NETWORK PERIPHERALS INC.
1997 STOCK PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 Establishment. The Network Peripherals Inc. 1997 Stock
Plan (the "Plan") is hereby established effective as of February 18, 1997 (the
"Effective Date").
1.2 Purpose. The purpose of the Plan is to advance the
interests of the Participating Company Group and its stockholders by providing
an incentive to attract, retain and reward persons performing services for the
Participating Company Group and by motivating such persons to contribute to the
growth and profitability of the Participating Company Group.
1.3 Term of Plan. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Awards granted under the Plan have lapsed. However, all Incentive
Stock Options shall be granted, if at all, within ten (10) years from the
earlier of the date the Plan is adopted by the Board or the date the Plan is
duly approved by the stockholders of the Company.
2. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used herein, the following terms
shall have their respective meanings set forth below:
(a) "Award" means an Option or Restricted Stock.
(b) "Board" means the Board of Directors of the
Company. If one or more Committees have been appointed by the Board to
administer the Plan, "Board" also means such Committee(s).
(c) "Code" means the Internal Revenue Code of 1986,
as amended, and any applicable regulations promulgated thereunder.
(d) "Committee" means the Compensation Committee or
other committee of the Board duly appointed to administer the Plan and having
such powers as shall be specified by the Board. Unless the powers of the
Committee have been specifically limited, the Committee shall have all of the
powers of the Board granted herein, including, without limitation, the power to
amend or terminate the Plan at any time, subject to the terms of the Plan and
any applicable limitations imposed by law.
(e) "Company" means Network Peripherals Inc., a
Delaware corporation, or any successor corporation thereto.
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(f) "Consultant" means any person, including an
advisor, engaged by a Participating Company to render services other than as an
Employee or a Director.
(g) "Director" means a member of the Board or of the
board of directors of any other Participating Company.
(h) "Disability" means the permanent and total
disability of the Participant within the meaning of Section 22(e)(3) of the
Code.
(i) "Employee" means any person treated as an
employee (including an officer or a Director who is also treated as an employee)
in the records of a Participating Company; provided, however, that neither
service as a Director nor payment of a director's fee shall be sufficient to
constitute employment for purposes of the Plan.
(j) "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(k) "Fair Market Value" means, as of any date, the
value of a share of Stock or other property as determined by the Board, in its
sole discretion, or by the Company, in its sole discretion, if such
determination is expressly allocated to the Company herein, subject to the
following:
(i) If, on such date, there is a public
market for the Stock, the Fair Market Value of a share of Stock shall be the
closing sale price of a share of Stock (or the mean of the closing bid and asked
prices of a share of Stock if the Stock is so quoted instead) as quoted on the
Nasdaq National Market, the Nasdaq Small-Cap Market or such other national or
regional securities exchange or market system constituting the primary market
for the Stock, as reported in the Wall Street Journal or such other source as
the Company deems reliable. If the relevant date does not fall on a day on which
the Stock has traded on such securities exchange or market system, the date on
which the Fair Market Value shall be established shall be the last day on which
the Stock was so traded prior to the relevant date, or such other appropriate
day as shall be determined by the Board, in its sole discretion.
(ii) If, on such date, there is no public
market for the Stock, the Fair Market Value of a share of Stock shall be as
determined by the Board without regard to any restriction other than a
restriction which, by its terms, will never lapse.
(l) "Incentive Stock Option" means an Option intended
to be (as set forth in the Option Agreement) and which qualifies as an incentive
stock option within the meaning of Section 422(b) of the Code.
(m) "Insider" means an officer or a Director of the
Company or any other person whose transactions in Stock are subject to Section
16 of the Exchange Act.
(n) "Nonstatutory Stock Option" means an Option not
intended to be (as set forth in the Option Agreement) or which does not qualify
as an Incentive Stock Option.
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(o) "Option" means a right granted under Section 6 to
purchase Stock (subject to adjustment as provided in Section 4.2) pursuant to
the terms and conditions of the Plan. An Option may be either an Incentive Stock
Option or a Nonstatutory Stock Option.
(p) "Option Agreement" means a written agreement
between the Company and an Optionee setting forth the terms, conditions and
restrictions of the Option granted to the Optionee and any shares acquired upon
the exercise thereof.
(q) "Optionee" means a person who has been granted
one or more Options.
(r) "Parent Corporation" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(s) "Participant" means a person who has been granted
one or more Awards.
(t) "Participating Company" means the Company or any
Parent Corporation or Subsidiary Corporation.
