ESS TECHNOLOGY, INC.
1997 EQUITY INCENTIVE PLAN
(AMENDED AND RESTATED AS OF APRIL 26, 2003)
1. PURPOSES OF THE PLAN. The purposes of this ESS Technology,
Inc. Equity Incentive Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to Employees and Consultants and to promote the success of the
Company's business. Options granted under the Plan may be Incentive Stock
Options or Nonstatutory Stock Options, as determined by the Administrator at the
time of grant of an option and subject to the applicable provisions of Section
422 of the Code and the regulations promulgated thereunder.
2. DEFINITIONS. As used herein, the following definitions shall
(a) "ADMINISTRATOR" means the Board or its Committee
appointed pursuant to Section 4 of the Plan.
(b) "AFFILIATE" means an entity other than a Subsidiary
(as defined below) which, together with the Company, is under common control of
a third person or entity.
(c) "APPLICABLE LAWS" means the legal requirements
relating to the administration of stock option and restricted stock purchase
plans under applicable U.S. state corporate laws, U.S. federal and applicable
state securities laws, the Code, any Stock Exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options are granted
under the Plan, as such laws, rules, regulations and requirements shall be in
place from time to time.
(d) "BOARD" means the Board of Directors of the Company.
(e) "CAUSE" for termination of a Participant's Continuous
Service Status will exist (unless otherwise defined in an applicable employment
agreement) if the Participant is terminated for any of the following reasons:
(i) Participant's willful failure substantially to perform his or her duties and
responsibilities to the Company or deliberate violation of a Company policy;
(ii) Participant's commission of any act of fraud, embezzlement, dishonesty or
any other willful misconduct that has caused or is reasonably expected to result
in material injury to the Company; (iii) unauthorized use or disclosure by
Participant of any proprietary information or trade secrets of the Company or
any other party to whom the Participant owes an obligation of nondisclosure as a
result of his or her relationship with the Company; or (iv) Participant's
willful breach of any of his or her obligations under any written agreement or
covenant with the Company. The determination as to whether a Participant is
being terminated for Cause shall be made in good faith by the Company and shall
be final and binding on the Participant. The foregoing definition does not in
any way limit the Company's ability to terminate a Participant's employment or
consulting relationship at any time as provided in Section 5(d) below, and the
term "Company" will be interpreted to include any Subsidiary, Parent, Affiliate
or successor thereto, if appropriate.
(f) "CHANGE OF CONTROL" means a sale of all or
substantially all of the Company's assets, or any merger or consolidation of the
Company with or into another corporation other than a merger or consolidation in
which the holders of more than 50% of the shares of capital stock of the Company
outstanding immediately prior to such transaction continue to hold (either by
the voting securities remaining outstanding or by their being converted into
voting securities of the surviving entity) more than 50% of the total voting
power represented by the voting securities of the Company, or such surviving
entity, outstanding immediately after such transaction.
(g) "CODE" means the Internal Revenue Code of 1986, as
(h) "COMMITTEE" means one or more committees or
subcommittees of the Board appointed by the Board to administer the Plan in
accordance with Section 4 below.
(i) "COMMON STOCK" means the Common Stock of the Company.
(j) "COMPANY" means ESS Technology, Inc., a California
(k) "CONSULTANT" means any person, including an advisor,
who is engaged by the Company or any Parent, Subsidiary or Affiliate to render
services and is compensated for such services, and any director of the Company
whether compensated for such services or not.
(l) "CONTINUOUS SERVICE STATUS" means the absence of any
interruption or termination of service as an Employee or Consultant. Continuous
Service Status as an Employee or Consultant shall not be considered interrupted
in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of
absence approved by the Administrator, provided that such leave is for a period
of not more than ninety (90) days, unless reemployment upon the expiration of
such leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (iv) in the case of
transfers between locations of the Company or between the Company, its Parents,
Subsidiaries, Affiliates or their respective successors. A change in status from
an Employee to a Consultant or from a Consultant to an Employee will not
constitute an interruption of Continuous Service Status.
