Exhibit 4.1 June 2, 2005 Stock and Stock Option Plan
Proton Laboratories, Inc.
June 2, 2005 Stock and Stock Option Plan
1. PURPOSE. The purpose of the Proton Laboratories, Inc. June 2, 2005 Stock
and Stock Option Plan ("the Plan") is to promote the financial interests of
the Company, its subsidiaries and its shareholders by providing incentives
in the form of stock and stock options to consultants, key employees and
directors who contribute materially to the success and profitability of the
Company. The grants of stock or stock options will recognize and reward
outstanding individual performances and contributions and will give such
persons a proprietary interest in the Company, thus enhancing their
personal interest in the Company's continued success and progress. This
Plan will also assist the Company and its subsidiaries in attracting,
retaining and motivating key employees and directors. The options granted
under this Plan may be either Incentive Stock Options, as that term is
defined in Section 422 of the Internal Revenue Code of 1986, as amended, or
Nonqualified options taxed under Section 83 of the Internal Revenue Code of
1986, as amended.
RULE 16B-3 PLAN. The Company is subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
therefore the Plan is intended to comply with all applicable conditions of
Rule 16b-3 (and all subsequent revisions thereof) promulgated under the
Exchange Act. To the extent any provision of the Plan or action by the
Committee or the Board of Directors or Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee. In addition, the Committee or the Board of
Directors may amend the Plan from time to time as it deems necessary in
order to meet the requirements of any amendments to Rule 16b-3 without the
consent of the shareholders of the Company.
EFFECTIVE DATE OF PLAN. The effective date of this Plan shall be June 2,
2005. (the "Effective Date"). The Board of Directors shall, within one year
of the Effective Date, submit the Plan for approval to the shareholders of
the Company. The plan shall be approved by at least a majority of
shareholders voting in person or by proxy at a duly held shareholders'
meeting, or if the provisions of the corporate charter, by-laws or
applicable state law prescribes a greater degree of shareholder approval
for this action, the approval by the holders of that percentage, at a duly
held meeting of shareholders. No Incentive Option or Nonqualified Stock
Option shall be granted pursuant to the Plan ten years after the Effective
Date. In the event that the Plan is not approved by the shareholders of the
Company, the Plan shall be deemed to be a non-qualified stock option plan.
REGISTRATION OF SHARES IN PLAN. The Company may register some or all the
shares in this plan on SEC Form S-8 or other appropriate form from time to
time.
2. DEFINITIONS. The following definitions shall apply to this Plan:
(a) "Affiliate" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation (other
than the Company) in an unbroken chain of corporations ending with the
Company if, at the time of the action or transaction, each of the
corporations other than the Company owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain. The term "subsidiary corporation" means any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of the action or transaction,
each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in the chain.
(b) "Agreement" means, individually or collectively, any agreement entered
into pursuant to the Plan pursuant to which Stock or Stock Options are
granted to a participant.
(c) "Award" means each of the following granted under this Plan: Stock,
Incentive Stock Options or Nonqualified Stock Options.
(d) "Board" means the board of directors of the Company.
(e) "Cause" shall mean, for purposes of whether and when a participant has
incurred a Termination of Employment for Cause: (i) any act or omission
which permits the Company to terminate the written agreement or arrangement
between the participant and the Company or a Subsidiary or Parent for Cause
as defined in such agreement or arrangement; or (ii) in the event there is
no such agreement or arrangement or the agreement or arrangement does not
define the term "cause," then Cause shall mean an act or acts of dishonesty
by the participant resulting or intending to result directly or indirectly
in gain to or personal enrichment of the participant at the Company's
expense and/or gross negligence or willful misconduct on the part of the
participant.
(f) "Change in Control" means, for purposes of this Plan:
i. there shall be consummated (a) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which shares of the Company's common stock would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of the Company's common stock immediately prior to the merger have
substantially the same proportionate ownership of common stock of the surviving
corporation immediately after the merger; or (b) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all
or substantially all of the assets of the Company; (iii) after the effective
date of this Plan a new person becomes the new owner of a simple majority of the
outstanding common stock of the Company, or,
ii. the shareholders of the Company shall approve any plan or proposal for the
liquidation or dissolution of the Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended, final
Treasury Regulations thereunder and any subsequent Internal Revenue Code.
