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Exhibit 4.1
RESOUND CORPORATION
1988 STOCK OPTION PLAN
As amended through April 18, 1996
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock
Options or Nonstatutory Stock Options, at the discretion of the Board and as
reflected in the terms of the written option agreement.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" shall mean the Board or any of its
Committees appointed pursuant to Section 4 of the Plan.
(b) "Applicable Laws" shall have the meaning set forth in
Section 4(a) below.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "Committee" shall mean the Committee appointed by the
Board of Directors in accordance with paragraph (a) of Section 4 of the Plan, if
one is appointed.
(f) "Common Stock" shall mean the Common Stock of the Company.
(g) "Company" shall mean ReSound Corporation, a California
corporation.
(h) "Consultant" shall mean any person who is engaged by the
Company or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, and any director of the Company
whether compensated for such services or not; provided that if and in the event
the Company registers any class of any equity security pursuant to Section 12 of
the Exchange Act, the term Consultant shall thereafter not include directors who
are not compensated for their services or are paid only a director's fee by the
Company.
(i) "Continuous Status as an Employee or Consultant" shall
mean the absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Administrator; provided that such leave is for
a period of not more than 90 days or reemployment upon the expiration of such
leave is
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guaranteed by contract or statute. For purposes of this Plan, a change in status
from an Employee to a Consultant or from a Consultant to an Employee will not
constitute a termination of employment.
(j) "Employee" shall mean 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 to
constitute "employment" by the Company.
(k) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(l) "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, its Fair Market Value shall be the closing sales
price for such stock as quoted on such system on the date of determination (if
for a given day no sales were reported, the closing bid on that day shall be
used), as such price is reported in The Wall Street Journal or such other source
as the Administrator 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, its Fair
Market Value shall be the mean between the bid and asked prices for the Common
Stock 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 Administrator.
(m) "Incentive Stock Option" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(n) "Named Executive" shall mean 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 highest 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.
(o) "Nonstatutory Stock Option" shall mean an Option not
intended to qualify as an Incentive Stock Option.
(p) "Option" shall mean a stock option granted pursuant to the
Plan.
(q) "Optioned Stock" shall mean the Common Stock subject to an
Option.
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(r) "Optionee" shall mean an Employee or Consultant who
receives an Option.
(s) "Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(t) "Plan" shall mean this 1988 Stock Option Plan.
(u) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(v) "Subsidiary" shall mean 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 11 of the Plan, the maximum aggregate number of shares that may be
optioned and sold under the Plan is 5,850,000 shares 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 that were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. Notwithstanding any other provision of the Plan,
shares issued under the Plan and later repurchased by the Company shall not
become available for future grant or sale under the Plan.
4. Administration of the Plan.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted by
Rule 16b-3 promulgated under the Exchange Act or any successor rule thereto, as
in effect at the time that discretion is being exercised with respect to the
Plan ("Rule 16b-3"), and by the legal requirements relating to the
administration of incentive stock option plans, if any, of applicable securities
laws and the Code (collectively, the "Applicable Laws"), the Plan may (but need
not) be administered by different administrative bodies with respect to
directors, officers who are not directors and Employees who are neither
directors nor officers.
(ii) Administration with respect to Directors and
Officers. With respect to grants of Options to Employees or Consultants who are
also officers or directors of the Company, the Plan shall be administered by (A)
the Board, if the Board may administer the Plan in compliance with Rule 16b-3 as
it applies to a plan intended to qualify thereunder as a discretionary plan and
Section 162(m) of the Code as it applies so as to qualify grants of Options to
Named Executives as performance-based compensation, or (B) a Committee
designated by the Board to administer the Plan, which Committee shall be
constituted (I) in such a manner as to permit the Plan to comply with Rule 16b-3
as it applies to a plan intended to qualify thereunder as a discretionary plan,
(II) in such a manner as to qualify grants of Options to Named Executives as
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performance-based compensation under Section 162(m) of the Code and (III) in
such a manner as to satisfy the Applicable Laws.
(iii) Administration with respect to Other Persons.
With respect to grants of Options to Employees or Consultants who are neither
directors nor officers of the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws.
(iv) General. Once a Committee has been appointed
pursuant to subsection (ii) or (iii) of this Section 4(a), 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 appointed under subsection (ii), to the extent permitted by Rule 16b-3
as it applies to a plan intended to qualify thereunder as a discretionary plan,
and to the extent required under Section 162(m) of the Code to qualify grants of
Options to Named Executives as performance-based compensation.
(b) 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(l) of the Plan;
(ii) to select the officers, Consultants and
Employees to whom Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options
are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the share price and any restriction or
limitation, or any vesting acceleration or waiver of forfeiture restrictions
regarding any Option and/or the shares of Common Stock relating thereto, based
in each case on such factors as the Administrator shall determine, in its sole
discretion);
(vii) to determine whether, to what extent and under
what circumstances Common Stock and other amounts payable with respect to an
award under this Plan shall be
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deferred either automatically or at the election of the participant (including
providing for and determining the amount, if any, of any deemed earnings on any
deferred amount during any deferral period); and
(viii) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted only to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option may, if he
or she is otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Stock Options are exercisable for the first time by an
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.
(c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right
with respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her 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 the earlier
to occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 17 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 13 of the Plan.
