TITAN INFORMATION SYSTEMS CORPORATION
1997 STOCK OPTION PLAN
ADOPTED SEPTEMBER 29, 1997
APPROVED BY SOLE SHAREHOLDER SEPTEMBER 29, 1997
AMENDED DECEMBER 4, 1997
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees, Directors and Consultants of the Company and any Affiliate may be
given an opportunity to benefit from increases in value of the Class A common
stock of the Company ("Class A Common Stock") through the granting of (i)
Incentive Stock Options and (ii) Nonstatutory Stock Options.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees, Directors or Consultants of the Company, to
secure and retain the services of new Employees, Directors and Consultants of
the Company and any Affiliate and to provide incentives for such persons to
exert maximum efforts for the success of the Company and any Affiliate.
(c) The Company intends that the Options issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options and Nonstatutory Stock Options. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and in such form as issued pursuant to Section 6,
and a separate certificate or certificates will be issued for shares purchased
on exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent or subsidiary corporation, whether now or
hereafter existing, as those terms are defined in Sections 424(e) and (f),
respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Titan Information Systems Corporation, a Delaware
corporation.
1.
(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee or who are not compensated for their services
as Directors.
(g) "CONTINUOUS SERVICE" means that the Optionee's service with the
Company or its Affiliate is not interrupted or terminated. The Optionee's
Continuous Service shall not be deemed to have terminated merely because of a
change in the capacity in which the Optionee renders service to the Company or
its Affiliate as an Employee, Consultant or Director, provided that there is no
interruption or termination of the Optionee's Continuous Service. For example,
a change in status from an Employee of the Company to a Consultant or a Director
of an Affiliate of the Company will not constitute an interruption of Continuous
Service as an Employee. The Board or the Chief Executive Officer of the
Company, in that party's sole discretion, may determine whether Continuous
Service shall be considered interrupted in the case of any leave of absence
approved by the Board or the Chief Executive Officer of the Company, including
sick leave, military leave, or any other personal leave. Unless waived by the
Board, in its sole discretion, Continuous Service shall be considered terminated
in the case of any transfer between the Company and any other subsidiary of the
Company's parent, The Titan Corporation, that is not also a subsidiary of the
Company.
(h) "COVERED EMPLOYEE" means the Chief Executive Officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(i) "DIRECTOR" means a member of the Board of Directors of the Company or
an Affiliate.
(j) "DISABILITY" means the permanent and total disability of the Optionee
within the meaning of Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
"employment" by the Company or an Affiliate.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the Class A
Common Stock of the Company determined as follows (and in each case prior to the
Listing Date, in a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations):
2.
(i) If the Class A Common Stock is listed on any established
stock exchange, or traded on the Nasdaq National Market or the Nasdaq
SmallCap Market, the Fair Market Value of a share of Class A Common Stock
shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or market (or the exchange or
market with the greatest volume of trading in Class A Common Stock) on the
trading day prior to the day of determination, as reported in the Wall Street
Journal or such other source as the Board deems reliable;
(ii) In the absence of such markets for the Class A Common Stock, the
Fair Market Value shall be determined in good faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(p) "NON-EMPLOYEE DIRECTOR" means a Director of the Company who either (i)
is not a current Employee or Officer of the Company or its parent or subsidiary,
does not receive compensation (directly or indirectly) from the Company or its
parent or subsidiary for services rendered as a consultant or in any capacity
other than as a Director (except for an amount as to which disclosure would not
be required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-
employee director" for purposes of Rule 16b-3.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(r) "OFFICER" means (i) prior to the Listing Date, any person designated
by the Company as an officer and (ii) from and after the Listing Date, a person
who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
(s) "OPTION" means a stock option granted pursuant to the Plan.
3.
(t) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(u) "OPTIONEE" means a person to whom an Option is granted pursuant to the
Plan.
(v) "OUTSIDE DIRECTOR" means a Director of the Company who either (i) is
not a current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(w) "PLAN" means this Titan Information Systems Corporation 1997 Stock
Option Plan.
(x) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(y) "SECURITIES ACT" means the Securities Act of 1933, as amended.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; whether an Option will be an Incentive Stock Option or a Nonstatutory
Stock Option; the provisions of each Option granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to an Option; and the number of shares with respect to
which an Option shall be granted to each such person.
