exercisable on the date of termination of the optionee's employment or relationship as a consultant or director. (h) The option may, but need not, include a provision whereby the optionee may elect at any time during the term of his or her employment or relationship as a consultant or director with the Company or any Affiliate to exercise the option as to any part or all of the shares subject to the option prior to the stated vesting date of the option or of any installment or installments specified in the option. Any shares so purchased from any unvested installment or option may be subject to a repurchase right in favor of the Company or to any other restriction the Board or the Committee determines to be appropriate. (i) To the extent provided by the terms of an option, the optionee may satisfy any federal, state or local tax withholding obligation relating to the exercise of such option by any of the following means or by a combination of such means: (1) tendering a cash payment; (2) authorizing the Company to withhold from the shares of the common stock otherwise issuable to the participant as a result of the exercise of the stock option a number of shares having a fair market value equal to the amount of the withholding tax obligation; or (3) delivering to the Company owned and unencumbered shares of the common stock having a fair market value equal to the amount of the withholding tax obligation. 6. STOCK BONUS PROVISIONS. Each Stock Bonus agreement shall be in such form and shall contain such terms and conditions as the Board or the Committee shall deem appropriate. The terms and conditions of Stock Bonus agreements may change from time to time, and the terms and conditions of separate agreements need not be identical, but each Stock Bonus agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions as appropriate: (a) The purchase price of stock under each Stock Bonus agreement shall be such amount as the Board or Committee shall determine and designate in such agreement. 6 Notwithstanding the foregoing, the Board or the Committee may determine that eligible participants in the Plan may be awarded stock pursuant to a Stock Bonus agreement in consideration for past services actually rendered to the Company or for its benefit. (b) No rights under a Stock Bonus agreement shall be assignable by any participant under the Plan, either voluntarily or by operation of law, except where such assignment is required by law or expressly authorized by the terms of the applicable Stock Bonus agreement. (c) The purchase price, if any, of stock acquired pursuant to a Stock Bonus agreement shall be paid either: (i) in cash at the time of purchase; (ii) at the discretion of the Board or the Committee, according to a deferred payment or other arrangement with the person to whom the stock is sold; or (iii) in any other form of legal consideration that may be acceptable to the Board or the Committee in their discretion. Notwithstanding the foregoing, the Board or the Committee to which administration of the Plan has been delegated may award stock pursuant to a Stock Bonus agreement in consideration for past services actually rendered to the Company or for its benefit. (d) Shares of stock sold or awarded under a Stock Bonus agreement may, but need not, be subject to a repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board or the Committee. (e) In the event an employee, director or consultant's employment or relationship with the Company is interrupted or terminated by the Company or any Affiliate, the Company may repurchase or otherwise reacquire any or all of the shares of stock held by that person which have not vested as of the date of termination under the terms of the Stock Bonus agreement between the Company and such person. (f) To the extent provided by the terms of the Stock Bonus agreement, the recipient may satisfy any federal, state or local tax withholding obligation relating to the receipt of the Stock Bonus by any of the following means or by a combination of such means: (1) tendering a cash payment; (2) authorizing the Company to withhold from the shares of the common stock otherwise issuable to the recipient as a result of the Stock Bonus a number of shares having a fair market value equal to the amount of the withholding tax obligation; or (3) delivering to the Company owned and unencumbered shares of the common stock having a fair market value equal to the amount of the withholding tax obligation. 7. DEFERRED SALARY GRANTS. (a) Any employee (including officers), director or consultant who is selected by the Board or Committee ("Deferral Participant") may elect to apply a portion of his or her base salary, in an amount equal to at least five thousand dollars ($5,000) but in no event more than fifty thousand dollars ($50,000), to the acquisition of an option to purchase shares of the Company's common stock pursuant to the terms of this paragraph 7 ("Deferred Salary Option"). Such election is irrevocable and must be filed with the Company prior to the commencement of 7 the calendar year in which the base salary to be deferred is earned. Notwithstanding the foregoing, a newly hired, elected or appointed Deferral Participant may file an irrevocable election with the Company within thirty (30) days of the date the Deferral Participant commences service to the Company. Each Deferral Participant who files such a timely election shall automatically be granted an option under this paragraph 7 on (i) the first trading day in January of the calendar year for which the deferral election is to be in effect; or (ii) for a newly hired, elected or appointed Deferral Participant, the first trading