MIPS TECHNOLOGIES, INC.
DIRECTORS' STOCK OPTION PLAN
(effective as of July 6, 1998)
1. Purposes of the Plan. The purposes of this Directors' Stock Option Plan
are to attract and retain the best available personnel for service as Directors
of the Company, to provide additional incentive to the Outside Directors of the
Company to serve as Directors, and to encourage their continued service on the
Board.
All options granted hereunder shall be non-statutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Annual Meeting" means the Company's regularly scheduled annual
meeting of stockholders, as provided for in the Company's bylaws.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Common Stock" means the Common Stock of the Company.
(e) "Company" means MIPS Technologies, Inc., a Delaware corporation.
(f) "Continuous Status as a Director" means the absence of any
interruption or termination of service as a Director.
(g) "Director" means a member of the Board.
(h) "Employee" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a Director's fee by the Company shall not be sufficient in and
of itself to constitute "employment" by the Company.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the
National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("Nasdaq") System, the Fair Market
Value of a Share of Common Stock shall be the closing sales price for
such stock or the closing bid,
if no sales were reported, as quoted on such system or exchange (or
the exchange with the greatest volume of trading in Common Stock) on
the day of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but not
on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, the
Fair Market Value of a Share of Common Stock shall be the mean between
the high and low asked prices for the Common Stock on the day of
determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable, or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith
by the Board.
(k) "Option" means a stock option granted pursuant to the Plan.
(l) "Optioned Stock" means the Common Stock subject to an Option.
(m) "Optionee" means an Outside Director who receives an Option.
(n) "Outside Director" means a Director who is not an Employee.
(o) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this Directors' Stock Option Plan.
(q) "Service Provider" means an Employee, Director or consultant of
the Company.
(r) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(s) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 600,000 Shares plus an annual increase to be added each year
on July 1 beginning on July 1, 1999 in an amount equal to the lesser of (i)
100,000 shares, (ii) the number of shares subject to option grants in the prior
year ending June 30 or (iii) a lesser number determined by the Board (the
"Pool") of Common Stock. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.
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4. Administration of and Grants of Options under the Plan.
(a) Administrator. Except as otherwise required herein, the Plan shall
be administered by the Board, or by a compensation committee (the
"Committee") appointed by the Board.
(b) Procedure for Grants. All grants of Options hereunder shall be
automatic and non-discretionary and shall be made strictly in accordance
with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of
Shares to be covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an
Option to purchase 40,000 Shares (which number shall be subject to
adjustment in the manner set forth in Section 10 hereof upon the
occurrence of any event described therein) upon the date on which such
person first becomes a Director (an "Initial Grant"), whether through
election by the stockholders of the Company or by appointment by the
Board to fill a vacancy.
(iii) On the date of each Annual Meeting during the term of this
Plan, each Outside Director who has served as a Director for at least
the previous six (6) months shall automatically receive an Option to
purchase 10,000 Shares, which number shall be subject to adjustment in
the manner set forth in Section 10 hereof upon the occurrence of any
event described therein (a "Renewal Grant").
(iv) The terms of each Option granted hereunder shall be as
follows:
(A) the term of the Option shall be ten (10) years.
(B) the Option shall be exercisable only while the Outside
Director remains a Service Provider, except as set forth in
Section 8 hereof.
(C) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Option.
(D) the Initial Grant will vest and become exercisable as
follows:
24% of the Shares subject to the Option shall vest twelve
months after the Option's grant date, and 2% of the Shares
subject to the Option shall vest each month thereafter, subject
to the Outside Director continuing to be a Service Provider on
such dates.
(E) The Renewal Grants will vest and become exercisable as
to 2% of the Shares subject to such Option each month beginning
with the first month after the grant date, subject to the Outside
Director continuing to be a Service Provider on such dates.
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(v) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the
number of Shares previously purchased upon exercise of Options to
exceed the Pool, then each such automatic grant shall be for that
number of Shares determined by dividing the total number of Shares
remaining available for grant by the number of Outside Directors on
the automatic grant date. No further grants shall be made until such
time, if any, as additional Shares become available for grant under
the Plan through action of the stockholders to increase the number of
Shares which may be issued under the Plan or through cancellation or
expiration of Options previously granted hereunder.
(c) Powers of the Board. Subject to the provisions and restrictions of
the Plan, the Board or the Committee shall have the authority, in its
discretion: (i) to determine, upon review of relevant information and in
accordance with Section 2(j) of the Plan, the Fair Market Value of the
Common Stock; (ii) to interpret the Plan; (iii) to prescribe, amend and
rescind rules and regulations relating to the Plan; (iv) to authorize any
person to execute on behalf of the Company any instrument required to
effectuate the grant of an Option previously granted hereunder; and (v) to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
(d) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board or the Committee shall be final.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) hereof. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer on any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the stockholders of the Company
as described in Section 16 of the Plan. It shall continue in effect for a term
of ten (10) years unless sooner terminated under Section 12 of the Plan.
7. Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for Optioned Stock
shall be 100% of the Fair Market Value per Share on the date of grant of
the Option.
(b) Form of 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 Board and may consist entirely of: (i) cash,
(ii) check, (iii) promissory note, (iv) other shares which (x) in the case
of Shares acquired upon exercise of an Option either have been owned by the
Optionee for more than six (6) months on the date of surrender, or were not
acquired directly or indirectly from the Company, and (y) have a Fair
Market Value on the date of surrender equal to the
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aggregate exercise price of the Shares as to which said Option shall be
exercised, (v) authorization from the Company to retain from the total
number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise
price for the total number of Shares as to which the Option is exercised,
(vi) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price, (vii)
by delivering an irrevocable subscription agreement for the Shares which
irrevocably obligates the Optionee to take and pay for the Shares not more
than twelve (12) months after the date of delivery of the subscription
agreement, (viii) any combination of the foregoing methods of payment, or
(ix) such other consideration and method of payment for the issuance of
Shares to the extent permitted by applicable law.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4(b) hereof; provided, however, that no Options shall be
exercisable until stockholder approval of the Plan in accordance with
Section 16 hereof has been obtained.
An Option may not be exercised for a fraction of a share.
An Option shall be deemed to be 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 full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7(b) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be issued
to the Optionee as soon as practicable after 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 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which 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.
(b) Rule 16b-3. Options granted to Outside Directors must comply with
the applicable provisions of Rule 16b-3 promulgated under the Exchange Act
or any successor thereto and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum
exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
(c) Termination of Status as a Service Provider. If an Outside
Director ceases to be a Service Provider, he or she may, but only within
three (3) months after the date he or she ceases
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to be a Service Provider, exercise an Option to the extent that he or she
was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may the Option be exercised
after its five (5) year term has expired. To the extent that the Optionee
was not entitled to exercise an Option at the date of such termination, or
if the Optionee does not exercise such Option (which he or she was entitled
to exercise) within the time specified herein, the Option shall terminate.
(d) Disability of Optionee. Notwithstanding the provisions of Section
8(c) above, in the event an Optionee is unable to continue as a Service
Provider as a result of the Optionee's total and permanent disability (as
defined in Section 22(e)(3) of the Code), he or she may, but only within
six (6) months from the date of termination, exercise an Option to the
extent that he or she was entitled to exercise it at the date of such
termination. Notwithstanding the foregoing, in no event may the Option be
exercised after its five (5) year term has expired. To the extent that the
Optionee was not entitled to exercise the Option at the date of
termination, or if the Optionee does not exercise such Option (which he or
she was entitled to exercise) within the time specified herein, the Option
shall terminate.
(e) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised, at any time within six (6) months following the
date of death, by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued at the date of death.
Notwithstanding the foregoing, in no event may the Option be exercised
after its five (5) year term has expired.
9. Non-Transferability of Options . The Option 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 and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Liquidation or Merger.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of Shares covered by each
outstanding Option, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding
Option or Right, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares of resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued
Shares 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 Board, 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 subject to an Option.
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(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, all outstanding Options will
terminate immediately prior to the consummation of such proposed action,
unless otherwise provided by the Board. The Board may, in the exercise of
its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right
to exercise his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options
may be substituted by the successor corporation or a Parent or Subsidiary
thereof (the "Successor Corporation"). If an Option is assumed or
substituted for, the Option or equivalent option shall continue to be
exercisable as provided in Section 4 hereof for so long as the Optionee is
a Service Provider of the Company or of the Successor Corporation.
Following such assumption or substitution, if the Optionee's status as a
Service Provider of the Company or of the Successor Corporation, as
applicable, is terminated other than upon a voluntary resignation by the
Optionee, the Option or option shall become fully exercisable, including as
to Shares for which it would not otherwise be exercisable. Thereafter, the
Option or option shall remain exercisable in accordance with Sections 8(c)
through (e) above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension,
or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without
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his or her consent. In addition, to the extent necessary and desirable to
comply with any applicable law or regulation, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a
degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option or Right
shall, for all purposes, be the date determined in accordance with Section 4(b)
hereof. Notice of the determination shall be given to each Outside Director to
whom an Option is so granted within a reasonable time after the date of such
grant.
13. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
state securities laws, and the requirements of any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option 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 any of the
aforementioned relevant provisions of law.
14. 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.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company at or prior to the first annual
meeting of stockholders subsequent to the granting of an Option hereunder. Such
stockholder approval shall be obtained in the manner and to the degree required
under applicable state and federal law.
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