-----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, Eg1NIm/P8LQ5kvPmfR9Y5icaAxRN+Hsje9IZJOxzVKOgCNl4vghvCC7Hza78bs1l NvD54N/OVq/S8H1bMzIOCA== 0000891618-02-001497.txt : 20020415 0000891618-02-001497.hdr.sgml : 20020415 ACCESSION NUMBER: 0000891618-02-001497 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20020328 EFFECTIVENESS DATE: 20020328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CADENCE DESIGN SYSTEMS INC CENTRAL INDEX KEY: 0000813672 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 770148231 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 333-85080 FILM NUMBER: 02589679 BUSINESS ADDRESS: STREET 1: 2655 SEELY ROAD BLDG 5 CITY: SAN JOSE STATE: CA ZIP: 95134 BUSINESS PHONE: 4089431234 MAIL ADDRESS: STREET 1: 555 RIVER OAKS PARKWAY CITY: SAN JOSE STATE: CA ZIP: 95134 FORMER COMPANY: FORMER CONFORMED NAME: ECAD INC /DE/ DATE OF NAME CHANGE: 19880609 S-8 1 f80259ors-8.txt FORM S-8 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 2002 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM S-8 REGISTRATION STATEMENT Under The Securities Act of 1933 ------------ CADENCE DESIGN SYSTEMS, INC. (Exact name of registrant as specified in its charter) DELAWARE 77-0148231 (State or Other Jurisdiction of Incorporation (I.R.S. Employer Identification No.) or Organization)
2655 SEELY AVENUE, BUILDING 5 SAN JOSE, CALIFORNIA 95134 (Address of Principal Executive Offices) (Zip Code) ---------------------- OPTIONS ASSUMED BY CADENCE DESIGN SYSTEMS, INC. ORIGINALLY GRANTED UNDER THE JTA RESEARCH INCORPORATED 1998 STOCK OPTION PLAN (Full title of the Plan) ---------------------- R.L. SMITH MCKEITHEN SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY CADENCE DESIGN SYSTEMS, INC. 2655 SEELY AVENUE, BUILDING 5, SAN JOSE, CALIFORNIA 95134 (Name and Address of Agent for Service) (408) 943-1234 (Telephone number, including area code, of agent for service) ---------------------- COPIES TO: GREGORY J. CONKLIN, ESQ. GIBSON, DUNN & CRUTCHER LLP ONE MONTGOMERY STREET, 31ST FLOOR SAN FRANCISCO, CALIFORNIA 94104 (415) 393-8200 CALCULATION OF REGISTRATION FEE
================================================================================================================================ Title of Securities Proposed Maximum Proposed Maximum Amount of to be Registered(1) Amount to be Registered(2) Offering Price per Share(3) Aggregate Offering Price(3) Registration Fee(3) - ------------------- -------------------------- --------------------------- --------------------------- ------------------- Common Stock, par 258,843 $21.068 $5,453,304.32 $501.70 value $0.01 per share
================================================================================ (1) Includes, with respect to each share of Common Stock, Rights, pursuant to the registrant's Amended and Restated Rights Agreement, dated as of February 1, 2000, between the Registrant and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, and until a triggering event thereunder, the Rights trade with, and cannot be separated from, the Common Stock. (2) This Registration Statement shall also cover any additional shares of Common Stock which become issuable under the 1998 Stock Option Plan (the "Plan") by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration which results in an increase in the number of the outstanding shares of Cadence Design Systems, Inc. Common Stock. (3) Calculated solely for purposes of this offering under Rule 457(h) of the Securities Act of 1933, as amended, on the basis of the maximum offering price per share that such options may be exercised. ================================================================================ PART I INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS Pursuant to the instructions to Form S-8, Part I (Information Required in the Section 10(a) Prospectus) is not filed as part of this Registration Statement. The shares of common stock subject to options registered hereunder have been assumed by the Registrant pursuant to an Agreement and Plan of Merger, dated as of March 4, 2002, among the Registrant, JTA Research Incorporated, a California corporation, Jackal Acquisition, Inc., a California corporation and wholly-owned subsidiary of the Registrant, and Jonathan Yee, as shareholder agent. These options were originally granted to directors, employees and consultants of JTA Research Incorporated under the Plan. PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 3. Incorporation of Documents by Reference The Registrant hereby incorporates by reference into this Registration Statement the following documents previously filed with the Securities and Exchange Commission (the "Commission"): (a) The Registrant's Annual Report on Form 10-K for the fiscal year ended December 29, 2001, including all material incorporated by reference therein; (b) The description of the Registrant's Common Stock to be offered hereby contained in the Registrant's Registration Statement on Form 8-A filed with the Commission on August 29, 1990; and (c) The description of the Registrant's Preferred Share Purchase Rights set forth in Exhibit 99.1 to the Registrant's Current Report on Form 8-K filed with the Commission on February 16, 1996. All documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), after the date of this Registration Statement and prior to the filing of a post-effective amendment which indicates that all securities offered hereby have been sold or which deregisters all securities then remaining unsold shall be deemed to be incorporated by reference into this Registration Statement and to be a part hereof from the date of filing of such documents. Any document, and any statement contained in a document, incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein, or in any other subsequently filed document that also is incorporated or deemed to be incorporated by reference herein, modifies or supersedes such document or statement. Any such document or statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement. Subject to the foregoing, all information appearing in this Registration Statement is qualified in its entirety by the information appearing in the documents incorporated by reference. II-1 Item 4. Description of Securities Not Applicable. Item 5. Interests of Named Experts and Counsel Not Applicable. Item 6. Indemnification of Directors and Officers Section 145 of the Delaware General Corporation Law permits a corporation to indemnify any of its directors or officers who was or is a party or is threatened to be made a party to any third party proceeding by reason of the fact that such person is or was a director or officer of the corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that such person's conduct was unlawful. In a derivative action, i.e., one by or in the right of a corporation, the