(m) "CORPORATE TRANSACTION" means a sale of all or
substantially all of the Company's assets, or a merger, consolidation or other
capital reorganization of the Company with or into another corporation and
includes a Change of Control.
(n) "DIRECTOR" means a member of the Board.
(o) "EMPLOYEE" means any person employed by the Company
or any Parent, Subsidiary or Affiliate, with the status of employment determined
based upon such factors as are deemed appropriate by the Administrator in its
discretion, subject to any requirements of the Code or the Applicable Laws. The
payment by the Company of a director's fee to a Director shall not be sufficient
to constitute "employment" of such Director by the Company.
(p) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(q) "FAIR MARKET VALUE" means, as of any date, the fair
market value of the Common Stock, as determined by the Administrator in good
faith on such basis as it deems appropriate and applied consistently with
respect to Participants. Whenever possible, the determination of Fair Market
Value shall be based upon the closing price for the Shares as reported in the
Wall Street Journal for the applicable date.
(r) "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code, as designated in the applicable Option Agreement.
(s) "INVOLUNTARY TERMINATION" means termination of a
Participant's Continuous Service Status under the following circumstances: (i)
termination without Cause by the Company or a Subsidiary, Parent, Affiliate or
successor thereto, as appropriate; or (ii) voluntary termination by the
Participant within 90 days following (A) a material reduction in the
Participant's job responsibilities, provided that neither a mere change in title
alone nor reassignment following a Change of Control to a position that is
substantially similar to the position held prior to the Change of Control shall
constitute a material reduction in job responsibilities; (B) relocation by the
Company or a Subsidiary, Parent, Affiliate or successor thereto, as appropriate,
of the Participant's work site to a facility or location more than 50 miles from
the Participant's principal work site for the Company at the time of the Change
of Control; or (C) a reduction in Participant's then-current base salary,
provided that an across-the-board reduction in the salary level of all other
employees or consultants in positions similar to the Participant's by the same
percentage amount as part of a general salary level reduction shall not
constitute such a salary reduction.
(t) "LISTED SECURITY" means any security of the Company
that is listed or approved for listing on a national securities exchange or
designated or approved for designation as a national market system security on
an interdealer quotation system by the National Association of Securities
(u) "NAMED EXECUTIVE" means any individual who, on the
last day of the Company's fiscal year, is the chief executive officer of the
Company (or is acting in such capacity) or among the four most highly
compensated officers of the Company (other than the chief executive officer).
Such officer status shall be determined pursuant to the executive compensation
disclosure rules under the Exchange Act.
(v) "NONSTATUTORY STOCK OPTION" means an Option not
intended to qualify as an Incentive Stock Option, as designated in the
applicable Option Agreement.
(w) "OPTION" means a stock option granted pursuant to the
(x) "OPTION AGREEMENT" means a written document, the
form(s) of which shall be approved from time to time by the Administrator,
reflecting the terms of an Option granted under the Plan and includes any
documents attached to or incorporated into such Option
Agreement, including, but not limited to, a notice of stock option grant and a
form of exercise notice.
(y) "OPTION EXCHANGE PROGRAM" means a program approved by
the Administrator whereby outstanding Options are exchanged for Options with a
lower exercise price or are amended to decrease the exercise price as a result
of a decline in the Fair Market Value of the Common Stock.
(z) "OPTIONED STOCK" means the Common Stock subject to an
(aa) "OPTIONEE" means an Employee or Consultant who
receives an Option.
(bb) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code, or any successor
(cc) "PARTICIPANT" means any holder of one or more
Options, or the Shares issuable or issued upon exercise of such Options, under
(dd) "PLAN" means this 1997 Equity Incentive Plan.
(ee) "REPORTING PERSON" means an officer, Director, or
greater than ten percent shareholder of the Company within the meaning of Rule
16a-2 under the Exchange Act, who is required to file reports pursuant to Rule
16a-3 under the Exchange Act.