(u) "Participating Company Group" means, at any point
in time, all corporations collectively which are then Participating Companies.
(v) "Restricted Stock" means Stock (subject to
adjustment as provided in Section 4.2) granted or sold to a Participant pursuant
to Section 7 and the terms and conditions of the Plan.
(w) "Restricted Stock Agreement" means a written
agreement between the Company and a Participant setting forth the terms,
conditions and restrictions applying to the Restricted Stock acquired by the
Participant.
(x) "Rule 16b-3" means Rule 16b 3 under the Exchange
Act, as amended from time to time, or any successor rule or regulation.
(y) "Section 162(m)" means Section 162(m) of the
Code, as amended by the Revenue Reconciliation Act of 1993 (P.L. 103-66), and
any regulations promulgated thereunder.
(z) "Securities Act" means the Securities Act of
1933, as amended.
(aa) "Service" means a Participant's employment or
service with the Participating Company Group, whether in the capacity of an
Employee, a Director or a Consultant. The Participant's Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders Service to the Participating Company Group or a change
in the Participating Company for which the Participant renders such Service,
provided that there is no interruption or termination of the Participant's
Service. Furthermore, a Participant's Service with the Participating Company
Group shall not be deemed to have
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terminated if the Participant takes any military leave, sick leave, or other
bona fide leave of absence approved by the Company; provided, however, that if
any such leave exceeds ninety (90) days, on the ninety-first (91st) day of such
leave the Participant's Service shall be deemed to have terminated unless the
Participant's right to return to Service with the Participating Company Group is
guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company or required by law, a leave of absence shall
not be treated as Service for purposes of determining vesting under the
Participant's Option Agreement or Restricted Stock Agreement. The Participant's
Service shall be deemed to have terminated either upon an actual termination of
Service or upon the corporation for which the Participant performs Service
ceasing to be a Participating Company. Subject to the foregoing, the Company, in
its sole discretion, shall determine whether the Participant's Service has
terminated and the effective date of such termination.
(bb) "Stock" means the common stock of the Company,
as adjusted from time to time in accordance with Section 4.2.
(cc) "Subsidiary Corporation" means any present or
future "subsidiary corporation" of the Company, as defined in Section 424(f) of
the Code.
(dd) "Ten Percent Stockholder" means a Participant
who, at the time an Award is granted to the Participant, owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of a Participating Company within the meaning of Section 422(b)(6) of the
Code.
2.2 Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.
3. ADMINISTRATION.
3.1 Administration by the Board. The Plan shall be
administered by the Board. All questions of interpretation of the Plan or of any
Award shall be determined by the Board, and such determinations shall be final
and binding upon all persons having an interest in the Plan or such Award. Any
officer of a Participating Company shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, determination or
election which is the responsibility of or which is allocated to the Company
herein, provided the officer has apparent authority with respect to such matter,
right, obligation, determination or election.
3.2 Administration with Respect to Insiders. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b 3.
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3.3 Powers of the Board. In addition to any other powers set
forth in the Plan and subject to the provisions of the Plan, the Board shall
have the full and final power and authority, in its sole discretion:
(a) to determine the persons to whom, and the time or
times at which, Awards shall be granted and the number of shares of Stock to be
subject to each Award;
(b) to determine whether an Award will be an
Incentive Stock Option, a Nonstatutory Stock Option, or Restricted Stock;
(c) to determine the Fair Market Value of shares of
Stock or other property;
(d) to determine the terms, conditions and
restrictions applicable to each Award (which need not be identical) and any
shares acquired pursuant to the Plan, including, without limitation, (i) the
exercise or purchase price, if any, applicable to each Award, (ii) the method of
payment for shares purchased under the Plan, (iii) the method for satisfaction
of any tax withholding obligation arising in connection with the Award or such
shares, including by the withholding or delivery of shares of stock, (iv) the
timing, terms and conditions of the exercisability of each Option or the vesting
of any shares acquired pursuant to the Plan, (v) the time of the expiration of
the Award, (vi) the effect of the Participant's termination of Service with the
Participating Company Group on any of the foregoing, and (vii) all other terms,
conditions and restrictions applicable to the Award or such shares not
inconsistent with the terms of the Plan;
(e) to approve one or more forms of Option Agreement
and Restricted Stock Agreement;
(f) to amend, modify, extend, or renew, or grant a
new Award in substitution for, any Award or to waive any restrictions or
conditions applicable to any Award or any shares acquired under the Plan;
(g) to accelerate, continue, extend or defer the
exercisability of any Option or the vesting of any shares acquired under the
Plan, including with respect to the period following a Participant's termination
of Service with the Participating Company Group;
(h) to delegate to any proper officer of the Company
the authority to grant one or more Awards, without further approval of the
Board, to any person eligible pursuant to Section 5, other than a person who, at
the time of such grant, is an Insider; provided, however, that (i) such Awards
shall not be granted to any one person within any fiscal year of the Company for
more than 50,000 shares in the aggregate, (ii) the exercise or purchase price
per share of Stock shall be equal to the Fair Market Value per share of the
Stock on the effective date of grant, and (iii) each such Award shall be subject
to the terms and conditions of the appropriate standard form of Option Agreement
or Restricted Stock Agreement approved by the Board and shall conform to the
provisions of the Plan and such other guidelines as shall be established from
time to time by the Board;
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(i) to prescribe, amend or rescind rules, guidelines
and policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted Awards;
and
(j) to correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option Agreement or Restricted
Stock Agreement and to make all other determinations and take such other actions
with respect to the Plan or any Award as the Board may deem advisable to the
extent consistent with the Plan and applicable law.