corporation is permitted to indemnify any of its directors or officers against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made if such person shall have been adjudged liable to the corporation, unless and only to the extent that the court in which such action or suit was brought shall determine upon application that such person is fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability. Article VII of the Registrant's currently effective Certificate of Incorporation eliminates the personal liability of its directors for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation 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 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. In addition, as permitted by Section 145 of the Delaware General Corporation Law, the Bylaws of the Registrant provide that: (a) the Registrant is required to indemnify its directors and officers and persons serving in such capacities in other business entities (including, for example, subsidiaries of the Registrant) at the Registrant's request (such directors, officers and other persons are collectively, "Covered Persons"), to the fullest extent permitted by Delaware law, including those circumstances in which indemnification would otherwise be discretionary; (b) the Registrant is required to advance expenses, as incurred to such Covered Persons in connection with defending a proceeding; (c) the indemnitee(s) of the Registrant have the right to bring suit, and to be paid the expenses of prosecuting such suit if successful, to enforce the rights to indemnification under the Bylaws or to advancement of expenses under the Bylaws; (d) the rights conferred in the Bylaws are not exclusive and the Registrant is authorized to enter into indemnification agreements with such directors, officers and employees; (e) the Registrant is required to maintain director and officer liability insurance to the extent reasonably available; and (f) the Registrant may not retroactively amend the Bylaws indemnification provision in a way that is adverse to such Covered Persons. The Registrant has entered into indemnity agreements with each of its executive officers and directors that provide the maximum indemnity allowed to officers and directors by Section 145 of the Delaware General Corporation Law and the Bylaws, as well as certain additional procedural protections. The Registrant also maintains a limited amount of director and officer insurance. The indemnification provision in the Bylaws, and the indemnity agreements entered into between the Registrant and its officers or directors, may be sufficiently broad to permit indemnification of the Registrant's officers and directors for liability arising under the Securities Act of 1933, as amended (the "1933 Act"). Item 7. Exemption from Registration Claimed Not Applicable. II-2 ================================================================================ Item 8. Exhibits
Exhibit Number Exhibit - -------------- ------- 4.1 Instruments Defining Rights of Stockholders. Reference is made to the Registrant's Registration Statement on Form 8-A filed with the Commission on August 29, 1990 incorporated by reference pursuant to Items 3(c) and (d). 5.1 Opinion and consent of Gibson, Dunn & Crutcher LLP. 23.1 Consent of Arthur Andersen LLP, Independent Public Accountants. 23.2 Consent of Gibson, Dunn & Crutcher LLP (contained in Exhibit 5.1). 24.1 Power of Attorney (included on the signature pages to this Registration Statement on Form S-8). 99.1 JTA Research Incorporated 1998 Stock Option Plan.
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 1933 Act; (ii) to reflect in the prospectus any facts or events arising after the effective date of this 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 this Registration Statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement; provided however, that clauses (1)(i) and (l)(ii) shall not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference into this Registration Statement; (2) that for the purpose of determining any liability under the 1933 Act, 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, and (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold upon the termination of the offering under the Plans. B. Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers or controlling persons of the Registrant pursuant to the indemnity provisions incorporated by reference in Item 6, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the 1933 Act 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 1933 Act and will be governed by the final adjudication of such issue. II-3 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 San Jose, State of California, on this 26th day of March, 2002 CADENCE DESIGN SYSTEMS, INC. By: /s/ H. Raymond Bingham -------------------------- H. Raymond Bingham President, Chief Executive Officer and Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints H. Raymond Bingham and R.L. Smith McKeithen, and each 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, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE /s/ H. Raymond Bingham President, Chief Executive March 20, 2002 - ---------------------------- Officer and Director H. Raymond Bingham (Principal Executive Officer) /s/ William Porter Senior Vice President, Chief March 20, 2002 - ----------------------------- Financial Officer (Principal William Porter Financial Officer and Principal Accounting Officer) /s/ Donald L. Lucas Chairman of the Board of March 20, 2002 - ----------------------------- Directors Donald L. Lucas /s/ Susan L. Bostrom Director March 14, 2002 - ----------------------------- Susan L. Bostrom /s/ Dr. Leonard Y.W. Liu Director March 20, 2002 - ----------------------------- Dr. Leonard Y.W. Liu /s/ Dr. Alberto Sangiovanni-Vincentelli Director March 13, 2002 - ----------------------------------------- Dr. Alberto Sangiovanni-Vincentelli
II-4 /s/ George M. Scalise Director March 15, 2002 ----------------------------- George M. Scalise /s/ Dr. John B. Shoven Director March 14, 2002 ----------------------------- Dr. John B. Shoven /s/ Roger S. Siboni Director March 20, 2002 ----------------------------- Roger S. Siboni
II-5 EXHIBIT INDEX
Exhibit Number Exhibit - -------------- ------- 4.1 Instruments Defining Rights of Stockholders. Reference is made to the Registrant's Registration Statement on Form 8-A filed with the Commission on August 29, 1990 incorporated by reference pursuant to Items 3(c) and (d). 5.1 Opinion and consent of Gibson, Dunn & Crutcher LLP. 23.1 Consent of Arthur Andersen LLP, Independent Public Accountants. 23.2 Consent of Gibson, Dunn & Crutcher LLP (contained in Exhibit 5.1). 24.1 Power of Attorney (included on the signature pages to this Registration Statement on Form S-8). 99.1 JTA Research Incorporated 1998 Stock Option Plan.