7. Term of Option. The term of each Option shall be the term
stated in the Option Agreement; provided, however, that in the case of an
Incentive Stock Option, the term shall be no more than ten (10) years from the
date of grant thereof or such shorter term as may be provided in the Option
Agreement. However, in the case of an Option granted to an Optionee who, at the
time the Option is granted, owns stock representing more than ten percent (10%)
of the voting
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power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.
8. Limitation on Grants to Employees. Subject to adjustment as
provided in this Plan, the maximum number of shares which may be granted under
options to any employee under this Plan for any fiscal year of the Company shall
be 750,000.
9. Option Exercise Price and Consideration.
(a) 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, 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 the grant of such Incentive Stock Option, 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, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant;
(B) granted to any 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
(A) granted to a person who, at the time of
the grant of such Option, 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, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant;
(B) granted to a person who, at the time of
the grant of such Option, is 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;
(C) granted to any person other than a Named
Executive, the per Share exercise price shall be no less than 85% of the Fair
Market Value per Share on the date of grant.
(iii) In the case of an Option granted on or after
the effective date of registration of any class of equity security of the
Company pursuant to Section 12 of the Exchange Act and prior to six months after
the termination of such registration, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
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(b) 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) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six 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 aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) 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, (6) delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to deliver promptly to the Company the amount of sale or loan proceeds
required to pay the exercise price, (7) delivery of an irrevocable subscription
agreement for the Shares that irrevocably obligates the option holder to take
and pay for the Shares not more than twelve months after the date of delivery of
the subscription agreement, (8) any combination of the foregoing methods of
payment, or (9) such other consideration and method of payment for the issuance
of Shares to the extent permitted under Applicable Laws. 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.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
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, as authorized by the Administrator, consist of
any consideration and method of payment allowable under Section 8(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 shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon 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 11 of the Plan.
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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) Termination of Status as an Employee or Consultant.
In the event of termination of an Optionee's Continuous Status as an Employee or
Consultant, such Optionee may, but only within thirty (30) days (or such other
period of time, not exceeding three (3) months in the case of an Incentive Stock
Option or six (6) months in the case of a Nonstatutory Stock Option, as is
determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option) after the
date of such termination (but in no event later than the date of expiration of
the term of such Option as set forth in the Option Agreement), exercise his or
her Option to the extent that he or she was entitled to exercise it at the date
of such termination. To the extent that the Optionee was not entitled to
exercise the 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.
(c) Disability of Optionee. Notwithstanding the
provisions of Section 9(b) above, in the event of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of his or her total
and permanent disability (as defined in Section 22(e)(3) of the Code), he or she
may, but only within six (6) months (or such other period of time not exceeding
twelve (12) months as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) from the date of such termination (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent he or she was
entitled to exercise it at the date of such termination. To the extent that he
or she was not entitled to exercise the Option at the date of termination, or if
he does not exercise such Option (which he was entitled to exercise) within the
time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an
Optionee:
(i) during the term of the Option who is at the
time of his death an Employee or Consultant of the Company and who shall have
been in Continuous Status as an Employee or Consultant since the date of grant
of the Option, the Option may be exercised, at any time within six (6) months
(or such other period of time, not exceeding six (6) months, as is determined by
the Administrator, with such determination in the case of an Incentive Stock
Option being made at the time of grant of the Option) following the date of
death (but in no event later than the date of expiration of the term of such
Option as set forth in the Option Agreement), 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 would have accrued had the
Optionee continued living and remained in continuous status as an Employee or
Consultant three (3) months (or such other period of time as is determined by
the Administrator as provided above) after the date of death, subject to the
limitation set forth in Section 5(b); or
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(ii) within thirty (30) days (or such other
period of time not exceeding three (3) months as is determined by the
Administrator, with such determination in the case of an Incentive Stock Option
being made at the time of grant of the Option) after the termination of
Continuous Status as an Employee or Consultant, the Option may be exercised, at
any time within six (6) months following the date of death (but in no event
later than the date of expiration of the term of such Option as set forth in the
Option Agreement), 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 termination.
(e) Rule 16b-3. Options granted to persons subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 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.
11. 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. The designation of a
beneficiary by an Optionee will not constitute a transfer. An Option may be
exercised, during the lifetime of the Optionee, only by the Optionee or a
transferee permitted by this Section 11.
12. Adjustments Upon Changes in Capitalization or Merger. Subject
to any required action by the shareholders of the Company, the number of shares
of Common Stock covered by each outstanding Option, 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 which have been returned to the Plan
upon cancellation or expiration of an Option, the maximum number of shares of
Common Stock for which Options may be granted to any employee under Section 8 of
the Plan, and 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 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.
In the event of the proposed dissolution or liquidation of the Company,
the Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Administrator. The Administrator may,
in the exercise of its sole discretion in such instances, declare that any
Option shall terminate as of a date fixed by the Administrator 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. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the
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Company with or into another corporation, the Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Administrator
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the Optionee shall have the right to exercise
the Option as to some or all of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable. If the Administrator makes an
Option exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee that the
Option shall be exercisable for a period of thirty (30) days from the date of
such notice, and the Option will terminate upon the expiration of such period.
