EXHIBIT 10.1
LINEO, INC.
1999 STOCK OPTION PLAN
1. DEFINITIONS.................................................................................................1
2. PURPOSES....................................................................................................4
3. ADMINISTRATION..............................................................................................4
(A) COMMITTEE................................................................................................4
(B) APPOINTMENT OF COMMITTEE.................................................................................4
(C) POWERS; REGULATIONS......................................................................................4
(D) DELEGATION TO EXECUTIVE OFFICER..........................................................................5
4. ELIGIBILITY.................................................................................................5
5. STOCK.......................................................................................................5
6. TERMS AND CONDITIONS OF OPTIONS.............................................................................5
(A) NUMBER OF SHARES AND TYPE OF OPTION......................................................................5
(B) DATE OF GRANT............................................................................................6
(C) OPTION PRICE.............................................................................................6
(D) DURATION OF OPTIONS......................................................................................6
(E) VESTING SCHEDULE OF OPTIONS..............................................................................7
(F) ACCELERATION OF VESTING..................................................................................7
(G) TERM OF OPTION...........................................................................................7
(H) EXERCISE OF OPTIONS......................................................................................8
(I) PAYMENT UPON EXERCISE OF OPTION..........................................................................9
(J) RIGHTS AS A SHAREHOLDER..................................................................................9
(K) TRANSFER OF OPTION......................................................................................10
(L) SECURITIES REGULATION AND TAX WITHHOLDING...............................................................11
(M) STOCK SPLIT, REORGANIZATION OR LIQUIDATION..............................................................12
(N) APPROVED TRANSACTIONS; CONTROL PURCHASE.................................................................12
(O) FURTHER ADJUSTMENTS OF AWARDS...........................................................................13
7. EFFECTIVE DATE; TERM.......................................................................................13
8. MARKET STANDOFF............................................................................................14
9. NO OBLIGATIONS TO EXERCISE OPTION..........................................................................14
10. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.......................................................................14
11. APPLICATION OF FUNDS.......................................................................................14
12. INDEMNIFICATION OF COMMITTEE...............................................................................15
13. SHAREHOLDERS AGREEMENT.....................................................................................15
14. SEPARABILITY...............................................................................................15
15. NON-EXCLUSIVITY OF THE PLAN................................................................................15
16. EXCLUSION FROM PENSION AND PROFIT-SHARING COMPUTATION......................................................15
17. AMENDMENT OF PLAN..........................................................................................16
LINEO, INC.
1999 STOCK OPTION PLAN
1. DEFINITIONS.
Capitalized terms not defined elsewhere in the Plan shall have the
following meanings (whether used in the singular or plural).
(a) "AGREEMENT" means a written agreement approved by the
Committee evidencing Options granted under the Plan.
(b) "APPROVED TRANSACTION" means
(i) the acquisition of the Company by another entity by
means of merger, consolidation or other transaction
or series of related transactions resulting in the
exchange of the outstanding shares of the Company for
securities of, or consideration issued, or caused to
be issued by, the acquiring entity or any of its
affiliates, provided, that after such event the
shareholders of the Company immediately prior to the
event own less than a majority of the outstanding
voting equity securities of the surviving entity
immediately following the event;
(ii) any liquidation or dissolution of the Company; and
(iii) any sale, lease, exchange or other transfer not in
the ordinary course of business (in one transaction
or a series of related transactions) of all, or
substantially all, of the assets of the Company.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute or statutes
thereto. Reference to any specific section of the Code shall
include any successor section.
(e) "COMMITTEE" shall mean the Board, or the committee appointed
by the Board pursuant to Section 3(b) of the Plan, if it is
administering the Plan.
(f) "COMMON STOCK" means the Common Stock, no par value, of the
Company.
(g) "COMPANY" means Lineo, Inc., a Utah corporation.
(h) "CONTROL PURCHASE" means any transaction (or series of related
transactions) in which any person, corporation or other entity
(including any "person" as defined in Sections 13(d)(3) and
14(d)(2) of the Exchange Act, but excluding the Company and
any employee benefit plan sponsored by the Company):
(i) purchases any Common Stock (or securities convertible
into Common Stock) for cash, securities or any other
consideration pursuant to a tender offer or exchange
offer unless by the terms of such offer the offeror,
upon consummation thereof, would be the "beneficial
owner" (as that term is defined in Rule 13d-3 under
the
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Exchange Act) of less than 30% of the shares of
Common Stock then outstanding; or
(ii) becomes the "beneficial owner", directly or
indirectly, of securities of the Company representing
fifty percent (50%) or more of the combined voting
power of the then outstanding securities of the
Company ordinarily (and apart from rights accruing
under special circumstances) having the right to vote
in the election of directors (calculated as provided
in Rule 13d-3(d) under the Exchange Act in the case
of rights to acquire the Company's securities);
PROVIDED, HOWEVER, that the foregoing shall not constitute a
Control Purchase if the transactions or related transactions
received the prior approval of a majority of all of the
directors of the Company, excluding for such purpose the votes
of directors who are directors or officers of, or have a
material financial interest in any Person (other than the
Company) who is a party to the event specified in either
clauses (i) or (ii).