EX-5.1 3 f80259orex5-1.txt EXHIBIT 5.1 EXHIBIT 5.1 [Letterhead of Gibson, Dunn & Crutcher LLP] March 25, 2002 Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, CA 95134 Re: Registration Statement on Form S-8 of Cadence Design Systems, Inc. Ladies and Gentlemen: We refer to the registration statement on Form S-8 (the "Registration Statement"), under the Securities Act of 1933, as amended (the "Securities Act"), filed by Cadence Design Systems, Inc., a Delaware corporation (the "Company"), with respect to the proposed offering by the Company of up to 258,843 shares (the "Shares") of its common stock, $0.01 par value per share (the "Common Stock"), subject to issuance by the Company under its 1998 Stock Option Plan (the "Plan"). The options issuable under the 1998 Stock Option Plan were assumed by the Company pursuant to the terms of that certain Agreement and Plan of Merger, dated as of March 4, 2002, by and among the Company, Jackal Acquisition, Inc., a California corporation and wholly-owned subsidiary of the Company, JTA Research Incorporated, a California corporation and Jonathan Yee, as Shareholder Agent. We have examined the originals or certified copies of such corporate records, certificates of officers of the Company and/or public officials and such other documents, and have made such other factual and legal investigations as we deemed relevant and necessary as the basis for the opinions set forth below. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as conformed or photostatic copies and the authenticity of the originals of such copies. Based on our examination mentioned above, subject to the assumptions stated above and relying on the statements of fact contained in the documents that we have examined, we are of the opinion that (i) the issuance by the Company of the Shares has been duly authorized and (ii) when issued in accordance with the terms of the Plan, the Shares will be duly and validly issued, fully paid and non-assessable shares of Common Stock. We are admitted to practice in the State of California, and are not admitted to practice in the State of Delaware. However, for the limited purposes of our opinions set forth above, we are generally familiar with the General Corporation Law of the State of Delaware (the "DGCL") as presently in effect and have made such inquiries as we consider necessary to render this opinion with respect to a Delaware corporation. This opinion letter is limited to the DGCL, as it presently exists and to the facts as they presently exist. We express no opinion with respect to the effect or applicability of the laws of any other jurisdiction. We assume no obligation to revise or supplement this opinion letter should the laws of such jurisdictions be changed after the date hereof by legislative action, judicial decision or otherwise. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the General Rules and Regulations of the Securities and Exchange Commission. Very truly yours, GIBSON, DUNN & CRUTCHER LLP EX-23.1 4 f80259orex23-1.txt EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF ARTHUR ANDERSEN LLP, INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Registration Statement of our report dated March 11, 2002 included in Cadence Design Systems, Inc.'s Form 10-K for the year ended December 29, 2001 and to all references to our Firm in this Registration Statement. Arthur Andersen LLP San Jose, California March 27, 2002 EX-99.1 5 f80259orex99-1.txt EXHIBIT 99.1 EXHIBIT 99.1 1998 STOCK OPTION PLAN OF JTA RESEARCH INC. ARTICLE I GENERAL PROVISIONS 1.1 Purpose. JTA Research, Inc. (the "Company") proposes to grant to selected key employees (including officers and directors who are employees) of the Company (hereinafter referred to as "Eligible Employees") and to key persons performing services as independent contractors and not as employees or members of the Board of Directors ("Eligible Consultants") options to purchase shares of Common Stock, no par value, of the Company ("Common Stock") for the purposes of (i) furnishing to such Eligible Employees and Eligible Consultants incentives to improve operations and increase profits of the Company, (ii) encouraging such Eligible Employees to accept or continue employment with the Company and its subsidiaries, and (iii) encouraging Eligible Consultants to begin or continue providing services to the Company. Such options wilt be granted pursuant to the plan herein set forth, which shall be known as the 1998 Stock Option Plan of JTA Research, Inc. (herein referred to as the "Plan"). The Company also proposes to grant to members of the Board of Directors of the Company (the "Board") who are not officers or employees of the Company at the time of a grant (hereinafter referred to as "Non-Employee Directors") options to purchase shares of Common Stock pursuant to the Plan. The purpose of such grants is to (i) provide incentives for highly qualified individuals to stand for election to the Board and continue service on the Board, (ii) provide incentives to promote long-term shareholder value, and (iii) promote a greater identity of interest between Non-Employee Directors and the Company's shareholders. Eligible Employees, Eligible Consultants and Non-Employee Directors who are granted options pursuant to the Plan are sometimes collectively referred to herein as "Optionees." 1.2 Shares Subject to the Plan. Subject to adjustment as provided in Section 1.8 (the "Adjustment Provisions"), the aggregate number of shares of Common Stock to be delivered upon exercise of all options granted under the Plan shall not exceed 2,100,000 shares. The shares of Common Stock issuable upon exercise of options granted under the Plan may be authorized and unissued shares or reacquired shares. In the event the number of shares to be delivered upon the exercise in full of any option granted under the Plan is reduced for any reason whatsoever or in the event any option granted under the Plan for any reason shall expire or shall terminate unexercised as to all or any shares covered thereby, the number of shares no longer subject to any such option shall thereupon be released from such option and shall thereafter be available to be re-optioned under the Plan, subject to the limitations, if any, imposed by the Internal Revenue Code of 1986, as amended (the "Code") on the availability for regrant of options previously granted pursuant to Article III. The Board or such committee of the Board as is specifically authorized by the Board in the future to administer the Plan in lieu of the Board (the "Committee") 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 under the Plan and the grant in substitution therefor of new options under the Plan pursuant to terms consistent therewith, covering the same or different numbers of shares of stock, provided, however, that no option granted pursuant to Article III shall be repriced or regranted on terms that would constitute a "modification" within the meaning of Section 424(h)(3) of the Code which would disqualify such option as an incentive stock option described in Section 422 of the Code unless the Company and the holder of such option shall so agree. Shares issued pursuant to the exercise of options granted under the Plan shall be fully paid and nonassessable. 