13. 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. 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.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided that, the following revisions or amendments shall require
approval of the shareholders of the Company in the manner described in Section
17 of the Plan:
(i) any increase in the number of Shares subject to
the Plan, other than in connection with an adjustment under
Section 11 of the Plan;
(ii) any change in the designation of the class of
persons eligible to be granted Options;
(iii) any change in the limitation on grants to
employees as described in Section 8 of the Plan or other
changes which would require shareholder approval to qualify
options granted hereunder as performance-based compensation
under Section 162(m) of the Code; or
(iv) if the Company has a class of equity securities
registered under Section 12 of the Exchange Act at the time of
such revision or amendment, any material increase in the
benefits accruing to participants under the Plan.
(b) Shareholder Approval. If any amendment requiring
shareholder approval under Section 13(a) of the Plan is made subsequent to the
first registration of any class of equity securities by the Company under
Section 12 of the Exchange Act, such shareholder approval shall be solicited as
described in Section 17 of the Plan.
(c) 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
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effect as if this Plan had not been amended or terminated, unless mutually
agreed otherwise between the Optionee and the Board, which agreement must be in
writing and signed by the Optionee and the Company.
15. 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, 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.
16. 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.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
17. Option Agreement. Options shall be evidenced by written
option agreements in such form as the Board shall approve.
18. Shareholder Approval.
(a) 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.
(b) If such shareholder approval is obtained at a duly
held shareholders' meeting, it must be obtained by the affirmative vote of the
holders of a majority of the outstanding shares of the Company, or if such
shareholder approval is obtained by written consent, it must be obtained by the
unanimous written consent of all shareholders of the Company; provided, however,
that approval at a meeting or by written consent may be obtained by a lesser
degree of shareholder approval if the Board determines, in its discretion after
consultation with the Company's legal counsel, that such a lesser degree of
shareholder approval will comply with all applicable laws and will not adversely
affect the qualification of the Plan under Section 422 of the Code.
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(c) In the event that the Company registers any class of
equity securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the Company obtained after such registration
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder.
(d) If any required approval by the shareholders of the
Plan itself or of any amendment thereto is solicited at any time otherwise than
in the manner described in Section 17(c) hereof, then the Company shall, at or
prior to the first annual meeting of shareholders held subsequent to the later
of (1) the first registration of any class of equity securities of the Company
under Section 12 of the Exchange Act or (2) the granting of an Option hereunder
to an officer or director after such registration, do the following:
(i) furnish in writing to the holders entitled
to vote for the Plan substantially the same information that would be required
(if proxies to be voted with respect to approval or disapproval of the Plan or
amendment were then being solicited) by the rules and regulations in effect
under Section 14(a) of the Exchange Act at the time such information is
furnished; and
(ii) file with, or mail for filing to, the
Securities and Exchange Commission four copies of the written information
referred to in subsection (i) hereof not later than the date on which such
information is first sent or given to shareholders.
19. Information to Optionees. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company. 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.
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RESOUND CORPORATION
NOTICE OF GRANT
(with New Employee Vesting Schedule included)
NAME OF OPTIONEE: GRANT DATE:
You have been granted an option to purchase Common Stock of ReSound
Corporation (the "Company") as follows:
Date of Grant:
Vesting Commencement Date:
Exercise Price Per Share:
Total Number of Shares Granted:
Total Price of Shares Granted:
Type of Option: ____ Incentive Stock Option
____ Nonstatutory Stock Option
Term/Expiration Date: End of Termination Period or 5 years from the Date of Grant,
whichever is earlier.
EXERCISE SCHEDULE
This Option shall vest and be exercisable cumulatively as follows: At
the end of six (6) months from the Vesting Commencement Date, 1/8th of the total
number of shares subject to this Option shall vest and this Option shall become
exercisable for such shares; at the end of each one-month period thereafter,
1/48th of the total number of shares subject to this Option shall vest and this
Option shall become exercisable for such shares plus any shares previously
vested but unpurchased.
TERMINATION PERIOD
The Option may be exercised for thirty (30) days (or, in the case of a
Nonstatutory Stock Option, such other period of time not exceeding six (6)
months as is determined by the Board) after termination of your employment or
consulting relationship with the Company except as set out in Sections 7 and 8
of the Stock Option Agreement (but in no event later than the Expiration Date).
INCORPORATION OF STOCK OPTION PLAN AND OPTION AGREEMENT
By your signature and the signature of the Company's representative below, you
and the Company agree that this Option is granted under and governed by the
terms and conditions of the 1988 Stock Option Plan and the Stock Option
Agreement, both of which are attached and made a part of this document.
RESOUND CORPORATION OPTIONEE:
By:___________________________________________ ___________________________
Peter Riepenhausen OPTIONEE
Title: President and Chief Executive Officer
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RESOUND CORPORATION
STOCK OPTION AGREEMENT
1. Grant of Option. ReSound Corporation, a California corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase the total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the 1988 Stock Option Plan (the
"Plan") adopted by the Company, which is incorporated in this Agreement by
reference. In the event of a conflict between the terms of the Plan and the
terms of this Agreement, the terms of the Plan shall govern. Unless otherwise
defined in this Agreement, the terms used in this Agreement shall have the
meanings defined in the Plan.
If designated an Incentive Stock Option in the Notice of Grant, this
Option is intended to qualify as an Incentive Stock Option as defined in Section
422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its term
in accordance with the Exercise Schedule set out in the Notice of Grant and with
the provisions of Sections 8 and 9 of the Plan as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction of a share.
(b) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in Section
2(i)(c) and (d).