day of the month following the month the Deferral Participant files such election. (b) The number of shares of Company common stock subject to a Deferred Salary Option shall be determined pursuant to the following formula (rounded down to the nearest whole number): X= A / (B x 66-2/3%), where X is the number of option shares, A is the maximum amount of base salary subject to the deferral election, and B is the fair market value per share of the common stock on the option grant date. (c) The purchase price per share of common stock of the Company for the shares to be purchased pursuant to the exercise of any Deferred Salary Option shall be thirty three and one third percent (33-1/3%) of the fair market value of the Company's common stock on the date such Deferred Salary Option is granted. (d) Each Deferred Salary Option shall vest (become exercisable) equally over the twelve (12) month period that is the calendar year in which salary is deferred, and shall terminate on the earlier of (i) ten (10) years from the date the option was granted, or (ii) three (3) years following termination of the Deferral Participant's employment or relationship as a consultant or director with the Company or an Affiliate. If the Deferred Salary Option is not exercised during the applicable period, it shall be deemed to have been forfeited and of no further force or effect. 8. COVENANTS OF THE COMPANY. (a) During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of stock required to satisfy such Stock Awards up to the number of shares of stock authorized under the Plan. (b) The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of stock under the Stock Awards granted under the Plan; provided, however, that this undertaking shall not require the Company to register under the Securities Act either the Plan, any Stock Award granted under the Plan or any stock issued or issuable pursuant to any such Stock Award. 8 If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock under such Stock Awards unless and until such authority is obtained. 9. USE OF PROCEEDS FROM STOCK. Proceeds from the sale of stock pursuant to Stock Awards granted under the Plan shall constitute general funds of the Company. 10. MISCELLANEOUS. (a) The Board or the Committee shall have the power to accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest. (b) The holder of a Stock Award (including any person to whom an option is transferred under subparagraph 5(d)) shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such Stock Award unless and until such person has satisfied all requirements for acquisition of the shares subject to the Stock Award pursuant to the terms of the Stock Award Agreement. (c) Nothing in the Plan or any instrument executed or Stock Award granted pursuant thereto shall confer upon any eligible employee, consultant or director or the holder of Stock Awards any right to continue in the employ of the Company or any Affiliate (or to continue acting as a consultant or director) or shall affect the right of the Company or any Affiliate to terminate the employment or consulting relationship or directorship of any eligible employee, consultant or director or other holder of Stock Awards with or without cause. In the event that a holder of Stock Awards is permitted or otherwise entitled to take a leave of absence, the Company shall have the unilateral right to (i) determine whether such leave of absence will be treated as a termination of employment or relationship as consultant or director for purposes of the Plan and corresponding provisions of any outstanding Stock Awards, and (ii) suspend or otherwise delay the time or times at which the shares subject to the Stock Awards would otherwise vest. (d) To the extent that the aggregate fair market value (determined at the time of grant) of stock with respect to which incentive stock options (as defined in the Code) granted after 1986 are exercisable for the first time by any optionee during any calendar year under all plans of the Company and its Affiliates exceeds one hundred thousand dollars ($100,000), the options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options. 9 (e) (1) The Board shall have the authority to effect, at any time and from time to time (i) the repricing of any outstanding options under the Plan and/or (ii) with the consent of the affected holders of options, the cancellation of any outstanding options and the grant in substitution therefor of new options under the Plan covering the same or different numbers of shares of common stock, but having an exercise price per share not less than fifty percent (50%) of the fair market value (one hundred percent (100%) of the fair market value in the case of an Incentive Stock Option generally or, in the case of an Incentive Stock Option granted to a ten percent (10%) stockholder (as defined in subparagraph 4(b)), not less than one hundred and ten percent (110%) of the fair market value) per share of common stock on the new grant date. Notwithstanding the foregoing: (i) in no event shall this subparagraph 10(e) apply to any option held by a director or officer (corporate and Section 16 insider) of the Company, and (ii) no more than twenty percent (20%) of the options reserved for issuance under the Plan shall be repriced or canceled pursuant to this subparagraph 10(e). (2) Shares subject to an option canceled under this subparagraph 10(e) shall continue to be counted against the maximum award of options permitted to be granted pursuant to subparagraph 4(c) of the Plan. The repricing of an outstanding option by the Board, resulting in a reduction of the exercise price, shall be deemed to be a cancellation