3.4 Committee Complying with Section 162(m). If a
Participating Company is a "publicly held corporation" within the meaning of
Section 162(m), the Board may establish a Committee of "outside directors"
within the meaning of Section 162(m) (a "Section 162(m) Committee") to approve
the grant of any Award which might reasonably be anticipated to result in the
payment of employee remuneration that would otherwise exceed the limit on
employee remuneration deductible for income tax purposes pursuant to Section
162(m).
4. SHARES SUBJECT TO PLAN.
4.1 Maximum Number of Shares Issuable. Subject to adjustment
as provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be one million five hundred thousand
(1,500,000) and shall consist of authorized but unissued or reacquired shares of
Stock or any combination thereof. If an outstanding Award for any reason expires
or is terminated or canceled or shares of Stock acquired, subject to repurchase
or forfeiture, pursuant to an Award are repurchased by the Company or forfeited,
the shares of Stock allocable to the unexercised portion of such Award, or such
repurchased or forfeited shares of Stock, shall again be available for issuance
under the Plan.
4.2 Adjustments for Changes in Capital Structure. In the event
of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and class of shares
subject to the Plan and to any outstanding Awards, in the Section 162(m) Grant
Limit set forth in Section 4.3, and in the exercise or purchase price per share
of any outstanding but unexercised Awards. If a majority of the shares which are
of the same class as the shares that are subject to outstanding Awards are
exchanged for, converted into, or otherwise become (whether or not pursuant to
an Ownership Change Event, as defined in Section 8.1) shares of another
corporation (the "New Shares"), the Board may unilaterally amend the outstanding
Awards to provide that such Awards are for New Shares. In the event of any such
amendment, the number of shares subject to outstanding Awards and the exercise
or purchase price per share of outstanding but unexercised Awards shall be
adjusted in a fair and equitable manner as determined by the Board, in its sole
discretion. Notwithstanding the foregoing, any fractional share resulting from
an adjustment pursuant to this Section 4.2 shall be rounded up or down to the
nearest whole number, as determined by the Board, and in no event may the
exercise
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or purchase price of any Award be decreased to an amount less than the par
value, if any, of the stock subject to the Award. The adjustments determined by
the Board pursuant to this Section 4.2 shall be final, binding and conclusive.
4.3 Section 162(m) Grant Limit. Subject to adjustment as
provided in Section 4.2, at any such time as a Participating Company is a
"publicly held corporation" within the meaning of Section 162(m), no Employee
shall be granted one or more Awards within any fiscal year of the Company which
in the aggregate are for more than five hundred thousand (500,000) shares;
provided, however, that the Company may make an additional one-time grant to any
newly-hired Employee of an Award for up to two hundred fifty thousand (250,000)
shares (the "Section 162(m) Grant Limit"). An Option which is canceled in the
same fiscal year of the Company in which it was granted shall continue to be
counted against the Section 162(m) Grant Limit for such period.
5. ELIGIBILITY. Awards may be granted only to Employees, Consultants,
and Directors. For purposes of the foregoing sentence, "Employees,"
"Consultants" and "Directors" shall include prospective Employees, prospective
Consultants and prospective Directors to whom Awards, other than a Restricted
Stock Bonus (as defined in Section 7 below), may be granted in connection with
written offers of a Service relationship with the Participating Company Group.