(h) "Committee" means the Compensation Committee of the Board of Directors
or such other committee designated by the Board of Directors. The Committee
shall be comprised solely of at least two members who are both
Disinterested Persons and Outside Directors.
(i) "Common Stock" means the Common Stock, par value per share of the
Company whether presently or hereafter issued, or such other class of
shares or securities as to which the Plan may be applicable, pursuant to
Section 11 herein.
(j) "Company" means Proton Laboratories, Inc., a State of Washington
Corporation and includes any successor or assignee company corporations
into which the Company may be merged, changed or consolidated; any company
for whose securities the securities of the Company shall be exchanged; and
any assignee of or successor to substantially all of the assets of the
Company.
(k) "Continuous Service" means the absence of any interruption or
termination of employment with or service to the Company or any Parent or
Subsidiary of the Company that now exists or hereafter is organized or
acquired by or acquires the Company. Continuous Service shall not be
considered interrupted in the case of sick leave, military leave, or any
other bona fide leave of absence of less than ninety (90) days (unless the
participants right to reemployment is guaranteed by statute or by contract)
or in the case of transfers between locations of the Company or between the
Company, its Parent, its Subsidiaries or its successors
(l) "Date of Grant" means the date on which the Committee grants Stock or
Stock Options.
(m) "Director" means any member of the Board of Directors of the Company or
any Parent or subsidiary of the Company that now exists or hereafter is
organized or acquired by or acquires the Company.
(n) "Non Employee Director" means a "Non Employee Director" as that term is
defined in Rule 16b-3 under the Exchange Act.
(o) "Eligible Persons" shall mean, with respect to the Plan, those persons
who, at the time that an Award is granted, are (i)officers, directors or
employees of the Company or Affiliate or (ii) vendors, consultants,
attorneys or subcontractors of the Company or its affiliates.
(p) "Employee" means any person employed on an hourly or salaried basis by
the Company or any Parent or Subsidiary of the Company that now exists or
hereafter is organized or acquired by or acquires the Company.
(q) "Exchange Act" means the Securities Exchange Act of 1934, as amended
and the rules and regulations promulgated thereunder.
(r) "Fair Market Value" means (i) if closing prices for the Common Stock
are not furnished through a quotation medium such as the NYSE, Amex,
Nasdaq, OTCBB or Pink Sheets, the value established by the Committee, in
its sole discretion, for purposes of the Plan; (ii) if the Common Stock is
listed or admitted to trade on a quotation medium such as the NYSE, Amex,
Nasdaq, OTCBB or Pink Sheets, the closing price of the Common Stock so
listed or admitted to trade on such date or, if there is no trading of the
Common Stock on such date, then the closing price of the Common Stock on
the next preceding day on which there was trading in such shares; or (iii)
if trading in the stock or a price quotation does not occur on the Date of
Grant, the next preceding date on which the stock was traded or a price was
quoted will determine the fair market value.
(s) "Incentive Stock Option" means a stock option, granted pursuant to
either this Plan or any other plan of the Company, that satisfies the
requirements of Section 422 of the Code and that entitles the Optionee to
purchase stock of the Company or in a corporation that at the time of grant
of the option was a Parent or subsidiary of the Company or a predecessor
company of any such company.
(t) "Nonqualified Stock Option" means an Option to purchase Common Stock in
the Company granted under the Plan other than an Incentive Stock Option
within the meaning of Section 422 of the Code.
(u) "Option" means a stock option granted pursuant to the Plan.
(v) "Option Period" means the period beginning on the Date of Grant and
ending on the day prior to the tenth anniversary of the Date of Grant or
such shorter termination date as set by the Committee.
(w) "Optionee" means an Employee, Officer Director, vendors, consultants,
attorneys or subcontractors who receives an Option.
(x) "Parent" means any corporation which owns 50% or more of the voting
securities of the Company.
(y) "Plan" means this June 2, 2005 Stock and Stock Option Plan as amended
from time to time.