(ii) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan
4.
or in any Option Agreement, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.
(iii) To amend the Plan or an Option as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a Committee or
Committees of one or more members of the Board. In the discretion of the Board,
a Committee may consist solely of two or more Outside Directors, in accordance
with Code Section 162(m), or solely of two or more Non-Employee Directors, in
accordance with Rule 16b-3. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board (and references in this Plan to the
Board shall thereafter be to the Committee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee at any time
and revest in the Board the administration of the Plan. Notwithstanding
anything in this Section 3 to the contrary, the Board or the Committee may
delegate to a committee of one or more members of the Board the authority to
grant Options to eligible persons who (1) are not then subject to Section 16 of
the Exchange Act and/or (2) are either (i) not then Covered Employees and are
not expected to be Covered Employees at the time of recognition of income
resulting from such Option, or (ii) not persons with respect to whom the Company
wishes to comply with Section 162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 11 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Options shall not
exceed in the aggregate two million (2,000,000) shares of Class A Common Stock.
If any Option shall for any reason expire or otherwise terminate, in whole or in
part, without having been exercised in full, the stock not acquired under such
Option shall revert to and again become available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
(c) Prior to the Listing Date, the total number of shares issuable upon
exercise of all outstanding Options and the total number of shares provided for
under any stock bonus or similar plan of the Company shall at no time exceed the
applicable percentage as calculated in accordance with the conditions and
exclusions of Section 260.140.45 of
5.
Title 10 of the California Code of Regulations, based on the shares of the
Company which are outstanding at the time the calculation is made.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees of the
Company and its Affiliates. Nonstatutory Options may be granted to Employees,
Directors and Consultants of the Company and its Affiliates.
(b) Prior to the Listing Date, no person shall be eligible for the grant
of an Option if, at the time of grant, such person owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates unless the exercise price of such Option is at least
one hundred ten percent (110%) of the Fair Market Value of such stock at the
date of grant and the Option is not exercisable after the expiration of five (5)
years from the date of grant. After the Listing Date this provision shall apply
only to Incentive Stock Options.
(c) Subject to the provisions of Section 11 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than five hundred thousand (500,000) shares of the Class A Common Stock in
any calendar year. This subsection 5(c) shall not apply prior to the Listing
Date and, following the Listing Date, shall not apply until (i) the earliest of:
(A) the first material modification of the Plan (including any increase to the
number of shares reserved for issuance under the Plan in accordance with Section
4); (B) the issuance of all of the shares of Class A Common Stock reserved for
issuance under the Plan; (C) the expiration of the Plan; or (D) the first
meeting of shareholders at which directors are to be elected that occurs after
the close of the third calendar year following the calendar year in which
occurred the first registration of an equity security under Section 12 of the
Exchange Act; or (ii) such other date required by Section 162(m) of the Code and
the rules and regulations promulgated thereunder.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
6.
(b) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted, and the exercise price
of each Nonstatutory Stock Option shall be not less than eighty-five percent
(85%) of the Fair Market Value of the stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, an Option may be granted
with an exercise price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board, at the time of the grant of the Option, (A) by
delivery to the Company of other Class A Common Stock, (B) according to a
deferred payment or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other Common Stock) with the person to
whom the Option is granted or to whom the Option is transferred pursuant to
subsection 6(d), or (C) in any other form of legal consideration that may be
acceptable to the Board; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Class A Common Stock's "par
value," as defined in the Delaware General Corporation Law, shall not be made by
deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(d) TRANSFERABILITY. Prior to the Listing Date, an Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Option is
granted only by such person. A Nonstatutory Stock Option (but not an Incentive
Stock Option) that is granted after the Listing Date may be transferred to the
extent provided in the Option Agreement; provided that if the Option Agreement
does not expressly permit the transfer of a Nonstatutory Stock Option, the
Nonstatutory Stock Option shall not be transferable except by will, by the laws
of descent and distribution or pursuant to a domestic relations order satisfying
the requirements of Rule 16 of the Exchange Act and shall be exercisable during
the lifetime of the person to whom the Option is granted only by such person or
any transferee pursuant to a domestic relations order. Notwithstanding the
foregoing, the person to whom the Option is granted may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionee, shall thereafter be
entitled to exercise the Option.