(i) "COVERED EMPLOYEE" has the meaning given to it by Section
162(m)(3) of the Code.
(j) "DATE OF GRANT" means that date the Committee has deemed to be
the effective date of the Option for purposes of the Plan.
(k) "DISABILITY" means any medically determinable physical or
mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months that renders the
Optionee unable to engage in any substantial gainful activity.
(l) "EFFECTIVE DATE" means at the time specified in the
resolutions of the Board adopting the Plan.
(m) "EMPLOYEES" means individuals employed by the Company or a
Related Corporation.
(n) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute or
statutes thereto. Reference to any specific section of the
Exchange Act shall include any successor section.
(o) "EXECUTIVE OFFICER" shall be defined in Section 3(d).
(p) "FAIR MARKET VALUE" means, if the Common Stock is publicly
traded, the last sales price (or, if no last sales price is
reported, the average of the high bid and low asked prices)
for a share of Common Stock on that day (or, if that day is
not a trading day, on the next preceding trading day), as
reported by the principal exchange on which the Common Stock
is listed, or, if the Common Stock is publicly traded but not
listed on an exchange, as reported by The Nasdaq Stock Market,
or if such prices or quotations are not reported by The Nasdaq
Stock Market, as reported by any other available source of
prices or quotations selected by the Committee. If the Common
Stock is not publicly traded or if the Fair Market Value is
not determinable by any of the foregoing means, the Fair
Market Value on any day shall be determined in good faith by
the Committee on the basis of such considerations as the
Committee deems important.
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(q) "IMMEDIATE FAMILY MEMBER" means a spouse, children or
grandchildren of the Optionee.
(r) "INCENTIVE STOCK OPTION" means an Option that is an incentive
stock option within the meaning of Section 422 of the Code.
(s) "NON-EMPLOYEE DIRECTOR" has the meaning given to it by Rule
16b-3 promulgated under the Exchange Act of 1934.
(t) "NON-INSIDERS" has the meaning given to it by Section
162(m)(3) of the Code.
(u) "NON-QUALIFIED STOCK OPTION" means an Option that is not an
Incentive Stock Option.
(v) "OPTION" means an option with respect to shares of Common
Stock awarded pursuant to Section 6.
(w) "OPTIONEE" means any person to whom an Option is granted under
the Plan (as well as any permitted transferee of an Option).
(x) "OUTSIDE DIRECTOR" has the meaning given to by the regulations
promulgated under Section 162(m) of the Code.
(y) "PLAN" means the Lineo, Inc. 1999 Stock Option Plan.
(z) "QUALIFIED PERFORMANCE-BASED COMPENSATION" has the meaning
given to it by the regulations promulgated under Section
162(m) of the Code.
(aa) "RELATED CORPORATION" means any corporation (other than the
Company) that is a "parent corporation" of the Company or
"subsidiary corporation" of the Company, as defined in
Sections 424(e) and 424(f) respectively, of the Code.
(bb) "SECTION 16 INSIDERS" means individuals who are subject to
Section 16(b) of the Exchange Act with respect to the Common
Stock.
(cc) "SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, or any successor statute or statutes
thereto. References to any specific section of the Securities
Act shall include any successor section.
(dd) "TEN PERCENT SHAREHOLDER" means a person who owns more than
ten percent of the total combined voting power of the Company
or any related corporation as determined with reference to
Section 424(d) of the Code.
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2. PURPOSES.
The purposes of the Plan are to retain the services of directors,
valued key employees and consultants of the Company and such other persons as
the Committee shall select in accordance with Section 4, to encourage such
persons to acquire a greater proprietary interest in the Company, thereby
strengthening their incentive to achieve the objectives of the shareholders of
the Company, and to serve as an aid and inducement in hiring new employees and
to provide an equity incentive to directors, consultants and other persons
selected by the Committee.
3. ADMINISTRATION.
(a) COMMITTEE.
The Plan shall be administered by the Board unless the Board appoints a
separate committee of the board to administer the Plan pursuant to Section 3(b)
below. A majority of the members of the Committee shall constitute a quorum, and
all actions of the Committee shall be taken by a majority of the members
present. Any action may be taken by a written instrument signed by all of the
members of the Committee and any action so taken shall be fully effective as if
it had been taken at a meeting.
(b) APPOINTMENT OF COMMITTEE.
The Board may appoint a committee consisting of two or more of its
members to administer the Plan. The Board shall consider whether a director is
(i) an Outside Director and (ii) a Non-Employee Director when appointing any
such Committee and shall appoint solely two or more individuals who qualify as
Outside Directors if the Board intends for compensation attributable to Options
to be Qualified Performance-Based Compensation. The Committee shall have the
powers and authority vested in the Board hereunder (including the power and
authority to interpret any provision of the Plan or of any Option). The members
of any such Committee shall serve at the pleasure of the Board.
(c) POWERS; REGULATIONS.
