-----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, I0tCjscLIGtjQANg5d5qfHgS7Rw+FCFvCMWL1tskT21AIMdlL6kkn35Hx1CSzaJV tRedjRSH8+LRipKeiLKSRg== 0001072993-99-000332.txt : 19991203 0001072993-99-000332.hdr.sgml : 19991203 ACCESSION NUMBER: 0001072993-99-000332 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19991202 EFFECTIVENESS DATE: 19991202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MELTRONIX INC CENTRAL INDEX KEY: 0000916232 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 943142624 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-91937 FILM NUMBER: 99767605 BUSINESS ADDRESS: STREET 1: 9577 CHESAPEAKE DRIVE CITY: SAN DIEGO STATE: CA ZIP: 92123 BUSINESS PHONE: 6192927000 MAIL ADDRESS: STREET 1: 9577 CHESAPEAKE DRIVE CITY: SAN DIEGO STATE: CA ZIP: 92123 FORMER COMPANY: FORMER CONFORMED NAME: MICROELECTRONIC PACKAGING INC /CA/ DATE OF NAME CHANGE: 19931215 S-8 1 FORM S-8 As filed with the Securities and Exchange Commission on December 2, 1999 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 MELTRONIX, INC. (Formerly MICROELECTRONIC PACKAGING, INC.) (Exact name of registrant as specified in its charter) California 94-3142624 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 9577 Chesapeake Drive, San Diego, CA 92123 (Address of principal executive offices) (Zip Code) _______________ 1993 Stock Option/Stock Issuance Plan (Full title of the plan) _______________ Andrew Wrobel President and Chief Executive Officer MELTRONIX, INC. 9577 Chesapeake Drive, San Diego, CA 92123 (Name and address of agent for service) (858) 292-7000 (Telephone number, including area code, of agent for service) _______________ Copies to: Timothy J. Fitzpatrick, Esq. Fisher Thurber LLP 4225 Executive Square, Suite 1600 La Jolla, CA 92037 (858) 535-9400 CALCULATION OF REGISTRATION FEE
=================================================================================================== Title of Proposed Maximum Proposed Maximum Securities to Amount to be Offering Price per Aggregate Amount of be Registered Registered/(1)/ Share/(2)/ Offering Price/(2)/ Registration Fee - --------------------------------------------------------------------------------------------------- Common Stock, no par value 2,309,368 $ 0.625 $ 1,443,355 $ 381.05 ====================================================================================================
(1) This Registration Statement shall also cover any additional shares of Common Stock which become issuable under the 1993 Stock Option/Stock Issuance 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 Registrant's outstanding shares of Common Stock. (2) Calculated solely for purposes of this offering under Rule 457(h) of the Securities Act of 1933, as amended, on the basis of the average of the high and low selling prices per share of Common Stock of Meltronix, Inc. on November 26, 1999 as reported by the OTC Bulletin Board. PART II Information Required in the Registration Statement Item 3. Incorporation of Documents by Reference. --------------------------------------- Meltronix, Inc. (the "Registrant") hereby incorporates by reference into this Registration Statement the following documents previously filed with the Securities and Exchange Commission (the "Commission"): a. Our Annual Report on Form 10-K for the fiscal year ended December 31, 1998, filed with the Commission on April 15, 1999, together with the amendment thereto on Form 10K/A, filed with the Commission on September 21, 1999; b. Our Quarterly Reports on Forms 10-Q for the fiscal quarters ended March 31, 1999, June 30, 1999 and September 30, 1999, filed with the Commission on May 14, 1999, August 16, 1999 and September 21, 1999, respectively, together with the amendments thereto on Forms 10-Q/A for both the March 31, 1999 and June 30, 1999 quarters filed on September 21, 1999; c. All other documents filed pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended ("1934 Act"), since the end of the 1998 fiscal year covered by the Annual Reports referred to in (a) above; and d. Our Registration Statement No. 0-23562 on Form 8-A filed with the Commission on March 3, 1994, in which there is described the terms, rights and provisions applicable to our outstanding Common Stock. All reports and definitive proxy or information statements filed pursuant to Section 13(a), 13(c), 14 or 15(d) of 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 statement contained in a II-1 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 subsequently filed document which also is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement. Item 4. Description of Securities. ------------------------- Not applicable. Item 5. Interests of Named Experts and Counsel. -------------------------------------- Not applicable. Item 6. Indemnification of Directors and Officers. ----------------------------------------- The California General Corporation Law provides that directors will not be personally liable to us for monetary damages arising from a breach of their fiduciary duty to us as directors, including such conduct during a merger or tender offer, in certain circumstances. Such limitation does not affect liability for any breach of a director's duty to us or our shareholders (i) with respect to approval by the director of any transaction from which he or she derives an improper personal benefit, (ii) with respect to acts or omissions involving an absence of good faith, that he or she believes to be contrary to the best interests of us or our shareholders, that involve intentional misconduct or a knowing and culpable violation of law, that constitute an unexcused pattern of inattention that amounts to an abdication of his or her duty us or our shareholders, or that show a reckless disregard for his or her duty to us or our shareholders in circumstances in which he or she was, or should have been aware, in the ordinary course of performing his or her duties, of a risk of serious injury to us or our shareholders, or (iii) based on transactions between us and our directors or another corporation with interrelated directors or on improper distributions, loans, or guarantees under applicable sections of the California Corporations Code. Such limitations of liability also do not affect the availability of equitable remedies such as injunctive relief or rescission, although in certain circumstances equitable relief may not be available as a practical matter. The limitation may relieve the directors of monetary liability to us for grossly negligent conduct, including conduct in situations involving attempted takeovers. No claim or litigation is currently pending against our directors that would be affected by the limitation of liability. Section 317 of the California Corporations Code authorizes a court to award, or a corporation's Board of Directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933, as amended (the "1933 Act"). Our Amended and Restated Articles of Incorporation and our Bylaws provide for indemnification of our directors and officers and other agents to the maximum extent permitted by the California Corporations Code. We also maintain insurance for the benefit of our directors and officers that insures such persons against certain liabilities, including liabilities under the securities laws. We have entered into an indemnification agreement with all of our directors and officers whereby we will reimburse our directors and officers against certain liabilities, including liabilities arising under the securities laws. Item 7. Exemption from Registration Claimed. ----------------------------------- Not Applicable. II-2 Item 8. Exhibits. -------- Exhibit Number Exhibit - -------------- ------- 4 Instruments Defining Rights of Shareholders. Reference is made to Registrant's Registration Statement No. 0-23562 on Form 8-A, which is incorporated herein by reference pursuant to Item 3(d). 5 Opinion and Consent of Fisher Thurber LLP. 23.1 Consent of Independent Auditors - BDO Seidman, LLP. 23.2 Consent of Fisher Thurber LLP is contained in Exhibit 5. 24 Power of Attorney. Reference is made to page II-5 of this Registration Statement. 99.1 1993 Stock Option/Stock Issuance Plan. 99.2 Form of Notice of Grant of Stock Option./(1)/ 99.3 Form of Stock Option Agreement. 99.4 Form of Addendum to Stock Option Agreement (Special Tax Elections)./(1)/ 99.5 Form of Notice of Grant of Stock Option (Non-Employee Director Automatic Grant)./(1)/ 99.6 Form of Stock Option Agreement (Non-Employee Director Automatic Grant)./(1)/ 99.7 Form of Stock Issuance Agreement./(1)/ __________________ (1) Incorporated by reference to the exhibit bearing the same number filed with the Registrant's Registration Statement on Form S-8 filed on February 25, 1998. 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 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, and (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 clauses (1)(i) and (1)(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 the 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 II-3 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 at the termination of the Registrant's 1993 Stock Option/Stock Issuance Plan. B. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the 1933 Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is incorporated by reference into the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers or controlling persons of the Registrant pursuant to the indemnification provisions summarized in Item 6 above, or otherwise, the Registrant has been informed 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. 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 Diego, State of California, on this 29th of November, 1999. MELTRONIX, INC. By: /s/ ANDREW WROBEL -------------------------------------------- Andrew Wrobel, President and Chief Executive Officer, Director II-4 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That the undersigned officers and directors of Meltronix, Inc., a California corporation, do hereby constitute and appoint Andrew Wrobel and Denis J. Trafecanty, and each of them, the lawful attorneys and agents, with full power of substitution and resubstitution, with full power and authority to do any and all acts and things and to execute any and all instruments which said attorneys and agents, and any one of them, determine may be necessary or advisable or required to enable said corporation to comply with the Securities Act of 1933, as amended, and any rules or regulations or requirements of the Commission in connection with this Registration Statement. Without limiting the generality of the foregoing power and authority, the powers granted include the power and authority to sign the names of the undersigned officers and directors in the capacities indicated below to this Registration Statement, to any and all amendments, both pre-effective and post-effective, and supplements to this Registration Statement, and to any and all instruments or documents filed as part of or in conjunction with this Registration Statement or amendments or supplements thereof, and each of the undersigned hereby ratifies and confirms all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof. This Power of Attorney may be signed in several counterparts. IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney as of the date indicated. 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. Signatures Title Date - ---------- ----- ---- /s/ ANDREW WROBEL President and Chief Executive November 29, 1999 - ------------------------- Andrew Wrobel Executive Officer, Director (Principal Executive Officer) /s/ DENIS J. TRAFECANTY Senior Vice President, Chief November 29, 1999 - ------------------------- Denis J. Trafecanty Financial Officer and Secretary (Principal Financial and Accounting Officer) /s/ WONG LIN HONG Chairman of the Board November 30, 1999 - ------------------------- Wong Lin Hong of Directors /s/ FRANK L. HOWLAND Director November 25, 1999 - ------------------------- Frank L. Howland /s/ ANTHONY J.A. BRYAN Director November 30, 1999 - ------------------------- Anthony J.A. Bryan /s/ WALDEMAR HEEB Director November 24, 1999 - ------------------------- Waldemar Heeb /s/ JAMES WARING Director November 29, 1999 - ------------------------- James Waring II-5 EXHIBIT INDEX ------------- Exhibit Number Exhibit 4 Instruments Defining Rights of Shareholders. Reference is made to Registrant's Registration Statement No. 0-23562 on Form 8-A, which is incorporated herein by reference pursuant to Item 3(d). 5 Opinion and Consent of Fisher Thurber LLP. 23.1 Consent of Independent Auditors - BDO Seidman, LLP. 23.2 Consent of Fisher Thurber LLP is contained in Exhibit 5. 24 Power of Attorney. Reference is made to page II-5 of this Registration Statement. 99.1 1993 Stock Option/Stock Issuance Plan. 99.2 Form of Notice of Grant of Stock Option./(1)/ 99.3 Form of Stock Option Agreement. 