(z) "Share" means the Common Stock, as adjusted in accordance with
Paragraph 11 of the Plan.
(aa) "Ten Percent Shareholder" means an individual who, at the time the
Stock or Option is granted, owns Stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or of
any Affiliate. An individual shall be considered as owning the Stock owned,
directly or indirectly, by or for his brothers and sisters (whether by the
whole or half blood), spouse, ancestors, and lineal descendants; and Stock
owned, directly or indirectly, by or for a corporation, partnership,
estate, or trust, shall be considered as being owned proportionately by or
for its shareholders, partners, or beneficiaries.
(bb) "Termination" or "Termination of Employment" means the occurrence of
any act or event whether pursuant to an employment agreement or otherwise
that actually or effectively causes or results in the person's ceasing, for
whatever reason, to be an officer or employee of the Company or of any
Subsidiary or Parent including, without limitation, death, disability,
dismissal, severance at the election of the participant, retirement, or
severance as a result of the discontinuance, liquidation, sale or transfer
by the Company or its Subsidiaries or Parent of all businesses owned or
operated by the Company or its Subsidiaries. A Termination of Employment
shall occur to an employee who is employed by an Subsidiary if the
Subsidiary shall cease to be a Subsidiary and the participant shall not
immediately thereafter become an employee of the Company or a Subsidiary.
(cc) "Subsidiary" means any corporation 50% or more of the voting
securities of which are owned directly or indirectly by the Company at any
time during the existence of this Plan.
In addition, certain other terms used in this Plan shall have the
definitions given to them in the first place in which they are used.
3. ADMINISTRATION.
a. This Plan will be administered by the Committee. A majority of the full
Committee constitutes a quorum for purposes of administering the Plan, and all
determinations of the Committee shall be made by a majority of the members
present at a meeting at which a quorum is present or by the unanimous written
consent of the Committee.
b. If no Committee has been appointed, members of the Board may vote on any
matters affecting the administration of the Plan or the grant of any Stock or
Stock Option pursuant to the Plan, except that no such member shall act on the
granting of Stock or a Stock Option to himself, but such member may be counted
in determining the existence of a quorum at any meeting of the Board during
which action is taken with respect to the granting of Stock or Stock Options to
him.
c. Subject to the terms of this Plan, the Committee has the sole and exclusive
power to:
i. select the participants in this Plan.
ii. establish the terms of the Stock or Stock Options granted to each
participant which may not be the same in each case.
iii. determine the total number of Stock or Stock Options to grant to an
Optionee, which may not be the same in each case.
iv. fix the Option period for any Option granted which may not be the same
in each case.
v. make all other determinations necessary or advisable under the Plan.
vi. determine the minimum number of shares with respect to which Options
may be exercised in part at any time.
vii. The Committee has the sole and absolute discretion to determine
whether the performance of an eligible Employee warrants an award under this
Plan, and to determine the amount of the award.
viii. The Committee has full and exclusive power to construe and interpret
this Plan, to prescribe and rescind rules and regulations relating to this Plan,
and take all actions necessary or advisable for the Plan's administration. Any
such determination made by the Committee will be final and binding on all
persons.
d. A member of the Committee will not be liable for performing any act or
making any determination in good faith.
4. SHARES SUBJECT TO THIS PLAN. Subject to the provisions of Paragraph 11 of
the Plan, the maximum aggregate number of Shares that may be granted or optioned
and sold under the Plan shall be 1,500,000 Shares. Such shares may be authorized
but unissued, or may be treasury shares. If an Option shall expire or become
unexercisable for any reason without having been exercised in full, the
unpurchased Shares that were subject to the Option shall, unless the Plan has
then terminated, be available for other Options under the Plan.
a. Eligible Persons. Every Eligible Person, as the Committee in its sole
discretion designates, is eligible to participate in this Plan. Directors
who are not employees of the Company or any subsidiary or Parent shall only
be eligible to receive Stock and Incentive Stock Options if and as
permitted be applicable law and regulations. The Committee's award to a
participant in any year does not require the Committee to make an award
that participant in any other year. Furthermore, the Committee may award
different amounts of Stock or Stock Options to different participants. The
Committee may consider such factors as it deems pertinent in selecting
participants and in determining the amount of their Stock or Stock Options,
including, without limitation:
(i) the financial condition of the Company or its Subsidiaries;
(ii) expected profits for the current or future years;
(iii) the contributions of a prospective participant to the profitability
and success of the Company or its Subsidiaries; and
(iv) the adequacy of the prospective participant's other compensation.
