-----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, SMwilcRIv8S5Ai0qlQkznF63tBMedjvRjNQMyWgvhRi1KOFL5kEQwypiCkVPhEPX 8k/aK2SVQSNOKpbkR/SqQA== 0001047469-98-037958.txt : 19981023 0001047469-98-037958.hdr.sgml : 19981023 ACCESSION NUMBER: 0001047469-98-037958 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19981022 EFFECTIVENESS DATE: 19981022 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZAMBA CORP CENTRAL INDEX KEY: 0000883741 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 411636021 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-66021 FILM NUMBER: 98729401 BUSINESS ADDRESS: STREET 1: 7301 OHMS LANE STE 200 CITY: MINNEAPOLIS STATE: MN ZIP: 55439 BUSINESS PHONE: 6128329800 MAIL ADDRESS: STREET 1: 7301 OHMS LANE STREET 2: STE 200 CITY: MINNEAPOLIS STATE: MN ZIP: 55439 FORMER COMPANY: FORMER CONFORMED NAME: RACOTEK INC DATE OF NAME CHANGE: 19931025 S-8 1 S-8 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 22, 1998 REGISTRATION NO. 333-______________ - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- ZAMBA CORPORATION (Formerly known as Racotek, Inc.) ------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 41-1636021 ------------------------ ------------------- (State of Incorporation) (I.R.S. Employer Identification No.) 7301 OHMS LANE, SUITE 200 MINNEAPOLIS, MINNESOTA 55439 ------------------------------------------------ (Address of principal executive offices) --------------------------------- COMMON STOCK ISSUED UPON EXERCISE OF OPTIONS ASSUMED BY ZAMBA CORPORATION ORIGINALLY GRANTED UNDER THE 1997 STOCK OPTION PLAN FOR KEY EMPLOYEES, CONSULTANTS AND DIRECTORS OF QUICKSILVER GROUP, INC. ------------------------------------------------------------------------- (Full title of the plan) PAUL EDELHERTZ PRESIDENT AND CHIEF EXECUTIVE OFFICER ZAMBA CORPORATION 7301 OHMS LANE, SUITE 200 MINNEAPOLIS, MINNESOTA 55439 (612) 832-9800 ------------------------------------------------ (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------------------------- Copies to: MICHAEL J. SULLIVAN, ESQ. COOLEY GODWARD LLP FIVE PALO ALTO SQUARE PALO ALTO, CALIFORNIA 94306 (650) 843-5000 -------------- CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- TITLE OF SECURITIES TO BE AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AGGREGATE AMOUNT OF REGISTERED REGISTERED (1) PRICE PER SHARE (2) OFFERING PRICE (2) REGISTRATION FEE - ---------------------------------------------------------------------------------------------------------------------------------- Common Stock (par value $0.01) 912,818 $.29 - $1.50 $949,331 $263.91 - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
(1) This Registration Statement shall cover any additional shares of Common Stock which become issuable under the plan set forth herein by reason of any stock dividend, stock split, recapitalization or any other similar stock dividend, stock split, recapitalization or any other similar transaction without receipt of consideration which results in an increase in the number of shares of the Company's outstanding Common Stock. (2) Calculated solely for the purpose of calculating the amount of the registration fee, pursuant to Rule 457(h) under the Securities Act of 1933, as amended (the "Act"), on the basis of the price at which the options may be exercised. The aggregate offering price is based upon the weighted average price at which the options may be exercised, for options previously granted under the 1997 Stock Option Plan For Key Employees, Consultants And Directors Of QuickSilver Group, Inc., pursuant to Rule 457(h) of the Act. Approximate date of commencement of proposed sale to the public: As soon as reasonably practicable after this Registration Statement becomes effective. The shares registered hereunder will be issued upon the exercise of stock options assumed by Zamba Corporation, formerly known as Racotek, Inc., a Delaware corporation (the "Registrant"), pursuant to that certain Agreement and Plan of Merger and Reorganization among the Registrant, QuickSilver Acquisition Corp. and QuickSilver Group, Inc. ("QSG"), dated July 6, 1998, as amended. These options were originally granted to employees, and directors under the 1997 Stock Option Plan For Key Employees, Consultants And Directors Of QuickSilver Group, Inc. PART II INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by Zamba Corporation, formerly known as Racotek, Inc., (the "Company" or the "Registrant") with the Securities and Exchange Commission are incorporated by reference into this Registration Statement: (a) The Company's annual report on Form 10-K for the year ended December 31, 1997, filed pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) The Company's quarterly reports on Form 10-Q for the periods ended March 31, 1998 and June 30, 1998. (c) The Company's Current Report on Form 8-K (File No. 0-22718), dated October 7, 1998. (d) The description of the Company's Common Stock which is contained in a registration statement filed under the Exchange Act, including any amendment or report filed for the purpose of updating such description. All reports and other documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference herein and to be a part of this registration statement from the date of the filing of such reports and documents. INDEMNIFICATION OF DIRECTORS AND OFFICERS As permitted by Section 145 of the Delaware General Corporation Law, the Registrant's Certificate of Incorporation includes a provision that eliminates the personal liability of its directors for monetary damages for breach or alleged breach of their duty of care, 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 (i) the Registrant is required to indemnify its directors and officers and persons serving