99.4 Form of Addendum to Stock Option Agreement (Special Tax Elections)./(1)/ 99.5 Form of Notice of Grant of Stock Option (Non-Employee Director Automatic Grant)./(1)/ 99.6 Form of Stock Option Agreement (Non-Employee Director Automatic Grant)./(1)/ 99.7 Form of Stock Issuance Agreement./(1)/ ___________________ (1) Incorporated by reference to the exhibit bearing the same number filed with the Registrant's Registration Statement on Form S-8 filed on February 25, 1998. II-6 EX-5 2 OPINION AND CONSENT OF FISHER THURBER Exhibit 5 OPINION AND CONSENT OF FISHER THURBER LLP November 30, 1999 Meltronix, Inc. 9577 Chesapeake Drive San Diego, CA 92123 Re: Form S-8 Registration Statement for 1993 Stock Option/Stock Issuance Plan Ladies and Gentlemen: We have examined the Registration Statement on Form S-8 (the "Registration Statement") to be filed by you with the Securities and Exchange Commission on or about December 2, 1999 to register a total of 2,309,368 shares of common stock, no par value per share (the "Common Stock"), of Meltronix, Inc., a California corporation (the "Company") for issuance pursuant to the Company's 1993 Stock Option/Stock Issuance Plan (the "1993 Plan"), as amended. For purposes of rendering this opinion, we have made such legal and factual examinations as we have deemed necessary under the circumstances and, as part of such examination, we have examined, among other things, originals and copies, certified and otherwise, identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary or appropriate. For the purposes of such examination, we have assumed the genuineness of all signatures on original documents and the conformity to original documents of all copies submitted to us. On the basis of and relying upon the foregoing examination and assumptions, we are of the opinion that, assuming the Registration Statement shall have become effective pursuant to the provisions of the Securities Act of 1933, as amended, the shares of Common Stock being offered in the Registration Statement, when issued and sold and the consideration therefore received pursuant to the provisions of the option agreements duly authorized under the 1993 Plan and in accordance with the Registration Statement, will be validly issued, fully paid and nonassessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and any amendments thereto. This opinion letter is rendered as of the date first written above and we disclaim any obligation to advise you of facts, circumstances, events or developments which hereafter may be brought to our attention and which may alter, affect or modify the opinion expressed herein. Our opinion is expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise, as to any other matters relating to the Company, the 1993 Plan or the Common Stock. Fisher Thurber LLP By: /s/ David A. Fisher ---------------------------------------- David A. Fisher EX-23.1 3 CONSENT OF INDEPENDENT AUDITORS Exhibit 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Meltronix, Inc. San Diego, California We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 of our report dated March 11, 1999 except for Note 14, paragraph 19, which is as of April 14, 1999 and Notes 19 and 20 which are as of September 2, 1999 relating to the consolidated financial statements and schedules of Meltronix, Inc. (formerly known as Microelectronic Packaging, Inc.) appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. Our report contains an explanatory paragraph regarding the Company's ability to continue as a going concern. BDO SEIDMAN, LLP Costa Mesa, California November 30, 1999 EX-99.1 4 1993 STOCK OPTION Exhibit 99.1 MELTRONIX, INC. 1993 STOCK OPTION/STOCK ISSUANCE PLAN ------------------------------------- (As Amended and Restated through May 17, 1999) ARTICLE ONE GENERAL ------- I. PURPOSE OF THE PLAN. ------------------- A. This 1993 Stock/Option Stock Issuance Plan (the "Plan"), is intended to promote the interests of Meltronix, Inc., a California corporation (the "Corporation"), by providing eligible individuals with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of the Corporation (or its parent or subsidiary corporations). B. The Discretionary Option Grant and Stock Issuance Programs under this Plan became effective on April 12, 1994, the date on which the shares of the Corporation's Common Stock were first registered under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "1943 Act"). Such date is hereby designated as the Plan Effective Date. The Automatic Option Grant Program under this Plan became effective immediately upon the execution and final pricing of the Underwriting Agreement for the initial public offering of the Corporation's Common Stock. The execution date of such Underwriting Agreement is hereby designated as the Automatic Grant Program Effective Date. C. This May, 1999 restatement of the Plan shall become effective immediately upon its adoption by the Board of Directors, subject, however, to shareholder approval. The Plan shall be administered in compliance with the applicable requirements of SEC Rule 16b-3, as in effect from time to time. D. This Plan serves as the successor to the Corporation's 1988 Stock Option Plan (the "Predecessor Plan"), and no further option grants or share issuances shall be made under the Predecessor Plan from and after the Plan Effective Date. All outstanding stock options and unvested share issuances under the Predecessor Plan on such Plan Effective Date are hereby incorporated into this Plan and shall accordingly be treated as outstanding stock options and unvested share issuances under this Plan. However, each outstanding option grant so incorporated shall continue to be governed solely by the express terms and conditions of the instrument evidencing such grant, and no provision of this Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such incorporated options with respect to their acquisition of shares of the Corporation's Common Stock thereunder. All unvested shares of Common Stock outstanding under the Predecessor Plan on the Plan Effective Date shall continue to be governed solely by the express terms and conditions of the instruments evidencing such issuances, and no provision of this Plan shall be deemed to affect or modify the rights or obligations of the holders of such unvested shares. II. DEFINITIONS. ----------- A. For purposes of the Plan, the following definitions shall be in effect: Board: the Corporation's Board of Directors. ----- Change in Control: a change in ownership or control of the ----------------- Corporation effected through either of the following transactions: (i) the acquisition directly or indirectly by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's shareholders which the Board does not recommend such shareholders to accept; or (ii) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either: (A) have been Board members continuously since the beginning of such period; or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time such election or nomination was approved by the Board. Code: the Internal Revenue Code of 1986, as amended. ---- Common Stock: shares of the Corporation's common stock. ------------ Corporate Transaction: any of the following shareholder- --------------------- approved transactions to which the Corporation is a party: (i) a merger or consolidation in which the Corporation is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Corporation is incorporated; (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Corporation in complete liquidation or dissolution of the Corporation; or (iii) any reverse merger in which the Corporation is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger. Employee: an individual who performs services while in the -------- employ of the Corporation or one or more parent or subsidiary corporations, subject to the control and direction -2- of the employer entity not only as to the work to be performed but also as to the manner and method of performance. Fair Market Value: the Fair Market Value per share of Common ----------------- Stock determined in accordance with the following provisions: (i) If the Common Stock is at the time traded on the Nasdaq Electronic Bulletin Board, the Fair Market Value shall be the average of the highest bid price and the lowest asked price per share on the date in question, as such prices are reported by the National Association of Securities Dealers through the Nasdaq Electronic Bulletin Board or any successor system. If there are no reported bid or asked prices for the Common Stock on the date in question, then the average of the highest bid price and the lowest asked price on the last preceding date for which such quotations exist shall be determinative of the Fair Market Value. (ii) If the Common Stock is at the time listed or admitted to trading on any national stock exchange, then the Fair Market Value shall be the closing selling price per share on the date in question, as such price is reported by the National Association of Securities Dealers through the Nasdaq National Market or any successor system. If there is no reported closing selling price for the Common Stock on the date in question, then the closing selling price on the last preceding date for which such quotation exists shall be determinative of Fair Market Value (iii) If the Common Stock is at the time listed or admitted to trading on any national stock exchange, then the Fair Market Value shall be the closing selling price per share on the date in question on the exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no reported sale of Common Stock on such exchange on the date in question, then the Fair Market Value shall be the closing selling price on the exchange on the last preceding date for which such quotation exists. Optionee: a person to whom an option is granted under the -------- Discretionary Option Grant or Automatic Option Grant Program. Participant: a person who is issued Common Stock under the Stock ----------- Issuance Program. Permanent Disability or Permanently Disabled: the inability of the -------------------------------------------- Optionee or the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. Plan Administrator: the particular entity, whether the Primary ------------------ Committee, the Board or the Secondary Committee, which is authorized to administer the Discretionary Option Grant and Stock Issuance Programs with respect to one or more classes or eligible persons, to the extent such entity is carrying out its administrative functions under those programs with respect to the persons under its jurisdiction. -3- Primary Committee: the committee of two (2) or more non-employee ----------------- Board members appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs with respect to Section 16 Insiders. Secondary Committee: a committee of two (2) or more Board members ------------------- appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs with respect to eligible persons other than Section 16 Insiders. Section 16 Insider: an officer or director of the Corporation ------------------ subject to the short-swing profit liabilities of Section 16 of the 1934 Act. Service: the performance of services on a periodic basis for the ------- Corporation (or any parent subsidiary corporation) in the capacity of an Employee, a non-employee member of the board of directors or an independent consultant or advisor, except to the extent otherwise specifically provided in the applicable stock option or stock issuance agreement. B. The following provisions shall be applicable in determining the parent and subsidiary corporations of the Corporation: (i) Any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation shall be considered to be a parent of the Corporation, provided each such corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. (ii) Each corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation shall be considered to be a subsidiary of the Corporation, provided each such corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. III. STRUCTURE OF THE PLAN. --------------------- A. Stock Programs. The Plan shall be divided into three (3) separate -------------- components: (i) the Discretionary Option Grant Program specified in Article Two; (ii) the Automatic Option Grant Program specified in Article Three; and (iii) the Stock Issuance Program specified in Article Four. Under the Discretionary Option Grant Program, eligible individuals may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock in accordance with the provisions of Article Two. Under the Automatic Option Grant Program, each individual serving as an eligible non-employee Board member on the Automatic Grant Program Effective Date and each individual who first joins the Board as an eligible non-employee director after the Automatic Grant Program Effective