1.3 Administration of the Plan. 1.3.1 Generally. Subject to the provisions of the Plan, the Board (or, if it is so authorized by the Board, the Committee) shall administer the Plan. All references herein to the "Board" shall, when referring to the administration of the Plan, be deemed to refer to the Committee if the Committee has been authorized to administer the Plan in lieu of the Board. The Board shall have the authority to (a) determine the provisions of the options to be granted under the Plan, (b) interpret the Plan and all options granted under the Plan, (c) adopt, amend or rescind such rules as it deems necessary for the proper administration of the Plan, (d) make all other determinations necessary or advisable for the administration of the Plan, and (e) correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any option granted under the Plan in the manner and to the extent that the Board deems desirable to carry the Plan or any option into effect. 1.3.2 Committee. If a Committee is authorized to administer the Plan, the Board shall have the power to add or remove members of the Committee from time to time, to fill vacancies thereon arising by resignation, death, removal, or otherwise, and shall designate a chairman from among the members of the Committee, which chairman shall preside at all meetings of the Committee. Meetings shall be held at such times and places as shall be determined by the Committee. A majority of the members of the Committee shall constitute a quorum for the transaction of business, and the vote of a majority of those members present at any meeting shall decide any question brought before that meeting. The actions of the Committee in exercising all of the rights, powers and authorities set out in the Plan, when performed in good faith and in its sole judgment, shall be final and conclusive. When appropriate, the Plan shall be administered in order to qualify certain of the options granted hereunder as "incentive stock options" described in Section 422 of the Code. 1.4 Amendment and Discontinuance of the Plan. The Board may amend, suspend or terminate the Plan; provided, however, that each such amendment of the Plan (a) extending the period within which options may be granted under the Plan, (b) increasing the aggregate number of shares of Common Stock to be optioned under the Plan except as provided in the Adjustment Provisions, (c) materially modifying the requirements as to eligibility of employees or consultants receiving options under, or changing the eligibility of employees or consultants or class of employees or consultants to whom options may be granted under Article II or III, as applicable, or (d) materially increasing the benefits to optionees under the Plan, shall, in each case, be subject to approval by the shareholders of the Company; provided, further, however, that 2 no amendment, suspension or termination of the Plan shall be made which may, without the consent of the holder of an option granted under Article II or III, terminate such option or adversely affect such person's rights in any material respect (except as set forth in the Plan). Furthermore, the Board may alter, amend, suspend, discontinue or terminate the Plan and any option granted hereunder, without the approval of the shareholders of the Company or any holder of any option thereby affected, if necessary in order to (a) enable the Plan and any option granted hereunder intended to be so qualified, to qualify for (i) the exemption provided by Rule 16b-3, promulgated under the Securities Exchange Act of 1934, as amended (the "Act"), (ii) the benefits provided under Section 422 of the Code, or (iii) the exclusion for qualified performance-based compensation under Section 162(m) of the Code and the applicable interpretive authority thereunder (including Treasury Regulation Section 1.162-27), and (b) comply with changes in the Code, the Employee Retirement Income Security Act or any other applicable law (including, with respect to any of the foregoing, changes in any rule, regulation or other interpretive authority). 1.5 Granting of Options to Employees. The board shall have authority to grant, prior to the expiration date of the Plan, to (i) Eligible Employees, Eligible Consultants and Non-Employee Directors options to purchase, on the terms and conditions hereinafter set forth in Article II, and (ii) Eligible Employees options to purchase, on the terms and conditions hereinafter set forth in Article III, authorized but unissued, or reacquired, shares of Common Stock, provided such grants shall be made only to those Eligible Employees, Eligible Consultants and Non-Employee Directors, in such amounts and at such times as determined in the discretion of the Board, and, for this purpose, the Board may consider the Eligible Employee's, Eligible Consultant's or Non-Employee Directors office or position, degree of responsibility for, and contribution to, the growth and success of the Company, length of service, promotions, potential and any other factors which it may deem relevant. Options granted to Eligible Employees under Article III shall be "incentive stock options" within the meaning of Section 422(b) of the Code, and are hereinafter referred to as "incentive stock options." All other options granted to Eligible Employees and all options granted to Eligible Consultants under the Plan shall be granted pursuant to Article II, and are hereinafter referred to as "nonqualified options." 1.6 Option Agreements. Each option granted under the Plan shall be evidenced by a written agreement between the Company and the applicable optionee and shall contain such terms and conditions, and may be exercisable for such periods, as may be approved by the Board, which terms and conditions need not be identical but which must be in compliance with the terms and provisions hereof. 1.7 Effective Date: Termination of Plan. The Plan shall become effective as of the date the Plan is approved by the shareholders of the Company (the "Effective Date"). Except with respect to options then outstanding, if not sooner terminated under Section 1.4, the Plan shall terminate upon, and no further options shall be granted after, the expiration of ten (10) years from the Effective Date. 3 1.8 Adjustment of Shares. (a) Reorganizations, Etc. If at any time or from time to time after the grant of any option hereunder there is a capital reorganization of the Common Stock, or a recapitalization, stock split, stock dividend or combination of shares with respect to the Company's outstanding Common Stock, then the Optionee shall be entitled to receive upon the exercise of such option, in lieu of the Common Stock, the number of shares of stock or other securities or property of the Company to which a holder of the number of shares of Common Stock deliverable upon exercise of such option would have been entitled as a result of such event. Such adjustment in an outstanding option granted under the Plan shall be made without change in the total price applicable to such option or the unexercised portion of such option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in exercise price per share. Any adjustment of an incentive stock option pursuant to this Section 1.8 shall be made in such manner as not to constitute a "modification" within the meaning of Section 424(h)(3) of the Code. (b) Mergers; Acquisitions (where the Company survives). If the Company shall merge with another corporation and the Company is the surviving corporation in such merger and under the terms of such merger the Common Stock outstanding immediately prior to the merger remain outstanding and unchanged, any option granted hereunder shall continue to apply to the Common Stock then subject thereto and shall also pertain and apply to any additional securities and other property, if any, to which a holder of the number of shares of Common Stock deliverable upon exercise of such option would have been entitled as a result of the merger. (c) Other Corporate Changes. If (i) the Company shall not be the