in such capacities in other business enterprises (including, for example, subsidiaries of the Registrant) at the Registrant's request to the fullest extent permitted by the Delaware General Corporation Law including those circumstances in which indemnification would otherwise be discretionary; (ii) the Registrant may, in its discretion, indemnify employees and agents where indemnification is not required by law; (iii) upon receipt of an undertaking by the indemnitee to repay all amounts advanced and if it is ultimately determined that such indemnitee is not entitled to indemnification, the Registrant is required to advance expenses, as incurred, to its directors and officers in connection with defending a proceeding; (iv) the rights conferred in the Bylaws are not exclusive and the Registrant is authorized to enter into indemnification agreements with its directors, officers and employees; and (v) the Registrant may not retroactively amend the Bylaw provisions in a way that is adverse to such directors, officers and employees. The Registrant's policy is to enter into indemnification agreements with each of its directors and executive officers that provide the maximum indemnity allowed to directors and executive officers by Section 145 of the Delaware General Corporation Law and the Registrant's Bylaws, as well as certain procedural protections. In addition, the indemnification agreements provide that directors and executive officers will be indemnified to the fullest possible extent not prohibited by law against all expenses including attorneys' fees and settlement amounts paid or incurred by them in any action or proceeding, including any derivative action by or in the right of the Registrant, on account of their services as directors or executive officers of the Registrant or as directors or officers of any other company or enterprise when they are serving in such capacities at the request of the Registrant. The Registrant will not be obligated 1. pursuant to the agreements to indemnify or advance expenses to an indemnified party with respect to proceedings or claims initiated by the indemnified party and not by way of defense, except with respect to proceeds specifically authorized by the Board of Directors or brought to enforce a right to indemnification under the indemnification agreement, the Registrant's Bylaws or any statute or law. Under the agreements, the Registrant is not obligated to indemnify the indemnified party (i) for any amounts paid in settlement of a proceeding unless the Registrant consents to such settlement; (ii) for any amounts paid in settlement of a proceeding unless the Registrant consents in advance to such settlement; and (iii) if a final decision by a court having jurisdiction in the matter shall determine that such indemnification is not lawful. The indemnification agreement requires a director or executive officer to reimburse the Registrant for all expenses advanced only to the extent it is ultimately determined that the director or executive officer is not entitled, under Delaware law, the Registrant's Bylaws, the indemnification agreement or otherwise to be indemnified for such expenses. The indemnification agreement provides that it is not exclusive of any rights a director or executive officer may have under the Certificate of Incorporation, the Registrant's Bylaws, other agreements, any majority-in-interest vote of the stockholders or vote of disinterested directors, Delaware law, or otherwise. The indemnification provision in the Registrant's Bylaws, and the indemnification agreements entered into between the Registrant and its directors and executive officers, may be sufficiently broad to permit indemnification of the officers and directors for liabilities arising under the Securities Act of 1933, as amended (the "Securities Act"). The indemnification agreements require the Registrant to maintain director and officer liability insurance to the extent reasonably available. As authorized by the Registrant's Bylaws, the Registrant, with approval by the Board, has purchased director and officer liability insurance. EXHIBITS
EXHIBIT NUMBER - ------- 5 Opinion of Counsel. 23.1 Consent of PricewaterhouseCoopers LLP. 23.2 Consent of Counsel is contained in Exhibit 5 to this Registration Statement. 24 Power of Attorney is contained on the signature page II-1. 99.1 1997 Stock Option Plan For Key Employees, Consultants And Directors Of QuickSilver Group, Inc.
2. UNDERTAKINGS 1. The undersigned registrant hereby undertakes: (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (Section 230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; PROVIDED, HOWEVER, that paragraphs (a)(i) and (a)(ii) do 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 issuer pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference herein. (b) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 2. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy, as expressed in the Securities Act 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 Securities Act and will be governed by the final adjudication of such issue. 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 Minneapolis, State of Minnesota, on October 22, 1998. ZAMBA CORPORATION BY /s/ PAUL EDELHERTZ ---------------------------- PAUL EDELHERTZ PRESIDENT AND CHIEF EXECUTIVE OFFICER POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Paul Edelhertz, 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 attorney-in-fact and agent 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 attorney-in-fact and agent, 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/ Paul Edelhertz President and Chief Executive October 22, 1998 - ------------------------ Officer and Director (Principal Paul Edelhertz Executive Officer) /s/ Mike Carrel Chief Financial Officer (Principal October 22, 1998 - ------------------------ Financial and Accounting Officer) Mike Carrel /s/ Michael A. Fabiaschi Director October 22, 1998 - ------------------------ Michael A. Fabiaschi /s/ Joseph B. Costello Director October 22, 1998 - ------------------------ Joseph B. Costello /s/ Dixon R. Doll Director October 22, 1998 - ------------------------ Dixon R. Doll /s/ James L. Osborn Director October 22, 1998 - ------------------------ James L. Osborn /s/ Thomas Minick Director October 22, 1998 - ------------------------ Thomas Minick