(ff) "RULE 16b-3" means Rule 16b-3 promulgated under the
Exchange Act, as amended from time to time, or any successor provision.
(gg) "SHARE" means a share of the Common Stock, as
adjusted in accordance with Section 14 of the Plan.
(hh) "STOCK EXCHANGE" means any stock exchange or
consolidated stock price reporting system on which prices for the Common Stock
are quoted at any given time.
(ii) "SUBSIDIARY" means a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Code, or
any successor provision.
(jj) "TEN PERCENT HOLDER" means a person who owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of Shares that may be sold
under the Plan is 13,000,000 Shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock. If an award should expire
or become unexercisable for any reason without having been exercised in full, or
is surrendered pursuant to an Option Exchange Program, the unpurchased Shares
that were subject thereto shall, unless the Plan shall have been terminated,
become available for future grant under the Plan. In addition, any Shares of
Common Stock which are retained by the
Company upon exercise of an award in order to satisfy the exercise or purchase
price for such award or any withholding taxes due with respect to such exercise
or purchase shall be treated as not issued and shall continue to be available
under the Plan. Shares issued under the Plan and later repurchased by the
Company pursuant to any repurchase right which the Company may have shall not be
available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) GENERAL. The Plan shall be administered by the Board
or a Committee, or a combination thereof, as determined by the Board. The Plan
may be administered by different administrative bodies with respect to different
classes of Participants and, if permitted by the Applicable Laws, the Board may
authorize one or more officers to make awards under the Plan.
(b) COMMITTEE COMPOSITION. If a Committee has been
appointed pursuant to this Section 4, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of any Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies (however caused) and remove all members of
a Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws and, in the case of a Committee administering
the Plan in accordance with the requirements of Rule 16b-3 or Section 162(m) of
the Code, to the extent permitted or required by such provisions.
(c) POWERS OF THE ADMINISTRATOR. Subject to the
provisions of the Plan and in the case of a Committee, the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(q) of the Plan, provided that such
determination shall be applied consistently with respect to Participants under
(ii) to select the Employees and Consultants to
whom Options may from time to time be granted;
(iii) to determine whether and to what extent
Options are granted;
(iv) to determine the number of Shares of Common
Stock to be covered by each award granted;
(v) to approve the form(s) of agreement(s) used
under the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder, which
terms and conditions include but are not limited to the exercise or purchase
price, the time or times when awards may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option, Optioned
Stock or restricted
stock issued upon exercise of an Option, based in each case on such factors as
the Administrator, in its sole discretion, shall determine;
(vii) to determine whether and under what
circumstances an Option may be settled in cash under Section 10(c) instead of
(viii) to implement an Option Exchange Program on
such terms and conditions as the Administrator in its discretion deems
appropriate, provided that no amendment or adjustment to an Option that would
materially and adversely affect the rights of any Optionee shall be made without
the prior written consent of the Optionee;
(ix) to adjust the vesting of an Option held by
an Employee or Consultant as a result of a change in the terms or conditions
under which such person is providing services to the Company;
(x) to construe and interpret the terms of the
Plan and awards granted under the Plan, which constructions, interpretations and
decisions shall be final and binding on all Participants; and
(xi) in order to fulfill the purposes of the Plan
and without amending the Plan, to modify grants of Options to Participants who
are foreign nationals or employed outside of the United States in order to
recognize differences in local law, tax policies or customs.
(a) RECIPIENTS OF GRANTS. Nonstatutory Stock Options may
be granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees, provided that Employees of Affiliates shall not be eligible
to receive Incentive Stock Options.
(b) TYPE OF OPTION. Each Option shall be designated in
the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock
(c) ISO $100,000 LIMITATION. Notwithstanding any
designation under Section 5(b), to the extent that the aggregate Fair Market
Value of Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
For purposes of this Section 5(c), Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares subject to an Incentive Stock Option shall be determined as of the
date of the grant of such Option.