Subject to the provisions of the Plan, and with a view to effecting its
purpose, the Committee shall have sole authority, in its absolute discretion,
to:
(i) construe and interpret the Plan;
(ii) define the terms used in the Plan;
(iii) prescribe, amend and rescind rules and regulations
relating to the Plan;
(iv) correct any defect, supply any omission or reconcile
any inconsistency in the Plan;
(v) grant Options under the Plan;
(vi) determine the individuals to whom Options shall be
granted under the Plan and whether the Option is an
Incentive Stock Option or a Non-Qualified Stock
Option;
(vii) determine the time or times at which Options shall be
granted under the Plan;
(viii) determine the number of shares of Common Stock
subject to each Option, the exercise price of each
Option, the duration of each Option and the times at
which each Option shall become exercisable;
(ix) determine all other terms and conditions of Options;
and
(x) make all other determinations necessary or advisable
for the administration of the Plan.
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All decisions, determinations and interpretations made by the Committee
shall be binding and conclusive on all participants in the Plan and on their
legal representatives, heirs and beneficiaries.
(d) DELEGATION TO EXECUTIVE OFFICER.
The Committee may by resolution delegate to one or more executive
officers (the "Executive Officer") of the Company the authority to grant Options
under the Plan to employees of the Company who, at the time of grant, are not
Section 16 Insiders nor Covered Employees; PROVIDED, HOWEVER, that the authority
delegated to the Executive Officer under this Section 3 shall not exceed that of
the Committee under the provisions of the Plan and shall be subject to such
limitations, in addition to those specified in this Section 3, as may be
specified by the Committee at the time of delegation.
4. ELIGIBILITY.
Incentive Stock Options may be granted to any individual who, at the
time such Options are granted, is an Employee, including Employees who are also
directors of the Company. Non-Qualified Stock Options may be granted to
Employees and to such other persons as the Committee shall select. Options may
be granted in substitution for outstanding options of another corporation in
connection with the merger, consolidation, acquisition of property or stock or
other reorganization between such other corporation and the Company or any
subsidiary of the Company. At such point as the Company first becomes subject to
the periodic reporting requirements of Section 12 of the Exchange Act, no person
shall be eligible to receive in any fiscal year Options to purchase more than
100,000 shares of Common Stock (subject to adjustment as set forth in Section
6(m) hereof).
5. STOCK.
The Company is authorized to grant Options to acquire up to a total of
2,000,000 shares of the Company's authorized but unissued, or reacquired, Common
Stock. The number of shares with respect to which Options may be granted
hereunder is subject to adjustment as set forth in Section 6(m). In the event
that any outstanding Option expires or is terminated for any reason, the shares
of Common Stock allocable to the unexercised portion of such Option may again be
subject to an Option granted to the same Optionee or to a different person
eligible under Section 4; PROVIDED, HOWEVER, that any canceled Options will be
counted against the maximum number of shares with respect to which Options may
be granted to any particular person as set forth in Section 4.
6. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under the Plan shall be evidenced by an Agreement.
Agreements may contain such provisions, not inconsistent with the Plan, as the
Committee or Executive Officer, in its discretion, may deem advisable. All
Options also shall comply with the following requirements:
(a) NUMBER OF SHARES AND TYPE OF OPTION.
Each Agreement shall state the number of shares of Common Stock to
which it pertains and whether the Option is intended to be an Incentive Stock
Option or a Non-Qualified Stock Option. In the absence of action to the contrary
by the Committee or Executive Officer in connection with the grant of an Option,
all Options shall be Non-Qualified Stock Options. The aggregate Fair Market
Value (determined at the Date of Grant) of the Common Stock with respect to
which the Incentive Stock Options granted to the Optionee and any incentive
stock options granted to the Optionee under any other stock option plan of the
Company, any
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Related Corporation or any predecessor corporation are exercisable for the first
time by the Optionee during any calendar year shall not exceed $100,000, or such
other limit as may be prescribed by the Code. If
(i) an Optionee holds one or more Incentive Stock Options
under the Plan (and/or any incentive stock options
under any other stock option plan of the Company, any
Related Corporation or any predecessor corporation),
and
(ii) the aggregate Fair Market Value of the shares of
Common Stock with respect to which, during any
calendar year, such Options become exercisable for
the first time exceeds $100,000 (said value to be
determined as provided above),
then such Option or Options are intended to qualify under Section 422 of the
Code with respect to the maximum number of such shares as can, in light of the
foregoing limitation, be so qualified, with the shares so qualified to be the
shares subject to the Option or Options earliest granted to the Optionee. If an
Option that would otherwise qualify as an Incentive Stock Option becomes
exercisable for the first time in any calendar year for shares of Common Stock
that would cause such aggregate Fair Market Value to exceed $100,000, then the
portion of the Option in respect of such shares shall be deemed to be a
Non-Qualified Stock Option.
(b) DATE OF GRANT.
Each Agreement shall state the Date of Grant.
(c) OPTION PRICE.
