EXHIBIT NO.
10.3
Form of Stock Option Plan
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1998 STOCK OPTION PLAN
1. PURPOSE The purpose of the SMD Group, Inc. 1998 Stock Option Plan (the
"Plan") is to enhance the long-term stockholder value of SMD Group, Inc., a
Delaware corporation (the "Company"), by offering opportunities to
employees, directors, officers, consultants, agents, advisors and
independent contractors of the Company and its Subsidiaries (as defined in
Section 2) to participate in the Company's growth and success, and to
encourage them to remain in the service of the Company and its Subsidiaries
and to acquire and maintain stock ownership in the Company.
2. DEFINITIONS For purposes of the Plan, the following terms shall be defined as
set forth below: 2.1 BOARD "Board" means the Board of Directors of the Company.
2.2 CAUSE "Cause" means dishonesty, fraud, misconduct, unauthorized use or
disclosure of confidential information or trade secrets, or conviction
or confession of a crime punishable by law (except minor violations),
in each case as determined by the Plan Administrator, and its
determination shall be conclusive and binding.
2.3 CODE "Code" means the Internal Revenue Code of 1986, as amended from time to
time. 2.4 COMMON STOCK "Common Stock" means the common stock, par value $.001
per share, of the Company. 2.5 CORPORATE TRANSACTION "Corporate Transaction"
means any of the
following events: (a) Consummation of any merger or consolidation of
the Company in which the Company is not the continuing or surviving
corporation, or pursuant to which shares of the Common Stock are
converted into cash, securities or other property (other than a merger
of the Company in which the holders of Common Stock immediately prior
to the merger have the same proportionate ownership of capital stock of
the surviving corporation immediately after the merger); (b)
Consummation of any sale, lease, exchange or other transfer in one
transaction or a series of related transactions of all or substantially
all of the Company's assets other than a transfer of the Company's
assets to a majority-owned subsidiary corporation (as the term
"subsidiary corporation" is defined in Section 8.3) of the Company; or
(c) Approval by the holders of the Common Stock of any plan or proposal
for the liquidation or dissolution of the Company. Ownership of voting
securities shall take into account and shall include ownership as
determined by applying Rule 13d-3(d)(1)(i) (as in effect on the date of
adoption of the Plan) under the Exchange Act.
2.6 DISABILITY "Disability" means "disability" as that term is defined for
purposes of Section 22(e)(3) of the Code. 2.7 EARLY RETIREMENT "Early
Retirement" means early retirement as that term is defined by the Plan
Administrator from time to
time for purposes of the Plan.
2.8 EXCHANGE ACT "Exchange Act" means the Securities Exchange Act of 1934, as
amended. 2.9 FAIR MARKET VALUE The "Fair Market Value" shall be as established
in
good faith by the Plan Administrator or (a) if the Common Stock is
listed on the Nasdaq National Market, the average of the high and low
per share sales prices for the Common Stock as reported by the Nasdaq
National Market for a single trading day or (b) if the Common Stock is
listed on the New York Stock Exchange or the American Stock Exchange,
the average of the high and low per share sales prices for the Common
Stock as such price is officially quoted in the composite tape of
transactions on such exchange for a single trading day. If there is no
such reported price for the Common Stock for the date in question, then
such price on the last preceding date for which such price exists shall
be determinative of the Fair Market Value.
2.10 GRANT DATE "Grant Date" means the date the Plan Administrator adopted
the granting resolution. If, however, the Plan Administrator designates
in a resolution a later date as the date an Option is to be granted,
then such later date shall be the "Grant Date."
2.11 INCENTIVE STOCK OPTION "Incentive Stock Option" means an Option to
purchase Common Stock granted under Section 7 with the intention that
it qualify as an "incentive stock option" as that term is defined in
Section 422 of the Code.
2.12 NONQUALIFIED STOCK OPTION "Nonqualified Stock Option" means an Option
to purchase Common Stock granted under Section 7 other than an
Incentive Stock Option.
2.13 OPTION "Option" means the right to purchase Common Stock granted under
Section 7.
2.14 OPTIONEE "Optionee" means (i) the person to whom an Option is granted;
(ii) for an Optionee who has died, the personal representative of the
Optionee's estate, the person(s) to whom the Optionee's rights under
the Option have passed by will or by the applicable laws of descent and
distribution, or the beneficiary designated in accordance with Section
9; or (iii) person(s) to whom an Option has been transferred in
accordance with Section 9.