Participants may include persons to whom stock, stock options, or other
benefits previously were granted under this or another plan of the Company or
any Subsidiary, whether or not the previously granted benefits have been fully
exercised.
b. No Right of Employment. An Eligible Person's right, if any, to
continue to serve the Company and its Subsidiaries as an Employee will not
be enlarged or otherwise affected by his designation as a participant under
this Plan, and such designation will not in any way restrict the right of
the Company or any Subsidiary, as the case may be, to terminate at any time
the employment of any
5. REQUIREMENTS OF OPTION GRANTS. Each Option granted under this Plan shall
satisfy the following requirements.
a. Written Option. An Option shall be evidenced by a written Agreement
specifying: (i) the number of Shares that may be purchased by its exercise,
(ii) the intent of the Committee as to whether the Option is be an
Incentive Stock Option or a Non-qualified Stock Option, (iii) the Option
period for any Option granted and (iv) such terms and conditions consistent
with the Plan as the Committee shall determine, all of which may differ
between various Optionees and various Agreements.
b. Duration of Option. Each Option may be exercised only during the
Option Period designated for the Option by the Committee. At the end of the
Option Period the Option shall expire.
c. Option Exercisability. The Committee, on the grant of an Option, each
Option shall be exercisable only in accordance with its terms.
d. Acceleration of Vesting. Subject to the provisions of Section 5(b), he
Committee may, it its sole discretion, provide for the exercise of Options
either as to an increased percentage of shares per year or as to all
remaining shares. Such acceleration of vesting may be declared by the
Committee at any time before the end of the Option Period, including, if
applicable, after termination of the Optionee's Continuous Service by
reason of death, disability, retirement or termination of employment.
e. Option Price. Except as provided in Section 6(a) the Option price of
each Share subject to the Option shall equal the Fair Market Value of the
Share on the Option's Date of Grant.
f. Termination of Employment Any Option which has not vested at the time
the Optionee ceases Continuous Service for any reason other than death,
disability or retirement shall terminate upon the last day that the
Optionee is employed by the Company. Incentive Stock Options must be
exercised within three months of cessation of Continuous Service for
reasons other death, disability or retirement in order to qualify for
Incentive Stock Option tax treatment. Nonqualified Options may be exercised
any time during the Option Period regardless of employment status.
g. Death. In the case of death of the Optionee, the beneficiaries
designated by the Optionee shall have one year from the Optionee's demise
or to the end of the Option Period, whichever is earlier, to exercise the
Option, provided, however, the Option may be exercised only for the number
of Shares for which it could have been exercised at the time the Optionee
died, subject to any adjustment under Sections 5(d) and 11.
h. Retirement. Any Option which has not vested at the time the Optionee
ceases Continuous Service due to retirement shall terminate upon the last
day that the Optionee is employed by the Company. Upon retirement Incentive
Stock Options must be exercised within three months of cessation of
Continuous Service in order to qualify for Incentive Stock Option tax
treatment. Nonqualified Options may be exercised any time during the Option
Period regardless of employment status
i. Disability. In the event of termination of Continuous Service due to
total and permanent disability (within the meaning of Section 422 of the
Code), the Option shall lapse at the earlier of the end of the Option
Period or twelve months after the date of such termination, provided,
however, the Option can be exercised at the time the Optionee became
disabled, subject to any adjustment under Sections 5(d) and 11.