Each Agreement shall state the price per share of Common Stock at which
it is exercisable. The exercise price shall be fixed by the Committee or
Executive Officer at whatever price the Committee or Executive Officer may
determine in the exercise of its sole discretion; PROVIDED, HOWEVER, that the
per share exercise price for an Incentive Stock Option shall not be less than
the Fair Market Value at the Date of Grant; PROVIDED FURTHER, that with respect
to Incentive Stock Options granted to Ten Percent Shareholders of the Company,
the per share exercise price shall not be less than 110 percent (110%) of the
Fair Market Value at the Date of Grant; and, PROVIDED FURTHER, that Options
granted in substitution for outstanding options of another corporation in
connection with the merger, consolidation, acquisition of property or stock or
other reorganization involving such other corporation and the Company or any
subsidiary of the Company may be granted with an exercise price equal to the
exercise price for the substituted option of the other corporation, subject to
any adjustment consistent with the terms of the transaction pursuant to which
the substitution is to occur.
(d) DURATION OF OPTIONS.
On the Date of Grant, the Committee or Executive Officer shall
designate, subject to Section 6(g), the expiration date of the Option, which
date shall not be later than ten (10) years from the Date of Grant in the case
of Incentive Stock Options; PROVIDED, HOWEVER, that the expiration date of any
Incentive Stock Option granted to a Ten Percent Shareholder shall not be later
than five (5) years from the Date of Grant. In the absence of action to the
contrary by the Committee in connection with the grant of an Option, and except
in the case of Incentive Stock Options granted to Ten Percent Shareholders, all
Options granted under this Section 6 shall expire ten (10) years from the Date
of Grant.
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(e) VESTING SCHEDULE OF OPTIONS
No Option shall be exercisable until it has vested. The vesting
schedule for each Option shall be specified by the Committee or Executive
Officer at the time of grant of the Option; PROVIDED, HOWEVER, that if no
vesting schedule is specified at the time of grant, the Option shall be vested
according to the following schedule:
Number of Years of
Continuous Employment Portion of Total
With the Company Following Option Which Will Become
Vesting Commencement Date Vested
- --------------------------------------------------- -------------------------
1 1/4th
Monthly thereafter 1/48th
The Committee or Executive Officer may specify a vesting schedule for
all or any portion of an Option based on the achievement of performance
objectives established in advance of the commencement by the Optionee of
services related to the achievement of the performance objectives. Performance
objectives shall be expressed in terms of one or more of the following: return
on equity, return on assets, share price, market share, sales, earnings per
share, costs, net earnings, net worth, inventories, cash and cash equivalents,
gross margin or the Company's performance relative to its internal business
plan. Performance objectives may be in respect of the performance of the Company
as a whole (whether on a consolidated or unconsolidated basis), a Related
Corporation, or a subdivision, operating unit, product or product line of the
foregoing. Performance objectives may be absolute or relative and may be
expressed in terms of a progression or a range. An Option which is exercisable
(in whole or in part) upon the achievement of one or more performance objectives
may be exercised only upon completion of the following process: (a) the Optionee
must deliver written notice to the Company that the performance objective has
been achieved and demonstrating, if necessary, how the objective has been
satisfied, (b) within 45 days after receipt of such notice, the Committee will
make a good faith determination whether such performance objective has been
achieved and deliver written notice to the Optionee detailing the results of
such determination; if the Company fails to respond with such 45-day period,
then the performance objective shall be presumed to have been achieved and (c)
upon receipt of written notice from the Company that the performance objective
has been achieved (or upon expiration of such 45-day period without a
determination by the Company), the Optionee may exercise the Option; upon
receipt of written notice from the Company that the performance objective has
not been achieved, the Optionee shall have 15 days to appeal the Company's
determination and the Company shall have 15 days after the receipt of such
appeal to consider the issues presented by the Optionee and make a determination
on the appeal, which determination shall be conclusive and binding on the
Optionee.
(f) ACCELERATION OF VESTING.
The vesting of one or more outstanding Options may be accelerated by
the Board at such times and in such amounts as it shall determine in its sole
discretion.
(g) TERM OF OPTION.
Any vested Option granted to an Optionee shall terminate, to the extent
not previously exercised, upon the occurrence of the first of the following
events:
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(i) as designated by the Committee or the Executive
Officer in accordance with Section 6(d) hereof;
(ii) the date of the Optionee's termination of employment
or contractual relationship with the Company or any
Related Corporation for cause (as determined in the
sole discretion of the Committee);
(iii) the expiration of ninety (90) days from the date of
the Optionee's termination of employment or
contractual relationship with the Company or any
Related Corporation for any reason whatsoever other
than cause, death or Disability unless the exercise
period is extended by the Committee until a date not
later than the expiration date of the Option;
(iv) the expiration of one year from (A) the date of death
of the Optionee or (B) cessation of the Optionee's
employment or contractual relationship by reason of
Disability unless the exercise period is extended by
the Committee until a date not later than the
expiration date of the Option; or
(v) any other event specified by the Committee at the
time of grant of the Option.
If an Optionee's employment or contractual relationship is terminated
by death, any Option granted to the Optionee shall be exercisable only by the
person or persons to whom such Optionee's rights under such Option shall pass by
the Optionee's will or by the laws of descent and distribution of the state or
county of the Optionee's domicile at the time of death. The Committee shall
determine whether an Optionee has incurred a Disability on the basis of medical
evidence reasonably acceptable to the Committee. Upon making a determination of
Disability, the Committee shall, for purposes of the Plan, determine the date of
an Optionee's termination of employment or contractual relationship.