of the original option and the grant of a substitute option; in the event of such repricing, both the original and the substituted options shall be counted against the maximum awards of options permitted to be granted pursuant to subparagraph 4(c) of the Plan. The provisions of this subparagraph 10(e) shall be applicable only to the extent required by Section 162(m) of the Code. 11. ADJUSTMENTS UPON CHANGES IN STOCK. (a) If any change is made in the stock subject to the Plan, or subject to any Stock Award granted under the Plan (through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise), the Plan and outstanding Stock Awards will be appropriately adjusted in the class(es) and maximum number of shares subject to the Plan and the class(es) and number of shares and price per share of stock subject to outstanding Stock Awards. (b) In the event of: (1) a dissolution or liquidation of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the Company is the surviving corporation but the shares of the Company's common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) any other capital reorganization in which more than fifty percent (50%) of the shares of the Company entitled to vote are exchanged, excluding in each case a capital reorganization in which the sole purpose is to change the state of incorporation on the Company, then all outstanding options shall become exercisable in full for a period of at least ten (10) days, and all stock bonuses shall be fully vested, prior to such event. Outstanding options which have not been exercised prior to such event shall terminate on the date of such event unless assumed by a successor corporation. 10 12. AMENDMENT OF THE PLAN. (a) The Board at any time, and from time to time, may amend the Plan. However, except as provided in paragraph 11 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent such amendment requires stockholder approval in order for the Plan to satisfy the requirements of Section 422 of the Code, to comply with the requirements of Rule 16b-3 promulgated under the Exchange Act or to satisfy any Nasdaq or securities exchange listing requirements. (b) The Board may in its sole discretion submit any other amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations promulgated thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to certain executive officers. (c) It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide optionees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to employee Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options granted under it into compliance therewith. (d) Rights under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the person to whom the Stock Award was granted and (ii) such person consents in writing. 13. TERMINATION OR SUSPENSION OF THE PLAN. (a) The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate on the day before the tenth anniversary of the date the Plan is adopted or the date the Plan is approved by the stockholders, whichever is earlier. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated. (b) Rights and obligations under any Stock Award granted while the Plan is in effect shall not be altered or impaired by suspension or termination of the Plan, except with the consent of the person to whom the Stock Award was granted. 14. EFFECTIVE DATE OF PLAN. The Plan becomes effective on the date approved by the Board, but no stock bonuses shall be granted and no options shall be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board. 11 EX-99.2 6 EX-99.2 EXHIBIT 99.2 EXAR CORPORATION 1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN ADOPTED JULY 23, 1996 APPROVED BY STOCKHOLDERS AUGUST 29, 1996 AMENDED AND RESTATED MARCH 20, 1997 AMENDED AND RESTATED JUNE 12, 1997 AMENDED AND RESTATED SEPTEMBER 18, 1997 AMENDED AND RESTATED SEPTEMBER 10, 1998 AMENDED SEPTEMBER 11, 1998 1. PURPOSE. (a) The purpose of the Exar Corporation 1996 Non-Employee Directors' Stock Option Plan (the "Plan") is to provide a means by which each director of Exar Corporation, a Delaware corporation (the "Company") who is not otherwise an employee of the Company or of any Affiliate of the Company (each such person being hereafter referred to as a "Non-Employee Director") will be given an opportunity to purchase stock of the Company. (b) The word "Affiliate" as used in the Plan means any parent corporation or subsidiary corporation of the Company as those terms are defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended from time to time (the "Code"). (c) The Company, by means of the Plan, seeks to retain the services of persons now serving as Non-Employee Directors of the Company, to secure and retain the services of persons capable of serving in such capacity, and to provide incentives for such persons to exert maximum efforts for the success of the Company. 2. ADMINISTRATION. (a) The Plan shall be administered by the Board of Directors of the Company (the "Board") unless and until the Board delegates administration to a committee, as provided in subparagraph 2(b). (b) The Board may delegate administration of the Plan to a committee composed of not fewer than two (2) members of the Board (the "Committee"). If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. 1 3. SHARES SUBJECT TO THE PLAN. (a) Subject to the provisions of paragraph 11 relating to adjustments upon changes in stock, the stock that may be sold pursuant to options granted under the Plan shall not exceed in the aggregate two hundred fifty thousand (250,000) shares of the Company's common stock. If any option granted under the Plan shall for any reason expire or otherwise terminate without having been exercised in full, the stock not purchased under such option shall again become available for the Plan. (b) The stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 4. ELIGIBILITY. Options shall be granted only to Non-Employee Directors of the Company. 