(d) NO EMPLOYMENT RIGHTS. The Plan shall not confer upon
any Participant any right with respect to continuation of an employment or
consulting relationship with the Company, nor shall it interfere in any way with
such Participant's right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without Cause.
6. TERM OF PLAN. The Plan shall become effective upon its
adoption by the Board of Directors. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 15 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term
stated in the Option Agreement; provided that the term shall be no more than ten
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement and provided further that, in the case of an Incentive
Stock Option granted to a person who at the time of such grant is a Ten Percent
Holder, the term of the Option shall be five years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
8. LIMITATION ON GRANTS. Subject to adjustment as provided in
Section 13 below, the maximum number of Shares that may be subject to Options
granted to any one individual under this Plan for any fiscal year of the Company
shall be 500,000; provided, however, that up to 1,000,000 shares subject to
options may be granted to an individual in the calendar year in which the
individual commences his or her employment with the Company, a Parent, a
Subsidiary or an Affiliate.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be such price as is
determined by the Administrator and set forth in the Option Agreement, but shall
be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who at the
time of grant is a Ten Percent Holder, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant; or
(B) granted to any other Employee, the
per Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option,
the per share Exercise Price shall be such price as determined by the
Administrator provided that if such eligible person is, at the time of the grant
of such Option, a Named Executive of the Company, the per share Exercise Price
shall be no less than 100% of the Fair Market Value on the date of grant if such
Option is intended to qualify as performance-based compensation under Section
162(m) of the Code.
(iii) Notwithstanding the foregoing, Options may
be granted with a per Share exercise price other than as required above pursuant
to a merger or other corporate transaction.
(b) PERMISSIBLE CONSIDERATION. The consideration to be
paid for the Shares to be issued upon exercise of an Option, including the
method of payment, shall be determined by the Administrator (and, in the case of
an Incentive Stock Option, shall be determined at the
time of grant) and may consist entirely of (1) cash; (2) check; (3) delivery of
Optionee's promissory note with such recourse, interest, security and redemption
provisions as the Administrator determines to be appropriate; (4) cancellation
of indebtedness; (5) other Shares that have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which the
Option is exercised, provided that in the case of Shares acquired, directly or
indirectly, from the Company, such Shares must have been owned by the Optionee
for more than six months on the date of surrender (or such other period as may
be required to avoid the Company's incurring an adverse accounting charge); (6)
delivery of a properly executed exercise notice together with such other
documentation as the Administrator and a securities broker approved by the
Company shall require to effect exercise of the Option and prompt delivery to
the Company of the sale or loan proceeds required to pay the exercise price and
any applicable withholding taxes; or (7) any combination of the foregoing
methods of payment. In making its determination as to the type of consideration
to accept, the Administrator shall consider if acceptance of such consideration
may be reasonably expected to benefit the Company and the Administrator may, in
its sole discretion, refuse to accept a particular form of consideration at the
time of any Option exercise.
10. EXERCISE OF OPTION.
(i) EXERCISABILITY. Any Option granted hereunder
shall be exercisable at such times and under such conditions as determined by
the Administrator, consistent with the term of the Plan and reflected in the
Option Agreement, including vesting requirements and/or performance criteria
with respect to the Company and/or the Optionee. The Administrator shall have
the discretion to determine whether and to what extent the vesting of Options
shall be tolled during any unpaid leave of absence; provided, however, that in
the absence of such determination, vesting of Options shall be tolled during any
(ii) MINIMUM EXERCISE REQUIREMENTS. An Option may
not be exercised for a fraction of a Share. The Administrator may require that
an Option be exercised as to a minimum number of Shares, provided that such
requirement shall not prevent an Optionee from exercising the full number of
Shares as to which the Option is then exercisable.