II-1. EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION 5 Opinion of Counsel. 23.1 Consent of PricewaterhouseCoopers LLP. 23.2 Consent of Counsel is contained in Exhibit 5 to this Registration Statement. 24 Power of Attorney is contained on the signature page II-1. 99.1 1997 Stock Option Plan For Key Employees, Consultants And Directors Of QuickSilver Group, Inc.
EX-5 2 EX-5 EXHIBIT 5 October 21, 1998 Zamba Corporation 7301 Ohms Lane, Suite 200 Minneapolis, MN 55439 Ladies and Gentlemen: I am counsel to Zamba Corporation (the "Company") and am rendering this opinion with respect to certain matters in connection with the filing by 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 912,818 shares of the Company's Common Stock, $0.01 par value, (the "Shares") pursuant to the exercise of outstanding options with respect to the common stock of QuickSilver Group, Inc., a California corporation ("QSG"), under the 1997 Stock Option Plan For Key Employees, Consultants And Directors Of QuickSilver Group, Inc. (the "Plan") and the terms and conditions of the certain Agreement and Plan of Merger and Reorganization among the Company, QuickSilver Acquisition Corp., a California corporation and a wholly-owned subsidiary of the Company, and QSG, dated as of July 6, 1998, as amended. In connection with this opinion, I have examined the Registration Statement and related Prospectus, the Company's Certificate of Incorporation and By-laws, as amended, and such other documents, records, certificates, memoranda and other instruments as I deem necessary as a basis for this opinion. On the basis of the foregoing, and in reliance thereon, I am of the opinion that the Shares, when sold and issued in accordance with the Plan, 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). I consent to the filing of this opinion as an exhibit to the Registration Statement. Sincerely, Zamba Corporation, By: /s/ Ian Nemerov --------------- Ian Nemerov Secretary and Attorney EX-23.1 3 EX-23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated January 12, 1998, on our audits of the financial statements and financial statement schedule of Zamba Corporation, formerly known as Racotek, Inc. (the Company), as of December 31, 1997 and 1996, and for each of the three years in the period ended December 31, 1997, which report is included in the Company's 1997 Annual Report on Form 10-K, and our report dated August 14, 1998, except for the sixth paragraph of Note 13 as to which the date is September 22, 1998, of our audits of the financial statements of QuickSilver Group, Inc., as of December 27, 1996 and December 26, 1997, and for each of the two years in the period ended December 26, 1997, which report is included in the Company's Form 8-K dated October 7, 1998. PRICEWATERHOUSECOOPERS LLP Minneapolis, Minnesota October 21, 1998 EX-99.1 4 EX-99.1 Exhibit 99.1 1997 STOCK OPTION PLAN FOR KEY EMPLOYEES, CONSULTANTS AND DIRECTORS OF QUICKSILVER GROUP, INC. QUICKSILVER GROUP, INC., a California corporation, hereby adopts this Stock Option Plan for key employees, consultants and directors of the Company. The purposes of this Plan are as follows: (1) To further the growth, development and financial success of the Company by providing additional incentives to its key employees, consultants and directors who have been or will be given responsibility for the management or administration of the Company's business affairs, or who are considered to have contributed meaningfully to the success of the Company, by assisting them to become owners of common stock of the Company and thus to benefit directly from its growth, development and financial success. (2) To enable the Company to obtain and retain the services of the type of professional, technical, managerial and other employees, consultants and directors considered essential to the long-range success of the Company by providing and offering them an opportunity to become owners of common stock of the Company under options, some of which are intended to qualify as "incentive stock options" under Section 422 of the Internal Revenue Code of 1986, as amended. ARTICLE 1 DEFINITIONS Whenever the following terms are used in this Plan, they shall have the meaning specified below unless the context clearly indicates to the contrary. SECTION 1.1 COMPANY. "Company" shall mean QUICKSILVER GROUP, INC. SECTION 1.2 PLAN ADMINISTRATOR. "Plan Administrator" shall mean the Board of Directors of the Company or a committee of three (3) or more members of the Board appointed by the Board to administer the Plan. Members of the committee shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time. The Board may at any time terminate the functions of the committee and reassume all powers and authority previously delegated to the committee. SECTION 1.3 EMPLOYEE. "Employee" shall mean any employee (as defined in accordance with the Regulations and Revenue Rulings then applicable under section 3401(c) of the Code) of the Company, or of any corporation which is then a Parent Corporation or a Subsidiary, whether such employee is so employed at the time this Plan is adopted