Date will at periodic intervals receive option grants to purchase shares of Common Stock in accordance with the provisions of Article Three, with the first such grants to be made on the Automatic Grant Program Effective Date. Under the Stock Issuance Program, eligible individuals may be issued shares of Common Stock directly, either through the immediate purchase of such shares at a price not less than eighty-five percent (85%) of the fair -4- market value of the shares at the time of issuance or as a bonus for past services rendered the Corporation. B. General Provisions. Unless the context clearly indicates ------------------ otherwise, the provisions of Articles One and Five shall apply to the Discretionary Option Grant Program, the Automatic Option Grant Program and the Stock Issuance Program and shall accordingly govern the interest of all individuals under the Plan. IV. ADMINISTRATION OF THE PLAN. -------------------------- A. The Primary Committee shall have the sole and exclusive authority to administer the Discretionary Option Grant and Stock Issuance Programs with respect to Section 16 Insiders, other than to those Section 16 Insiders who are serving on the Primary Committee. The Board shall retain sole and exclusive authority to administer the Discretionary Option Grant and Stock Issuance Programs with respect to members of the Primary Committee. B. Administration of the Discretionary Option Grant and Stock Issuance Programs with respect to all other persons eligible to participate in those programs may, at the Board's discretion, be vested in the Primary Committee or a Secondary Committee, or the Board may retain the power to administer those programs with respect to such persons. The members of the Secondary Committee may be individuals who are Employees eligible to receive discretionary option grants or direct stock issuances under the Plan or any stock option, stock appreciation, stock bonus or other stock plan of the Corporation (or any parent or subsidiary). C. Members of the Primary Committee or any Secondary Committee shall serve for such period of time as the Board may determine and may be removed by the Board at any time. The Board may also at any time terminate the functions of any Secondary Committee and reassume all powers and authority previously delegated to such committee. D. Each Plan Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration of the Discretionary Option Grant and Stock Issuance Programs and to make such determinations under, and issue such interpretations of, the provisions of such programs and any outstanding options or stock issuances thereunder as it may deem necessary or advisable. Decisions of the Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on all parties who have an interest in the Discretionary Option Grant or Stock Issuance Program under its jurisdiction or any option or stock issuance thereunder. E. Service on the Primary Committee or the Secondary Committee shall constitute service as a Board member, and members of each such committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on such committee. No member of the Primary Committee or the Secondary Committee shall be liable for any act or omission made in good faith with respect to the Plan or any option grants or stock issuances under the Plan. -5- F. Administration of the Automatic Option Grant Program shall be self-executing in accordance with the express terms and conditions of Article Three, and the Plan Administrator shall exercise no discretionary functions with respect to option grants made pursuant to that program. V. OPTION GRANTS AND STOCK ISSUANCES. --------------------------------- A. The persons eligible to participate in the Discretionary Option Grant Program under Article Two and the Stock Issuance Program under Article Four shall be limited to the following: (i) officers and other key employees of the Corporation (or its parent or subsidiary corporations) who render services which contribute to the management, growth and financial success of the Corporation (or its parent or subsidiary corporations); (ii) non-employee Board members; and (iii) those consultants or other independent contractors who provide valuable services to the Corporation (or its parent or subsidiary corporations). B. The Plan Administrator shall have full authority to determine: (i) with respect to the option grants made under the Discretionary Option Grant Program, which eligible individuals are to receive option grants, the number of shares to be covered by each such grant, the status of the granted option as either an incentive stock option ("Incentive Option") that satisfies the requirements of Section 422 of the Code or a non-statutory option not intended to meet such requirements, the time or times at which each granted option is to become exercisable and the maximum term for which the option may remain outstanding; and (ii) with respect to stock issuances under the Stock Issuance Program, the number of shares to be issued to each Participant, the vesting schedule (if any) to be applicable to the issued shares, and the consideration to be paid by the individual for such shares. C. Approval by the Plan Administrator of an option grant under the Discretionary Option Grant Program shall constitute approval by such Plan Administrator of the subsequent exercise, and payment of the exercise price of, such option in accordance with the terms and conditions thereof. VI. STOCK SUBJECT TO THE PLAN. ------------------------- A. Shares of Common Stock shall be available for issuance under the Plan and shall be drawn from either the Corporation's authorized but unissued shares of Common Stock or from reacquired shares of Common Stock, including shares repurchased by the Corporation on the open market. The maximum number of shares of Common Stock which may be issued over the term of the Plan shall not exceed seven million (7,000,000) shares, subject to adjustment from time to time in accordance with the provisions of this Section VI. Such authorized share reserve includes the two million two hundred thousand (2,200,000)-share increase authorized by the Board on November 21, 1996,the one million eight hundred thousand (1,800,00)-share increase authorized -6- by the Board on April 10, 1997, and the two million three hundred nine thousand three hundred sixty-eight (2,309,368)-share increase authorized by the Board on May 17, 1999. To the extent one or more outstanding options under the Predecessor Plan incorporated into this Plan are subsequently exercised, the number of shares issued with respect to such option shall reduce, on a share-for-share basis, the number of shares available for issuance under this Plan. B. No one person participating in the Plan may receive options, separately exercisable stock appreciation rights and direct stock issuances for more than two million (2,000,000) shares of Common Stock in the aggregate per calendar year, beginning at any time after May 17, 1999. C. Should one or more outstanding options under this Plan (including outstanding options under the Predecessor Plan incorporated into this Plan) expire or terminate for any reason prior to exercise in full (including any option canceled in accordance with the cancellation-regrant provisions of Section IV of Article Two of the Plan), then the shares subject to the portion of each option not so exercised shall be available for subsequent option grants under the Plan. Unvested shares issued under the Plan and subsequently repurchased by the Corporation at the original option or issue price paid per share shall be added back to the share reserve and shall accordingly be made available for subsequent issuance under the Plan. However, should the exercise price of an outstanding option under the Plan (including any option incorporated from the Predecessor Plan) be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in connection with the exercise of an outstanding option under the Plan or the vesting of a direct share issuance made under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced by the gross number of shares for which the option is exercised or which vest under the share issuance, and not by the net number of shares of Common Stock actually issued to the holder of such option or share issuance. D. Should any change be made to the Common Stock issuable under the Plan by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, then appropriate adjustments shall be made to: (i) the maximum number and/or class of securities issuable under the Plan; (ii) the number and/or class of securities for which any one person may be granted options, separately exercisable stock appreciation rights and direct stock issuances per calendar year; (iii) the number and/or class of securities for which automatic option grants are to be subsequently made per eligible non-employee Board member under the Automatic Option Gant Program; (iv) the number and/or class of securities and price per share in effect under each option outstanding under either the Discretionary Option Grant or Automatic Option Grant Program; and (v) the number and/or class of securities and price per share in effect under each outstanding option incorporated into this Plan from the Predecessor Plan. Such adjustments to the outstanding options are to be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under such options. The adjustments determined by the Plan Administrator shall be final, binding and conclusive. -7- ARTICLE TWO DISCRETIONARY OPTION GRANT PROGRAM ---------------------------------- I. TERMS AND CONDITIONS OF OPTIONS. ------------------------------- Options granted pursuant to the Discretionary Option Grant Program shall be authorized by the action of the Plan Administrator and may, at the Plan Administrator's discretion, be either Incentive Options or non-statutory options. Individuals who are not Employees of the Corporation or its parent or subsidiary corporations may only be granted non-statutory options. Each granted option shall be evidenced by one or more instruments in the form approved by the Plan Administrator; provided, however, that each such instrument shall comply -------- with the terms and conditions specified below. Each instrument evidencing an Incentive Option shall, in addition, be subject to the applicable provisions of Section II of this Article Two. A. Option Price. ------------ 1. The option price per share shall be fixed by the Plan Administrator in accordance with the following provisions: (i) The option price per share of Common Stock subject to an Incentive Option shall in no event be less than one hundred percent (100%) of the Fair Market Value of such Common Stock on the grant date. (ii) The option price per share of Common Stock subject to a non-statutory stock option shall in no event be less than eighty-five percent (85%) of the Fair Market Value of such Common Stock on the grant date. 2. The option price shall become immediately due upon the exercise of the option and, subject to the provisions of Section I of Article Five and the instrument evidencing the grant, shall be payable in one of the following alternative forms specified below: (i) full payment in cash or check drawn to the Corporation's order; (ii) full payment in shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date (as such term is defined below); (iii) full payment in a combination of shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date and cash or check drawn to the Corporation's order; or (iv) full payment through a broker-dealer sale and remittance procedure pursuant to which the Optionee shall provide irrevocable written instructions to: (I) a -8- Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate option price payable for the purchased shares plus all applicable Federal and state income and employment taxes required to be withheld by the Corporation in connection with such purchase; and (II) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction. For purposes of this subparagraph 2, the Exercise Date shall be the date on which written notice of the option exercise is delivered to the Corporation. Except to the extent the sale and remittance procedure is used in connection with the exercise of the option, payment of the option price for the purchased shares must accompany such notice. B. Term and Exercise of Options. Each option granted under this ---------------------------- Discretionary Option Grant Program shall be exercisable at such time or times and during such period as is determined by the Plan Administrator and set forth in the instrument evidencing the grant. No such option, however, shall have a maximum term in excess of ten (10) years from the grant date. During the lifetime of the Optionee, the option shall be exercisable only by the Optionee and shall not be assignable or transferable by the Optionee other than