(c) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Grant.
(d) If designated an Incentive Stock in the Notice of Grant, in
the event that this Option becomes exercisable at a time or times which, when
this Option is aggregated with all other incentive stock options granted to
Optionee by the Company or any Parent or Subsidiary, would result in Shares
having an aggregate fair market value (determined for each Share as of the Date
of Grant of the option covering such Share) in excess of $100,000 becoming first
available for purchase upon exercise of one or more incentive stock options
during any calendar year, the amount in excess of $100,000 shall be treated as a
Nonstatutory Stock Option, pursuant to Section 5 of the Plan.
If designated an Incentive Stock Option in the Notice of Grant,
in no event may this Option become exercisable at a time or times which, when
this Option is aggregated with all other incentive stock options granted to
Optionee by the Company or any Parent or Subsidiary, would result in Shares
having an aggregate fair market value (determined for each Share as of the date
of grant of the Option covering such Share) in excess of $100,000 becoming first
available for purchase upon exercise of one or more incentive stock options
during the calendar year.
-2-
15
(ii) Method of Exercise.
(a) This Option shall be exercisable by delivering to the
Company a written notice of exercise (in the form attached as Exhibit A) which
shall state the election to exercise the Option, the number of Shares in respect
of which the Option is being exercised, and such other representations and
agreements as to the holder's investment intent with respect to such shares of
Common Stock as may be required by the Company pursuant to the provisions of the
Plan. Such written notice shall be signed by the Optionee and shall be delivered
in person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the Exercise Price. This Option shall
be deemed to be exercised upon receipt by the Company of such written notice
accompanied by the Exercise Price.
(b) As a condition to the exercise of this Option, the Optionee
agrees to make adequate provision for federal, state or other tax withholding
obligations, if any, which arise upon the exercise of the Option or disposition
of Shares, whether by withholding, direct payment to the Company, or otherwise.
(c) No Shares will be issued pursuant to the exercise of an
Option unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed. Assuming such compliance, for income tax purposes the
Shares shall be considered transferred to the Optionee on the date on which the
Option is exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company an investment
representation statement in customary form, a copy of which is available for
Optionee's review from the Company upon request.
4. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination of the following, at the election of the
Optionee: (i) cash; (ii) check; (iii) surrender of other shares of Common Stock
of the Company which (a) 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 (b) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised; or (iv) if there is a public market for the Shares
and they are registered under the Securities Act of 1933, as amended, delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to deliver promptly to the Company the amount of sale or loan proceeds
required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
-3-
16
6. Termination of Relationship. In the event of termination of
Optionee's Continuous Status as an Employee or Consultant (as the case may be),
Optionee may, to the extent otherwise so entitled at the date of such
termination (the "Termination Date"), exercise this Option during the
Termination Period set out in the Notice of Grant. To the extent that Optionee
was not entitled to exercise this Option at the date of such termination, or if
Optionee does not exercise this Option within the time specified in the Notice
of Grant, the Option shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's Continuous Status as an
Employee (or Consultant in the case of a Nonstatutory Stock Option) as a result
of total and permanent disability (as defined in Section 22(e)(3) of the Code),
Optionee may, but only within six (6) months (or, in the case of a Nonstatutory
Stock Option, such other period of time not exceeding twelve (12) months as is
determined by the Board) from the date of termination of employment (but in no
event later than the date of expiration of the term of this Option as set forth
in Section 10 below), exercise the Option to the extent otherwise so entitled at
the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option (to the extent otherwise so entitled) within the time specified in
this Agreement, the Option shall terminate.
8. Death of Optionee. In the event of the death of Optionee:
(i) during the term of this Option and while an Employee (or
Consultant in the case of a Nonstatutory Stock Option) of the Company and having
been in Continuous Status as an Employee (or Consultant) since the date of grant
of the Option, the Option may be exercised, at any time within six (6) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by 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 would have
accrued had Optionee continued living and remained in Continuous Status as an
Employee (or Consultant) three (3) months after the date of death, subject to
the limitation contained in Section 2(i)(d) above in the case of an Incentive
Stock Option; or
(ii) within thirty (30) days (or, in the case of a Nonstatutory
Stock Option, such other period of time not exceeding three (3) months as is
determined by the Board) after the termination of Optionee's Continuous Status
as an Employee (or Consultant), the Option may be exercised, at any time within
six (6) months following the date of death (but in no event later than the date
of expiration of the term of this Option as set forth in Section 10 below), by
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 termination.
9. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution. The
designation of a beneficiary does not constitute a transfer. An Option may be
exercised during the lifetime of Optionee only by the Optionee or a transferee
permitted by this section. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
-4-
17
11. No Additional Employment Rights. Optionee understands and agrees
that the vesting of Shares pursuant to the Exercise Schedule is earned only by
continuing as an Employee or Consultant at the will of the Company (not through
the act of being hired, being granted this Option or acquiring Shares under this
Agreement). Optionee further acknowledges and agrees that nothing in this
Agreement, nor in the Plan which is incorporated in this Agreement by reference,
shall confer upon Optionee any right with respect to continuation as an Employee
or Consultant with the Company, nor shall it interfere in any way with his or
her right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
12. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT
A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(i) Exercise of ISO. If this Option qualifies as an ISO, there will
be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the fair market value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(ii) Exercise of Nonqualified Stock Option. If this Option does not
qualify as an ISO, there may be a regular federal income tax liability upon the
exercise of the Option. The Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the fair market value of the Shares on the date of exercise over the
Exercise Price. In addition, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
(iii) Disposition of Shares. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal income tax purposes. In the
case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and are disposed of at least two years after the
Date of Grant, any gain realized on disposition of the Shares will also be
treated as long-term capital gain for federal income tax purposes. If Shares
purchased under an ISO are disposed of within such one-year period or within two
years after the Date of Grant, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent
of the excess, if any, of the lesser of (1) fair market value of the Shares on
the date of exercise, or (2) the sales proceeds, over the Exercise Price.