Unless accelerated in accordance with Section 6(f), any unvested Option
granted to an Optionee shall terminate immediately upon termination of
employment of the Optionee by the Company for any reason whatsoever, including
death or Disability. For purposes of the Plan, transfer of employment between or
among the Company and/or any Related Corporation shall not be deemed to
constitute a termination of employment with the Company or any Related
Corporation. For purposes of this subsection with respect to Incentive Stock
Options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined by
the Committee). The foregoing notwithstanding, employment shall not be deemed to
continue beyond the first ninety (90) days of such leave, unless the Optionee's
re-employment rights are guaranteed by statute or by contract.
(h) EXERCISE OF OPTIONS.
An Option shall be exercisable, either all or in part, at any time
after vesting and prior to the expiration date with respect to, or the
termination of, the Option. If less than all of the shares included in an
exercisable Option are purchased, the remainder may be purchased at any
subsequent time prior to the expiration date with respect to, or the termination
of, the Option. No portion of any vested Option may be exercised for less than
one hundred (100) shares (as adjusted pursuant to Section 6(m)); PROVIDED,
HOWEVER, that if the vested Option is less than one hundred (100) shares, it may
be exercised with respect to all shares for which it is vested. Only whole
shares may be issued upon exercise of an vested Option, and to the extent that a
vested Option covers less than one (1) share, it is unexercisable.
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A vested Option or any portion thereof may be exercised by giving
written notice to the Company upon such terms and conditions as the Agreement
evidencing the vested Option may provide and in accordance with such other
procedures for the exercise of a vested Option as the Committee may establish
from time to time. Such notice shall be accompanied by payment in the amount of
the aggregate exercise price for such shares, which payment shall be in the form
specified in Section 6(i). The Company shall not be obligated to issue, transfer
or deliver a certificate of Common Stock to the holder of any vested Option
until provision has been made by the holder, to the satisfaction of the Company,
for the payment of the aggregate exercise price for all shares for which the
vested Option shall have been exercised and for satisfaction of any tax
withholding obligations associated with such exercise. Options granted to an
Optionee are, during the Optionee's lifetime, exercisable only by the Optionee
or a transferee who takes title to the Option in the manner permitted by Section
6(k).
(i) PAYMENT UPON EXERCISE OF OPTION.
The exercise price for shares purchased under an Option shall be paid
in full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
must be paid in cash or by check or, unless the Committee in its sole discretion
determines otherwise, either at the time the Option is granted or at any time
before it is exercised, a combination of cash and/or check (if any) and one or
both of the following alternative forms: (a) tendering (either actually or, if
and so long as the Common Stock is registered under Section 12(b) or 12(g) of
the Exchange Act, by attestation) Common Stock already owned by the Optionee for
at least six months (or any shorter period necessary to avoid a charge to the
Company's earnings for financial reporting purposes) having a Fair Market Value
on the day prior to the exercise date equal to the aggregate Option exercise
price; or (b) if and so long as the Common Stock is registered under Section
12(b) or 12(g) of the Exchange Act, delivery of a properly executed exercise
notice, together with irrevocable instructions, to (i) a brokerage firm
designated by the Company to deliver promptly to the Company the aggregate
amount of sale or loan proceeds to pay the Option exercise price and any
withholding tax obligations that may arise in connection with the exercise and
(ii) the Company to deliver the certificates for such purchased shares directly
to such brokerage firm, all in accordance with the regulations of the Federal
Reserve Board. In addition, to the extent permitted by the Committee in its sole
discretion, the price for shares purchased under an Option may be paid, either
singly or in combination with one or more of the alternative forms of payment
authorized by this Section 6(i), by (y) a full-recourse promissory note; or (z)
such other consideration as the Committee may permit.
(j) RIGHTS AS A SHAREHOLDER.
An Optionee shall have no rights as a shareholder with respect to any
shares of Common Stock issuable upon exercise of the Option until such holder
becomes a record holder of such shares. Subject to the provisions of Sections
6(m), no rights shall accrue to an Optionee and no adjustments shall be made on
account of dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights declared on, or created in, the
Common Stock for which the record date is prior to the date such Optionee
becomes a record holder of the shares of Common Stock issuable upon exercise of
such Option.
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(k) TRANSFER OF OPTION.
Options granted under the Plan and the rights and privileges conferred
by the Plan may not be transferred, assigned, pledged or hypothecated in any
manner (whether by operation of law or otherwise) other than by will, by
applicable laws of descent and distribution or pursuant to a domestic relations
order (as defined in the Code or Title I of the Employment Retirement Income
Security Act of 1974 or the rules or regulations thereunder), and shall not be
subject to execution, attachment or similar process; PROVIDED, HOWEVER, that
solely with respect to Non-Qualified Stock Options, the Committee may, in its
discretion, authorize all or a portion of the Options to be granted to an
Optionee to be on terms which permit transfer by such Optionee to:
(i) Immediate Family Members,
(ii) a trust or trusts for the exclusive benefit of such
Immediate Family Members, or
(iii) a partnership in which such Immediate Family Members
are the only partners, provided that :
(x) there may be no consideration for any such
transfer,
(y) the Agreement evidencing such Options must
be approved by Committee, and must expressly
provide for transferability in a manner
consistent with this Section, and
(z) subsequent transfers of transferred Options
shall be prohibited other than by will, by
applicable laws of descent and distribution
or pursuant to a domestic relations order
(as defined in the Code or Title I of the
Employment Retirement Income Security Act of
1974 or the rules or regulations
thereunder).