by will or by the laws of descent and distribution following Optionee's death. C. Termination of Service. ---------------------- 1. The following provisions shall govern the exercise period applicable to any outstanding options held by the Optionee at the time of cessation of Service or death. (i) Should an Optionee cease Service for any reason (other than death) while holding one or more outstanding options under this Article Two, then none of those options shall remain exercisable for more than a ninety (90)- day period (or such shorter period determined by the Plan Administrator and set forth in the instrument evidencing the grant) measured from the date of such cessation of Service. (ii) Any option held by the Optionee under this Article Two and exercisable in whole or in part on the date of his or her death may be subsequently exercised by the personal representative of the Optionee's estate or by the person or persons to whom the option is transferred pursuant to the Optionee's will or in accordance with the laws of descent and distribution. Such exercise, however, must occur prior to the earlier of: (A) six (6) months ------- measured from the date of the Optionee's death; or (B) the specified expiration date of the option term. Upon the occurrence of the earlier event, the option shall terminate. (iii) Under no circumstance shall any such option be exercisable after the specified expiration date of the option term. (iv) During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of shares (if any) in which the Optionee is vested at the time of his or her cessation of Service. Upon the expiration of the limited post-Service exercise period or (if earlier) upon the specified expiration date of the option term, each -9- such option shall terminate and cease to be outstanding with respect to any vested shares for which the option has not otherwise been exercised. However, each outstanding option shall immediately terminate and cease to be outstanding, at the time of the Optionee's cessation of Service, with respect to any shares for which the option is not otherwise at that time exercisable or in which the Optionee is not otherwise vested. (v) Should: (A) the Optionee's Service be terminated for misconduct (including, but not limited to, any act of dishonesty, willful misconduct, fraud or embezzlement); or (B) the Optionee makes any unauthorized use or disclosure of confidential information or trade secrets of the Corporation or its parent or subsidiary corporations, then in any such event all outstanding options held by the Optionee under this Article Two shall terminate immediately and cease to be outstanding. 2. The Plan Administrator shall have complete discretion, exercisable either at the time the option is granted or at any time while the option remains outstanding, to permit one or more options held by the Optionee under this Article Two to be exercised, during the limited post-Service exercise period applicable under subparagraph 1 above, not only with respect to the number of vested shares of Common Stock for which each such option is exercisable at the time of the Optionee's cessation of Service but also with respect to one or more subsequent installments in which Optionee would have otherwise vested had such cessation of Service not occurred. D. Shareholder Rights. An Optionee shall have no shareholder rights ------------------ with respect to any shares covered by the option until such individual shall have exercised the option and paid the option price for the purchased shares. E. Repurchase Rights. The shares of Common Stock acquired upon the ----------------- exercise of any Article Two option grant may be subject to repurchase by the Corporation in accordance with the following provisions: (i) The Plan Administrator shall have the discretion to authorize the issuance of unvested shares of Common Stock under this Article Two. Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase any or all of those unvested shares at the option price paid per share. The terms and conditions upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the instrument evidencing such repurchase right. (ii) All of the Corporation's outstanding repurchase rights under this Article Two shall automatically terminate, and all shares subject to such terminated rights shall immediately vest in full, upon the occurrence of a Corporate Transaction, except to the extent: (A) any such repurchase right is expressly assigned to the successor corporation (or parent thereof) in connection with the Corporate Transaction; or (B) such termination is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued. (iii) The Plan Administrator shall have the discretionary authority, exercisable either before or after the Optionee's cessation of Service, to cancel the Corporation's -10- outstanding repurchase rights with respect to one or more shares purchased or purchasable by the Optionee under this Article Two and thereby accelerate the vesting of such shares in whole or in part at any time. II INCENTIVE OPTIONS. ----------------- The terms and conditions specified below shall be applicable to all Incentive Options granted under this Article Two. Incentive Options may only be granted to individuals who are Employees. Options which are specifically designed as "non-statutory" options when issued under the Plan shall not be --- subject to such terms and conditions. A. Dollar Limitation. The aggregate Fair Market (determined as of ----------------- the respective date or dates of grant) of the Common Stock for which one or more options granted to any Employee after December 31, 1986, under this Plan (or any other option plan of the Corporation or its parent or subsidiary corporations) may for the first time become exercisable as incentive stock options under the Federal tax laws during any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000.00). To the extent the Employee holds two (2) or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as incentive stock options under the Federal tax laws shall be applied on the basis of the order in which such options are granted. Should the number of shares of Common Stock for which any Incentive Option first becomes exercisable in any calendar year exceed the applicable One Hundred Thousand Dollar ($100,000.00) limitation, then that option may nevertheless be exercised in that calendar year for the excess number of shares as a non-statutory option under the Federal tax laws. B. Ten Percent (10%) Shareholder. If any individual to whom an ----------------------------- Incentive Option is granted is the owner of stock (as determined under Section 424(d) of the Code) possessing ten percent (10%) or more of the total combined voting power of all classes of stock of the Corporation or any one of is parent or subsidiary corporations, then the option price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the grant date, and the option term shall not exceed five (5) years, measured from the grant date. Except as modified by the preceding provisions of this Section II, the provisions of Articles One, Two and Five of the Plan shall apply to all Incentive Options granted hereunder. III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL. ----------------------------------------- A. In the event of any Corporate Transaction, each option which is at the time outstanding under this Article Two shall automatically accelerate so that each such option shall, immediately prior to the specified effective date for the Corporate Transaction, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for all or any portion of such shares. However, an outstanding option under this Article Two shall not so accelerate if and to the extent: (i) --- such option is, in connection with the Corporate Transaction, either to be assumed by the successor corporations or parent thereof or to be replaced with a comparable option to purchase shares of the capital stock of the successor -11- corporation or parent thereof; (ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the option spread existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such option; or (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant. The determination of option comparability under clause (i) above shall be made by the Plan Administrator, and its determination shall be final, binding and conclusive. B. Immediately following the consummation of the Corporate Transaction, all outstanding options under this Article Two shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation or its parent company. C. Each outstanding option under this Article Two which is assumed in connection with the Corporate Transaction or is otherwise to continue in effect shall be appropriately adjusted, immediately after such Corporate Transaction, to apply and pertain to the number and class of securities which would have been issued to the option holder, in consummation of such Corporate Transaction, had such person exercised the option immediately prior to such Corporate Transaction. Appropriate adjustments shall also be made to the option price payable per share, provided the aggregate option price payable for such -------- securities shall remain the same. In addition, the class and number of securities available for issuance under the Plan following the consummation of the Corporate Transaction shall be appropriately adjusted. D. The Plan Administrator shall have the discretion, exercisable either at the time the option is granted or at any time while the option remains outstanding, to provide (upon such terms as it may deem appropriate) for the automatic acceleration of one or more outstanding options granted under the Plan that are assumed or replaced in a Corporate Transaction and do not otherwise accelerate at that time, in the event the Optionee's Service should subsequently terminate within a designated period following the effective date of such Corporate Transaction. E. The grant of options under this Article Two shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. F. The Plan Administrator shall have the discretionary authority, exercisable either at the time the option is granted or at any time while the option remains outstanding, to provide for the automatic acceleration of one or more outstanding options under this Article Two (and the termination of one or more of the Corporation's outstanding repurchase rights under this Article Two) upon the occurrence of a Change in Control. The Plan Administrator shall also have full power and authority to condition any such option acceleration (and the termination of any outstanding repurchase rights) upon the subsequent termination of the Optionee's Service within a specified period following the Change in Control. G. Any options accelerated in connection with the Change in Control shall remain fully exercisable until the expiration or sooner termination of the option term. -12- H. The exercisability as incentive stock option under the Federal tax laws of any options accelerated under this Section III in connection with a Corporation Transaction or Change in Control shall remain subject to the dollar limitation of Section II of this Article Two. To the extent such dollar limitation is exceeded, the accelerated option shall be exercisable as a non-statutory option under the Federal tax laws. IV. CANCELLATION AND REGRANT OF OPTIONS. ----------------------------------- The Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected optionees, the cancellation of any or all outstanding options under this Article Two (including outstanding options under the Predecessor Plan incorporated into this Plan) and to grant in substitution new options under the Plan covering the same or different numbers or shares of Common Stock but with an option price per share not less than: (i) one hundred percent (100%) of the Fair Market Value on the new grant date in the case of a grant of an Incentive Option; (ii) one hundred ten percent (110%) of such Fair Market Value in the case of a grant of an Incentive Option to a ten percent (10%) Shareholder; or (iii) eighty-five percent (85%) of such Fair Market Value in the case of all other grants. ARTICLE THREE AUTOMATIC OPTION GRANT PROGRAM ------------------------------ I. ELIGIBILITY. ----------- The individuals eligible to receive automatic option grants pursuant to the provisions of this Article Three program shall be limited to those individuals who are serving as non-employee Board members on the Automatic Grant Program Effective Date or who are first elected or appointed as non-employee Board members on or after such Effective Date, whether through appointment by the Board or election by the Corporation's shareholders. Each non-employee Board member eligible to participate in the Automatic Option Grant Program pursuant to the foregoing criteria shall be designated an