Eligible persons may be granted more than one (1) Award.
6. TERMS AND CONDITIONS OF OPTIONS.
Options shall be evidenced by Option Agreements specifying the
number of shares of Stock covered thereby, in such form as the Board shall from
time to time establish. Option Agreements may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
6.1 Limitations on Options.
(a) Option Grant Restrictions. Any person who is not
an Employee on the effective date of the grant of an Option to such person may
be granted only a Nonstatutory Stock Option. An Incentive Stock Option granted
to a prospective Employee upon the condition that such person become an Employee
shall be deemed granted effective on the date such person commences Service as
an Employee with a Participating Company, with an exercise price determined as
of such date in accordance with Section 6.2.
(b) Fair Market Value Limitation. To the extent that
options designated as Incentive Stock Options (granted under all stock option
plans of the Participating Company Group, including the Plan) become exercisable
by an Optionee for the first time during any calendar year for stock having a
Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the
portion of such options which exceeds such amount shall be treated as
Nonstatutory Stock Options. For purposes of this Section 6.1(b), options
designated as Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of stock shall be
determined as of the time the option with respect to such stock is granted. If
the Code is amended to provide for a different limitation from that set forth in
this
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Section 6.1(b), such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason of the
limitation set forth in this Section 6.1(b), the Optionee may designate which
portion of such Option the Optionee is exercising. In the absence of such
designation, the Optionee shall be deemed to have exercised the Incentive Stock
Option portion of the Option first. Separate certificates representing each such
portion shall be issued upon the exercise of the Option.
6.2 Exercise Price. The exercise price for each Option shall
be established in the sole discretion of the Board; provided, however, that (a)
the exercise price per share for an Incentive Stock Option shall be not less
than the Fair Market Value of a share of Stock on the effective date of grant of
the Option, (b) the exercise price per share for a Nonstatutory Stock Option
shall be not less than eighty five percent (85%) of the Fair Market Value of a
share of Stock on the effective date of grant of the Option, and (c) no
Incentive Stock Option granted to a Ten Percent Stockholder shall have an
exercise price per share less than one hundred ten percent (110%) of the Fair
Market Value of a share of Stock on the effective date of grant of the Option.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a
Nonstatutory Stock Option) may be granted with an exercise price lower than the
minimum exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying under the
provisions of Section 424(a) of the Code.
6.3 Exercise Period. Options shall be exercisable at such time
or times, or upon such event or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the Board and
set forth in the Option Agreement evidencing such Option; provided, however,
that (a) no Incentive Stock Option shall be exercisable after the expiration of
ten (10) years after the effective date of grant of such Option, (b) no
Incentive Stock Option granted to a Ten Percent Stockholder shall be exercisable
after the expiration of five (5) years after the effective date of grant of such
Option, and (c) no Option granted to a prospective Employee, prospective
Consultant or prospective Director may become exercisable prior to the date on
which such person commences Service with a Participating Company. Except as
otherwise provided in this Section or by the Board in the grant of an Option,
any Option granted hereunder shall have a term of ten (10) years from the
effective date of grant of the Option.
6.4 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as
otherwise provided below, payment of the exercise price for the number of shares
of Stock being purchased pursuant to any Option shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of shares of Stock
owned by the Optionee having a Fair Market Value (as determined by the Company
without regard to any restrictions on transferability applicable to such stock
by reason of federal or state securities laws or agreements with an underwriter
for the Company) not less than the exercise price, (iii) by the assignment of
the proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option
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(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System) (a "Cashless Exercise"), (iv) by the
Optionee's promissory note in a form approved by the Company, (v) by such other
consideration as may be approved by the Board from time to time to the extent
permitted by applicable law, or (vi) by any combination thereof. The Board may
at any time or from time to time, by adoption of or by amendment to the standard
forms of Option Agreement described in Section 6.7, or by other means, grant
Options which do not permit all of the foregoing forms of consideration to be
used in payment of the exercise price or which otherwise restrict one or more
forms of consideration.
(b) Tender of Stock. Notwithstanding the foregoing,
an Option may not be exercised by tender to the Company of shares of Stock to
the extent such tender of Stock would constitute a violation of the provisions
of any law, regulation or agreement restricting the redemption of the Company's
stock. Unless otherwise provided by the Board, an Option may not be exercised by
tender to the Company of shares of Stock unless such shares either have been
owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.
(c) Cashless Exercise. The Company reserves, at any
and all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.