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2.15 PLAN ADMINISTRATOR "Plan Administrator" means the Board or any
committee of the Board designated to administer the Plan under Section
3.1.
2.16 RETIREMENT "Retirement" means retirement as of the individual's normal
retirement date as that term is defined by the Plan Administrator from
time to time for purposes of the Plan.
2.17 SECURITIES ACT "Securities Act" means the Securities Act of 1933, as
amended.
2.18 SUBSIDIARY "Subsidiary," except as provided in Section 8.3 in
connection with Incentive Stock Options, means any entity that is
directly or indirectly controlled by the Company or in which the
Company has a significant ownership interest, as determined by the Plan
Administrator, and any entity that maybecome a direct or indirect
parent of the Company.
3. ADMINISTRATION
3.1 PLAN ADMINISTRATOR The Plan shall be administered by the Board or a
committee or committees(which term includes subcommittees) appointed
by, and consisting of two or more members of, the Board. If and so long
as the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, the Board shall consider in selecting the Plan
Administrator and the membership of any committee acting as Plan
Administrator, with respect to any persons subject or likely to become
subject to Section 16 of the Exchange Act, the provisions regarding (a)
"outside directors" as contemplated by Section 162(m) of the Code and
(b) "non employee directors" as contemplated by Rule 16b-3 under the
Exchange Act. The Board may delegate the responsibility for
administering the Plan with respect to designated classes of eligible
persons to different committees consisting of one or more members of
the Board, subject to such limitations as the Board deems appropriate.
Committee members shall serve for such term as the Board maydetermine,
subject to removal by the Board at any time.
3.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR Except for
the terms and conditions explicitly set forth in the Plan, the Plan
Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to Options under the Plan, including the
selection of individuals to be granted Options, the type of Options,
the number of shares of Common Stock subject to an Option, all terms,
conditions, restrictions and limitations, if any, of an Option and the
terms of any instrument that evidences the Option. The Plan
Administrator shall also have exclusive authority to interpret the Plan
and may from time to time adopt, and change, rules and regulations of
general application for the Plan's administration. The Plan
Administrator's interpretation of the Plan and its rules and
regulations, and all actions taken and determinations made by the Plan
Administrator pursuant to the Plan, shall be conclusive and binding on
all parties involved or affected. The Plan Administrator may delegate
administrativeduties to such of the Company's officers as it so
determines.
4. STOCK SUBJECT TO THE PLAN
4.1 AUTHORIZED NUMBER OF SHARES Subject to adjustment from time to time as
provided in Section 10.1, a maximum of 1 million shares of Common Stock
shall be available for issuance under the Plan, except that any shares
of Common Stock that, as of the date the Plan is approved by the
Company's stockholders, are available for issuance under the Company's
Amended and Restated 1994 Stock Option Plan (or that thereafter become
available for issuance under that Plan in accordance with its terms as
in effect on such date) and that are not issued under that Plan shall
be added to the aggregate number of shares available for issuance under
the Plan. Shares issued under the Plan shall be drawn from authorized
and unissued shares or shares now held or subsequently acquired by the
Company as treasury shares.
4.2 LIMITATIONS Subject to adjustment from time to time as provided in
Section 10.1, not more than 250,000 shares of Common Stock may be made
subject to Options under the Plan to any individual in the aggregate in
any one fiscal year of the Company, except that the Company may make
additional one-time grants of up to 1 million shares to newly hired
individuals, such limitation to be applied in a manner consistent with
the requirements of, and only to the extent required for compliance
with, the exclusion from the limitation on deductibility of
compensation under Section 162(m) of the Code.
4.3 REUSE OF SHARES Any shares of Common Stock that have been made subject
to an Option that cease to be subject to the Option (other than by
reason of exercise of the Option to the extent it is exercised for
shares) and/or shares of Common Stock subject to repurchase which are
subsequently repurchased by the Company, shall again be available for
issuance in connection with future grants of Options under the Plan;
provided, however, that for purposes of Section 4.2, any such shares
shall be counted in accordance with the requirements of Section 162(m)
of the Code.
5. ELIGIBILITY Options may be granted under the Plan to those officers,
directors and employees of the Company and its Subsidiaries as the Plan
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Administrator from time to time selects. Options may also be granted to
consultants, agents, advisors and independent contractors who provide
services to the Company and its Subsidiaries.