(iv) Notice of Disqualifying Disposition of ISO Shares. If the
Option granted to Optionee in this Agreement is an ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or
before the later of (1) the date two years after the Date of Grant, or (2) the
date one year after transfer of such Shares to the Optionee upon exercise of the
ISO, the Optionee shall notify the Company in writing within thirty (30) days
after the date of any such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee from the early disposition by payment in cash or out
of the current earnings paid to the Optionee.
-5-
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13. Signature. This Stock Option Agreement shall be deemed executed by
the Company and the Optionee upon execution by such parties of the Notice of
Grant attached to this Stock Option Agreement.
-6-
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EXHIBIT A
NOTICE OF EXERCISE
To: ReSound Corporation
Attn: Secretary
Subject: Notice of Intention to Exercise Stock Option
This is official notice that the undersigned ("Optionee") intends to
exercise Optionee's option to purchase __________ shares of ReSound Corporation
Common Stock, under and pursuant to the Company's 1988 Stock Option Plan, as
amended, and the Stock Option Agreement dated _______________, as follows:
Grant Number: ________________________________
Number of Shares: ________________________________
Vesting Commencement
Date: ________________________________
Date of Purchase: ________________________________
Purchase Price: ________________________________
Social Security No.: ________________________________
The shares should be issued as follows:
Name: ________________________________
Address:________________________________
________________________________
________________________________
Signed:
________________________________
Date:
________________________________
-1-
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RESOUND CORPORATION
NOTICE OF GRANT
(with Continuing Employee Vesting Schedule included)
NAME OF OPTIONEE: GRANT DATE
You have been granted an option to purchase Common Stock of ReSound
Corporation (the "Company") as follows:
Date of Grant:
Vesting Commencement Date:
Exercise Price Per Share:
Total Number of Shares Granted:
Total Price of Shares Granted:
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: End of Termination Period or 5 years from the Date of Grant,
whichever is earlier.
EXERCISE SCHEDULE
This Option shall vest and be exercisable cumulatively as follows: At
the end of each one-month period following the Vesting Commencement Date, 1/48th
of the total number of shares subject to this Option shall vest and this Option
shall become exercisable for such shares plus any shares previously vested but
unpurchased.
TERMINATION PERIOD
The Option may be exercised for thirty (30) days (or, in the case of a
Nonstatutory Stock Option, such other period of time not exceeding six (6)
months as is determined by the Board) after termination of your employment or
consulting relationship with the Company except as set out in Sections 7 and 8
of the Stock Option Agreement (but in no event later than the Expiration Date).
INCORPORATION OF STOCK OPTION PLAN AND OPTION AGREEMENT
By your signature and the signature of the Company's representative below, you
and the Company agree that this Option is granted under and governed by the
terms and conditions of the 1988 Stock Option Plan and the Stock Option
Agreement, both of which are attached and made a part of this document.
RESOUND CORPORATION OPTIONEE:
By:__________________________________________ ______________________________
OPTIONEE
Title: President and Chief Executive Officer
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RESOUND CORPORATION
STOCK OPTION AGREEMENT
1. Grant of Option. ReSound Corporation, a California corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase the total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the 1988 Stock Option Plan (the
"Plan") adopted by the Company, which is incorporated in this Agreement by
reference. In the event of a conflict between the terms of the Plan and the
terms of this Agreement, the terms of the Plan shall govern. Unless otherwise
defined in this Agreement, the terms used in this Agreement shall have the
meanings defined in the Plan.
If designated an Incentive Stock Option in the Notice of
Grant, this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its term
in accordance with the Exercise Schedule set out in the Notice of Grant and with
the provisions of Sections 8 and 9 of the Plan as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction
of a share.
(b) In the event of Optionee's death, disability or
other termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in Section
2(i)(c) and (d).
(c) In no event may this Option be exercised after
the date of expiration of the term of this Option as set forth in the Notice of
Grant.
(d) If designated an Incentive Stock Option
in the Notice of Grant, in the event that this Option becomes exercisable at a
time or times which, when this Option is aggregated with all other incentive
stock options granted to Optionee by the Company or any Parent or Subsidiary,
would result in Shares having an aggregate fair market value (determined for
each Share as of the Date of Grant of the option covering such Share) in excess
of $100,000 becoming first available for purchase upon exercise of one or more
incentive stock options during any calendar year, the amount in excess of
$100,000 shall be treated as a Nonstatutory Stock Option, pursuant to Section 5
of the Plan.
(ii) Method of Exercise.
(a) This Option shall be exercisable by delivering to
the Company a written notice of exercise (in the form attached as Exhibit A)
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised, and such other representations
and agreements as to the holder's investment intent with respect to
-2-
22
such shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the Exercise
Price. This Option shall be deemed to be exercised upon receipt by the Company
of such written notice accompanied by the Exercise Price.