(d) Payment by Promissory Note. No promissory note
shall be permitted if the exercise of an Option using a promissory note would be
a violation of any law. Any permitted promissory note shall be on such terms as
the Board shall determine at the time the Option is granted. The Board shall
have the authority to permit or require the Optionee to secure any promissory
note used to exercise an Option with the shares of Stock acquired upon the
exercise of the Option or with other collateral acceptable to the Company.
Unless otherwise provided by the Board, if the Company at any time is subject to
the regulations promulgated by the Board of Governors of the Federal Reserve
System or any other governmental entity affecting the extension of credit in
connection with the Company's securities, any promissory note shall comply with
such applicable regulations, and the Optionee shall pay the unpaid principal and
accrued interest, if any, to the extent necessary to comply with such applicable
regulations.
6.5 Tax Withholding. The Company shall have the right, but not
the obligation, to deduct from the shares of Stock issuable upon the exercise of
an Option, or to accept from the Optionee the tender of, a number of whole
shares of Stock having a Fair Market Value, as determined by the Company, equal
to all or any part of the federal, state, local and foreign taxes, if any,
required by law to be withheld by the Participating Company Group with respect
to such Option or the shares acquired upon the exercise thereof. Alternatively
or in addition, in its sole discretion, the Company shall have the right to
require the Optionee, through payroll withholding, cash payment or otherwise,
including by means of a Cashless Exercise, to make adequate provision for any
such tax withholding obligations of the Participating Company
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Group arising in connection with the Option or the shares acquired upon the
exercise thereof. The Company shall have no obligation to deliver shares of
Stock or to release shares of Stock from an escrow established pursuant to the
Option Agreement until the Participating Company Group's tax withholding
obligations have been satisfied by the Optionee.
6.6 Effect of Termination of Service.
(a) Option Exercisability. Subject to earlier
termination of the Option as otherwise provided herein, an Option shall be
exercisable after an Optionee's termination of Service as follows:
(i) Disability. If the Optionee's Service
with the Participating Company Group is terminated because of the Disability of
the Optionee, the Option, to the extent unexercised and exercisable on the date
on which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months (or such longer period of time as determined by the
Board, in its sole discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the date of expiration of the
Option's term as set forth in the Option Agreement evidencing such Option (the
"Option Expiration Date").
(ii) Death. If the Optionee's Service with
the Participating Company Group is terminated because of the death of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee's
legal representative or other person who acquired the right to exercise the
Option by reason of the Optionee's death at any time prior to the expiration of
six (6) months (or such longer period of time as determined by the Board, in its
sole discretion) after the date on which the Optionee's Service terminated, but
in any event no later than the Option Expiration Date. The Optionee's Service
shall be deemed to have terminated on account of death if the Optionee dies
within three (3) months after the Optionee's termination of Service.
(iii) Other Termination of Service. If the
Optionee's Service with the Participating Company Group terminates for any
reason, except Disability or death, the Option, to the extent unexercised and
exercisable by the Optionee on the date on which the Optionee's Service
terminated, may be exercised by the Optionee within thirty (30) days (or such
longer period of time as determined by the Board, in its sole discretion) after
the date on which the Optionee's Service terminated, but in any event no later
than the Option Expiration Date.
(b) Extension if Exercise Prevented by Law.
Notwithstanding the foregoing, if the exercise of an Option within the
applicable time periods set forth in Section 6.6(a) is prevented by the
provisions of Section 12 below, the Option shall remain exercisable until three
(3) months after the date the Optionee is notified by the Company that the
Option is exercisable, but in any event no later than the Option Expiration
Date.
(c) Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 6.6(a) of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b)
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of the Exchange Act, the Option shall remain exercisable until the earliest to
occur of (i) the tenth (10th) day following the date on which a sale of such
shares by the Optionee would no longer be subject to such suit, (ii) the one
hundred and ninetieth (190th) day after the Optionee's termination of Service,
or (iii) the Option Expiration Date.