6. INCENTIVE STOCK OPTIONS. Any Options intended to qualify as an Incentive
Stock Option shall satisfy the following requirements in addition to the
other requirements of the Plan:
a. Ten Percent Shareholders. An Option intended to qualify as an
Incentive Stock Option granted to an individual who, on the Date of Grant,
owns stock possessing more than ten (10) percent of the total combined
voting power of all classes of stock of either the Company or any Parent or
Subsidiary, shall be granted at a price of 110 percent of Fair Market Value
on the Date of Grant and shall be exercised only during the five-year
period immediately following the Date of Grant. In calculating stock
ownership of any person, the attribution rules of Section 425(d) of the
Code will apply. Furthermore, in calculating stock ownership, any stock
that the individual may purchase under outstanding options will not be
considered.
b. Limitation on Incentive Stock Options. The aggregate Fair Market
Value, determined on the date of Grant, of stock in the Company exercisable
for the first time by any Optionee during any calendar year, under the Plan
and all other plans of the Company or its Parent or Subsidiaries (within
the meaning of Subsection (d) of Section 422 of the Code) in any calendar
year shall not exceed $100,000.00.
c. Exercise of Incentive Stock Options. No disposition of the shares
underlying an Incentive Stock Option may be made within two years from the
Date of Grant nor within one year after the exercise of such incentive
Stock Option.
d. Approval of Plan. No Option shall qualify as an Incentive Stock Option
unless this Plan is approved by the shareholders within one year of the
Plan's adoption by the Board.
7. NONQUALIFIED AND INCENTIVE STOCK OPTIONS. Any Option not intended to
qualify as an Incentive Stock Option shall be a Nonqualified Stock Option.
Nonqualified Stock Options shall satisfy each of the requirements of
Section 5 of the Plan. An Option intended to qualify as an Incentive Stock
Option, but which does not meet all the requirements of an Incentive Stock
Option shall be treated as a Nonqualified Stock Option.
8. METHOD OF EXERCISE. An Option granted under this Plan can be exercised when
the person entitled to exercise the Option (i) delivers written notice to
the President of the Company of the decision to exercise; (ii) concurrently
tenders to the Company full payment for the Shares to be purchased pursuant
to the exercise; and (iii) complies with such other reasonable requirements
as the Committee establishes pursuant to Section 3 of the Plan. The day
that the items in this Section 8.(i), (ii) and (iii) are completed shall be
deemed to be the Exercise Day (the "Exercise Day"). During the lifetime of
the Employee to whom an Option is granted, such Option may be exercised
only by him. Payment to the Company by the Option holder of the Exercise
Price of the Option may be in: (i) cash, (ii) cashier's check, (iii)
certified check, or, (iv) wholly or partially in the form of Common Stock
of the Company that has been held by the option holder for at least six
months prior to the Exercise Day (the "In-Kind Exercise Payment Stock").
The value of the In-Kind Exercise Payment Stock shall be the closing bid
price of the Company's Common Stock on the business day immediately prior
to the Exercise Day. No person shall have the rights of a shareholder with
respect to Shares subject to an Option granted under this Plan until a
certificate or certificates for the Shares have been delivered to him.
An Option granted under this Plan may be exercised in increments of not
less than 10% of the full number of Shares as to which it can be exercised.
A partial exercise of an Option will not effect the holder's right to
exercise the Option from time to time in accordance with this Plan as to
the remaining Shares subject to the Option.
9. TAXES. COMPLIANCE WITH LAW: APPROVAL OF REGULATORY BODIES. The Company, if
necessary or desirable, may pay or withhold the amount of any tax
attributable to any Shares deliverable or amounts payable under this Plan,
and the Company may defer making delivery or payment until it is
indemnified to its satisfaction for the tax. Stock is deliverable, and
Options are exercisable, and Shares can be delivered and payments made
under this Plan, only in compliance with all applicable federal and state
laws and regulations, including, without limitation, state and federal
securities laws, and the rules of all stock exchanges on which the
Company's stock is listed at any time. An Option is exercisable only if
either (i) a registration statement pertaining to the Shares to be issued
upon exercise of the Option has been flied with and declared effective by
the Securities and Exchange Commission and remains effective on the date of
exercise, or (ii) an exemption from the registration requirements of
applicable securities laws is available. This plan does not require the
Company, however, to file such registration statement or to assure the
availability of such exemptions. Any certificate issued to evidence Shares
issued under the Plan may bear such legends and statements, and shall be
subject to such transfer restrictions, as the Committee deems advisable to
assure compliance with federal and state laws and regulations and with the
requirements of this Section 9 of the Plan. No Option may be exercised, and
no Shares may be issued under this Plan, until the Company has obtained the
consent or approval of every regulatory body, federal or state, having
jurisdiction over such matter as the Committee deems advisable.