6. AWARDS
6.1 FORM AND GRANT OF OPTIONS The Plan Administrator shall have the
authority, in its sole discretion, to determine the type or types of
awards to be made under the Plan. Such awards may consist of Incentive
Stock Options and/or Nonqualified Stock Options. Options may be granted
singly or in combination.
6.2 ACQUIRED COMPANY OPTION AWARDS Notwithstanding anything in the Plan to
the contrary, the Plan Administrator may grant Options under the Plan
in substitution for awards issued under other plans, or assume under
the Plan awards issued under other plans, if the other plans are or
were plans of other acquired entities ("Acquired Entities") (or the
parent of an Acquired Entity) and the new Option is substituted, or the
old award is assumed, by reason of a merger, consolidation, acquisition
of property or of stock, reorganization or liquidation (the
"Acquisition Transaction"). In the event that a written agreement
pursuant to which the Acquisition Transaction is completed is approved
by the Board and said agreement sets forth the terms and conditions of
the substitution for or assumption of outstanding awards of the
Acquired Entity, said terms and conditions shall be deemed to be the
action of the Plan Administrator without any further action by the Plan
Administrator, except as may be required for compliance with Rule 16b-3
underthe Exchange Act, and the persons holding such awards shall be
deemed to be Optionees.
7. TERMS AND CONDITIONS OF OPTIONS
7.1 GRANT OF OPTIONS The Plan Administrator is authorized under the Plan,
in its sole discretion, to issue Options as Incentive Stock Options or
as Nonqualified Stock Options, which shall be appropriately designated.
7.2 OPTION EXERCISE PRICE The exercise price for shares purchased under an
Option shall be as determined by the Plan Administrator, but shall not
be less than 100% of the Fair Market Value of the Common Stock on the
Grant Date with respect to Incentive Stock Options.
7.3 TERM OF OPTIONS The term of each Option shall be as established by the
Plan Administrator or, if not so established, shall be 10 years from
the Grant Date.
7.4 EXERCISE AND VESTING OF OPTIONS The Plan Administrator shall establish
and set forth in each instrument that evidences an Option the time at
which or the installments in which the Option shall vest and become
exercisable, which provisions may be waived or modified by the Plan
Administrator at any time. If not so established in the instrument
evidencing the Option, the Option will be immediately exercisable and
the shares subject to the Option will vest according to the following
schedule, which may be waived or modified by the Plan Administrator at
any time: Period of Optionee's Continuous Employment or Service With
the Company or Its Subsidiaries Percent of Total Option From the Grant
Date That Is Vested ------------------- -------------- After 1
year 20% After 2 years 40% Each three-month period completed thereafter
An additional 5% After 5 years 100 Any unvested shares acquired upon
exercise of an Option shall be subject to repurchase by the Company
upon termination of the Optionee's employment or services in accordance
with the provisions of Section 13.1. To the extent that the right to
purchase shares has accrued thereunder, an Option may be exercised from
time to time by written notice to the Company, in accordance with
procedures established by the Plan Administrator, setting forth the
number of shares with respect to which the Option is being exercised
and accompanied by payment in full as described in Section 7.5. The
Plan Administrator may determine at any time that an Option may not be
exercised as to less than 100 shares at any one time for vested shares
and any number in its discretion for unvested shares (or the lesser
number of remaining shares covered by the Option). To the extent
required by the Plan Administrator, as a condition to exercise by the
Optionee of an Option, the Optionee shall execute and deliver to the
Company a Shareholders Agreement in substantially the form in use at
the time of exercise, unless either (i) the Optionee has previously
executed and delivered such Shareholder Agreement and it is in effect
at the time the Optionee exercises the Option or (ii) such Shareholders
Agreement is no longer in effect with respect to other holders of
Common Stock.