6.7 Standard Forms of Option Agreement. Unless otherwise
provided by the Board at the time the Option is granted, an Option designated as
an "Incentive Stock Option" or a "Nonstatutory Stock Option" shall comply with
and be subject to the terms and conditions set forth in the form of Incentive
Stock Option Agreement or Nonstatutory Stock Option Agreement, respectively,
adopted by the Board concurrently with its adoption of the Plan and as amended
from time to time. The Board shall have the authority from time to time to vary
the terms of any of the standard forms of Option Agreement described in this
Section either in connection with the grant or amendment of an individual Option
or in connection with the authorization of a new standard form or forms;
provided, however, that the terms and conditions of any such new, revised or
amended standard form or forms of Option Agreement are not inconsistent with the
terms of the Plan. Such authority shall include, but not by way of limitation,
the authority to grant Options which are immediately exercisable subject to the
Company's right to repurchase any unvested shares of Stock acquired by an
Optionee upon the exercise of an Option in the event such Optionee's employment
or service with the Participating Company Group is terminated for any reason,
with or without cause.
6.8 Nontransferability of Incentive Stock Options. During the
lifetime of the Optionee, an Option shall be exercisable only by the Optionee or
the Optionee's guardian or legal representative. No Option shall be assignable
or transferable by the Optionee, except by will or by the laws of descent and
distribution. Notwithstanding the foregoing, a Nonstatutory Stock Option shall
be assignable or transferable to the extent permitted by the Board and set forth
in the Option Agreement evidencing such Option.
7. TERMS AND CONDITIONS OF RESTRICTED STOCK.
The Board may from time to time grant Restricted Stock Awards
which may be in the form of a stock bonus (a "Restricted Stock Bonus") or a
stock purchase right (a "Restricted Stock Purchase Right"). Restricted Stock
Awards shall be evidenced by Restricted Stock Agreements, specifying the number
of shares of Stock covered there, in such form as the Board shall from time to
time establish. Restricted Stock Agreements may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
7.1 Performance-Based Restricted Stock Awards. A Section
162(m) Committee may, but need not, condition the grant of any Restricted Stock
Award (a "Performance Award") on the attainment, during a performance period
established by such Committee, of one or more performance goals pursuant to
procedures intended to qualify such Award as "performance-based compensation"
for purposes of Section 162(m). Any such performance goals shall be
preestablished in writing by the Section 162(m) Committee within the period
required by Section 162(m) and shall be based on one or more of the following
business
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criteria with respect to the Participating Company Group: revenue, operating
income, pre-tax profit, net income, gross margin, operating margin, earnings per
share, return on stockholder equity, return on capital, return on assets, or the
initial shipment of a new product. Such business criteria shall have the same
meaning as used in the Company's financial statements, or, if not used in the
Company's financial statements, the meaning pursuant to generally accepted
accounting principles or as used generally in the Company's industry. Each
performance goal shall be objectively determinable and may be an absolute
measure or a relative measure determined with reference to an index or other
standard selected by the Section 162(m) Committee. Prior to the issuance of
Stock pursuant to a Performance Award, the Section 162(m) Committee shall
certify in writing the attainment of the relevant performance goals. Neither the
Board nor any Committee thereof shall have the discretion to waive the
attainment of any performance goal or to increase the number of shares issuable
pursuant to a Performance Award in excess of the amount determined in accordance
with the objective formula established by the Section 62(m) Committee. However,
if provided in a Participant's Restricted Stock Agreement, the Section 62(m)
Committee shall have the authority to reduce the number of shares that would
otherwise become issuable to the Participant upon the attainment of the relevant
performance goals if, in the Section 162(m) Committee's sole judgment, such
reduction is appropriate; provided, however, that such reduction shall not
increase the number of shares issuable to another Participant.
7.2 Purchase Price. The purchase price under each Restricted
Stock Purchase Right shall be established by the Board. No monetary payment
(other than applicable tax withholding) shall be required as a condition of
receiving a Restricted Stock Bonus, the consideration for which shall be
services actually rendered to the Participating Company Group or for its
benefit.
7.3 Purchase Period. A Restricted Stock Purchase Right shall
be exercisable within a period established by the Board, which shall in no event
exceed thirty (30) days from the effective date of the grant of the Restricted
Stock Purchase Right; provided, however, that no Restricted Stock Purchase Right
granted to a prospective Employee, prospective Consultant or prospective
Director may become exercisable prior to the date on which such person commences
Service with a Participating Company.
7.4 Payment of Purchase Price.
(a) Forms of Consideration Authorized. Except as
otherwise provided below, payment of the purchase price for the number of shares
of Stock being purchased pursuant to any Restricted Stock Purchase Right shall
be made (i) in cash, by check, or cash equivalent, (ii) by the Participant's
promissory note in a form approved by the Company, (iii) y such other
consideration as may be approved by the Board from time to time to the extent
permitted by applicable law, or (iv) by any combination thereof. The Board may
at any time or from time to time, by adoption of or by amendment to the standard
form of Restricted Stock Agreement described in Section 7.9, or by other means,
grant Restricted Stock Purchase Rights which do not permit all of the foregoing
forms of consideration to be used in payment of the purchase price or which
otherwise restrict one or more forms of consideration. Restricted Stock
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Bonuses shall be issued in consideration for services actually rendered to the
Participating Company Group or for its benefit.