(iii) PROCEDURES FOR AND RESULTS OF EXERCISE. An
Option shall be deemed exercised when written notice of such exercise has been
given to the Company in accordance with the terms of the Option by the person
entitled to exercise the Option and the Company has received full payment for
the Shares with respect to which the Option is exercised. Full payment may, as
authorized by the Administrator, consist of any consideration and method of
payment allowable under Section 9(b) of the Plan, provided that the
Administrator may, in its sole discretion, refuse to accept any form of
consideration at the time of any Option exercise.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares that thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(iv) RIGHTS AS SHAREHOLDER. Until the issuance of
the Shares (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 14 of the
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP.
Except as otherwise set forth in this Section 10(b), the Administrator shall
establish and set forth in the applicable Option Agreement the terms and
conditions upon which an Option shall remain exercisable, if at all, following
termination of an Optionee's Continuous Service Status, which provisions may be
waived or modified by the Administrator at any time. To the extent that the
Optionee is not entitled to exercise an Option at the date of his or her
termination of Continuous Service Status, or if the Optionee (or other person
entitled to exercise the Option) does not exercise the Option to the extent so
entitled within the time specified in the Option Agreement or below (as
applicable), the Option shall terminate and the Optioned Stock underlying the
unexercised portion of the Option shall revert to the Plan. In no event may any
Option be exercised after the expiration of the Option term as set forth in the
Option Agreement (and subject to Section 7).
The following provisions (1) shall apply to the extent an
Option Agreement does not specify the terms and conditions upon which an Option
shall terminate upon termination of an Optionee's Continuous Service Status, and
(2) establish the minimum post-termination exercise periods that may be set
forth in an Option Agreement:
(i) TERMINATION OTHER THAN UPON DISABILITY OR
DEATH OR FOR CAUSE. In the event of termination of an Optionee's Continuous
Service Status, such Optionee may exercise an Option for 30 days following such
termination to the extent the Optionee was entitled to exercise it at the date
of such termination. No termination shall be deemed to occur and this Section
10(b)(i) shall not apply if (i) the Optionee is a Consultant who becomes an
Employee, or (ii) the Optionee is an Employee who becomes a Consultant.
(ii) DISABILITY OF OPTIONEE. In the event of
termination of an Optionee's Continuous Service Status as a result of his or her
disability (including a disability within the meaning of Section 22(e)(3) of the
Code), such Optionee may exercise an Option at any time within six months
following such termination to the extent the Optionee was entitled to exercise
it at the date of such termination.
(iii) DEATH OF OPTIONEE. In the event of the death
of an Optionee during the period of Continuous Service Status since the date of
grant of the Option, or within thirty days following termination of Optionee's
Continuous Service Status, the Option may be exercised by Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance at any time within twelve months following the date of death, but
only to the extent of the right to exercise that had accrued at the date of
death or, if earlier, the date the Optionee's Continuous Service Status
(iv) TERMINATION FOR CAUSE. In the event of
termination of an Optionee's Continuous Service Status for Cause, any Option
(including any exercisable portion thereof) held by such Optionee shall
immediately terminate in its entirety upon first notification to the Optionee of
termination of the Optionee's Continuous Service Status. If an Optionee's
employment or consulting relationship with the Company is suspended pending an
investigation of whether the Optionee shall be terminated for Cause, all the
Optionee's rights under any Option likewise shall be suspended during the
investigation period and the Optionee shall have no right to exercise any
(c) BUYOUT PROVISIONS. The Administrator may at any time
offer to buy out for a payment in cash or Shares an Option previously granted
under the Plan based on such terms and conditions as the Administrator shall
establish and communicate to the Optionee at the time that such offer is made.