surviving entity in any merger, consolidation or other reorganization (or survives only as a subsidiary of an entity other than a previously wholly-owned subsidiary of the Company), (ii) the Company sells, leases or exchanges all or substantially all of its assets to any other person or entity (other than a wholly-owned subsidiary of the Company), (iii) the Company is to be dissolved and liquidated, or (iv) any person or entity, including a "group" as contemplated by Section 13(d)(3) of the Act, acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the outstanding shares of the Company's voting stock (based upon voting power), (each such event is referred to herein as a "Corporate Change"), then all options granted hereunder (including both vested and unvested portions), shall terminate immediately prior to such Corporate Change, unless exercised prior to such time. Notwithstanding the above, the Board may, in its sole discretion, determine: (A) that all outstanding Options, including that portion not then otherwise vested, shall become exercisable in full effective immediately prior to the consummation of the Corporate Change, provided that the exercise of any such option that would not have been vested in the absence of the Corporate Change shall be conditioned 4 upon the occurrence of the Corporate Change (i.e., so that if the Corporate Change does not subsequently occur, the unvested portion of the option shall vest according to its original terms), or (B) that the outstanding Options shall not terminate upon the occurrence of the Corporate Change, and that their vesting provisions shall not be amended, but instead that following such Corporate Change each holder of an Option shall be entitled to receive upon the exercise of the Option, in lieu of the Common Stock, the number of shares of stock or other securities or property of the Company, or of the successor corporation, resulting from such Corporate Change, to which a holder of the number of shares of Common Stock deliverable upon exercise would have been entitled on such Corporate Change. The Board's determination to accelerate the vesting of the outstanding Options prior to a Corporate Change, or to permit the Options to survive the Corporate Change as set forth above, shall be effective only if made pursuant to a majority vote of the Board taken in accordance with the Bylaws of the Company and applicable law. In addition, in no event shall any incentive stock option, without the consent of the holder thereof, first become exercisable pursuant hereto if the result would be to cause such option, when granted, not to be treated as an incentive stock option (whether or not by reason of the possible future violation of the annual limitation set forth in Section 3.3.3 or otherwise). 1.9 Foreign Options and Rights. The Board may grant options to Eligible Employees, Eligible Consultants and Non-Employee Directors who are subject to the tax laws of nations other than the United States, which options may have terms and conditions as determined by the Board as necessary to comply with applicable foreign laws. The Board may take any action which it deems advisable to obtain approval of any such option by the appropriate foreign governmental entity; provided, however, that no such option may be granted pursuant to this Section 1.9 and no action may be taken which would result in a violation of the Act, the Code or any other applicable law. 1.10 General Terms and Conditions of Options. Options granted under the Plan shall be subject to the following terms and conditions and may contain such additional terms and conditions, not inconsistent with law or the Article pursuant to which such option was granted, as the Board shall deem desirable: 1.10.1 Manner of Exercise. In order to exercise all or a portion of any option granted under the Plan, an Optionee shall deliver to the Company payment in full of the shares then being purchased, together with any required withholding tax. The payment of such exercise price and any required withholding tax shall be in cash. If the Board so requires, such person or persons shall also deliver a written representation that all shares being purchased are being acquired for investment and not with a view to, or for resale in connection with, any distribution of such shares. An option agreement may, in the discretion of the Board, provide for other methods to pay for, or otherwise exercise, an option, including, without limitation, a "net exercise" provision under which an in-the-money option is exchanged for shares pursuant to a formula set forth therein. An option agreement also may, in the discretion of the Board, provide for the withholding of federal, state or local income tax upon exercise of an option from any cash or stock remuneration (from the Plan or otherwise), then or thereafter payable by the Company to 5 the Optionee. To the extent provided by the terms of an option agreement, the Optionee may, at the discretion of the Board, satisfy any mandatory federal, state or local tax withholding obligation relating to the exercise or acquisition of stock under an option by any of the following means or by a combination of such means: (1) tendering cash payment; (2) authorizing the Company to withhold shares from the shares of the Common Stock otherwise issuable to the Optionee as a result of the exercise or acquisition of stock under the option provided that such arrangement will not result in a charge to the Company's reported earnings in excess of that which the Company is willing to accept; or (3) delivering to the Company owned and unencumbered shares of the Common Stock of the Company that have been held for the greater of (i) six (6) months, or (ii) the period required to avoid a charge to the Company's reported earnings in excess of that which the Company is willing to accept. The exercise of the option may be conditioned upon the receipt by the Company of satisfactory evidence of the Optionee's satisfaction of any withholding obligations. 1.10.2 Options Not Transferable. No option granted under the Plan shall be transferable otherwise than by will or by the laws of descent and distribution and, during the lifetime of the Optionee, such option shall be exercisable only by the Optionee. Any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of, or to subject to execution, attachment or similar process, any option granted under the Plan, or any right thereunder, contrary to the provisions hereof, shall be void and ineffective, shall give no right to the purported transferee, and shall, at the sole discretion of the Board, result in forfeiture of the option with respect to the shares involved in such attempt. 1.10.3 Listing and Registration of Shares. Each option granted under the Plan shall be subject to the requirement that if at any time the Board determines, in its discretion, that the listing, registration, or qualification of the shares subject to such option upon any securities exchange or under any state or Federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the issue or purchase of shares thereunder, such option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained and the same shall have been free of any conditions not acceptable to the Board. 