Following transfer, any such Options shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer, provided
that for purposes of Section 6(l)(2), the term "Optionee" shall be deemed to
refer to the initial transferor. The events of termination of employment of
Section 6(g) shall continue to be applied with respect to the original Optionee,
following which the options shall be exercisable by the transferee only to the
extent, and for the periods specified at Section 6(g). Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of any Option or of
any right or privilege conferred by the Plan contrary to the provisions hereof,
or upon the sale, levy or any attachment or similar process upon the rights and
privileges conferred by the Plan, such Option shall thereupon terminate and
become null and void.
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(l) SECURITIES REGULATION AND TAX WITHHOLDING.
(1) No shares of Common Stock shall be issued upon exercise of
an Option unless the exercise of such Option and the issuance and delivery of
such shares shall comply with all relevant provisions of law, including, without
limitation, any applicable state securities laws, the Securities Act, the
Exchange Act, the rules and regulations thereunder and the requirements of any
stock exchange upon which such shares may then be listed, and such issuance
shall be further subject to the approval of counsel for the Company with respect
to such compliance, including the availability of an exemption from registration
for the issuance and sale of such shares. The inability of the Company to obtain
from any regulatory body the authority deemed by the Company to be necessary for
the lawful issuance and sale of any shares under the Plan, or the unavailability
of an exemption from registration for the issuance and sale of any shares under
the Plan, shall relieve the Company of any liability with respect to the
non-issuance or sale of such shares.
As long as the Common Stock is not registered under the Exchange Act,
the Company intends that all offers and sales of Options and shares of Common
Stock issuable upon exercise of Options shall be exempt from registration under
the provisions of Section 5 of the Securities Act, and the Plan shall be
administered in a manner so as to preserve such exemption. The Company also
intends that the Plan shall constitute a written compensatory benefit plan,
within the meaning of Rule 701(b) promulgated under the Securities Act, and that
each Option granted pursuant to the Plan at a time when the Common Stock is not
registered under the Exchange Act shall, unless otherwise specified by the
Committee at the time the Option is granted or at any time thereafter, be
granted in reliance on the exemption from the registration requirements of
Section 5 of the Securities Act provided by Rule 701.
As a condition to the exercise of an Option, the Committee may require
the Optionee to represent and warrant in writing at the time of such exercise
that the shares of Common Stock issuable upon exercise of the Option are being
purchased only for investment and without any then-present intention to sell or
distribute such shares. At the option of the Committee, a stop-transfer order
against such shares may be placed on the stock books and records of the Company,
and a legend indicating that such shares may not be pledged, sold or otherwise
transferred unless an opinion of counsel is provided stating that such transfer
is not in violation of any applicable law or regulation, may be stamped on the
certificates representing such shares in order to assure an exemption from
registration. The Committee also may require such other documentation as it
shall, in its discretion, deem necessary from time to time to comply with
federal and state securities laws. THE COMPANY HAS NO OBLIGATION TO UNDERTAKE
REGISTRATION OF ANY OPTION OR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE OF ANY OPTION.
(2) The Company may require the Optionee to pay to the Company
the amount of any withholding taxes that the Company is required to withhold
with respect to the grant, vesting or exercise of any Option. Subject to the
Plan and applicable law, the Committee may, in its sole discretion, permit the
Optionee to satisfy withholding obligations, in whole or in part, by paying
cash, by electing to have the Company withhold shares of Common Stock or by
transferring shares of Common Stock to the Company, in such amounts as are
equivalent to the Fair Market Value of the withholding obligation. The Company
shall have the right to withhold from any shares of Common Stock issuable
pursuant to an Option or from any cash amounts otherwise due or to become due
from the Company to the Optionee an amount equal to such taxes. The Company may
also deduct from any Option any other amounts due from the Optionee to the
Company or a Related Corporation.
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(3) The issuance, transfer or delivery of certificates of
Common Stock pursuant to the exercise of an Option may be delayed, at the
discretion of the Committee, until the Committee is satisfied that the
applicable requirements of the federal and state securities laws and the
withholding provisions of the Code have been met.
(m) STOCK SPLIT, REORGANIZATION OR LIQUIDATION.
(1) In the event that, at any time or from time to time, a
stock dividend, stock split, spin-off, combination or exchange of shares,
recapitalization, merger, consolidation, distribution to shareholders other than
a normal cash dividend, or other change in the Company's corporate or capital
structure results in (a) the outstanding shares, or any securities exchanged
therefor or received in their place, being exchanged for a different number or
class of securities of the Company or of any other corporation or (b) new,
different or additional securities of the Company or of any other corporation
being received by the holders of shares of Common Stock of the Company, then the
Board shall make proportional adjustments in (i) the maximum number and kind of
securities subject to the Plan as set forth in Section 5 and (ii) the number and
kind of securities that are subject to any outstanding Option and the per share
price of such securities, without any change in the aggregate price to be paid
therefor. The determination by the Board as to the terms of any of the foregoing
adjustments shall be conclusive and binding. Notwithstanding the foregoing, an
Approved Transaction or Control Purchase shall not be governed by this Section
6(m) but shall be governed by Section 6(n).