7.5 PAYMENT OF EXERCISE PRICE The exercise price for shares purchased under
an Option shall be paid in full to the Company by delivery of
consideration equal to the product of the Option exercise price and the
number of shares purchased. Such consideration must be paid in cash or
by check or, unless the Plan Administrator in its sole discretion
determines otherwise, either at the time the Option is granted or at
any time before it is exercised, a combination of cash and/or check (if
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any) and one or both of the following alternative forms: (a) tendering
(either actually or, if and so long as the Common Stock is registered
under Section 12(b) or 12(g) of the Exchange Act, by attestation)
Common Stock already owned by the Optionee for at least six months (or
any shorter period necessary to avoid a charge to the Company's
earnings for financial reporting purposes) having a Fair Market Value
on the day prior to the exercise date equal to the aggregate Option
exercise price or (b) if and so long as the Common Stock is registered
under Section 12(b) or 12(g) of the Exchange Act, delivery of a
properly executed exercise notice, together with irrevocable
instructions, to (i) a brokerage firm designated by the Company to
deliver promptly to the Company the aggregate amount of sale or loan
proceeds to pay the Option exercise price and any withholding tax
obligations that may arise in connection with the exercise and(ii) the
Company to deliver the certificates for such purchased shares directly
to such brokerage firm, all in accordance with the regulations of the
Federal Reserve Board. In addition, the exercise price for shares
purchased under an Option may be paid, either singly or in combination
with one or more of the alternative forms of payment authorized by this
Section 7.5, by (y) a promissory note delivered pursuant to Section 12
or (z) such other consideration as the Plan Administrator may permit.
7.6 POST-TERMINATION EXERCISES The Plan Administrator shall establish and
set forth in each instrument that evidences an Option whether the
Option will continue to be exercisable, and the terms and conditions of
such exercise, if an Optionee ceases to be employed by, or to provide
services to, the Company or its Subsidiaries, which provisions may be
waived or modified by the Plan Administrator at any time. If not so
established in the instrument evidencing the Option, the Option will be
exercisable according to the following terms and conditions, which may
be waived or modified by the Plan Administrator at any time. In case of
termination of the Optionee's employment or services other than by
reason of death or Cause, the Option shall be exercisable, to the
extent of the number of shares vested at the date of such termination,
only (a) within one year if the termination of the Optionee's
employment or services is coincident with Retirement, Early Retirement
at the Company's request or Disability or (b)within three months after
the date the Optionee ceases to be an employee, director, officer,
consultant, agent, advisor or independent contractor of the Company or
a Subsidiary if termination of the Optionee's employment or services is
for any reason other than Retirement, Early Retirement at the Company's
request or Disability, but in no event later than the remaining term of
the Option. Any Option exercisable at the time of the Optionee's death
may be exercised, to the extent of the number of shares vested at the
date of the Optionee's death, by the personal representative of the
Optionee's estate, the person(s) to whom the Optionee's rights under
the Option have passed by will or the applicable laws of descent and
distribution or the beneficiary designated pursuant to Section 9 at any
time or from time to time within one year after thedate of death, but
in no event later than the remaining term of the Option. Any portion of
an Option that is not vested on the date of termination of the
Optionee's employment or services shall terminate on such date, unless
the Plan Administrator determines otherwise. In case of termination of
the Optionee's employment or services for Cause, the Option shall
automatically terminate upon first notification to the Optionee of such
termination, unless the Plan Administrator determines otherwise. If an
Optionee's employment or services with the Company are suspended
pending an investigation of whether the Optionee shall be terminated
for Cause, all the Optionee's rights under any Option likewise shall be
suspended during the period of investigation. With respect to
employees, unless the Plan Administrator at any time determines
otherwise, "termination of the Optionee's employment or services" for
purposes of the Plan (including without limitation this Section 7 and
Section 13 shall mean any reduction in the Optionee's regular hours of
employment to less than thirty (30) hours per week. A transfer of
employment or services between or among the Company and its
Subsidiaries shall not be considered a termination of employment or
services. The effect of a Company-approved leave of absence on the
terms and conditions of an Option shall be determined by the Plan
Administrator, in its sole discretion.
8. INCENTIVE STOCK OPTION LIMITATIONS To the extent required by Section 422 of
the Code, Incentive Stock Options shall be subject to the following
additional terms and conditions:
8.1 DOLLAR LIMITATION To the extent the aggregate Fair Market Value
(determined as of the Grant Date) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time during any
calendar year (under the Plan and all other stock option plans of the
Company) exceeds $100,000, such portion in excess of $100,000 shall be
subject to delayed exercisability or treated as a Nonqualified Stock
Option as set forth by the Plan Administrator in the agreement(s)
evidencing the Option. In the event the Optionee holds two or more such
Options that become exercisable for the first time in the same calendar
year, such limitation shall be applied on the basis of the order in
which such Options are granted.