Eligible Director for purposes of the Plan. II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS. ------------------------------------------------ A. Grant Dates. Subject to shareholder approval of the amendments to ----------- the Plan adopted by the Board on November 21, 1996 and May 17, 1999, option grants shall be made under this Article Three on the dates specified below: 1. Initial Grant. Each Eligible Director who is first elected ------------- or appointed as a non-employee Board member on or after May 17, 1999, shall automatically be granted, on the date of such initial election or appointment (as the case may be), a Non-Statutory Option to purchase forty thousand (40,000) shares of Common Stock upon the terms and conditions of this Article Three. -13- 2. Annual Grant. On the date of each Annual Shareholders ------------ Meeting, beginning with the 2000 Annual Meeting, each individual who is to continue to serve as an Eligible Director shall automatically be granted, whether or not such individual is standing for re-election as a Board member at that Annual Meeting, a Non-Statutory Option to purchase an additional thirty thousand (30,000) shares of Common Stock upon the terms and conditions of this Article Three. There shall be no limit on the number of such thirty thousand (30,000)-share option grants any one Eligible Director may receive over his or her period of Board service. B. Exercise Price. The exercise price per share of Common Stock -------------- subject to each automatic option grant made under this Article Three shall be equal to one hundred percent (100%) of the Fair Market Value per share of Common Stock on the automatic grant date. C. Payment. The exercise price shall be payable in one of the ------- alternative forms specified below: (i) full payment in cash or check drawn to the Corporation's order; (ii) full payment in shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date (as such term is defined below); (iii) full payment in a combination of shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date and cash or check drawn to the Corporation's order; or (iv) full payment through a sale and remittance procedure pursuant to which the Optionee shall provide irrevocable written instructions to: (I) a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares; and (II) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction. For purposes of this subparagraph C, the Exercise Date shall be the date on which written notice of the option exercise is delivered to the Corporation. Except to the extent the sale and remittance procedure specified above is used for the exercise of the option for vested shares, payment of the exercise price for the purchased shares must accompany the exercise notice. D. Option Term. Each automatic grant under this Article Three shall ----------- have a maximum term of ten (10) years measured from the automatic grant date. E. Exercisability. Each automatic grant shall become exercisable in -------------- a series of four (4) equal and successive annual installments over the Optionee's period of continued service as a Board member, with the first such installment to become exercisable one (1) year after the automatic grant date. The exercisability of each automatic grant outstanding under this Article Three shall be accelerated as provided in Section II.G and Section III of this Article Three. -14- F. Non-Transferability. During the lifetime of the Optionee, each ------------------- automatic option grant shall be exercisable only by the Optionee and shall not be assignable or transferable by the Optionee other than by will or by the laws of descent and distribution following Optionee's death. G. Effect of Termination of Board Membership. ----------------------------------------- 1. Should the Optionee cease to serve as a Board member for any reason (other than death or Permanent Disability) while holding one or more automatic option grants under this Article Three, then such individual shall have a ninety (90)-day period following the date of such cessation of Board membership in which to exercise each such option for any or all of the shares of Common Stock for which that option is exercisable at the time of such cessation of Board service. Each such option shall immediately terminate and cease to be outstanding, at the time of such cessation of Board service, with respect to any shares for which the option is not otherwise at that time exercisable. 2. Should the Optionee die within ninety (90) days after the cessation of Board service, than any automatic option grant held by the Optionee at the time of death may subsequently be exercised, for any or all of the shares of Common Stock for which such option is exercisable at the time of the Optionee's cessation of Board membership (less any option shares subsequently purchased by the Optionee prior to death), by the personal representative of the Optionee's estate or by the person or persons to whom the option is transferred pursuant to the Optionee's will or in accordance with the laws of descent and distribution. Any such exercise must occur within six (6) months after the date of the Optionee's death. 3. Should the Optionee die or become Permanently Disabled while serving as a Board member, then any automatic option grant held by such Optionee under this Article Three shall accelerate in full, and the Optionee (or the representative of the Optionee's estate or the person or persons to whom the option is transferred upon the Optionee's death) shall have a six (6)-month period following the date of the Optionee's cessation of Board membership in which to exercise such option for any or all of the shares of Common Stock subject to the option at the time of such cessation of Board membership. 4. In no event shall any automatic grant under this Article Three remain exercisable after the expiration date of the ten (10)-year option term. Upon the expiration of the applicable post-service exercise period under subparagraph 1, 2 or 3 above or (if earlier) upon the expiration of the ten (10)-year option term, the automatic grant shall terminate and cease to be outstanding for any unexercised shares for which the option was otherwise exercisable at the time of the Optionee's cessation of Board membership. H. Shareholder Rights. The holder of an automatic option grant under ------------------ this Article Three shall have none of the rights of a shareholder with respect to any shares subject to such option until such individual shall have exercised the option and paid the exercise price for the purchased shares. -15- I. Remaining Terms. The remaining terms and conditions of each --------------- automatic option grant shall be as set forth in the form Director Automatic Grant Agreement attached hereto as Exhibit "A" and incorporated herein by reference. III. CORPORATE TRANSACTION/CHANGE IN CONTROL. --------------------------------------- A. In the event of any Corporate Transaction, each automatic option grant at the time outstanding under this Article Three shall automatically accelerate so that each such option shall, immediately prior to the specified effective date for the Corporate Transaction, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for all or any portion of those shares as fully-vested shares. Immediately after the consummation of the Corporate Transaction, all automatic option grants under this Article Three shall terminate and cease to be outstanding. B. In connection with any Change in Control, each automatic option grant at the time outstanding under this Article Three shall automatically accelerate so that each such option shall, immediately prior to the specified effective date for the Change in Control, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for all or any portion of those shares as fully-vested shares. Any option accelerated in connection with the Change in Control shall remain fully exercisable until the expiration or sooner termination of the option term. C. The automatic option grants outstanding under this Article Three shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. ARTICLE FOUR STOCK ISSUANCE PROGRAM ---------------------- I. TERMS AND CONDITIONS OF STOCK ISSUANCES. --------------------------------------- Shares may be issued under the Stock Issuance Program through direct and immediate purchases without any intervening stock option grants. The issued shares shall be evidenced by a Stock Issuance Agreement ("Issuance Agreement") that complies with the terms and conditions of this Article Four. A. Consideration. ------------- 1. Shares of Common Stock shall be issued under the Stock Issuance Program for one or more of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance: -16- (i) cash or check drawn to the Corporation's order; (ii) a promissory note payable to the Corporation's order in one or more installments, which may be subject to cancellation in whole or in part upon terms and conditions established by the Plan Administrator; or (iii) past services rendered to the Corporation or any parent or subsidiary corporation. 2. Shares of Common Stock may, in the absolute discretion of the Plan Administrator be issued for consideration with a value less than one hundred percent (100%) of the Fair Market Value of such shares at the time of issuance, but in no event less than eight-five percent (85%) of such Fair Market Value. B. Vesting Provisions. ------------------ 1. Shares of Common Stock issued under the Stock Issuance Program may, in the absolute discretion of the Plan Administrator, be fully and immediately vested upon issuance or may vest in one or more installments over the Participant's period of Service. The elements of the vesting schedule applicable to any unvested shares of Common Stock issued under the Stock Issuance Program, namely: (i) the Service period to be completed by the Participant or the performance objectives to be achieved by the Corporation; (ii) the number of installments in which the shares are to vest; (iii) the interval or intervals (if any) which are to lapse between installments; and (iv) the effect which death, Permanent Disability or other event designated by the Plan Administrator is to have upon the vesting schedule, shall be determined by the Plan Administrator and incorporated into the Issuance Agreement executed by the Corporation and the Participant at the time such unvested shares are issued. 2. The Participant shall have full shareholder rights with respect to any shares of Common Stock issued to him or her under the Plan, whether or not his or her interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares. Any new, additional or different shares of stock or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to his or her unvested shares by reason of any stock dividend, stock split, reclassification of Common Stock or other similar change in the Corporation's capital structure or by reason of any Corporate Transaction shall be issued, subject to: (i) the same vesting requirements applicable to his or her unvested shares; and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate. -17- 3. Should the Participant cease to remain in Service while holding one or more unvested shares of Common Stock under the Plan, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further shareholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash equivalent (including the Participant's purchase-money promissory note), the Corporation shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel the unpaid principal balance of any outstanding purchase-money note of the Participant attributable to such surrendered shares. 