or becomes so employed subsequent to adoption of this Plan. 1 SECTION 1.4 CODE. "Code" shall mean the Internal Revenue Code of 1986, as amended. SECTION 1.5 INCENTIVE STOCK OPTION. "Incentive Stock Option" shall mean an Option which qualifies under section 422 of the Code and which is designated as an Incentive Stock Option by the Plan Administrator. SECTION 1.6 NON-STATUTORY OPTION. "Non-Statutory Option" shall mean an Option which is not an Incentive Stock Option and which is designated as a Non-Statutory Option by the Board. SECTION 1.7 COMMON STOCK. "Common Stock" shall mean the Company's no par value common stock. SECTION 1.8 CONSULTANT. "Consultant" shall mean any individual or entity which provides or renders goods and/or services to the Company in any capacity other than as an Employee or Director. SECTION 1.9 DIRECTOR. "Director" shall mean any individual who is a member of the Company's Board of Directors. SECTION 1.10 OPTION. "Option" shall mean an option to purchase common stock, no par value, of the Company, granted under the Plan. SECTION 1.11 OPTIONEE. "Optionee" shall mean an Employee, consultant or director to whom an Option is granted under the Plan. SECTION 1.12 PLAN. "Plan" shall mean this 1997 Stock Option Plan for Officers and Key Employees of Quicksilver Group, Inc. SECTION 1.13 PARENT CORPORATION. "Parent Corporation" shall mean any corporation in an unbroken chain of corporations ending with the Company if each of the corporations other than the Company then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. SECTION 1.14 SUBSIDIARY. "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. SECTION 1.15 PRONOUNS. The masculine pronoun shall include the feminine and neuter and the singular shall include the plural, where the context so indicates. ARTICLE 2 SHARES SUBJECT TO PLAN SECTION 2.1 SHARES SUBJECT TO PLAN. There shall be reserved for issue upon the exercise of Options granted under the Plan one hundred twenty-five thousand (125,000) shares of Common Stock. SECTION 2.2 LIMITATION ON INCENTIVE STOCK OPTION GRANTS. Subject to the overall limitations of section 2.1 above, the maximum aggregate fair market value (determined as of the time the Option is granted) of the Common Stock for which any Employee may be granted an Incentive Stock Option which either becomes exercisable or vests for the first time in any calendar year under the Plan shall not exceed One Hundred Thousand Dollars ($100,000) with respect to such Employee. SECTION 2.3 UNEXERCISED OPTION. If any Option expires or is cancelled without having been fully exercised, the number of shares subject to such Option but as to which such Option was not exercised prior to its expiration or cancellation may again be subject to Options granted under this Plan, subject to the limitations of sections 2.1 and 2.2 above. SECTION 2.4 CHANGES IN COMPANY'S SHARES. Except as otherwise provided in this Plan, in the event that the outstanding shares of Common Stock of the Company are hereafter changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of a reorganization, merger, consolidation, recapitalization, reclassification, stock dividend or combination of shares, appropriate adjustments shall be made by the Plan Administrator in the number and kind of shares for the purchase of which an Option may be granted, including adjustments of the limitations in sections 2.1 and 2.2 above on the maximum number and kind of shares which may be issued on exercise of an Option, all as provided in section 4.7 below. ARTICLE 3 GRANTING OF OPTIONS SECTION 3.1 ELIGIBILITY. Subject to the requirements of section 3.2 for Incentive Stock Options, any full-time, salaried key Employee of the Company, Consultant to the Company or Director shall be eligible to be granted an Option. SECTION 3.2 QUALIFICATION OF INCENTIVE STOCK OPTION. No Incentive Stock Option shall be granted unless such Option, when granted, qualifies as an "incentive stock option" under section 422 of the Code. SECTION 3.3 GRANTING OF OPTION (a) The Plan Administrator shall from time to time, in its absolute discretion: (i) Determine which Employees, Consultants and Directors are eligible under the Plan and select from among those persons such of them as in its opinion should be granted an Option; and (ii) Determine the number of shares to be subject to such Option granted to such selected eligible Employees, Consultants and Directors and determine whether such Option is to be an Incentive Stock Option or a Non-Statutory Option; and (iii) Determine the terms and conditions of such Option, consistent with the Plan. (b) No Incentive Stock Option shall be granted to any Employee who, at the time such option would be granted, owns Common Stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, or of any Parent or Subsidiary, unless the Option price (as provided in section 4.2) is not less than one hundred ten percent (110%) of the fair market value of the Common Stock on the date the Option is granted and the period within which the Option may be exercised (as provided in section 4.4 below) does not exceed five (5) years from the date the Option is granted. ARTICLE 4 TERMS OF OPTION SECTION 4.1 OPTION AGREEMENT. Each Option shall be evidenced by a written Stock Option Agreement, which shall be executed by the Optionee and an authorized officer of the Company and which shall contain such terms and conditions as the Plan Administer shall determine, consistent with the Plan. Each Incentive Stock Option Agreement shall contain such terms and conditions as may be necessary to qualify such Option as an "incentive stock option" under section 422 of the Code, SECTION 4.2 OPTION PRICE. (a) The price of the shares subject to each Option shall be set by the Plan