(b) As a condition to the exercise of this Option,
the Optionee agrees to make adequate provision for federal, state or other tax
withholding obligations, if any, which arise upon the exercise of the Option or
disposition of Shares, whether by withholding, direct payment to the Company, or
otherwise.
(c) No Shares will be issued pursuant to the exercise
of an Option unless such issuance and such exercise shall comply with all
relevant provisions of law and the requirements of any stock exchange upon which
the Shares may then be listed. Assuming such compliance, for income tax purposes
the Shares shall be considered transferred to the Optionee on the date on which
the Option is exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company an investment
representation statement in customary form, a copy of which is available for
Optionee's review from the Company upon request.
4. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination of the following, at the election of the
Optionee: (i) cash; (ii) check; (iii) surrender of other shares of Common Stock
of the Company which (a) 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 (b) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised; or (iv) if there is a public market for the Shares
and they are registered under the Securities Act of 1933, as amended, delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to deliver promptly to the Company the amount of sale or loan proceeds
required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event of termination of
Optionee's Continuous Status as an Employee or Consultant (as the case may be),
Optionee may, to the extent otherwise
-3-
23
so entitled at the date of such termination (the "Termination Date"), exercise
this Option during the Termination Period set out in the Notice of Grant. To the
extent that Optionee was not entitled to exercise this Option at the date of
such termination, or if Optionee does not exercise this Option within the time
specified in the Notice of Grant, the Option shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's Continuous Status as an
Employee (or Consultant in the case of a Nonstatutory Stock Option) as a result
of total and permanent disability (as defined in Section 22(e)(3) of the Code),
Optionee may, but only within six (6) months (or, in the case of a Nonstatutory
Stock Option, such other period of time not exceeding twelve (12) months as is
determined by the Board) from the date of termination of employment (but in no
event later than the date of expiration of the term of this Option as set forth
in Section 10 below), exercise the Option to the extent otherwise so entitled at
the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option (to the extent otherwise so entitled) within the time specified in
this Agreement, the Option shall terminate.
8. Death of Optionee. In the event of the death of Optionee:
(i) during the term of this Option and while an Employee (or
Consultant in the case of a Nonstatutory Stock Option) of the Company and having
been in Continuous Status as an Employee (or Consultant) since the date of grant
of the Option, the Option may be exercised, at any time within six (6) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by 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 would have
accrued had Optionee continued living and remained in Continuous Status as an
Employee (or Consultant) three (3) months after the date of death, subject to
the limitation contained in Section 2(i)(d) above in the case of an Incentive
Stock Option; or
(ii) within thirty (30) days (or, in the case of a
Nonstatutory Stock Option, such other period of time not exceeding three (3)
months as is determined by the Board) after the termination of Optionee's
Continuous Status as an Employee (or Consultant), the Option may be exercised,
at any time within six (6) months following the date of death (but in no event
later than the date of expiration of the term of this Option as set forth in
Section 10 below), by 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 termination.
9. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution. The
designation of a beneficiary does not constitute a transfer. An Option may be
exercised during the lifetime of Optionee only by the Optionee or a transferee
permitted by this section. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
-4-
24
10. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
11. No Additional Employment Rights. Optionee understands and agrees
that the vesting of Shares pursuant to the Exercise Schedule is earned only by
continuing as an Employee or Consultant at the will of the Company (not through
the act of being hired, being granted this Option or acquiring Shares under this
Agreement). Optionee further acknowledges and agrees that nothing in this
Agreement, nor in the Plan which is incorporated in this Agreement by reference,
shall confer upon Optionee any right with respect to continuation as an Employee
or Consultant with the Company, nor shall it interfere in any way with his or
her right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
12. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT
A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(i) Exercise of ISO. If this Option qualifies as an ISO,
there will be no regular federal income tax liability upon the exercise of the
Option, although the excess, if any, of the fair market value of the Shares on
the date of exercise over the Exercise Price will be treated as an adjustment to
the alternative minimum tax for federal tax purposes and may subject the
Optionee to the alternative minimum tax in the year of exercise.
(ii) Exercise of Nonqualified Stock Option. If this Option
does not qualify as an ISO, there may be a regular federal income tax liability
upon the exercise of the Option. The Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the fair market value of the Shares on the date of exercise over the
Exercise Price. In addition, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
(iii) Disposition of Shares. In the case of an NSO, if Shares
are held for at least one year, any gain realized on disposition of the Shares
will be treated as long-term capital gain for federal income tax purposes. In
the case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and are disposed of at least two years after the
Date of Grant, any gain realized on disposition of the Shares will also be
treated as long-term capital gain for federal income tax purposes. If Shares
purchased under an ISO are disposed of within such one-year period or within two
years after the Date of Grant, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent
of the excess, if any, of the lesser of (1) fair market value of the Shares on
the date of exercise, or (2) the sales proceeds, over the Exercise Price.
-5-
25
(iv) Notice of Disqualifying Disposition of ISO
Shares. If the Option granted to Optionee in this Agreement is an ISO, and if
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
the ISO on or before the later of (1) the date two years after the Date of
Grant, or (2) the date one year after transfer of such Shares to the Optionee
upon exercise of the ISO, the Optionee shall notify the Company in writing
within thirty (30) days after the date of any such disposition. Optionee agrees
that Optionee may be subject to income tax withholding by the Company on the
compensation income recognized by the Optionee from the early disposition by
payment in cash or out of the current earnings paid to the Optionee.