7.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. Prior to the Listing Date
and to the extent required by applicable law, the vesting provisions of
individual Options may vary, but Options granted to persons other officers,
directors and consultants (within the meaning of Section 260.140.41 of Title 10
of the California Code of Regulations) in each case will provide for vesting of
at least twenty percent (20%) per year of the total number of shares subject to
the Option although vesting may be subject to reasonable conditions such as
continued employment. The provisions of this subsection 6(e) are subject to any
Option provisions governing the minimum number of shares as to which an Option
may be exercised.
(f) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionee's
Continuous Service terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within
such period of time ending on the earlier of (i) the date three (3) months after
the termination of the Optionee's Continuous Service (or such longer or shorter
period specified in the Option Agreement, which shall not be less than thirty
(30) days unless such termination is for cause), or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, after termination,
the Optionee does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that, if the exercise of
the Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee's death or disability) would be prohibited at any time
solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option as described in
subsection 6(a) or (ii) the expiration of a period of three (3) months after the
termination of the Optionee's Continuous Service during which the exercise of
the Option would not be in violation of such registration requirements (if such
provisions would result in an extension of the time during which the Option may
be exercised beyond the period described in the first paragraph of this
subsection 6(f)).
8.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Service
terminates as a result of the Optionee's disability, the Optionee may exercise
his or her Option (to the extent that the Optionee was entitled to exercise it
at the date of termination), but only within such period of time ending on the
earlier of (i) the date twelve (12) months following such termination (or such
longer or shorter period specified in the Option Agreement, which, prior to the
Listing Date, in no event shall be less than six (6) months), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
at the date of termination, the Optionee is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option after the termination of, the
Optionee's Continuous Service, the Option may be exercised (to the extent the
Optionee was entitled to exercise the Option at the date of death or such longer
period specified in the Option) by the Optionee's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date twelve (12) months following the date of death (or such longer or shorter
period specified in the Option Agreement, which, prior to the Listing Date, in
no event shall be less than six (6) months), or (ii) the expiration of the term
of such Option as set forth in the Option Agreement. If, at the time of death,
the Optionee was not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after death, the Option is
not exercised within the time specified herein, the Option shall terminate, and
the shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time before the Optionee's Continuous
Service terminates to exercise the Option as to any part or all of the shares
subject to the Option prior to the full vesting of the Option. Any unvested
shares so purchased may be subject to a repurchase right in favor of the Company
or to any other restriction the Board determines to be appropriate. If the
repurchase option described in this subsection 6(i) shall give the Company the
right to repurchase the shares upon termination of service at less than the fair
market value of the shares to be repurchased on the date of termination of
service, the right to repurchase shall lapse at the rate of at least twenty
percent (20%) of the shares per year over five (5) years from the date the
Option is granted (without respect to the date the Option was exercised or
became exercisable). The right to
9.
repurchase shall be exercised for cash or cancellation of purchase money
indebtedness for the shares within (A) ninety (90) days of termination of
Continuous Service or (B) such longer period as may be agreed to by the Company
and the Optionee (for example, for purposes of satisfying the requirements of
Section 1202(c)(3) of the Code (regarding "qualified small business stock")),
and the repurchase right must terminate when the Company's securities become
publicly traded within the meaning of Section 260.140.41 of Title 10 of the
California Code of Regulations. Options held by an officer, director or
consultant of the Company or an Affiliate within the meaning of Section
260.140.41 of Title 10 of the California Code of Regulations may be subject to
additional or greater restrictions.
(j) RIGHT OF REPURCHASE. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to
repurchase all or any part of the vested shares exercised pursuant to the
Option. If the repurchase option described in this subsection 6(j) shall give
the Company the right to repurchase the shares upon termination of service at
less than the fair market value of the shares to be repurchased on the date of
termination of service, the right to repurchase shall lapse at the rate of at
least twenty percent (20%) of the shares per year over five (5) years from the
date the Option is granted (without respect to the date the Option was exercised
or became exercisable). The right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the shares within (A) ninety
(90) days of termination of Continuous Service or (B) such longer period as may
be agreed to by the Company and the Optionee (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code (regarding
"qualified small business stock")), and the repurchase right must terminate when
the Company's securities become publicly traded within the meaning of Section
260.140.41 of Title 10 of the California Code of Regulations. Options held by
an officer, director or consultant of the Company or an Affiliate within the
meaning of Section 260.140.41 of Title 10 of the California Code of Regulations
may be subject to additional or greater restrictions.