(a) As a condition of the exercise of an Option granted
under the Plan, the Participant (or in the case of the Participant's death, the
person exercising the Option) shall make such arrangements as the Administrator
may require for the satisfaction of any applicable federal, state, local or
foreign withholding tax obligations that may arise in connection with the
exercise of the Option and the issuance of Shares. The Company shall not be
required to issue any Shares under the Plan until such obligations are
satisfied. If the Administrator allows the withholding or surrender of Shares to
satisfy a Participant's tax withholding obligations under this Section 11
(whether pursuant to Section 11(c), (d) or (e), or otherwise), the Administrator
shall not allow Shares to be withheld in an amount that exceeds the minimum
statutory withholding rates for federal and state tax purposes, including
(b) In the case of an Employee and in the absence of any
other arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to satisfy
such tax obligations from the next payroll payment otherwise payable after the
date of an exercise of the Option.
(c) This Section 11(c) shall apply only after the date,
if any, upon which the Common Stock becomes a Listed Security. In the case of
Participant other than an Employee (or in the case of an Employee where the next
payroll payment is not sufficient to satisfy such tax obligations, with respect
to any remaining tax obligations), in the absence of any other arrangement and
to the extent permitted under the Applicable Laws, the Participant shall be
deemed to have elected to have the Company withhold from the Shares to be issued
upon exercise of the Option that number of Shares having a Fair Market Value
determined as of the applicable Tax Date (as defined below) equal to the amount
required to be withheld. For purposes of this Section 11, the Fair Market Value
of the Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined under the Applicable Laws (the "Tax
(d) If permitted by the Administrator, in its discretion,
a Participant may satisfy his or her tax withholding obligations upon exercise
of an Option by surrendering to the
Company Shares that have a Fair Market Value determined as of the applicable Tax
Date equal to the amount required to be withheld. In the case of shares
previously acquired from the Company that are surrendered under this Section
11(d), such Shares must have been owned by the Participant for more than six (6)
months on the date of surrender (or such other period of time as is required for
the Company to avoid adverse accounting charges).
(e) Any election or deemed election by a Participant to
have Shares withheld to satisfy tax withholding obligations under Section 11(c)
or (d) above shall be irrevocable as to the particular Shares as to which the
election is made and shall be subject to the consent or disapproval of the
Administrator. Any election by a Participant under Section 11(d) above must be
made on or prior to the applicable Tax Date.
(f) In the event an election to have Shares withheld is
made by a Participant and the Tax Date is deferred under Section 83 of the Code
because no election is filed under Section 83(b) of the Code, the Participant
shall receive the full number of Shares with respect to which the Option is
exercised but such Participant shall be unconditionally obligated to tender back
to the Company the proper number of Shares on the Tax Date.
12. NON-TRANSFERABILITY OF OPTIONS.
(a) GENERAL. Except as set forth in this Section 12,
Options may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent or
distribution. The designation of a beneficiary by an Optionee will not
constitute a transfer. An Option may be exercised, during the lifetime of the
holder of an Option, only by such holder or a transferee permitted by this
(b) LIMITED TRANSFERABILITY RIGHTS. The Administrator may
in its discretion grant transferable Nonstatutory Stock Options pursuant to
Option Agreements specifying the manner in which such Nonstatutory Stock Options
are transferable. "Immediate Family" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN
(a) CHANGES IN CAPITALIZATION. Subject to any required
action by the shareholders of the Company, the number of Shares of Common Stock
covered by each outstanding Option, the numbers of Shares set forth in Sections
3 and 8 above, and the number of Shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per Share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination, recapitalization or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued Shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares of Common Stock subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such action, unless otherwise
determined by the Administrator.
(c) CORPORATE TRANSACTION. In the event of a Corporate
Transaction, each outstanding Option shall be assumed or an equivalent option or
right shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation (the "Successor Corporation"), unless
the Successor Corporation does not agree to assume the award or to substitute an
equivalent option or right, in which case such Option shall terminate upon the
consummation of the transaction.
Notwithstanding the above, in the event of a Change of Control
in which outstanding awards are not being assumed, substituted or terminated in
connection with the transaction, the vesting and exercisability of each
outstanding Option may, in the Administrator's sole discretion, accelerate such
that the Options shall become vested and exercisable to the extent of up to 100%
of the Shares then unvested, in each case effective as of immediately prior to
consummation of the transaction. To the extent that an Option is not exercised
prior to consummation of a Corporate Transaction in which the Option is not
being assumed or substituted, such Option shall terminate upon such consummation
and the Administrator shall notify the Optionee or holder of such fact at least
five (5) days prior to the date on which the Option terminates.