Administrator, provided, however, that in no event shall the price per share be less than eighty-five percent (85%) of the fair market value of such shares on the date such Option is granted; except that the price per share shall not be less than one hundred percent (100%) of the fair market value of such shares on the date such Option is granted in the case of an individual then owning more than ten percent (10%) of the combined voting power of all classes of stock of the Company if the Option granted is a Non-Statutory Option, and the price per share shall be not less than one hundred ten percent (110%) of the fair market value of such shares on the date such Option is granted in the case of an individual then owning (within the meaning of section 424(d) of the Code) more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, any Subsidiary or any Parent Corporation if the Option granted is an Incentive Stock Option. (b) For the purpose of section 4.2(a) above, the fair market value of a share of the Company's Common Stock on the date the Option is granted shall be: (i) the closing price of a share of the Company's Common Stock on the principal exchange on which shares of the Company's Common Stock are then trading, if any, on such date, or, if shares were not traded on such date, then on the next preceding trading day during which a sale occurred; or (ii) if such Common Stock is not traded on an exchange but quoted on NASDAQ or a successor quotation system, (1) the last sale price (if the Common Stock is then listed as a National Market Issue under the NASD National Market System) or (2) the mean between the closing representative bid and asked prices (in all other cases) for the Common Stock on such date as reported by NASDAQ or such successor quotation system; or (iii) if such Common Stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the mean between the closing bid and asked prices for the Common Stock on such date as determined in traded, the fair market value established by the Plan Administrator acting in good faith considering book value, earnings history and prospects of the Company in light of market conditions generally. SECTION 4.3 COMMENCEMENT OF EXERCISABILITY. (a) At a minimum, the Optionee shall have the right to exercise the Option at the rate of at least twenty percent (20%) per year over five (5) years from the date the Option is granted. (b) Subject to the provisions of sections 4.3(a), 4.3(c) and 7.3 of this Plan, each Option shall become exercisable at such time and in such installments (which may be cumulative) as the Plan Administrator shall provide in the terms of each individual Stock Option Agreement; provided, however, that by a resolution adopted after an Option is granted the Plan Administrator may, on such terms and conditions as it may determine to be appropriate and subject to sections 4.3(a), 4.3(c) and 7.3 of this Plan, accelerate the time at which such Option or any portion thereof may be exercised. (c) No portion of an Option which is unexercisable at the time of Optionee's death, disability, retirement or termination of employment (as defined in section 5.7 below) shall thereafter become exercisable. The Plan Administrator shall have the discretion to determine whether any termination of consulting services will effect the exercisability of any Option granted to a Consultant or Director. SECTION 4.4 EXPIRATION OF OPTIONS. The period or periods within which an Option may be exercised shall be determined by the Plan Administrator at the time the Option is granted but shall in no event exceed ten (10) years from the date the Option is granted. SECTION 4.5 CONSIDERATION. In consideration of the granting of the Option, the Optionee shall agree, in the written Stock Option Agreement, to remain in the employ of the Company or a Subsidiary for a period of not less than one year after the Option is granted. Nothing in this Plan or in any Stock Option Agreement under this Plan shall change the Optionee's status as an "at-will" employee of the Company (unless otherwise expressly provided in any written employment agreement between any Optionee and the Company), nor shall it otherwise confer upon any Optionee any right to continue in the employ of the Company or any Subsidiary or Parent Corporation or shall interfere with or restrict in any way the rights of the Company and any Subsidiary or Parent Corporation, which are hereby expressly reserved, to discharge any Optionee at any time for any reason whatsoever, with or without good cause. SECTION 4.6 MERGER, CONSOLIDATION, ACQUISITION, LIQUIDATION OR DISSOLUTION. In its absolute discretion, and on such terms and conditions as it deems appropriate, the Plan Administrator may provide by the terms of any Stock Option Agreement that the Option thereunder cannot be exercised after the merger or consolidation of the Company into another corporation, the acquisition by another corporation of all or substantially all of the Company's assets or eighty percent (80%) or more of the Company's then outstanding voting stock or the liquidation or dissolution of the Company; and if the Plan Administrator so provides, it may, in its absolute discretion and on such terms and conditions as it deems appropriate, also provide, either by the terms of such Option or by a resolution adopted prior to the occurrence of such merger. Consolidation, acquisition, liquidation or dissolution, that, for some period of time prior to such event, such Option shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in section 4.3(a) above, section 4.3(b) above and/or any installment provisions of such Option. SECTION 4.7 ADJUSTMENTS IN OUTSTANDING OPTIONS. In the event that the outstanding shares of the Common Stock subject