Each Person who acquires the right to exercise an Option by bequest or
inheritance may be required by the Committee to furnish reasonable evidence
of ownership of the Option as a condition to his exercise of the Option. In
addition, the Committee may require such consents and release of taxing
authorities as the Committee deems advisable.
10. ASSIGNABILITY. An Option granted under this Plan is not transferable except
by will or the laws of descent and distribution. The Option may be
exercised only by the Optionee during the life of the Optionee. More
particularly, but without limitation of the foregoing, the Option may be
not be assigned or transferred except as provided above and shall not be
assignable by operation of law and shall not be subject to execution,
attachment or similar process. Any attempted assignment, transfer or
distribution contrary to the provisions hereof shall be null and void and
without effect.
11. ADJUSTMENT UPON CHANGE OF SHARES. If a reorganization, merger,
consolidation, reclassification, recapitalization, combination or exchange
of shares, stock split, stock dividend, rights offering, or other expansion
or contraction of the Common Stock of the Company occurs, the number and
class of Shares for which Options are authorized to be granted under this
Plan, the number and class of Shares then subject to Options previously
granted under this Plan, and the price per Share payable upon exercise of
each Option outstanding under this Plan shall be equitably adjusted by the
Committee to reflect such changes. To the extent deemed equitable and
appropriate by the Committee or the Board, subject to any required action
by shareholders, in any merger, consolidation, reorganization, liquidation
or dissolution, any Option granted under the Plan shall pertain to the
securities and other property to which a holder of the number of Shares of
stock covered by the Option would have been entitled to receive in
connection with such event.
12. ACCELERATIONS OF OPTIONS UPON CHANGE IN CONTROL. In the event that a Change
of Control has occurred with respect to the Company, any and all Options
will become fully vested and immediately exercisable with such acceleration
to occur without the requirement of any further act by either the Company
or the participant, subject to Section 9 hereof.
13. LIABILITY OF THE COMPANY. The Company, its Parent and any Subsidiary that
is in existence or hereafter comes into existence shall not be liable to
any person for any tax consequences expected but not realized by an
Eligible Person or other person due to the exercise of an Option.
14. EXPENSES OF PLAN. The Company shall bear the expenses of administering the
Plan.
15. DURATION OF PLAN. Stock may be granted and Options may be granted under
this Plan only within 10 years from the effective date of the Plan.
16. AMENDMENT, SUSPENSION OR TERMINATION OF PLAN. The Board of Directors of the
Company may amend, terminate or suspend this Plan at any time, in its sole
and absolute discretion; provided, however, that to the extent required to
qualify this Plan under Rule 16b-3 promulgated under Section 16 of the
Exchange Act, no amendment that would (a) materially increase the number of
shares of Stock that may be issued under this Plan, (b) materially modify
the requirements as to eligibility for participation in this Plan, or (c)
otherwise materially increase the benefits accruing to participants under
this Plan, shall be made without the approval of the Company's
shareholders; provided further, however, that to the extent required to
maintain the status of any Incentive Option under the Code, no amendment
that would (a) change the aggregate number of shares of Stock which may be
issued under Incentive Options, (b) change the class of employees eligible
to receive Incentive Options, or (c) decrease the Option price for
Incentive Options below the Fair Market Value of the Stock at the time it
is granted, shall be made without the approval of the Company's
shareholders. Subject to the preceding sentence, the Board of Directors
shall have the power to make any changes in the Plan and in the regulations
and administrative provisions under it or in any outstanding Incentive
Option as in the opinion of counsel for the Company may be necessary or
appropriate from time to time to enable any Incentive Option granted under
this Plan to continue to qualify as an incentive stock option or such other
stock option as may be defined under the Code so as to receive preferential
federal income tax treatment. Notwithstanding the foregoing, no amendment,
suspension or termination of the Plan shall act to impair or extinguish
rights in Options already granted at the date of such amendment, suspension
or termination.