5. NON-DISCRETIONARY GRANTS. (a) Each person who is elected for the first time to be a Non-Employee Director after September 11, 1998 shall, on the date of initial election as a Non-Employee Director by the Board or shareholders of the Company, automatically be granted an option to purchase eighteen thousand (18,000) shares of the Company's common stock (subject to adjustment as provided in paragraph 11 hereof) on such date upon the terms and conditions set forth herein (the "Initial Grant"). (b) On the first day following the date of each Annual Meeting of the Stockholders of the Company (or the next day that the Company's stock is traded should the stock not trade on such date), an option to purchase seven thousand five hundred (7,500) shares of the Company's common stock (subject to adjustment as provided in paragraph 11 hereof) shall automatically be granted to such person provided that such person (i) is at that time a Non-Employee Director, and (ii) has served continuously as a Non-Employee Director since the date of the previous Annual Meeting of the Stockholders of the Company or for at least six (6) months (the "Annual Grant"); PROVIDED, HOWEVER, that the Annual Grant for 1998 shall be made on September 11, 1998, and the number of shares of the Company's Common Stock subject to such Annual Grant shall equal seven thousand five hundred (7,500) multiplied by a fraction, the numerator of which is equal to the number of full months which have elapsed between the most recent annual grant received by such Non-Employee Director and September 11, 1998, and the denominator of which is twelve (12). (c) Notwithstanding amendments made to this Plan effective September 11, 1998, options granted to Non-Employee Directors of the Company under this Plan prior to such date shall remain outstanding on the original terms of such options. 6. DEFERRED DIRECTOR FEE GRANTS. (a) Each Non-Employee Director may elect to apply a percentage of his or her fees for any calendar year otherwise payable in cash for his or her service on the Board or a committee of the Board ("Directors' Fees"), in an amount equal to at least twenty-five percent 2 (25%) but in no event more than fifty percent (50%), to the acquisition of an option to purchase shares of the Company's common stock pursuant to the terms of this paragraph 6 ("Deferred Fee Option"). Such election is irrevocable and must be filed with the Board or a delegate of the Board prior to the commencement of the calendar year in which the Directors' Fees to be deferred are earned. Notwithstanding the foregoing, a newly elected Non-Employee Director may file such an irrevocable election with the Board or a delegate of the Board within thirty (30) days of the date the Non-Employee Director is elected to the Board. Each Non-Employee Director who files such a timely election shall automatically be granted an option under this paragraph 6 on (i) the first trading day in January of the calendar year for which the deferral election is to be in effect; or (ii) for a newly elected Non-Employee Director, the first trading day of the month following the month in which the Non-Employee Director files such election. Notwithstanding the foregoing, if the number of shares remaining available for the grant of options under the Plan is not sufficient to cover non-discretionary option grants under paragraph 5 and Deferred Fee Options, the available shares shall be first allocated to non-discretionary option grants under paragraph 5 and then ratably among the Non-Employee Directors eligible to receive a Deferred Fee Option based on their relative deferred fees. (b) The purchase price per share of common stock of the Company for the shares to be purchased pursuant to the exercise of any Deferred Fee Option shall be 33-1/3% of the fair market value of the stock on the date such Deferred Fee Option is granted. (c) The number of shares of common stock of the Company subject to a Deferred Fee Option shall be determined pursuant to the following formula (rounded down to the nearest whole number): X = A / (B x 66-2/3%), where X is the number of option shares, A is the maximum amount of the Directors' Fees subject to the Non-Employee Director's deferral election, and B is the fair market value per share of stock on the option grant date. (d) Each Deferred Fee Option shall vest (become exercisable) in installments on each date that Directors' Fees would have been payable in cash had no deferral election been in effect under this paragraph 6 with respect to the number of shares equal to (1) the aggregate shares subject to the Deferred Fee Option multiplied by (2) the fraction in which the numerator is the Directors' Fees that the Non-Employee Director would have received in cash on such date absent a deferral election and the denominator is the aggregate Directors' Fees that the Non-Employee Director would have received for the calendar year in cash absent a deferral election. Each Deferred Fee Option shall be fully vested and exercisable in the event the Non-Employee Director dies or becomes disabled within the meaning of Section 22(e)(3) of the Code while a director or immediately prior to the consummation of a corporate reorganization event as described in paragraph 11(b). 