For purposes of this Section 13(c), an Option shall be
considered assumed, without limitation, if, at the time of issuance of the stock
or other consideration upon a Corporate Transaction or a Change of Control, as
the case may be, each holder of an Option would be entitled to receive upon
exercise of the award the same number and kind of shares of stock or the same
amount of property, cash or securities as such holder would have been entitled
to receive upon the occurrence of the transaction if the holder had been,
immediately prior to such transaction, the holder of the number of Shares of
Common Stock covered by the award at such time (after giving effect to any
adjustments in the number of Shares covered by the Option as provided for in
this Section 13); provided that if such consideration received in the
transaction is not solely common stock of the Successor Corporation, the
Administrator may, with the consent of the Successor Corporation, provide for
the consideration to be received upon exercise of the award to be solely common
stock of the Successor Corporation equal to the Fair Market Value of the per
Share consideration received by holders of Common Stock in the transaction.
(d) CERTAIN DISTRIBUTIONS. In the event of any
distribution to the Company's shareholders of securities of any other entity or
other assets (other than dividends payable in cash
or stock of the Company) without receipt of consideration by the Company, the
Administrator may, in its discretion, appropriately adjust the price per Share
of Common Stock covered by each outstanding Option to reflect the effect of such
14. TIME OF GRANTING OPTIONS. The date of grant of an Option
shall, for all purposes, be the date on which the Administrator makes the
determination granting such Option, or such other date as is determined by the
Administrator, provided that in the case of any Incentive Stock Option, the
grant date shall be the later of the date on which the Administrator makes the
determination granting such Incentive Stock Option or the date of commencement
of the Optionee's employment relationship with the Company. Notice of the
determination shall be given to each Employee or Consultant to whom an Option is
so granted within a reasonable time after the date of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AUTHORITY TO AMEND OR TERMINATE. The Board may at any
time amend, alter, suspend or discontinue the Plan, but no amendment,
alteration, suspension or discontinuation (other than an adjustment pursuant to
Section 13 above) shall be made that would materially and adversely affect the
rights of any Optionee under any outstanding grant, without his or her consent.
In addition, to the extent necessary and desirable to comply with the Applicable
Laws, the Company shall obtain shareholder approval of any Plan amendment in
such a manner and to such a degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or
termination of the Plan shall materially and adversely affect Options already
granted, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee or
holder and the Company.
16. CONDITIONS UPON ISSUANCE OF SHARES. Notwithstanding any other
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the Applicable Laws, with such compliance determined
by the Company in consultation with its legal counsel. As a condition to the
exercise of an Option, the Company may require the person exercising the award
to represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by law.
17. RESERVATION OF SHARES. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
18. AGREEMENTS. Options shall be evidenced by Option Agreements in
such form(s) as the Administrator shall from time to time approve.
19. SHAREHOLDER APPROVAL. If required by the Applicable Laws,
continuance of the Plan shall be subject to approval by the shareholders of the
Company within twelve (12) months before or after the date the Plan is adopted.
Such shareholder approval shall be obtained in the manner and to the degree
required under the Applicable Laws.
20. INFORMATION AND DOCUMENTS TO OPTIONEES AND PURCHASERS. If
required by the Applicable Laws, the Company shall provide financial statements
at least annually to each Optionee and to each individual who acquired Shares
pursuant to the Plan, during the period such Optionee or purchaser has one or
more Options outstanding, and in the case of an individual who acquired Shares
pursuant to the Plan, during the period such individual owns such Shares. The
Company shall not be required to provide such information if the issuance of
Options under the Plan is limited to key employees whose duties in connection
with the Company assure their access to equivalent information.