(b) Payment by Promissory Note. No promissory note
shall be permitted if the purchase of Restricted Stock using a promissory note
would be a violation of any law. Any permitted promissory note shall be on such
terms as the Board shall determine at the time the Restricted Stock Purchase
Right is granted. The Board shall have the authority to permit or require the
Participant to secure any promissory note used to purchase Restricted Stock with
such shares or with other collateral acceptable to the Company. Unless otherwise
provided by the Board, if the Company at any time is subject to the regulations
promulgated by the Board of Governors of the Federal Reserve System or any other
governmental entity affecting the extension of credit in connection with the
Company's securities, any promissory note shall comply with such applicable
regulations, and the Participant shall pay the unpaid principal and accrued
interest, if any, to the extent necessary to comply with such applicable
regulations.
7.5 Tax Withholding. The Company shall have the right to
require the Participant, through payroll withholding, cash payment or otherwise,
to make adequate provision for the federal, state, local and foreign taxes, if
any, required by law to be withheld by the Participating Company Group in
connection with a Restricted Stock Award or the shares acquired pursuant
thereto. The Company shall have no obligation to deliver shares of Stock or to
release shares of Stock from an escrow established pursuant to the Restricted
Stock Agreement until the Participating Company Group's tax withholding
obligations have been satisfied by the Participant.
7.6 Vesting and Restrictions on Transfer. Shares issued
pursuant to any Restricted Stock Award may be made subject to vesting
conditioned upon the satisfaction of such Service requirements, performance
goals (which may, but need not, be established and certified in accordance with
the provisions of Section 7.1), or other restrictions (the "Vesting
Restrictions") as shall be determined by the Board (or a Section 162(m)
Committee, as the case may be) and set forth in the Restricted Stock Agreement
evidencing such Award. During such period (the "Restriction Period") as shares
acquired pursuant to a Restricted Stock Award remain subject to Vesting
Restrictions, such shares may not be sold, exchanged, transferred, pledged,
assigned or otherwise disposed of other than pursuant to an Ownership Change
Event or as provided in Section 7.10. Upon request by the Company, each
Participant shall execute any agreement evidencing such transfer restrictions
prior to the receipt of shares of Stock hereunder and shall promptly present to
the Company any and all certificates representing shares of Stock acquired
hereunder for the placement on such certificates of appropriate legends
evidencing any such transfer restrictions.
7.7 Voting Rights; Dividends. Except as provided in this
Section and Section 7.6, during the Restriction Period applicable to shares of
Restricted Stock held by a Participant, the Participant shall have all of the
rights of a stockholder of the Company holding shares of Stock, including the
right to vote the shares of Restricted Stock and to receive all dividends and
other distributions paid with respect to such shares; provided, however, that if
any
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such dividends or distributions are paid in shares of Stock, such shares shall
be subject to the same Vesting Restrictions as the shares of Restricted Stock
with respect to which they were paid.
7.8 Effect of Termination of Service. If a Participant's
Service with the Participating Company Group terminates for any reason, whether
voluntary or involuntary (including the Participant's death or disability), (a)
the Company shall have the option to repurchase at the original purchase price
paid by the Participant shares of Restricted Stock acquired by the Participant
pursuant to a Restricted Stock Purchase Right and (b) the Participant shall
forfeit to the Company shares of Restricted Stock acquired by the Participant
pursuant to a Restricted Stock Bonus which, in either case, remain subject to
Vesting Restrictions as of the date of the Participant's termination of Service.
The Company shall have the right to assign at any time any repurchase right it
may have, whether or not such right is then exercisable, to one or more persons
as may be selected by the Company.
7.9 Standard Forms of Restricted Stock Agreement. The Board
shall have the authority from time to time to approve one or more standard forms
of Restricted Stock Agreement and to vary the terms of any such standard forms
either in connection with the grant or amendment of an individual Restricted
Stock Award or in connection with the authorization of a new standard form or
forms; provided, however, that the terms and conditions of any such new, revised
or amended standard form or forms of Restricted Stock Agreement are not
inconsistent with the terms of the Plan.