17. FORFEITURE. Notwithstanding any other provisions of this Plan, if the
Committee finds by a majority vote after full consideration of the facts
that an Eligible Person, before or after termination of his employment with
the Company or an Affiliate for any reason (a) committed or engaged in
fraud, embezzlement, theft, commission of a felony, or proven dishonesty in
the course of his employment by the Company or an Affiliate, which conduct
damaged the Company or Affiliate, or disclosed trade secrets of the Company
or an Affiliate, or (b) participated, engaged in or had a material,
financial or other interest, whether as an employee, officer, director,
consultant, attorney, contractor, shareholder, owner, or otherwise, in any
commercial endeavor anywhere which is competitive with the business of the
Company or an Affiliate without the written consent of the Company or
Affiliate, the Eligible Person shall forfeit all outstanding Options,
including all exercised Options and other situations pursuant to which the
Company has not yet delivered a stock certificate. Clause (b) shall not be
deemed to have been violated solely by reason of the Eligible Person's
ownership of stock or securities of any publicly owned corporation, if that
ownership does not result in effective control of the corporation. The
decision of the Committee as to the cause of an Employee's discharge, the
damage done to the Company or an Affiliate, and the extent of an Eligible
Person's competitive activity shall be final. No decision of the Committee,
however, shall affect the finality of the discharge of the Employee by the
Company or an Affiliate in any manner.
18. INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS. With respect
to administration of this Plan, the Company shall indemnify each present
and future member of the Committee and the Board of Directors against, and
each member of the Committee and the Board of Directors shall be entitled
without further act on his part to indemnity from the Company for, all
expenses (including attorney's fees, the amount of judgments and the amount
of approved settlements made with a view to the curtailment of costs of
litigation, other than amounts paid to the Company itself) reasonably
incurred by him in connection with or arising out of any action, suit, or
proceeding in which he may be involved by reason of his being or having
been a member of the Committee and/or the Board of Directors, whether or
not he continues to be a member of the Committee and/or the Board of
Directors at the time of incurring the expenses, including, without
limitation, matters as to which he shall be finally adjudged in any action,
suit or proceeding to have been found to have been negligent in the
performance of his duty as a member of the Committee or the Board of
Directors. However, this indemnity shall not include any expenses incurred
by any member of the Committee and/or the Board of Directors in respect of
matters as to which he shall be finally adjudged in any action, suit or
proceeding to have been guilty of gross negligence or willful misconduct in
the performance of his duty as a member of the Committee and the Board of
Directors. In addition, no right of indemnification under this Plan shall
be available to or enforceable by any member of the Committee and the Board
of Directors unless, within 60 days after institution of any action, suit
or proceeding, he shall have offered the Company the opportunity to handle
and defend same at its own expense. The failure to notify the Company
within 60 days shall only affect a Director or committee member's right to
indemnification if said failure to notify results in an impairment of the
Company's rights or is detrimental to the Company. This right of
indemnification shall inure to the benefit of the heirs, executors or
administrators of each member of the Committee and the Board of Directors
and shall be in addition to all other rights to which a member of the
Committee and the Board of Directors may be entitled as a matter of law,
contract, or otherwise.
19. GENDER. If the context requires, words of one gender when used in this Plan
shall include the others and words used in the singular or plural shall
include the other.
20. HEADINGS. Headings of Articles and Sections are included for convenience of
reference only and do not constitute part of the Plan and shall not be used
in construing the terms of the Plan.
21. OTHER COMPENSATION PLANS. The adoption of this Plan shall not affect any
other stock, stock option, incentive or other compensation or benefit plans
in effect for the Company or any Affiliate, nor shall the Plan preclude the
Company from establishing any other forms of incentive or other
compensation for employees of the Company or any Affiliate.
22. OTHER OPTIONS OR AWARDS. The grant of an Option or Awards shall not confer
upon the Eligible Person the right to receive any future or other Options
or Awards under this Plan, whether or not Options or Awards may be granted
to similarly situated Eligible Persons, or the right to receive future
Options or Awards upon the same terms or conditions as previously granted.
23. GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of California.