(k) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionee of the
intent to transfer all or any part of the shares exercised pursuant to the
Option. Except as expressly provided in this subsection 6(k), such right of
first refusal shall otherwise comply with any applicable provisions of the
Bylaws of the Company. The right of first refusal provision described in this
subsection 6(k) shall be subject to the following limitations: Such right of
first refusal shall be exercised by the Company no more than thirty (30) days
following receipt of notice of the Optionee's intent to transfer shares and
shall be exercised as to all the shares the Optionee intends to transfer unless
the Optionee consents to exercise for less than all the shares offered. The
purchase of the shares following exercise shall be completed within thirty (30)
days of the Company's receipt of notice of the Optionee's
10.
intent to transfer shares, or such longer period of time as has been offered by
the person to whom the Optionee intends to transfer the shares, or as may be
agreed to by the Company and the Optionee(for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code (regarding
"qualified small business stock").
(l) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionee to a further Option (a "Re-Load Option") in
the event the Optionee exercises the Option evidenced by the Option Agreement,
in whole or in part, by surrendering other shares of Class A Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option (i) shall be for a number of shares equal to the number
of shares surrendered as part or all of the exercise price of such Option; (ii)
shall have an expiration date which is the same as the expiration date of the
Option the exercise of which gave rise to such Re-Load Option; and (iii) shall
have an exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Class A Common Stock subject to the Re-Load Option on the
date of exercise of the original Option. Notwithstanding the foregoing, a Re-
Load Option which is an Incentive Stock Option and which is granted to a 10%
shareholder (as described in subsection 5(b)), shall have an exercise price
which is equal to one hundred ten percent (110%) of the Fair Market Value of the
stock subject to the Re-Load Option on the date of exercise of the original
Option and shall have a term which is no longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board may designate at the time of the grant of the
original Option; PROVIDED, HOWEVER, that the designation of any Re-Load Option
as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 10(e) of the Plan and in Section 422(d) of the
Code. There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load
Option shall be subject to the availability of sufficient shares under
subsection 4(a) and shall be subject to such other terms and conditions as the
Board may determine which are not inconsistent with the express provisions of
the Plan regarding the terms of Options.
7. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board shall have the authority to effect, at any time and from
time to time, (i) the repricing of any outstanding Options under the Plan
and/or (ii) with the consent of any adversely affected holders of Options, the
cancellation of any outstanding Options under the Plan and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of stock. The exercise price per share shall be not
less than that specified under the Plan for newly granted Options.
11.
Notwithstanding the foregoing, the Board may grant an Option with an exercise
price lower than that set forth above if such Option is granted as part of a
transaction to which Section 424(a) of the Code applies.
(b) Shares subject to an Option canceled under this Section 7 shall
continue to be counted against the maximum award of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The repricing of an Option
under this Section 7, resulting in a reduction of the exercise price, shall be
deemed to be a cancellation of the original Option and the grant of a substitute
Option; in the event of such repricing, both the original and the substituted
Options shall be counted against the maximum awards of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The provisions of this
subsection 7(b) shall be applicable only to the extent required by Section
162(m) of the Code.
8. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares under Options; provided, however, that this undertaking
shall not require the Company to register under the Securities Act the Plan, any
Option or any stock issued or issuable pursuant to any such Option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such Options unless and until such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
10. MISCELLANEOUS.
(a) Prior to the Listing Date and subject to any applicable provisions of
the California Corporate Securities Law of 1968 and related regulations relied
upon as a condition of issuing securities pursuant to the Plan, the Board shall
have the power to accelerate the time at which an Option may first be exercised
or the time during which an Option or any part thereof will vest,
notwithstanding the provisions in the Option stating the time at which it may
first be exercised or the time during which it will vest.
12.
(b) Neither an Employee, Director or a Consultant nor any person to whom
an Option is transferred in accordance with the Plan shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Option unless and until such person has satisfied all
requirements for exercise of the Option pursuant to its terms.