to an Option are changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company in the event of a stock split, reverse stock split, stock dividend, recapitalization, combination or reclassification of the Company's shares, the Plan Administrator shall make an appropriate and equitable adjustment in the number and kind of shares as to which each outstanding Option, or portions thereof then unexercised, shall be exercisable, to the end that after such event the Optionee's proportionate interest shall be maintained as before the occurrence of such event (subject to like dilution suffered by the shareholders of the Company in the event of a merger or other reorganization). Such adjustment in an outstanding Option shall be made without change in the total price applicable to the Option or the unexercised portion of the 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 Option price per share; provided, however, that, in the case of an Incentive Stock Option, each adjustment shall be made so that it is not a "modification" within the meaning of Section 424(h)(3) of the Code. Any adjustment made by the Plan Administrator shall be final and binding upon all the Optionees, the Company and all other interested persons. ARTICLE 5 EXERCISE OF OPTIONS SECTION 5.1 PERSON ELIGIBLE TO EXERCISE. During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee and shall not be assignable or transferable by the Optionee. After the death of the Optionee, any exercisable portion of an Option may, prior to the time when such portion becomes unexercisable under sections 4.4 or 4.6 above, be exercised by his personal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution as provided in Section 5.5 below. SECTION 5.2 PARTIAL EXERCISE. At any time and from time to time prior to the time when any exercisable Option or exercisable portion thereof becomes unexercisable under sections 4.4 or 4.6 above, such Option or portion thereof may be exercised in whole or in part; provided, however, that the Company shall not be required to issue fractional shares and the Plan Administrator may, by the terms of the specific Stock Option Agreement, require any partial exercise to be with respect to a specified minimum number of shares. SECTION 5.3 MANNER OF EXERCISE. An exercisable Option, or any exercisable portion thereof, may be exercised solely by delivery to the secretary of the Company or his office of all of the following prior to the time when such Option or such portion becomes unexercisable under sections 4.4 or 4.6 above: (a) Notice in writing signed by the Optionee or other person then entitled to exercise such Option or portion, stating that such Option or portion is exercised (and such notice must comply with all applicable rules established by the Plan Administrator); and (b) Subject to section 5.4 below, full payment (in cash or by check) for the shares with respect to which such Option or portion is thereby exercised; and (c) Such representations and documents as the Plan Administrator, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act of 1933, as amended, and any other federal or applicable state securities laws or regulations. The Plan Administrator may in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer orders to transfer agents and registrars; and (d) In the event that the Option or portion thereof shall be exercised pursuant to section 5.1 above by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option or portion thereof. SECTION 5.4 LOANS OR GUARANTEE OF LOANS. The Plan Administrator may assist any Optionee (including any officer or director) in the exercise of one or more Options under the Plan by (a) authorizing the extension of a loan to such Optionee from the Company, (b) permitting the Optionee to pay the Option price for the purchased Common Stock in installments over a period of years or (c) authorizing a guarantee by the Company of a third-party loan to the Optionee. The terms of any loan, installment method of payment or guarantee (including the interest rate and terms of repayment) will be established by the Plan Administrator in its sole discretion. Loans, installment payments and guarantees may be granted without security or collateral. SECTION 5.5 DEATH. Upon the death of an Optionee, any Option which he holds may be exercised, to the extent then exercisable, within such period after the date of his death as the Plan Administrator shall prescribe in his Stock Option Agreement (but not to exceed twelve (12) months) by the Optionee's representative or by any other person entitled to exercise such Option under his will or the laws of intestate succession. SECTION 5.6 DISABILITY. Upon the disability of an Optionee (meaning the Optionee is unable to engage in any substantial gainful activity for the Company by reason of a medically determined physical or mental impairment), any Option which he holds may be exercised, to the extent then exercisable, by him during such period after the date of his termination of employment resulting from such disability as the Plan Administrator shall prescribe in his Stock Option Agreement (but not to exceed twelve (12) months). SECTION 5.7 RETIREMENT. Upon the voluntary retirement of an Optionee (meaning the Optionee terminates employment or the rendering of consulting service on a permanent basis), any Option may be exercised, to the extent then exercisable, by him during such period after the date of his retirement as the Plan Administrator shall prescribe in his Stock Option Agreement (but not to exceed three (3) months). The Option shall terminate upon the expiration of such period unless the Optionee dies prior to that expiration date, in which event he shall be deemed to have died on the date of his retirement. SECTION 