7.10 Nontransferability of Restricted Stock Award Rights.
Rights to acquire shares of Stock pursuant to a Restricted Stock Award may not
be assigned or transferred in any manner except by will or the laws of descent
and distribution, and, during the lifetime of the Participant, shall be
exercisable only by the Participant.
8. TRANSFER OF CONTROL.
8.1 Definitions.
(a) An "Ownership Change Event" shall be deemed to
have occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange
in a single or series of related transactions by the stockholders of the Company
of more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the
Company is a party;
(iii) the sale, exchange, or transfer of all
or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the
Company.
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(b) A "Transfer of Control" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, the
"Transaction") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "Transferee
Corporation(s)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 Effect of Transfer of Control on Awards. In the event of a
Transfer of Control, the Board, in its sole discretion, may provide that any
unexercisable or unvested portion of the outstanding Awards shall be immediately
exercisable and vested in full as of a date determined by the Board and/or may
arrange with the surviving, continuing, successor, or purchasing corporation or
parent corporation thereof, as the case may be (the "Acquiring Corporation"),
for the Acquiring Corporation to either assume the Company's rights and
obligations under outstanding Awards or substitute for outstanding Awards
substantially equivalent awards for the Acquiring Corporation's stock. For
purposes of this Section 8.2, an Award shall be deemed assumed if, following the
Transfer of Control, the Award confers the right to acquire in accordance with
its terms and conditions, for each share of Stock subject to the Award
immediately prior to the Transfer of Control, the consideration (whether stock,
cash or other securities or property) to which a holder of a share of Stock on
the effective date of the Transfer of Control was entitled. Any Awards which are
neither assumed or substituted for by the Acquiring Corporation in connection
with the Transfer of Control nor exercised as of the date of the Transfer of
Control shall terminate and cease to be outstanding effective as of the date of
the Transfer of Control. Notwithstanding the foregoing, shares acquired upon
exercise of an Award prior to the Transfer of Control and any consideration
received pursuant to the Transfer of Control with respect to such shares shall
continue to be subject to all applicable provisions of the Award Agreement
evidencing such Award except as otherwise provided in such Award Agreement or by
the Board.
9. PROVISION OF INFORMATION. Each Participant shall be given
access to information concerning the Company equivalent to that information
generally made available to the Company's common stockholders.
10. COMPLIANCE WITH SECURITIES LAW. The grant of Awards and
the issuance of shares of Stock pursuant to Awards shall be subject to
compliance with all applicable requirements of federal, state or foreign law
with respect to such securities. No shares may be issued pursuant an Award if
such issuance would constitute a violation of any applicable federal,
15
state or foreign securities laws or other law or regulations or the requirements
of any stock exchange or market system upon which the Stock may then be listed.
In addition, no Award may be exercised or shares issued pursuant to an Award
unless (a) a registration statement under the Securities Act shall at the time
of such exercise or issuance be in effect with respect to the shares issuable
pursuant to the Award or (b) in the opinion of legal counsel to the Company, the
shares issuable pursuant to the Award may be issued in accordance with the terms
of an applicable exemption from the registration requirements of the Securities
Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company's legal 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. As a
condition to the issuance of shares pursuant to any Award, the Company may
require the Participant to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as may be requested by
the Company.
11. INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.
12. TERMINATION OF AMENDMENT OF PLAN. The Board may terminate or amend
the Plan at any time. However, subject to changes in applicable law, regulations
or rules that would permit otherwise, without the approval of the Company's
stockholders, there shall be (a) no increase in the maximum aggregate number of
shares of Stock that may be issued under the Plan (except by operation of the
provisions of Section 4.2), (b) no change in the class of persons eligible to
receive Incentive Stock Options, and (c) no other amendment of the Plan that
would require approval of the Company's stockholders under any applicable law,
regulation or rule. In any event, no termination or amendment of the Plan may
adversely affect any then outstanding Award or any unexercised portion thereof,
without the consent of the Participant, unless such termination or amendment is
required to enable an Option designated as an Incentive Stock Option to qualify
as an Incentive Stock Option or is necessary to comply with any applicable law,
regulation or rule.
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IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Network Peripherals Inc. 1997 Stock Plan was duly adopted by
the Board on February 18, 1997.
________________________________
Secretary
17
PLAN HISTORY
------------
February 18, 1997 Board adopts Plan, with an initial reserve of
1,500,000 shares.
[April 24, 1997 Stockholders approve Plan, with an initial reserve of
1,500,000 shares.]
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