4. The Plan Administrator may in its discretion elect to waive the surrender and cancellation of one or more unvested shares of Common Stock (or other assets attributable thereto) which would otherwise occur upon the non- completion of the vesting schedule applicable to such shares. Such waiver shall result in the immediate vesting of the Participant's interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participant's cessation of Service. II. CORPORATE TRANSACTIONS/CHANGE IN CONTROL. ---------------------------------------- A. Upon the occurrence of any Corporate Transaction, all unvested shares of Common Stock at the time outstanding under the Stock Issuance Program shall immediately vest in full, except to the extent the Plan Administrator imposes limitations in the Issuance Agreement which preclude such accelerated vesting in whole or in part. B. The Plan Administrator shall have the discretionary authority, exercisable either at the time the shares are issued under the Stock Issuance Program or at any time while the issued shares remain unvested, to provide for the immediate and automatic vesting of one or more of those shares at the time of a Change in Control. The Plan Administrator shall also have full power and authority to condition any such accelerated vesting upon the subsequent termination of the Participant's Service within a specified period following the Change in Control. III. TRANSFER RESTRICTIONS/SHARE ESCROW. ---------------------------------- A. Unvested shares may, in the Plan Administrators' discretion, be held in escrow by the Corporation until the Participant's interest in such shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing such unvested shares. To the extent an escrow arrangement is utilized, the unvested shares and any securities or other assets issued with respect to such shares (other than regular cash dividends) shall be delivered in escrow to the Corporation to be held until the Participant's interest in such shares (or other securities or assets) vests. Alternatively, if the unvested shares are issued directly to the Participant, the restrictive legend on the certificates for such shares shall read substantially as follows: "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE ACCORDINGLY SUBJECT TO: (I) CERTAIN TRANSFER RESTRICTIONS; AND (II) CANCELLATION OR REPURCHASE IN THE EVENT THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN -18- INTEREST) CEASES TO REMAIN IN THE CORPORATION'S SERVICE. SUCH TRANSFER RESTRICTIONS AND THE TERMS AND CONDITIONS OF SUCH CANCELLATION OR REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) DATED ____________, ______, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION." B. The Participant shall have no right to transfer any unvested shares of Common Stock issued to him or her under the Stock Issuance Program. For purposes of this restriction, the term "transfer" shall include (without limitation) any sale, pledge, assignment, encumbrance, gift, or other disposition of such shares, whether voluntary or involuntary. Upon any such attempted transfer, the unvested shares shall immediately be canceled, and neither the Participant nor the proposed transferee shall have any rights with respect to those shares. However, the Participant shall have the right to make a gift of unvested shares acquired under the Stock Issuance Program to his or her spouse or issue, including adopted children, or to a trust established for such spouse or issue, provided the donee of such shares delivers to the Corporation a written agreement to be bound by all the provisions of the Stock Issuance Program and the Issuance Agreement applicable to the gifted shares. ARTICLE FIVE MISCELLANEOUS ------------- I. LOANS OR INSTALLMENT PAYMENTS. ----------------------------- A. The Plan Administrator may, in its discretion, assist any Optionee or Participant (including an Optionee or Participant who is an officer of the Corporation) in the exercise of one or more options granted to such Optionee under the Discretionary Option Grant Program or the purchase of one or more shares issued to such Participant under the Stock Issuance Program, including the satisfaction of any Federal and state income and employment tax obligations arising therefrom, by: (i) authorizing the extension of a loan from the Corporation to such Optionee or Participant; or (ii) permitting the Optionee or Participant to pay the option price or purchase price for the purchased Common Stock in installments over a period of years. The terms of any loan or installment method of payment (including the interest rate and terms of repayment) shall be upon such terms as the Plan Administrator specifies in the applicable option or issuance agreement or otherwise deems appropriate under the circumstances. Loans or installment payments may be authorized with or without security or collateral. However, any loan made to a consultant or other non- employee advisor must be secured by property other than the purchased shares of Common Stock. In all events, the maximum credit available to the Optionee or Participant may not exceed the option or purchase price of the acquired shares plus any Federal and state income and -19- employment tax liability incurred by the Optionee or Participant in connection with the acquisition of such shares. B. The Plan Administrator may, in its absolute discretion, determine that one or more loans extended under this financial assistance program shall be subject to forgiveness by the Corporation in whole or in part upon such terms and conditions as the Plan Administrator may deem appropriate. II. AMENDMENT OF THE PLAN AND AWARDS. -------------------------------- A. The Board has complete and exclusive power and authority to amend or modify the Plan (or any component thereof) in any or all respects whatsoever. However, no such amendment or modification shall adversely affect rights and obligations with respect to options at the time outstanding under the Plan, nor adversely affect the rights of any Participant with respect to Common Stock issued under the Stock Issuance Program prior to such action, unless the Optionee or Participant consents to such amendment. In addition, amendments to the Plan shall be subject to shareholder approval to the extent required under applicable law or regulation. B. (i) Options to purchase shares of Common Stock may be granted under the Discretionary Option Grant Program; and (ii) shares of Common Stock may be issued under the Stock Issuance Program, which are in both instances in excess of the number of shares then available for issuance under the Plan, provided any excess shares actually issued under the Discretionary Option Grant Program or the Stock Issuance Program are held in escrow until shareholder approval is obtained for a sufficient increase in the number of shares available for issuance under the Plan. If such shareholder approval is not obtained within twelve (12) months after the date the first such excess option grants or excess share issuances are made, then: (I) any unexercised excess options shall terminate and cease to be exercisable; and (II) the Corporation shall promptly refund the purchase price paid for any excess shares actually issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow. III. TAX WITHHOLDING. --------------- The Corporation's obligation to deliver shares of Common Stock upon the exercise of stock options for such shares or the vesting of such shares under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income tax and employment tax withholding requirements. The Plan Administrator may, in its discretion and in accordance with the provisions of this Section III of Article Five and such supplemental rules as the Plan Administrator may from time to time adopt (including the applicable safe-harbor provisions of Rule 16b-3 of the Securities and Exchange Commission), provide any or all holders of non-statutory options (other than the automatic grants made pursuant to Article Three of the Plan) or unvested shares under the Plan with the right to use shares of Common Stock in satisfaction of all or part of the Federal, state and local income and employment tax liabilities incurred by such holders in connection with the exercise of -20- their options or the vesting of their shares (the "Taxes"). Such right may be provided to any such holder in either or both of the following formats: (i) Stock Withholding. The holder of the non-statutory option ----------------- or unvested shares may be provided with the election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such non-statutory option or the vesting of such shares, a portion of those shares with an aggregate Fair Market Value equal to the percentage of the applicable Taxes (not to exceed one hundred percent (100%)) designated by the holder. (ii) Stock Delivery. The Plan Administrator may, in its -------------- discretion, provide the holder of the non-statutory option or the unvested shares with the election to deliver to the Corporation, at the time the non- statutory option is exercised or the shares vest, one or more shares of Common Stock previously acquired by such individual (other than in connection with the option exercise of share vesting triggering the Taxes) with an aggregate Fair Market Value equal to the percentage of the Taxes incurred in connection with such option exercise or share vesting (not to exceed one hundred percent (100%)) designated by the holder. IV. EFFECTIVE DATE AND TERM OF PLAN. ------------------------------- A. This Plan, as successor to the Predecessor Plan, became effective as of the Plan Effective Date, and no further option grants or stock issuances shall be made under the Predecessor Plan from and after the Plan Effective Date. B. Each stock option grant outstanding under the Predecessor Plan immediately prior to the Plan Effective Date was incorporated into this Plan and is treated as an outstanding option under this Plan, but each such option shall continue to be governed solely by the terms and conditions of the instrument evidencing such grant, and nothing in this Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such options with respect to their acquisition of shares of Common Stock thereunder. Each unvested share of Common Stock outstanding under the Predecessor Plan on the Plan Effective Date shall continue to be governed solely by the terms and conditions of the instrument evidencing such share issuance, and nothing in this Plan shall be deemed to affect or otherwise modify the rights or obligations of the holder of such unvested shares. C. The option/vesting acceleration provisions of Section III of Article Two and Section II of Article Four relating to Corporate Transactions and Changes in Control may, in the Plan Administrator's discretion, be extended to one or more stock options or unvested share issuances which are outstanding under the Predecessor Plan on the Plan Effective Date but which do not otherwise provide for such acceleration. D. The Plan was amended by the Board on June 5, 1995, to increase the number of shares of Common Stock authorized for issuance under the Plan by an additional one hundred ten thousand (110,000) shares, and the Plan was further amended by the Board on February 29, 1996, to: (i) increase the number of shares of Common Stock authorized for issuance under the Plan by an additional one hundred ninety thousand (190,000) shares; and (ii) establish a five hundred thousand (500,000)-share limit on the aggregate number of shares of Common Stock for which any one -21- participant may be issued stock options and direct stock issuances over the remaining term of the Plan. Each of the above amendments was approved by the shareholders at the 1996 Annual Meeting. E. The Plan was amended on November 21, 1996, to effect the following changes: (i) increase the number of shares of Common Stock authorized for issuance over the term of the Plan by an additional two million two hundred thousand (2,200,000) shares; (ii) render the non-employee Board members eligible to receive option grants under the Discretionary Option Grant Program; (iii) provide for administration of the Plan by either a Primary Committee, Secondary Committee or the Board; (iv) allow unvested shares issued under the Plan and subsequently repurchased by the Company at the option exercise price or issue price paid per share to be reissued under the Plan; (v) amend the Automatic Option Grant Program to: (a) provide for special option grants to be made to eligible Board members on November 21, 1996; (b) increase the number of shares of Common Stock for which Options are to be granted to non-employee Board members on their initial election or appointment; and (c) increase the number of shares of Common Stock for which options are to be granted on an annual basis to non-employee Board members upon their re-election to the Board at each Annual Shareholders Meeting, beginning with the 1997 Annual Meeting; and (v) effect a series of technical changes to the provisions of the Plan in order to take advantage of the recent amendments to Rule 16b-3 of the Securities Exchange Act of 1934 which exempts certain officer and director transactions under the Plan from the short-swing liability provisions of the federal securities laws. F. On April 10, 1997, the Board again amended and restated the Plan to increase the number of shares of Common Stock reserved for issuance over the term of the Plan by an additional one million eight hundred thousand (1,800,000) shares. G. Both the November 21, 1996 and the April 10, 1997 amendments were approved by the shareholders at the 1997 Annual Meeting. H. The Plan was also amended on May 17, 1999 to effect the following changes: (i) increase the maximum number of shares of Common Stock authorized for issuance over the term of the 1993 Plan from 4,690,632 to 7,000,000 shares; (ii) increase the maximum number of options, stock appreciation rights and direct stock issuances to any one person per calendar year to 2,000,000 shares of Common Stock from 500,000 shares of Common