13. Signature. This Stock Option Agreement shall be deemed executed by
the Company and the Optionee upon execution by such parties of the Notice of
Grant attached to this Stock Option Agreement.
-6-
26
EXHIBIT A
NOTICE OF EXERCISE
To: ReSound Corporation
Attn: Secretary
Subject: Notice of Intention to Exercise Stock Option
This is official notice that the undersigned ("Optionee") intends to
exercise Optionee's option to purchase __________ shares of ReSound Corporation
Common Stock, under and pursuant to the Company's 1988 Stock Option Plan, as
amended, and the Stock Option Agreement dated _______________, as follows:
Grant Number: ________________________________
Number of Shares: ________________________________
Vesting Commencement
Date: ________________________________
Date of Purchase: ________________________________
Purchase Price: ________________________________
Social Security No.: ________________________________
The shares should be issued as follows:
Name:_____________________________________
Address:__________________________________
__________________________________
__________________________________
Signed:___________________________________
Date:_____________________________________
27
RESOUND CORPORATION
NOTICE OF GRANT
(with Replenishment Vesting Schedule included)
NAME OF OPTIONEE: GRANT DATE
You have been granted an option to purchase Common Stock of ReSound
Corporation (the "Company") as follows:
Date of Grant:
Vesting Commencement Date:
Exercise Price Per Share:
Total Number of Shares Granted:
Total Price of Shares Granted:
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: End of Termination Period or 5 years from the Date of Grant,
whichever is earlier.
EXERCISE SCHEDULE
This Option shall vest and be exercisable cumulatively in accordance
with the Vesting Schedule set forth below:
At the end of each one-month period following the Vesting Commencement
Date, _______________ of the total number of shares subject to this Option shall
vest and this Option shall become exercisable for such shares plus any shares
previously vested but unpurchased.
TERMINATION PERIOD
The Option may be exercised for thirty (30) days (or, in the case of a
Nonstatutory Stock Option, such other period of time not exceeding six (6)
months as is determined by the Board) after termination of your employment or
consulting relationship with the Company except as set out in Sections 7 and 8
of the Stock Option Agreement (but in no event later than the Expiration Date).
INCORPORATION OF STOCK OPTION PLAN AND OPTION AGREEMENT
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the 1988 Stock Option Plan and the Stock Option
Agreement, both of which are attached and made a part of this document.
RESOUND CORPORATION OPTIONEE:
By:__________________________________________ ______________________________
OPTIONEE
Title: President and Chief Executive Officer
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RESOUND CORPORATION
STOCK OPTION AGREEMENT
1. Grant of Option. ReSound Corporation, a California corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase the total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the 1988 Stock Option Plan (the
"Plan") adopted by the Company, which is incorporated in this Agreement by
reference. In the event of a conflict between the terms of the Plan and the
terms of this Agreement, the terms of the Plan shall govern. Unless otherwise
defined in this Agreement, the terms used in this Agreement shall have the
meanings defined in the Plan.
If designated an Incentive Stock Option in the Notice of
Grant, this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its term
in accordance with the Exercise Schedule set out in the Notice of Grant and with
the provisions of Sections 8 and 9 of the Plan as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction
of a share.
(b) In the event of Optionee's death, disability or
other termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in Section
2(i)(c) and (d).
(c) In no event may this Option be exercised after
the date of expiration of the term of this Option as set forth in the Notice of
Grant.
(d) If designated an Incentive Stock Option in the
Notice of Grant, in the event that this Option becomes exercisable at a time or
times which, when this Option is aggregated with all other incentive stock
options granted to Optionee by the Company or any Parent or Subsidiary, would
result in Shares having an aggregate fair market value (determined for each
Share as of the Date of Grant of the option covering such Share) in excess of
$100,000 becoming first available for purchase upon exercise of one or more
incentive stock options during any calendar year, the amount in excess of
$100,000 shall be treated as a Nonstatutory Stock Option, pursuant to Section 5
of the Plan.
(ii) Method of Exercise.
(a) This Option shall be exercisable by delivering to
the Company a written notice of exercise (in the form attached as Exhibit A)
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised, and
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such other representations and agreements as to the holder's investment intent
with respect to such shares of Common Stock as may be required by the Company
pursuant to the provisions of the Plan. Such written notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The written notice shall be accompanied by payment of
the Exercise Price. This Option shall be deemed to be exercised upon receipt by
the Company of such written notice accompanied by the Exercise Price.
(b) As a condition to the exercise of this Option,
the Optionee agrees to make adequate provision for federal, state or other tax
withholding obligations, if any, which arise upon the exercise of the Option or
disposition of Shares, whether by withholding, direct payment to the Company, or
otherwise.
(c) No Shares will be issued pursuant to the exercise
of an Option unless such issuance and such exercise shall comply with all
relevant provisions of law and the requirements of any stock exchange upon which
the Shares may then be listed. Assuming such compliance, for income tax purposes
the Shares shall be considered transferred to the Optionee on the date on which
the Option is exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company an investment
representation statement in customary form, a copy of which is available for
Optionee's review from the Company upon request.
4. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination of the following, at the election of the
Optionee: (i) cash; (ii) check; (iii) surrender of other shares of Common Stock
of the Company which (a) 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 (b) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised; or (iv) if there is a public market for the Shares
and they are registered under the Securities Act of 1933, as amended, delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to deliver promptly to the Company the amount of sale or loan proceeds
required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
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6. Termination of Relationship. In the event of termination of
Optionee's Continuous Status as an Employee or Consultant (as the case may be),
Optionee may, to the extent otherwise so entitled at the date of such
termination (the "Termination Date"), exercise this Option during the
Termination Period set out in the Notice of Grant. To the extent that Optionee
was not entitled to exercise this Option at the date of such termination, or if
Optionee does not exercise this Option within the time specified in the Notice
of Grant, the Option shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's Continuous Status as an
Employee (or Consultant in the case of a Nonstatutory Stock Option) as a result
of total and permanent disability (as defined in Section 22(e)(3) of the Code),
Optionee may, but only within six (6) months (or, in the case of a Nonstatutory
Stock Option, such other period of time not exceeding twelve (12) months as is
determined by the Board) from the date of termination of employment (but in no
event later than the date of expiration of the term of this Option as set forth
in Section 10 below), exercise the Option to the extent otherwise so entitled at
the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option (to the extent otherwise so entitled) within the time specified in
this Agreement, the Option shall terminate.
8. Death of Optionee. In the event of the death of Optionee:
(i) during the term of this Option and while an Employee (or
Consultant in the case of a Nonstatutory Stock Option) of the Company and having
been in Continuous Status as an Employee (or Consultant) since the date of grant
of the Option, the Option may be exercised, at any time within six (6) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by 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 would have
accrued had Optionee continued living and remained in Continuous Status as an
Employee (or Consultant) three (3) months after the date of death, subject to
the limitation contained in Section 2(i)(d) above in the case of an Incentive
Stock Option; or
(ii) within thirty (30) days (or, in the case of a Nonstatutory
Stock Option, such other period of time not exceeding three (3) months as is
determined by the Board) after the termination of Optionee's Continuous Status
as an Employee (or Consultant), the Option may be exercised, at any time within
six (6) months following the date of death (but in no event later than the date
of expiration of the term of this Option as set forth in Section 10 below), by
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 termination.
9. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution. The
designation of a beneficiary does not constitute a transfer. An Option may be
exercised during the lifetime of Optionee only by the Optionee or a transferee
permitted by this section. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
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10. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
11. No Additional Employment Rights. Optionee understands and agrees
that the vesting of Shares pursuant to the Exercise Schedule is earned only by
continuing as an Employee or Consultant at the will of the Company (not through
the act of being hired, being granted this Option or acquiring Shares under this
Agreement). Optionee further acknowledges and agrees that nothing in this
Agreement, nor in the Plan which is incorporated in this Agreement by reference,
shall confer upon Optionee any right with respect to continuation as an Employee
or Consultant with the Company, nor shall it interfere in any way with his or
her right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
12. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT
A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(i) Exercise of ISO. If this Option qualifies as an ISO, there
will be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the fair market value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(ii) Exercise of Nonqualified Stock Option. If this Option
does not qualify as an ISO, there may be a regular federal income tax liability
upon the exercise of the Option. The Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the fair market value of the Shares on the date of exercise over the
Exercise Price. In addition, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
(iii) Disposition of Shares. In the case of an NSO, if Shares
are held for at least one year, any gain realized on disposition of the Shares
will be treated as long-term capital gain for federal income tax purposes. In
the case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and are disposed of at least two years after the
Date of Grant, any gain realized on disposition of the Shares will also be
treated as long-term capital gain for federal income tax purposes. If Shares
purchased under an ISO are disposed of within such one-year period or within two
years after the Date of Grant, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent
of the excess, if any, of the lesser of (1) fair market value of the Shares on
the date of exercise, or (2) the sales proceeds, over the Exercise Price.
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(iv) Notice of Disqualifying Disposition of ISO Shares. If the
Option granted to Optionee in this Agreement is an ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or
before the later of (1) the date two years after the Date of Grant, or (2) the
date one year after transfer of such Shares to the Optionee upon exercise of the
ISO, the Optionee shall notify the Company in writing within thirty (30) days
after the date of any such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee from the early disposition by payment in cash or out
of the current earnings paid to the Optionee.
13. Signature. This Stock Option Agreement shall be deemed executed by
the Company and the Optionee upon execution by such parties of the Notice of
Grant attached to this Stock Option Agreement.
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EXHIBIT A
NOTICE OF EXERCISE
To: ReSound Corporation
Attn: Secretary
Subject: Notice of Intention to Exercise Stock Option
This is official notice that the undersigned ("Optionee") intends to
exercise Optionee's option to purchase __________ shares of ReSound Corporation
Common Stock, under and pursuant to the Company's 1988 Stock Option Plan, as
amended, and the Stock Option Agreement dated _______________, as follows:
Grant Number: ________________________________
Number of Shares: ________________________________
Vesting Commencement
Date: ________________________________
Date of Purchase: ________________________________
Purchase Price: ________________________________
Social Security No.: ________________________________
The shares should be issued as follows:
Name: ______________________________
Address: ______________________________
______________________________
______________________________
Signed: ______________________________
Date: ______________________________
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