5.8 TERMINATION OF EMPLOYMENT OR CONSULTING SERVICES. In the event an Optionee's employment terminates or consulting services terminate for any reason other than as set forth in sections 5.5 through 5.7 above, any Option which he holds may be exercised, to the extent then exercisable, by him during such period such period after the date of his termination of employment or consulting services as the Plan Administrator shall prescribe in his Stock Option Agreement (but not to exceed twelve (12) months). SECTION 5.9 SECURITIES LAW REQUIREMENTS. (a) The Plan Administrator may require an Optionee, as a condition of either the grant or the exercise of an Option, to represent and establish to the satisfaction of the Plan Administrator that all shares of Common Stock acquired upon the exercise of such Option will be acquired for investment and not for resale. The Plan Administrator may permit the sale or other disposition of any Common Stock acquired pursuant to any such representation if it is satisfied that such sale or other disposition would not be in contravention of applicable state or federal securities law. (b) No shares of Common Stock shall issue upon the exercise of any Option if counsel for the Company determines that there has not been met any applicable registration requirement under the Securities Act of 1933, or the Securities Exchange Act of 1934, any applicable listing requirement of any stock exchange on which the Common Stock is listed or any other applicable provision of state or federal law. SECTION 5.10 RIGHTS AS SHAREHOLDERS. (a) An Optionee shall not be, nor have any of the rights or privileges of shareholders of the Company in respect of any shares issuable upon the exercise of any part of an Option unless and until certificates representing such shares have been issued by the Company to such holders. (b) Security holders shall receive a copy of the Company's financial statements at least annually. SECTION 5.11 TRANSFER RESTRICTIONS. The Plan Administrator, in its absolute discretion, may impose such restrictions on the transferability of the shares issuable upon the exercise of an Option as it deems appropriate and any such restriction shall be set forth in the Stock Option Agreement and may be referred to on the certificates evidencing such shares. The Plan Administrator may require the Optionee to give the Company prompt notice of any disposition of shares of Common Stock, acquired by exercise of an Option, within two years from the date of granting such Option or one year after the transfer of such shares to such Optionee. The Plan Administrator may direct that the certificates evidencing shares acquired by exercise of an Option refer to such requirement to give prompt notice of disposition. SECTION 5.12 REPURCHASE RIGHTS. (a) Except as provided in Section 5.12 (c) below, all of the shares acquired by any Employee upon the exercise of any Option granted under this Plan shall be subject to the right and option of Company (or its assignee) to repurchase the shares ("Repurchase Option") as set forth in this Section 5.12. Upon the termination of an Employee's employment with Company or any parent or subsidiary corporation of Company, whether voluntarily or involuntarily and with or without cause, the Repurchase Option shall become effective (or in the case of Common Stock issued upon exercise of any Option after the date of termination, the Repurchase Option shall become effective upon exercise of the Option). (b) The purchase price per share under the Repurchase Option shall be determined as follows: The purchase price will be the higher of (x) the original purchase price, or (y) the fair market value on the date of termination of employment as established by the Board of Directors either by third party appraisal or in good faith (any appraisal report that is dated more than fifteen (15) months prior to the date of termination of employment will be considered to be obsolete unless otherwise agreed to by the parties). The purchase price shall be payable by cancellation of all or any outstanding indebtedness of the Employee to Company and, if applicable, in cash (or by check). (c) Within ninety (90) days following the date of termination of employment (or within ninety (90) days of the exercise of the Option, if any Option is exercised after termination of employment), Company shall notify the Employee by written notice as to whether it wishes to purchase the shares pursuant to exercise of the Repurchase Option. If the Company (or its assignee) elects to repurchase such Employee's shares, it shall repurchase all (but not less than all, unless such Employee consents) of such Employee's shares. If Company (or its assignee) elects to purchase the shares, it must close the transaction within thirty (30) days after it gives notice to such Employee. At such closing, Company (or its assignee) shall tender payment for the shares and the certificates representing the shares so purchased shall be tendered by the Employee or by his/her personal representative, duly endorsed for transfer to Company (or its assignee). (d) If, from time to time during the term of the Employee's employment with the Company: (i) there is any stock dividend, stock split, recapitalization, reorganization or other change in the character or amount of any of the outstanding securities of Company; or (ii) there is any consolidation, merger or sale of all, or substantially all of the assets of Company; then, in such event, any and all new, substituted or additional securities or other property to which the Employee is entitled by reason of his/her ownership of shares shall be immediately subject to the Repurchase Option. While the aggregate purchase price shall remain the same