3 (e) If a Non-Employee Director's term as a director for the Company shall terminate for any reason, any Deferred Fee Option then held by such Non-Employee Director, to the extent then exercisable, shall remain exercisable after the termination of his or her service as a Non-Employee Director for a period of three (3) years (but in no event beyond seven (7) years from the date of grant of the Deferred Fee Option). If the Deferred Fee Option is not exercised during the applicable period, it shall be deemed to have been forfeited and of no further force or effect. 7. OPTION PROVISIONS. Each option shall be subject to the following terms and conditions: (a) The term of each option commences on the date it is granted and, unless sooner terminated as set forth herein, expires on the date ("Expiration Date") seven (7) years from the date of grant. If the optionee's service as a Non-Employee Director terminates for any reason or for no reason, the option shall terminate on the earlier of the Expiration Date or the date twelve (12) months following the date of termination of such service; PROVIDED, HOWEVER, that if a Non-Employee Director becomes an employee or consultant of the Company while holding an option issued under the Plan, the option shall terminate on the earlier of the Expiration Date or the date twelve (12) months after the date on which both the directorship and the employment or consulting relationship of the optionee with the Company terminate; PROVIDED FURTHER, that Deferred Fee Options shall remain exercisable for a period of three (3) years (but in no event beyond seven (7) years from the date of grant) from the date of termination of such relationship. Notwithstanding the foregoing, if such termination is due to the optionee's death or permanent and total disability, within the meaning of Section 422(c)(6) of the Code, the option shall terminate on the earlier of the Expiration Date or twelve (12) months following termination of such directorship or service. In any and all circumstances, an option may be exercised following termination of the optionee's service as a Non-Employee Director or employee of or consultant to the Company or any Affiliate only as to that number of shares as to which it was exercisable on the date of termination of such service under the provisions of subparagraph 7(e). (b) The exercise price of each option shall be one hundred percent (100%) of the fair market value of the stock subject to such option on the date such option is granted. (c) Payment of the exercise price of each option is due in full in cash at the time of exercise. (d) An option shall not be transferable except by will or by the laws of descent and distribution, or pursuant to a domestic relations order satisfying the requirements of Rule 16(a)-12 under the Securities Exchange Act of 1934 and shall be exercisable during the lifetime of the person to whom the option is granted only by such person (or by his guardian or legal representative) or transferee pursuant to such an order. Notwithstanding the foregoing, the optionee may, by delivering written notice to the Company in a form satisfactory to the Company, designate a third party who, in the event of the death of the optionee, shall thereafter be entitled to exercise the option. (e) An option granted in an Initial Grant shall become exercisable in annual installments over a period of three (3) years from the date of grant, with thirty-three and one third 4 percent (33-1/3%) becoming exercisable at the end of each anniversary of the date of grant, provided that the optionee has, during the entire period prior to such vesting date, continuously served as a Non-Employee Director or employee of or consultant to the Company or any Affiliate of the Company, whereupon such option shall become fully exercisable in accordance with its terms with respect to that portion of the shares represented by that installment. (f) An option granted in an annual grant shall become exercisable: (i) if granted prior to September 11, 1998, in annual installments over a period of four (4) years from the date of grant, with twenty-five percent (25%) becoming exercisable at the end of each anniversary of the date of grant, provided that the optionee has, during the entire period prior to such vesting date, continuously served as a Non-Employee Director or employee of or consultant to the Company or any Affiliate of the Company, whereupon such option shall become fully exercisable in accordance with its terms with respect to that portion of the shares represented by that installment. (ii) if granted on or after September 11, 1998, in monthly installments over a period of twelve (12) months from the date of grant, with eight and one-third percent (8-1/3%) becoming exercisable at the end of each full month following the date of grant, provided that the optionee has, during the entire period prior to such vesting date, continuously served as a Non-Employee Director or employee of or consultant to the Company or any Affiliate of the Company, whereupon such option shall become fully exercisable in accordance with its terms with respect to that portion of the shares represented by that installment. (g) If a Non-Employee Director's term as a Director of the Company expires and the Non-Employee Director is not elected or appointed to an immediate subsequent term as a Director of the Company, any option from an Annual Grant then held by such Non-Employee Director shall become fully vested and exercisable in accordance with its terms. (h) The Company may require any optionee, or any person to whom an option is transferred under subparagraph 7(d), as a condition of exercising any such option: (i) to give written assurances satisfactory to the Company as to the optionee's knowledge and experience in financial and business matters; and (ii) to give written assurances satisfactory to the Company stating that such person is acquiring the stock subject to the option for such person's own account and not with any present intention of selling or otherwise distributing the stock. These requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise of the option has been registered under a then-currently-effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), or (ii), as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then-applicable securities laws. (i) Notwithstanding anything to the contrary contained herein, an option may not be exercised unless the shares issuable upon exercise of such option are then registered under the Securities Act or, if such shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. 