1.10.4 Amendments. The Board may, with the consent of the person or persons entitled to exercise any outstanding option granted under the Plan, amend such option; provided, however, that any such amendment shall be subject to shareholder approval when required in Section 1.4. The Board may at any time or from time to time, in its discretion, in the case of any option previously granted under the Plan (other than an option granted to a Non-Employee Director) which is not then immediately exercisable in full, accelerate the time or times at which such option may be exercised to any earlier time or times. Any amendment of an incentive stock option pursuant to this Section 1.10.4 shall be made in such manner as not to constitute a "modification" within the meaning of Section 424(h)(3) of the Code. 6 1.10.5 Certain Definitions. For purposes hereof, the following terms shall have the meanings set forth below: (a) The "Fair Market Value" of corporate stock shall mean: (i) If the stock is then "Publicly Traded" (as defined below): The closing price of the stock of that class as of the day in question (or, if such day is not a trading day in the principal securities market or markets for such stock, on the nearest preceding trading day), as reported with respect to the market (or the composite of markets, if more than one) in which shares of such stock are then traded, or, if no such closing prices are reported, on the basis of the mean between the high bid and low asked prices that day on the principal market or quotation system on which shares of such stock are then quoted, or, if no so quoted, as furnished by a professional securities dealer making a market in such stock selected by the Board or Committee. (ii) If the stock is then not Publicly Traded: The price at which one could reasonably expect such stock to be sold in an arm's length transaction, for cash, other than on an installment basis, to a person not employed by, controlled by, in control of or under common control with the issuer of such stock. Such Fair Market Value shall be that which has currently or most recently been determined for this purpose by the Board, or at the discretion of the Board by an independent appraiser or appraisers selected by the Board, in either case giving due consideration to recent transactions involving shares of such stock, if any, the issuer's net worth, prospective earning power and dividend-paying capacity, the goodwill of the issuer's business, the issuer's industry position and its management, that industry's economic outlook, the values of securities of issuers whose stock is Publicly Traded and which are engaged in similar businesses, the effect of transfer restrictions to which such stock may be subject under law and under the applicable terms of any contract governing such stock, the absence of a public market for such stock and such other matters as the Board or its appraiser or appraisers deem pertinent. The determination by the Board or its appraiser or appraisers of the Fair Market Value shall, if not unreasonable, be conclusive and binding notwithstanding the possibility that other persons might make a different, and also reasonable, determination. If the Fair Market Value to be used was thus fixed more than sixteen (16) months prior to the day as of which the Fair Market Value is being determined, it shall in any event be no less than the book value of the stock being valued at the end of the most recent period for which financial statements of the issuer are available. (b) Corporate stock is "Publicly Traded" if stock of that class is listed or admitted to unlisted trading privileges on a national securities exchange or on the Nasdaq National Market or if sales or bid and offer quotations are reported for 7 that class of stock in the automated quotation system ("NASDAQ") operated by the National Association of Securities Dealers, Inc. (c) An individual's "Immediate Family" includes only his or her spouse, parents or other ancestors, and children and other direct descendants of that individual or of his or her spouse (including such ancestors and descendants by adoption). 1.10.6 Miscellaneous. (a) The person or persons entitled to exercise, or who have exercised, any option granted under the Plan shall not be entitled to any rights as a shareholder of the Company with respect to any shares subject to such option until such person shall have become the beneficial owner of such shares. (b) No option granted under the Plan shall be construed as limiting any right which the Company or any subsidiary of the Company may have to terminate at any time, with or without cause, the employment of any person to whom such option has been granted. (c) Notwithstanding any provision of the Plan or the terms of any option granted under the Plan, the Company shall not be required to issue any shares hereunder or thereunder if such issuance would, in the judgment of the Board, constitute a violation of any state or Federal law or of the rules or regulations of any governmental regulatory body. (d) The Board may require any person who exercises an incentive stock option to give prompt notice to the Company of any disposition of shares of Common Stock acquired upon exercise of an incentive stock option within one (1) year after the transfer of shares to such person. 1.11 Company Repurchase Option. 1.11.1 Grant. The Company shall have, and by acceptance of an option each Optionee shall be deemed to grant to the Company, an option (the "Company Repurchase Option") to purchase from the Optionee all of the shares of Common Stock purchased from the Company upon the exercise of any option. Such Company Repurchase Option shall have a term commencing upon the date of exercise of the Optionee's option and terminating at 5:00 p.m., Los Angeles Time, on that date (the "Termination Date") two years thereafter (provided that if such Termination Date is a not a business day (which shall be defined as any day that is not a Saturday, Sunday or day on which banks in California are not open for business)), then the Termination Date shall be the next business day. 1.11.2 Exercise Price. The exercise price for the Company Repurchase Option shall be equal to the exercise price paid by the Optionee upon exercise of the corresponding option, plus five percent (5%) per annum, pro rated on a daily basis to the date of exercise of the Company Repurchase Option. Such exercise price shall be 8 payable in full by Company check or in cash at the time of exercise of the Company Repurchase Option. 1.11.3 Assignment. If the Company is unable to exercise the Company Repurchase Option due to the application of Section 500 et seq. of the California Corporations Code, or believes in good faith that it is unable to do so for such reason, the Company may assign the Company Repurchase Option to an affiliate of the Company or such other person as may be approved by the Board. 1.11.4 Manner of Exercise. The Company Repurchase Option may be exercised by providing written notice of such exercise to the Optionee in question and tendering payment of the exercise price. Such notice shall be effective if deposited in the United States Mail, first class postage prepaid, addressed to the Optionee at his or her address as maintained on the books and records of the Company. Any notice given in such manner shall be effective to exercise the Company Repurchase Option, regardless whether such notice is actually received by the Optionee. Upon notice and tender of payment given as set forth above, the Company Repurchase Option shall be validly exercised, and the Common Stock subject thereto shall be transferred to the Company (or its assignee), regardless whether the certificate representing such Common Stock is endorsed or delivered to the Company. By acceptance and exercise of the option, the Optionee appoints the Secretary of the Company as his attorney in fact to transfer the Common Stock on the books and records of the Company and to execute, on behalf of such Optionee, all stock powers and other documents necessary to effect such transfer. 