Stock; and (iii) amend the Automatic Option Grant Program to increase the number of shares of Common Stock for which option grants are to be made to each new non-employee Board member from 15,000 to 40,000 shares and to increase the number of shares for which option grants are to be made annually to each continuing non-employee Board member from 10,000 to 30,000 shares. I. The May 17, 1999 amendments were approved by the shareholders on October 15, 1999. J. All option grants made prior to the May 17, 1999, amendments shall remain outstanding in accordance with the terms and conditions of the respective instruments evidencing those options, and nothing in the May 17, 1999, amendments shall be deemed to modify or in any way affect those outstanding options. Subject to the foregoing limitations, the Plan Administrator -22- may make option grants under the Plan at any time before the date fixed herein for the termination of the Plan. K. The Plan shall terminate upon the earlier of: (i) December 8, ------- 2003; or (ii) the date on which all shares available for issuance under the Plan shall have been issued pursuant to the exercise of the options granted under the Plan or the issuance of shares (whether vested or unvested) under the Stock Issuance Program. If the date of termination is determined under clause (i) above, then all option grants and unvested share issuances outstanding on such date shall thereafter continue to have force and effect in accordance with the provisions of the instruments evidencing such grants or issuances. V. USE OF PROCEEDS. --------------- Any such proceeds received by the Corporation from the sale of shares pursuant to option grants or share issuances under the Plan shall be used for general corporate purposes. VI. REGULATORY APPROVALS. -------------------- A. The implementation of the Plan, the granting of any option under the Plan, the issuance of any shares under the Stock Issuance Program, and the issuance of Common Stock upon the exercise or surrender of the option grants made hereunder shall be subject to the Corporation's procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the options granted under it, and the Common Stock issued pursuant to it. B. No shares of Common Stock or other assets shall be issued or delivered under this Plan unless and until there shall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any securities exchange on which stock of the same class is then listed. VII. NO EMPLOYMENT/SERVICE RIGHTS. ---------------------------- Neither the action of the Corporation in establishing the Plan, nor any action taken by the Plan Administrator hereunder, nor any provision of the Plan shall be construed so as to grant any individual the right to remain in the employ or service of the Corporation (or any parent or subsidiary corporation) for any period of specific duration, and the Corporation (or any parent or subsidiary corporation retaining the services of such individual) may terminate such individual's employment or service at any time and for any reason, with or without cause. VIII. MISCELLANEOUS PROVISIONS. ------------------------ A. The right to acquire Common Stock or other assets under the Plan may not be assigned, encumbered or otherwise transferred by any Optionee or Participant. -23- B. The provisions of the Plan relating to the exercise of options and the vesting of shares shall be governed by the laws of the State of California, as such laws are applied to contracts entered into and performed in such State. C. The provisions of the Plan shall inure to the benefit of, and be binding upon, the Corporation and its successors or assigns, whether by Corporate Transaction or otherwise, and the Participants and Optionees, the legal representatives of their respective estates, their respective heirs or legatees and their permitted assignees. -24- EX-99.3 5 FORM OF STOCK OPTION AGREEMENT Exhibit 99.3 MICROELECTRONIC PACKAGING, INC. STOCK OPTION AGREEMENT WITNESSETH: RECITALS - -------- A. The Corporation's 1993 Stock Option/Stock Issuance Plan, as amended and restated through April 10, 1997 (the "Plan"), has been implemented for the purpose of attracting and retaining the services of key employees (including officers and directors), non-employee Board members and consultants and other independent advisors. B. Optionee is an individual who is to render valuable services to the Corporation or one or more parent or subsidiary corporations, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the grant of a stock option to purchase shares of the Corporation's common stock ("Common Stock") under the Plan. NOW, THEREFORE, it is hereby agreed as follows: 1. Grant of Option. Subject to and upon the terms and conditions set --------------- forth in this Agreement, the Corporation hereby grants to Optionee, as of the grant date (the "Grant Date") specified in the accompanying Notice of Grant of Stock Option (the "Grant Notice"), a stock option to purchase up to that number of shares of the Corporation's Common Stock (the "Option Shares") as is specified in the Grant Notice. Such Option Shares shall be purchasable from time to time during the option term at the exercise price (the "Exercise Price") specified in the Grant Notice. 2. Option Term. This option shall expire at the close of business on the ----------- expiration date (the "Expiration Date") specified in the Grant Notice, unless sooner terminated in accordance with Paragraph 5 or 6. 3. Limited Transferability. This option shall be exercisable only by ----------------------- Optionee during Optionee's lifetime and shall not be transferable or assignable by Optionee other than by will or by the laws of descent and distribution following Optionee's death. 4. Exercisability. This option shall become exercisable for the Option -------------- Shares in accordance with the exercise schedule specified in the Grant Notice. As the option becomes exercisable for one or more installments, those installments shall accumulate, and the option shall remain exercisable for the accumulated installments until the Expiration Date or sooner termination of the option term under Paragraph 5, 6 or 19. In no event shall this option become exercisable for any additional Option Shares following Optionee's cessation of Service. 1 5. Cessation of Service. The option term specified in Paragraph 2 shall -------------------- terminate (and this option shall cease to remain outstanding) prior to the Expiration Date in accordance with the following provisions: a. This option shall immediately terminate and cease to remain outstanding for any Option Shares for which it is not exercisable at the time of Optionee's cessation of Service (as defined below). b. Should Optionee cease Service for any reason other than death while this option remains outstanding, then Optionee shall have a ninety (90)-day period measured from the date of such cessation of Service in which to exercise this option to the extent outstanding at the time. In no event, however, may this option be exercised at any time after the specified Expiration Date of the option term. c. Should Optionee die while in Service or during the ninety (90)-day period following his or her cessation of Service, then the personal representative of Optionee's estate or the person or persons to whom this option is transferred pursuant to Optionee's will or in accordance with the laws of descent and distribution shall have the right to exercise the option to the extent outstanding at the time. Such right shall lapse, and this option shall terminate and cease to remain outstanding, upon the earlier of (i) the expiration of the six (6)-month period measured from the ------- date of Optionee's death or (ii) the Expiration Date. d. During the applicable period of post-Service exercisability under subparagraphs b through c above, this option may not be exercised in the aggregate for more than the number of Option Shares (if any) for which this option is, at the time of Optionee's cessation of Service, exercisable in accordance with either the normal exercise provisions specified in the Grant Notice or the special acceleration provisions of Paragraph 6 of this Agreement. e. Should (i) Optionee's Service be terminated for misconduct (including, but not limited to, any act of dishonesty, willful misconduct, fraud or embezzlement) or (ii) Optionee make any unauthorized use or disclosure of confidential information or trade secrets of the Corporation or any parent or subsidiary, then in any such event this option shall terminate immediately and cease to be outstanding. f. For purposes of this Agreement, the following definitions shall be in effect: Optionee shall be deemed to remain in Service for so long as such individual performs services on a periodic basis for the Corporation (or any parent or subsidiary corporation) in the capacity of an Employee, a non-employee member of the Board or an independent consultant or advisor. 2 Optionee shall be considered to be an Employee for so long as such individual performs services while in the employ of the Corporation or any parent or subsidiary, subject to the control and direction of the employer entity not only as to the work to be performed but also as to the manner and method of performance. A corporation shall be considered to be a subsidiary of the Corporation if it is a member of an unbroken chain of corporations beginning with the Corporation, provided each such corporation in the unbroken chain (other than the last corporation) owns, at the time of determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation shall be considered to be a parent of the Corporation if it is a member of an unbroken chain ending with the Corporation provided each such corporation in the unbroken chain (other than the Corporation) owns, at the time of determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 6. Corporate Transaction/Change in Control. --------------------------------------- a. In the event of any of the following shareholder-approved transactions to which the Corporation is a party (a "Corporate Transaction"): (1) a merger or consolidation in which the Corporation is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Corporation is incorporated, (2) the sale, transfer or other disposition of all or substantially all of the assets of the Corporation in complete liquidation or dissolution of the Corporation, or (3) any reverse merger in which the Corporation is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such merger, this option, to the extent outstanding at such time but not otherwise fully exercisable, shall automatically accelerate so that this option shall, immediately prior to the specified effective date for the Corporate Transaction, become exercisable for all the Option Shares at the time subject to this option and may be exercised for all or any portion of such shares as fully- vested shares. No such acceleration of this option, however, shall occur if and to the extent: (i) this option is, in connection with the Corporate Transaction, either to be assumed by the successor corporation or parent thereof or replaced with a comparable option to purchase shares of the capital stock of the successor corporation or parent thereof or (ii) this option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing at the time of the 3 Corporate Transaction on the Option Shares for which this option is not otherwise at the time exercisable (the excess of the Fair Market Value of those Option Shares over the aggregate Exercise Price payable for such shares) and provides for subsequent pay-out in accordance with the same vesting schedule in effect for those Option Shares pursuant to the option exercise schedule set forth in the Grant Notice. The determination of option comparability under clause (i) shall be made by the Plan Administrator, and such determination shall be final, binding and conclusive. b. This option shall terminate immediately after the consummation of such Corporate Transaction, except to the extent the option is expressly assumed by the successor corporation or parent thereof. c. This Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise make changes in its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 7. Adjustment in Option Shares. --------------------------- a. In the event any change is made to the Common Stock issuable under the Plan by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class effected without the Corporation's receipt of consideration, the Plan Administrator shall make appropriate adjustments to (i) the number and/or class of securities subject to this option and (ii) the Exercise Price payable per share in order to prevent any dilution or enlargement of rights and benefits hereunder. Such adjustments shall be final, binding and conclusive. b. If this option is to be assumed in connection with any Corporate Transaction under Paragraph 6 or is otherwise to continue outstanding, then this option shall, immediately after such Corporate Transaction, be appropriately adjusted to apply and pertain to the number and class of securities which would have been issued to Optionee in the consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments shall also be made to the Exercise Price payable per share, provided the aggregate Exercise Price payable hereunder shall remain the -------- same. 8. Privilege of Stock Ownership. The holder of this option shall not ---------------------------- have any of the rights of a shareholder with respect to the Option Shares until such individual shall have exercised the option and paid the Exercise Price for the purchased Option Shares. 