after each such event, the purchase price per share upon exercise of the Repurchase Option shall be appropriately adjusted. (e) The Company's Repurchase Option shall terminate when the Company's securities become publicly traded on an established securities market. ARTICLE 6 ADMINISTRATION SECTION 6.1 DUTIES AND POWERS OF PLAN ADMINISTRATOR. The Plan Administrator shall have full power and authority to interpret the Plan and to adopt such rules for the administration, interpretation and application of the Plan as are consistent with the Plan and to interpret, amend or revoke any such rules. Before any director is granted an Option pursuant to Section 3.1 above, the Plan Administrator must first satisfy the requirements of California Corporations Code section 310. SECTION 6.2 MAJORITY RULE. The Plan Administrator shall act by a majority of its members in office and the Plan Administrator may act either by vote at a meeting or by a memorandum or other written instrument signed by a majority of its members. SECTION 6.3 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS. Directors serving as Plan Administrator shall not receive compensation for their services in administering the Plan, but all expenses and liabilities they incur in connection with the administration of the Plan shall be borne by the Company. The Plan Administrator may employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Plan Administrator, the Company and its officers and directors, shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Plan Administrator in good faith shall be final and binding upon the Optionee, the Company and all other interested persons. The Plan Administrator shall not be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or any Option and all directors serving as Plan Administrator shall be fully protected and indemnified by the Company in respect to any such action, determination or interpretation. ARTICLE 7 MISCELLANEOUS PROVISIONS SECTION 7.1 OPTION NOT TRANSFERABLE. No Option or interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Optionee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy) and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this section 7.1 shall prevent transfer by will or by the applicable laws of descent and distribution. SECTION 7.2 AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN. The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Plan Administrator. However, without approval of the Company's shareholders given within twelve (12) months before or after the action by the Plan Administrator, no action of the Plan Administrator may, except as provided in Section 2.4, increase the limit imposed in section 2.1 on the maximum number of shares which may be issued on exercise of Options, modify the eligibility requirements of section 3.1, reduce the minimum Option price requirements in section 4.2(a) or extend the limit imposed in this section 7.2 on the period during which an Option may be granted. Neither the amendment, suspension nor termination of the Plan shall, without the consent of the Optionee, alter or impair any rights, or obligations under any Option granted before such event. No Option may be granted during any period of suspension nor after termination of the Plan, and in no event may any Option be granted under this Plan after the first to occur of the following events: (a) The expiration of ten (10) years from the date the Plan is adopted by the Plan Administrator; or (b) The expiration of ten (10) years from the date the Plan is approved by the Company's shareholders under section 7.3. SECTION 7.3 APPROVAL OF PLAN BY SHAREHOLDERS. This Plan will be submitted for the approval of the Company's shareholders within twelve (12) months after the date of initial adoption of the Plan by the Company's Board of Directors. An Option may be granted prior to such shareholder approval; provided, however, that such Option shall not be exercisable prior to the time when the Plan is approved by the shareholders; provided, further, that if such approval has not been obtained at the end of that twelve-month period, an Option previously granted under the Plan shall thereupon be cancelled and become null and void. SECTION 7.4 EFFECT OF PLAN UPON OTHER OPTIONS AND COMPENSATION PLANS. The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company or any Subsidiary or Parent Corporation. Nothing in this Plan shall be construed to limit the rights of the Company or any Subsidiary or Parent Corporation (a) to establish any other forms of incentives or compensation for Employees of the Company or any Subsidiary or Parent Corporation or Co) to grant or assume options otherwise than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association. SECTION 7.5 TITLES. Titles are provided in this Plan for convenience only and are not to serve as a basis for interpretation or construction of the Plan. SECTION 7.6 EFFECTIVE DATE. The Plan shall be effective as of July 31, 1997, provided that within the twelve-month period described in section 7.3 above, it is approved at a duly called meeting of the shareholders by the vote of the holders of a majority of the shares present, or represented, and entitled to vote at such meeting; or by the written consent of the holders of a majority of the shares entitled to vote. Options may be granted but may not be exercised prior to shareholder approval. I hereby certify that the foregoing Plan was duly approved by the shareholders of QUICKSILVER GROUP, INC. effective as of July 31, 1997. /s/ Thomas W. Minick -------------------- THOMAS W. MINICK, Chairman & CEO Attest: /s/ Todd Fitzwater - ------------------------------- TODD FITZWATER, CFO and Treasurer CORPORATE SEAL -----END PRIVACY-ENHANCED MESSAGE-----