1.11.5 Proxy. By exercising an option, an Optionee shall be deemed to grant to the Company or an officer of the Company selected by the Board an irrevocable proxy to vote, on all corporate questions, all of the Common Stock purchased upon exercise of such option. Such proxy is granted in connection with the grant of the Company Repurchase Option, and shall continue in full force and effect until the Company Repurchase Option expires or is exercised. 1.11.6 Legend. The form of option issued to the Optionee at the time of grant, and the certificate for any Common Stock issued upon the exercise, shall contain a legend or other written terms reflecting the existence of the Company Repurchase Option, and the proxy set forth above. ARTICLE II NONQUALIFIED OPTIONS 2.1 Eligible Employees. All Eligible Employees, Eligible Consultants and Non-Employee Directors shall be eligible to receive nonqualified options under this Article II. 2.2 Calculation of Exercise Price. The exercise price to be paid for each share of Common Stock deliverable upon exercise of each nonqualified option granted under Article II shall be determined by the Board and may be more or less than, or equal to, the fair market value per share of Common Stock at the time of grant as determined by the Board. The exercise price 9 for each nonqualified option shall be subject to adjustment as provided in the Adjustment Provisions. 2.3 Terms and Conditions of Options. Nonqualified options granted under this Article II shall be in such form as the Board may from time to time approve, shall be subject to the following terms and conditions and may contain such additional terms and conditions, not inconsistent with this Article II, as the Board shall deem desirable: 2.3.1 Option Period and Conditions and Limitations on Exercise. No nonqualified option shall be exercisable by an Eligible Employee or Eligible Consultant later than the date which is the date determined by the Board upon the grant thereof (the "Nonqualified Option Expiration Date") which shall be no later than ten (10) years after the date of grant. To the extent not prohibited by other provisions of the Plan, each nonqualified option granted to an Eligible Employee or Eligible Consultant shall be exercisable at such time or times as the Board in its discretion may determine at or prior to the time such option is granted. In the event the Board makes no such determination, each nonqualified option granted to an Eligible Employee or Eligible Consultant shall be exercisable from time to time, in whole or in part, at any time prior to the Nonqualified Option Expiration Date. 2.3.2 Termination of Employment or Relationship as Eligible Consultant; Death. For purposes of this Article 11 and each nonqualified option granted under this Article 11, an Eligible Employee's employment and a Eligible Consultant's relationship with the Company shall be deemed to have terminated at the close of business on the day preceding the first date on which such Eligible Employee or Eligible Consultant no longer for any reason whatsoever (including the death of such Eligible Employee or Eligible Consultant) is employed by, or has a relationship with, the Company or a subsidiary of the Company. An Eligible Employee shall be considered to be in the employment of the Company or a subsidiary of the Company as long as such Eligible Employee remains an employee of the Company or a subsidiary of the Company, whether active or on any authorized leave of absence. An Eligible Consultant shall be considered to have a relationship with the Company as long as such Eligible Consultant has an executory assignment from Company personnel authorized to make such an assignment. Any question as to whether and when there has been a termination of such employment or relationship, and the cause of such termination, shall be determined by the Board and its determination shall be final and conclusive. If an Eligible Employee's employment or a Eligible Consultant's relationship is terminated for any reason whatsoever (including the death of such Eligible Employee or Eligible Consultant), each nonqualified option thereunto granted under this Article II and all rights thereunder shall wholly and completely terminate as follows: (a) With respect to nonqualified options not then exercisable, at the time the Eligible Employee's employment or a Eligible Consultant's relationship is terminated; and 10 (b) With respect to nonqualified options then exercisable: (i) At the time the Eligible Employee's employment or a Eligible Consultant's relationship is terminated if the Eligible Employee's employment or the Consultant's relationship is terminated because such person has committed fraud, theft or embezzlement against the Company or a subsidiary, affiliated entity or customer of the Company, or for conflict of interest (other than legitimate competition); or (ii) At the expiration of a period of six (6) months after the Eligible Employee's or Eligible Consultant's death (but in no event later than the Nonqualified Option Expiration Date) if the Eligible Employee's employment or Eligible Consultant's relationship is terminated by reason of such person's death. Any such nonqualified option may be exercised by the Eligible Employee's or Eligible Consultant's estate or by the person or persons who acquire the right to exercise such nonqualified option by bequest or inheritance; or (iii) At the expiration of a period of six (6) months (but in no event later than the Nonqualified Option Expiration Date) after the Eligible Employee's employment is terminated or the Eligible Consultant's relationship, if the Eligible Employee's employment has terminated because such person's disability; or (iv) At the expiration of a period of thirty (30) days after the Eligible Employee's or Eligible Consultant's employment or relationship is terminated (but in no event later than the Nonqualified Option Expiration Date) if the Eligible Employee's employment or Eligible Consultant's relationship is terminated for any reason (including his or her retirement) other than the reasons specified in Section 2.3.2(b)(i)-(iii). 2.3.3 Termination of Directorship; Death. For purposes of this Article II and each nonqualified option granted under this Article II, a Non-Employee Director's directorship shall be deemed to have terminated at the close of business on the day preceding the first date on which he ceases to be a member of the Board for any reason whatsoever (including the death of such Non-Employee Director). If a Non-Employee Director's directorship is terminated for any reason (including the death of such Non-Employee Director), each nonqualified option thereunto granted under this Article II and all rights thereunder shall wholly and completely terminate as follows: (a) With respect to nonqualified options not then exercisable, at the time the Non-Employee Director's directorship is terminated; and (b) With respect to nonqualified options then exercisable: (i) At the time the Non-Employee Director's directorship is terminated if his directorship is terminated as a result of his removal from the Board for cause (other than disability); or 11 (ii) At the expiration of a period of six (6) months after the Non-Employee Director's death (but in no event later than the Option Expiration Date) if the Non-Employee Director's directorship is terminated by reason of his death. A nonqualified option granted under this Article II may be exercised by the Non-Employee Director's estate or by the person or persons who acquire the right to exercise such nonqualified option by bequest or inheritance; or (iii) At the expiration of a