(2) The foregoing adjustments shall be made by the Committee
or by the applicable terms of any assumption or substitution document.
(3) With respect to the foregoing adjustments, the number of
shares subject to an Option shall always be a whole number. The Committee may,
if deemed appropriate, provide for a cash payment to any Optionee in connection
with any adjustment made pursuant to this Section 6(m).
(4) The grant of an Option shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge,
consolidate or dissolve, to liquidate or to sell or transfer all or any part of
its business or assets.
(k) APPROVED TRANSACTIONS; CONTROL PURCHASE.
(1) Except as otherwise provided in this instrument that
evidences an Option, in the event of any Approved Transaction or Control
Purchase, each Option that is at the time outstanding shall automatically
accelerate so that each such Option shall, immediately prior to the specified
effective date for the Approved Transaction or Control Purchase, become 100%
vested and exercisable.
(2) Such Option shall not so accelerate, however, if and to
the extend that such Option is, in connection with the Approved Transaction or
Control Purchase, either to be assumed by the successor corporation or parent
thereof (the "Successor Corporation") or to be replaced with a comparable option
for the purchase of shares of capital stock of the Successor Corporation. The
determination of option comparability shall be made by the Board, and its
determination shall be conclusive and binding.
(3) All such Options shall terminate and cease to remain
outstanding immediately following the consummation of the Approved Transaction
or Control Purchase, except to the extent assumed by the Successor Corporation.
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(4) The acceleration will not occur if, in the opinion of the
Company's outside accountants, it would render unavailable "pooling of interest"
accounting for an Approved Transaction or Control Purchase that would otherwise
qualify for such accounting treatment.
(o) FURTHER ADJUSTMENTS OF AWARDS.
Subject to the other provisions of Section 6, the Board shall have the
discretion, exercisable at any time before a sale, merger, consolidation,
reorganization, liquidation or change in control of the Company, as defined by
the Board, to take such further action as it determines to be necessary or
advisable, and fair and equitable to the Optionees, with respect to Options.
Such authorized action may include (but shall not be limited to) establishing,
amending or waiving the type, terms, conditions or duration of, or restrictions
on, Options so as to provide for earlier, later, extended or additional time for
exercise, lifting restrictions and other modifications, and the Board may take
such actions with respect to all Optionees, to certain categories of Optionees
or only to individual Optionees. The Board may take such action before or after
granting Options to which the action relates and before or after any public
announcement with respect to such sale, merger, consolidation, reorganization,
liquidation or change in control that is the reason for such action.
7. EFFECTIVE DATE; TERM.
The Plan shall be effective at the time specified in the resolutions of
the Board adopting the Plan (the "Effective Date"). Options may be granted by
the Committee or Executive Officer from time to time thereafter until the tenth
anniversary of the Effective Date. Termination of the Plan shall not terminate
any Option granted prior to such termination. Issuance of Non-Qualified Stock
Options under the Plan shall be subject to the requirement of RCW 21.20.310(10)
that the Administrator of Securities of the Department of Financial Institutions
of the State of Washington be provided with notification of the adoption of the
Plan. No Non-Qualified Stock Option shall be granted hereunder until this
notification requirement has been satisfied. Issuance of Incentive Stock Options
under the Plan within twelve (12) months after the Effective Date shall be
subject to the approval of the Plan by the shareholders of the Company at a duly
held meeting of shareholders at which a majority of all outstanding voting stock
of the Company is represented in person or by proxy. The approval required shall
be a majority of the votes cast on the proposal to approve the Plan. Such
approval may also be provided pursuant to a written consent in lieu of such
meeting. No Incentive Stock Option granted hereunder shall be exercisable until
this approval requirement has been satisfied. If this requirement is not
satisfied within twelve (12) months after the Effective Date, then,
notwithstanding any contrary provision in the Plan (a) no Incentive Stock
Options may thereafter be granted under the Plan, and (b) each Incentive Stock
Option granted under the Plan prior thereto shall automatically be deemed to be
a Non-Qualified Stock Option (except to the extent the Agreement evidencing the
Option expressly provides otherwise).
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8. MARKET STANDOFF.
In connection with any underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed
under the Securities Act, including the Company's initial public offering, a
person shall not sell, make any short sale of, loan, hypothecate, pledge, grant
any option for the purchase of, or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to,
any shares issued pursuant to an Option granted under the Plan without the prior
written consent of the Company or its underwriters. Such limitations shall be in
effect for such period of time as may be requested by the Company or such
underwriters and agreed to by the Company's officers and directors with respect
to their shares; provided, however, that in no event shall such period exceed
180 days. The limitations of this paragraph shall in all events terminate two
years after the effective date of the Company's initial public offering. Holders
of shares issued pursuant to an Option granted under the Plan shall be subject
to the market standoff provisions of this paragraph only if the officers and
directors of the Company are also subject to similar arrangements.