(c) Prior to the Listing Date and to the extent required by applicable
law, throughout the term of any Option, the Company shall deliver to the holder
of such Option, not later than one hundred twenty (120) days after the close of
each of the Company's fiscal years during the term of such Option, a balance
sheet and an income statement. This subsection 10(c) shall not apply (i) after
the Listing Date, or (ii) when issuance is limited to key employees whose duties
in connection with the Company assure them access to equivalent information.
(d) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Consultant or other holder of
Options any right to continue in the employ of the Company or any Affiliate or
to continue serving as a Consultant or a Director, or shall affect the right of
the Company or any Affiliate to terminate the employment of any Employee with or
without notice and with or without cause, or the right to terminate the
relationship of any Consultant pursuant to the terms of such Consultant's
agreement with the Company or Affiliate or service as a Director pursuant to the
Company's Bylaws and, prior to the Listing Date and to the extent required by
applicable law, the provisions of the corporate law of the state in which the
Company is incorporated.
(e) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(f) The Company may require any person to whom an Option is granted, or
any person to whom an Option is transferred in accordance with the Plan, as a
condition of exercising or acquiring stock under any Option, (1) to give written
assurances satisfactory to the Company as to such person's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (2) to give written assurances satisfactory
to the Company stating that such person is acquiring the stock subject to the
Option for such person's own account and not with any present intention of
selling or
13.
otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise or acquisition of stock under the
Option has been registered under a then currently effective registration
statement under the Securities Act, or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(g) To the extent provided by the terms of an Option Agreement, the person
to whom an Option is granted may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under an
Option by any of the following means (in addition to the Company's right to
withhold from any compensation paid to such person by the Company) or by a
combination of such means: (1) tendering a cash payment; (2) authorizing the
Company to withhold shares from the shares of the Class A Common Stock otherwise
issuable to the participant as a result of the exercise or acquisition of stock
under the Option; or (3) delivering to the Company owned and unencumbered shares
of the Class A Common Stock of the Company.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Option, without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a) and the maximum
number of shares subject to award to any person during any calendar year
pursuant to subsection 5(c), and the outstanding Options will be appropriately
adjusted in the class(es) and number of shares and price per share of stock
subject to such outstanding Options. Such adjustments shall be made by the
Board, the determination of which shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a "transaction not involving the receipt of consideration by the Company".)
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of Class A Common
Stock outstanding immediately preceding the
14.
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) after the Listing Date, the
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act, or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or any Affiliate of the Company) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
directors, then (i) any surviving corporation or acquiring corporation shall
assume any Options outstanding under the Plan or shall substitute similar
Options (including an award to acquire the same consideration paid to the
shareholders in the transaction described in this subsection 11(b)) for those
outstanding under the Plan, or (ii) in the event any surviving corporation or
acquiring corporation refuses to assume such Options or to substitute similar
Options for those outstanding under the Plan, (A) with respect to Options held
by persons whose Continuous Service has not terminated, and subject to any
applicable provisions of the California Corporate Securities Law of 1968 and
related regulations relied upon as a condition of issuing securities pursuant to
the Plan, the vesting of such Options (and, if applicable, the time during which
such Options may be exercised) shall be accelerated prior to such event and the
Options terminated if not exercised (if applicable) after such acceleration and
at or prior to such event, and (B) with respect to any other Options outstanding
under the Plan, such Options shall be terminated if not exercised (if
applicable) prior to such event.
12. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 11 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company to the extent shareholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for shareholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations thereunder regarding the exclusion of performance-based compensation
from the limit on corporate deductibility of compensation paid to certain
executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the
15.
regulations promulgated thereunder relating to Incentive Stock Options and/or to
bring the Plan and/or Incentive Stock Options granted under it into compliance
therewith.
(d) Rights under any Option granted before amendment of the Plan shall not
be impaired by any amendment of the Plan unless (i) the Company requests the
consent of the person to whom the Option was granted and (ii) such person
consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Options; provided, however, that the rights under any Option
shall not be impaired by any such amendment unless (i) the Company requests the
consent of the person to whom the Option was granted and (ii) such person
consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the day before the tenth (10th)
anniversary of the date the Plan is adopted by the Board or approved by the
shareholders of the Company, whichever is earlier. No Options may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Option was granted.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the date adopted by the Board, but no
Options granted under the Plan shall be exercised unless and until the Plan has
been approved by the shareholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.
16.