5 8. COVENANTS OF THE COMPANY. (a) During the terms of the options granted under the Plan, the Company shall keep available at all times the number of shares of stock required to satisfy such options. (b) The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of stock upon exercise of the options granted under the Plan; PROVIDED, HOWEVER, that this undertaking shall not require the Company to register under the Securities Act either the Plan, any option granted under the Plan, or any stock issued or issuable pursuant to any such option. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of such options. 9. USE OF PROCEEDS FROM STOCK. Proceeds from the sale of stock pursuant to options granted under the Plan shall constitute general funds of the Company. 10. MISCELLANEOUS. (a) Neither an optionee nor any person to whom an option is transferred under subparagraph 7(d) shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such option unless and until such person has satisfied all requirements for exercise of the option pursuant to its terms. (b) Nothing in the Plan or in any instrument executed pursuant thereto shall confer upon any Non-Employee Director any right to continue in the service of the Company or any Affiliate or shall affect any right of the Company, its Board or shareholders or any Affiliate to terminate the service of any Non-Employee Director with or without cause. (c) No Non-Employee Director, individually or as a member of a group, and no beneficiary or other person claiming under or through him, shall have any right, title or interest in or to any option reserved for the purposes of the Plan except as to such shares of common stock, if any, as shall have been reserved for him pursuant to an option granted to him. (d) In connection with each option made pursuant to the Plan, it shall be a condition precedent to the Company's obligation to issue or transfer shares to a Non-Employee Director, or to evidence the removal of any restrictions on transfer, that such Non-Employee Director make arrangements satisfactory to the Company to insure that the amount of any federal or other withholding tax that may be required to be withheld with respect to such sale or transfer, or such removal or lapse, is made available to the Company for timely payment of such tax. 11. ADJUSTMENTS UPON CHANGES IN STOCK. (a) If any change is made in the stock subject to the Plan, or subject to any option granted under the Plan (through merger, consolidation, reorganization, recapitalization, stock 6 dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise), the Plan and outstanding options will be appropriately adjusted in the class(es) and maximum number of shares subject to the Plan and the class(es) and number of shares and price per share of stock subject to outstanding options. (b) In the event of: (1) a dissolution or liquidation of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the Company is the surviving corporation but the shares of the Company's common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) any other capital reorganization in which more than fifty percent (50%) of the shares of the Company entitled to vote are exchanged, excluding in each case a capital reorganization in which the sole purpose is to change the state of incorporation of the Company, then all outstanding options shall become exercisable in full for a period of at least ten (10) days prior to such event. Outstanding options which have not been exercised prior to such event shall terminate on the date of such event unless assumed by a successor corporation. 12. AMENDMENT OF THE PLAN. (a) The Board at any time, and from time to time, may amend the Plan. Except as provided in paragraph 11 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the stockholders of the Company where stockholder approval is necessary for the Plan to comply with the requirements of Rule 16b-3 or Nasdaq or securities exchange listing requirements. (b) Rights and obligations under any option granted before any amendment of the Plan shall not be impaired by such amendment unless (i) the Company requests the consent of the person to whom the option was granted and (ii) such person consents in writing. 13. TERMINATION OR SUSPENSION OF THE PLAN. (a) The Board may suspend or terminate the Plan at any time. No options may be granted under the Plan while the Plan is suspended or after it is terminated. (b) Rights and obligations under any option granted while the Plan is in effect shall not be impaired by suspension or termination of the Plan, except with the consent of the person to whom the option was granted. 14. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE. The Plan shall become effective on the date approved by the Board, provided that no options may be exercised unless and until the Plan is approved by the stockholders of the Company. 7 -----END PRIVACY-ENHANCED MESSAGE-----