In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock effected as a class without the Company's
receipt of consideration, then an new, substituted or additional securities
distributed with respect to the purchased shares shall immediately subject to
the provisions of this Section 8, to the same extent the purchased shares are at
such time covered by such provisions.
In order to enforce the limitations of this Section 8, the Company may
impose stop-transfer instructions with respect to the purchased shares until the
end of the applicable standoff period.
9. NO OBLIGATIONS TO EXERCISE OPTION.
The grant of an Option shall impose no obligation upon the Optionee to
exercise such Option.
10. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
Whether or not any Options are to be granted under the Plan shall be
exclusively within the discretion of the Committee, and nothing contained in the
Plan shall be construed as giving any person any right to participate under the
Plan. The grant of an Option to any Optionee shall in no way constitute any form
of agreement or understanding binding on the Company or any Related Corporation,
express or implied, that the Company or such Related Corporation will employ or
contract with such Optionee for any length of time, nor shall it interfere in
any way with the Company's or, where applicable, a Related Corporation's right
to terminate such Optionee's employment at any time, which right is hereby
reserved.
11. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock
issued upon the exercise of Options shall be used for general corporate
purposes, unless otherwise directed by the Board.
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12. INDEMNIFICATION OF COMMITTEE.
In addition to all other rights of indemnification they may have by
virtue of being a member of the Board or an executive officer of the Company,
members of the Committee and the Executive Officer shall be indemnified by the
Company for all reasonable expenses and liabilities of any type or nature,
including attorneys' fees, incurred in connection with any action, suit or
proceeding to which they or any of them are a party by reason of, or in
connection with, the Plan or any Option granted under the Plan, and against all
amounts paid by them in settlement thereof (provided that such settlement is
approved by independent legal counsel selected by the Company), except to the
extent that such expenses relate to matters for which it is adjudged that such
Committee member or Executive Officer is liable for willful misconduct;
PROVIDED, HOWEVER, that within fifteen (15) days after the institution of any
such action, suit or proceeding, the Committee member or Executive Officer
involved therein shall, in writing, notify the Company of such action, suit or
proceeding, so that the Company may have the opportunity to make appropriate
arrangements to prosecute or defend the same.
13. SHAREHOLDERS AGREEMENT.
Unless the Agreement evidencing an Option expressly provides otherwise,
each Optionee may be required, as a condition to the issuance of any shares of
Common Stock that such Optionee acquires upon the exercise of the Option, to
execute and deliver to the Company a shareholders agreement in such form as may
be required by the Company at the time of such exercise, or a counterpart
thereof, together with, unless the Optionee is unmarried, a spousal consent in
the form required thereby, unless the Optionee has previously executed and
delivered such documents and they are in effect at the time of exercise and
apply by their terms to the shares to be issued.
14. SEPARABILITY.
With respect to Incentive Stock Options, if the Plan does not contain
any provision required to be included herein under Section 422 of the Code, such
provision shall be deemed to be incorporated herein with the same force and
effect as if such provision had been set out in full herein; PROVIDED, HOWEVER,
that to the extent any Option that is intended to qualify as an Incentive Stock
Option cannot so qualify, the Option, to that extent, shall be deemed to be a
Non-Qualified Stock Option for all purposes of the Plan.
15. NON-EXCLUSIVITY OF THE PLAN.
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the shareholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and the awarding of stock and cash otherwise than
pursuant to the Plan, and such arrangements may be either generally applicable
or applicable only in specific cases.
16. EXCLUSION FROM PENSION AND PROFIT-SHARING COMPUTATION.
By acceptance of an Option, unless otherwise provided in the Agreement
evidencing the Option, the Optionee with respect to such Option shall be deemed
to have agreed that the Option is special incentive compensation that will not
be taken into account, in any manner, as salary, compensation or bonus in
determining the amount of any payment or other benefit under any pension,
retirement or other employee benefit plan, program or policy of the Company or
any of its affiliates.
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17. AMENDMENT OF PLAN.
The Board may, at any time, modify, amend or terminate the Plan or
modify or amend any Option granted pursuant to the Plan, including, without
limitation, such modifications or amendments as are necessary to maintain
compliance with applicable statutes, rules or regulations; PROVIDED, HOWEVER,
that no amendment with respect to an outstanding Option which has the effect of
reducing the benefits afforded to the Optionee shall be made over the objection
of such Optionee; FURTHER PROVIDED, that the events triggering acceleration of
vesting of an outstanding Option may be modified, expanded or eliminated without
the consent of the Optionee. The Board may condition the effectiveness of any
such amendment on the receipt of shareholder approval at such time and in such
manner as the Committee may consider necessary for the Company to comply with or
to avail the Company, the Optionees or both of the benefits of any securities,
tax, market listing or other administrative or regulatory requirement which the
Board determines to be desirable. Without limiting the generality of the
foregoing, the Board may modify grants to persons who are eligible to receive
Options under the Plan who are foreign nationals or employed outside the United
States to recognize differences in local law, tax policy or custom.
Date Approved by the Board of Directors of Company: June 28, 1999
Date Approved by the Shareholders of Company: ____________________, 1999
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