9. Manner of Exercising Option. --------------------------- a. In order to exercise this option with respect to all or any part of the Option Shares for which this option is at the time exercisable, Optionee (or in the case of exercise after Optionee's death, Optionee's executor, administrator, heir or legatee, as the case may be) must take the following actions: 4 (1) Deliver to the Corporate Secretary of the Corporation an executed notice of exercise in substantially the form of Exhibit I to this Agreement (the "Exercise Notice") in which there is specified the number of Option Shares to be purchased under the exercised option. (2) Pay the aggregate Exercise Price for the purchased shares through one or more of the following alternatives: (a) full payment in cash or by check made payable to the Corporation's order; (b) full payment in shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date (as such term is defined below); (c) full payment through a combination of shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date and cash or check payable to the Corporation's order; or (d) full payment effected through a broker-dealer sale and remittance procedure pursuant to which Optionee shall provide concurrent irrevocable instructions to (i) a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld in connection with such purchase and (ii) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction. (3) Furnish to the Corporation appropriate documentation that the person or persons exercising this option (if other than Optionee) have the right to exercise the option. (4) Make appropriate arrangements with the Corporation (or Parent or Subsidiary employing or retaining Optionee) for satisfaction of all Federal, state and local income and employment tax withholding requirements applicable to the option exercise. b. For purposes of this Agreement, the Exercise Date shall be the date on which the executed Exercise Notice shall have been delivered to the Corporation. Except to the extent the sale and remittance procedure specified above is utilized in connection with the option exercise, payment of the Exercise Price for the purchased shares must accompany such Exercise Notice. 5 c. For all valuation purposes under this Agreement, the Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: (1) If the Common Stock is at the time traded on the Nasdaq Electronic Bulletin Board, the Fair Market Value shall be the average of the highest bid price and the lowest asked price per share on the date in question, as such prices are reported by the National Association of Securities Dealers on the Nasdaq Electronic Bulletin Board. If there are no reported bid or asked prices for the Common Stock on the date in question, then the average of the highest bid price and the lowest asked price on the last preceding date for which such quotations exist shall be determinative of the Fair Market Value. (2) If the Common Stock is not at the time listed or admitted to trading on any national securities exchange but is traded on the Nasdaq National Market, the Fair Market Value shall be the closing selling price per share on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market. If there is no reported closing selling price for the Common Stock on the date in question, then the closing selling price on the last preceding date for which such quotation exists shall be determinative of Fair Market Value. (3) If the Common Stock is at the time listed or admitted to trading on any national securities exchange, then the Fair Market Value shall be the closing selling price per share on the date in question on the securities exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no reported sale of Common Stock on such exchange on the date in question, then the Fair Market Value shall be the closing selling price on the exchange on the last preceding date for which such quotation exists. d. As soon as practical after receipt of the Exercise Notice, the Corporation shall mail or deliver to or on behalf of Optionee (or any other person or persons exercising this option in accordance herewith) a certificate or certificates representing the purchased Option Shares. e. In no event may this option be exercised for any fractional share. 10. Governing Law. The interpretation, performance and enforcement of ------------- this Agreement shall be governed by the laws of the State of California without resort to that State's conflict-of-laws provisions. 11. Compliance with Laws and Regulations. The exercise of this option and ------------------------------------ the issuance of Option Shares upon such exercise shall be subject to compliance by the Corporation and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any securities exchange on which shares of the Corporation's Common Stock may be listed at the time 6 of such exercise and issuance. In connection therewith, the Optionee represents that, either alone or with his or her purchaser representative, he or she has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment. 12. Successors and Assigns. Except to the extent otherwise provided in ---------------------- Paragraph 3 or 5, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs and legal representatives of Optionee and the successors and assigns of the Corporation. 13. Liability of Corporation. The inability of the Corporation to obtain ------------------------ approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common Stock pursuant to this option shall relieve the Corporation of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Corporation shall use its best efforts to obtain all such approvals. 14. No Employment/Service Contract. Nothing in this Agreement or in the ------------------------------ Plan shall confer upon Optionee any right to continue in the Service of the Corporation (or any parent or subsidiary employing or retaining Optionee) for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any such parent or subsidiary) or of Optionee, which rights are hereby expressly reserved by each party, to terminate Optionee's Service at any time for any reason whatsoever, with or without cause. 15. Notices. Any notice required to be given or delivered to the ------- Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation in care of the Corporate Secretary at the Corporation's principal offices at 9350 Trade Place, San Diego, California 92126. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated on the Grant Notice. All notices shall be deemed to have been given or delivered upon personal delivery or upon deposit in the U.S. mail, by registered or certified mail, postage prepaid and properly addressed to the party to be notified. 16. Construction. This Agreement and the option evidenced hereby are made ------------ and granted pursuant to the Plan and are in all respects limited by and subject to the express terms and provisions of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this option. 17. Additional Terms Applicable to an Incentive Stock Option. In the -------------------------------------------------------- event this option is designated an incentive stock option in the Grant Notice, the following terms and conditions shall also apply to the grant: a. This option shall cease to qualify for favorable tax treatment as an incentive stock option under the Federal tax laws if (and to the extent) this option is exercised for one or more 7 Option Shares more than three (3) months after the date Optionee ceases to be an Employee for any reason other than death. b. If this option is to become exercisable in a series of installments as indicated in the Grant Notice, no such installment shall qualify for favorable tax treatment as an incentive stock option under the Federal tax laws if (and to the extent) the aggregate Fair Market Value (determined at the Grant Date) of the shares of the Corporation's Common Stock for which such installment first becomes exercisable hereunder will, when added to the aggregate value (determined as of the respective date or dates of grant) of the Common Stock or other securities for which this option or one or more other incentive stock options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Corporation or any parent or subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should the number of shares of Common Stock for which this option first becomes exercisable in any calendar year exceed the applicable One Hundred Thousand Dollar ($100,000) limitation, the option may nevertheless be exercised for those excess shares in such calendar year as a non-statutory option. c. Should the exercisability of this option be accelerated upon a Corporate Transaction in accordance with Paragraph 6, then this option shall qualify for favorable tax treatment as an incentive stock option under the Federal tax laws only to the extent the aggregate Fair Market Value (determined at the Grant Date) of the number of shares of the Corporation's Common Stock for which this option first becomes exercisable in the calendar year in which the Corporate Transaction occurs does not, when added to the aggregate value (determined as of the respective date or dates of grant) of the shares of Common Stock or other securities for which this option or one or more other incentive stock options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Corporation or any parent or subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should the number of shares of Common Stock for which this option first becomes exercisable in the calendar year of such Corporate Transaction exceed the applicable One Hundred Thousand Dollar ($100,000) limitation, the option may nevertheless be exercised for the excess shares in such calendar year as a non-statutory option. d. Should Optionee hold, in addition to this option, one or more other options to purchase shares of the Corporation's Common Stock which become exercisable for the first time in the same calendar year as this option, then the foregoing limitations on the exercisability of such options as incentive stock options under the Federal tax laws shall be applied on the basis of the order in which such options are granted. 18. Excess Shares. If the Option Shares covered by this Agreement exceed, ------------- as of the Grant Date, the number of shares of Common Stock which may without shareholder approval be issued under the Plan, then this option shall be void with respect to those excess shares, unless shareholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan. 8 EXHIBIT I NOTICE OF EXERCISE OF STOCK OPTION I hereby notify Microelectronic Packaging, Inc. (the "Corporation") that I elect to purchase ____________________ shares of the Corporation's Common Stock (the "Purchased Shares") at the option exercise price of $_____ per share (the "Exercise Price") pursuant to that certain option (the "Option") granted to me under the Corporation's 1993 Stock Option/Stock Issuance Plan on ____________________, 199__ to purchase up to ___________ shares of the Corporation's Common Stock. Concurrently with the delivery of this Exercise Notice to the Corporate Secretary of the Corporation, I shall hereby pay to the Corporation the Exercise Price for the Purchased Shares in accordance with the provisions of my agreement with the Corporation evidencing the Option and shall deliver whatever additional documents may be required by such agreement as a condition for exercise. Alternatively, I may utilize the special broker-dealer sale and remittance procedure specified in my agreement to effect the payment of the Exercise Price for the Purchased Shares. ________________, 199__ Date _____________________________________ Optionee Address: ____________________________ ____________________________ Print name in exact manner it is to appear on the stock certificate: ___________________________________ Address to which certificate is to be sent, if different from address above: ___________________________________ Social Security Number: ___________________________________ 9 -----END PRIVACY-ENHANCED MESSAGE-----