period of six (6) months after the Non-Employee Director's directorship is terminated as a result of such person's resignation or removal from the Board because of disability (but in no event later than the Option Expiration Date); or (iv) At the expiration of a period of thirty (30) days after the Non-Employee Director directorship is terminated (but in no event later than the Option Expiration Date) if the Non-Employee Director's directorship is terminated for any reason other than the reasons specified in Section 2.3.3(b)(i)-(iii). ARTICLE III INCENTIVE STOCK OPTIONS 3.1 Eligible Employees. All Eligible Employees shall be eligible to receive incentive stock options under this Article III. 3.2 Calculation of Exercise Price. The exercise price to be paid for each share of Common Stock deliverable upon exercise of each incentive stock option granted hereunder shall be equal to the Fair Market Value per share of Common Stock at the time of grant as determined by the Board; provided, however, that in the case of an Eligible Employee who, at the time such incentive stock option is granted, owns more than 10% of the total combined voting power of all classes of stock of the Company or any subsidiary corporation, within the meaning of Section 422(b)(6) of the Code (a "10% Eligible Employee"), the exercise price per share shall be at least 110% of the Fair Market Value per share of Common Stock at the time of grant. The exercise price for each incentive stock option shall be subject to adjustment as provided in Section 1.8. 3.3 Term and Conditions of Options. Incentive stock options shall be in such form as the Board may from time to time approve, shall be subject to the following terms and conditions and may contain such additional terms and conditions, not inconsistent with this Article III, as the Board shall deem desirable: 3.3.1 Option Period and Conditions and Limitations on Exercise. No incentive stock option shall be exercisable with respect to any of the shares subject to such incentive stock option later than the date which is the date determined by the Board upon the grant thereof (the "ISO Expiration Date"), which shall be no later than ten (10) years after the date of grant; provided, however, that in the case of any 10% Eligible Employee, the ISO Expiration Date of any incentive stock option granted thereto shall not be later than five (5) years after the date of 12 such grant. To the extent not prohibited by other provisions of the Plan, each incentive stock option shall be exercisable at such time or times as the Board in its discretion may determine at or prior to the time such incentive stock option is granted. In the event the Board makes no such determination, each incentive stock option shall be exercisable from time to time, in whole or in part, subject to the monetary limitations set forth in Section 3.3.3, at any time prior to the ISO Expiration Date. 3.3.2 Termination of Employment; Death. For purposes of this Article III and each incentive stock option granted hereunder, an Eligible Employee's employment shall be deemed to have terminated at the close of business on the day preceding the first date on which such Eligible Employee is no longer for any reason whatsoever (including the death of such Eligible Employee) employed by the Company or a subsidiary of the Company. An Eligible Employee shall be considered to be in the employment of the Company or a subsidiary of the Company as long as such Eligible Employee remains an employee of the Company or a subsidiary of the Company, whether active or on any authorized leave of absence. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Board and its determination shall be final and conclusive. If an Eligible Employee's employment is terminated for any reason whatsoever (including the death of such Eligible Employee), each incentive stock option thereunto granted hereunder and all rights thereunder shall wholly and completely terminate as follows: (a) With respect to incentive stock options not then exercisable, at the time the Eligible Employee's employment is terminated; and (b) With respect to incentive stock options then exercisable: (i) At the time the Eligible Employee's employment is terminated if his employment is terminated because he is discharged for fraud, theft or embezzlement committed against the Company or a subsidiary, affiliated entity or customer of the Company, or for conflict of interest (other than legitimate competition); or (ii) At the expiration of a period of six (6) months after the Eligible Employee's death (but in no event later than the ISO Expiration Date) if the Eligible Employee's employment is terminated by reason of his death. An incentive stock option granted under this Article III may be exercised by the Eligible Employee's estate or by the person or persons who acquire the right to exercise such incentive stock option by bequest or inheritance; or (iii) At the expiration of a period of six (6) months (but in no event later than the ISO Expiration Date) after the Eligible Employee's employment is terminated if the Eligible Employee's employment has terminated because of retirement or disability ; or (iv) At the expiration of a period of thirty (30) days after the Eligible Employee's employment is terminated (but in no event later than 13 the ISO Expiration Date) if the Eligible Employee's employment is terminated for any reason (including retirement) other than the reasons specified in Section 3.3.2(b)(i)-(iii). In the event and to the extent that an incentive stock option granted under this Article III is not exercised (i) within three (3) months after the Eligible Employee's employment is terminated because of retirement or disability not within the meaning of Section 22(e)(3) of the Code, or (ii) within one (1) year after the Eligible Employee's employment is terminated because of disability within the meaning of Section 22(e)(3) of the Code, such option shall be taxed as a nonqualified option. 3.3.3 Limitation on Amount. Notwithstanding any other provision of the Plan, the aggregate fair market value (determined as of the time an incentive stock option is granted, based upon the calculation of the exercise price as provided in Section 3.2) of the Common Stock with respect to which incentive stock options are exercisable for the first time by an Eligible Employee, under all incentive stock option plans of the Company and its subsidiaries, during any calendar year cannot exceed $100,000 or such other maximum amount permitted under Section 422(d) of the Code. If the date on which one or more of such incentive stock options could first be exercised would be accelerated pursuant to any provision of the Plan or any option agreement, and the acceleration of such exercise date would result in a violation of the monetary restriction set forth in the preceding sentence, then, notwithstanding any such provision, but subject to the provisions of the next succeeding sentence, the exercise dates of such incentive stock options shall be accelerated only to the date or dates, if any, that do not result in a violation of such restriction and, in such event the exercise date of the incentive stock options with the lowest option prices shall be accelerated to the earliest such dates. The Board may, in its discretion, authorize the acceleration of the exercise date of one or more incentive stock options even if such acceleration would violate the monetary restriction set forth in the first sentence of this Section 3.3.3 and even if such incentive stock options were thereby converted in whole or in part to nonqualified options. 14 -----END PRIVACY-ENHANCED MESSAGE-----