8.2 10% STOCKHOLDERS If an individual owns more than 10% of the total
voting power of all classes of the Company's stock, then the exercise
price per share of an Incentive Stock Option shall not be less than
110% of the Fair Market Value of the Common Stock on the Grant Date and
the Option term shall not exceed five years. The determination of 10%
ownership shall be made in accordance with Section 422 of the Code.
8.3 ELIGIBLE EMPLOYEES Individuals who are not employees of the Company or
one of its parent corporations or subsidiary corporations may not be
granted Incentive Stock Options. For purposes of this Section 8.3,
"parent corporation" and "subsidiary corporation" shall have the
meanings attributed to those terms for purposes of Section 422 of the
Code.
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8.4 TERM The term of an Incentive Stock Option shall not exceed 10 years.
8.5 EXERCISABILITY To qualify for Incentive Stock Option tax treatment, an
Option designated as an Incentive Stock Option must be exercised within
three months after termination of employment for reasons other than
death, except that, in the case of termination of employment due to
total disability, such Option must be exercised within one year after
such termination. Employment shall not be deemed to continue beyond the
first 90 days of a leave of absence unless the Optionee's reemployment
rights are guaranteed by statute or contract. For purposes of this
Section 8.5, "total disability" shall mean a mental or physical
impairment of the Optionee that is expected to result in death or that
has lasted or is expected to last for a continuous period of 12 months
or more and that causes the Optionee to be unable, in the opinion of
the Company, to perform his or her duties for the Company and to be
engaged in any substantial gainful activity. Total disability shall be
deemed to have occurred on the first day after the Company has
furnished its opinion of total disability to the Plan Administrator.
8.6 TAXATION OF INCENTIVE STOCK OPTIONS In order to obtain certain tax
benefits afforded to Incentive Stock Options under Section 422 of the
Code, the Optionee must hold the shares issued upon the exercise of an
Incentive Stock Option for two years after the Grant Date of the
Incentive Stock Option and one year from the date of exercise. An
Optionee may be subject to the alternative minimum tax at the time of
exercise of an Incentive Stock Option. The Plan Administrator may
require an Optionee to give the Company prompt notice of any
disposition of shares acquired by the exercise of an Incentive Stock
Option prior to the expiration of such holding periods
8.7 PROMISSORY NOTES The amount of any promissory note delivered pursuant
to Section 12 in connection with an Incentive Stock Option shall bear
interest at a rate specified by the Plan Administrator but in no case
less than the rate required to avoid imputation of interest (taking
into account any exceptions to theimputed interest rules) for federal
income tax purposes.
9. ASSIGNABILITY No Option granted under the Plan may be assigned, pledged or
transferred by the Optionee other than by will or by the applicable laws of
descent and distribution, and, during the Optionee's lifetime, such Option
may be exercised only by the Optionee or a permitted assignee or transferee
of the Optionee (as provided below). Notwithstanding the foregoing, and to
the extent permitted by Section 422 of the Code, the Plan Administrator, in
its sole discretion, may permit such assignment, transfer and
exercisability and may permit an Optionee to designate a beneficiary who
may exercise the Option after the Optionee's death; provided, however, that
any Option so assigned or transferred shall be subject to all the same
terms and conditions contained in the instrument evidencing the Option.
10. ADJUSTMENTS
10.1 ADJUSTMENT OF SHARES In the event that, at any time or from time to
time, a stock dividend, stock split, spin-off, combination or exchange
of shares, recapitalization, merger, consolidation, distribution to
stockholders other than a normal cash dividend, or other change in the
Company's corporate or capital structure results in (a) the outstanding
shares, or any securities exchanged therefor or received in their
place, being exchanged for a different number or class of securities of
the Company or of any other corporation or (b) new, different or
additional securities of the Company or of any other corporation being
received by the holders of shares of Common Stock of the Company, then
the Plan Administrator shall make proportional adjustments in (i) the
maximum number and kind of securities subject to the Plan as set forth
in Section 4.1, (ii) the maximum number and kind of securities that may
be made subject to Options to any individual as set forth in Section
4.2, and (iii) the number and kind of securities that are subject to
any outstanding Option and the per share price of such securities,
without any change in the aggregate price to be paid therefore. The
determination by the Plan Administrator as to the terms of any of the
foregoing adjustments shall be conclusive and binding.
10.2 CORPORATE TRANSACTION Except as otherwise provided in the instrument
that evidences the Option,in the event of a Corporate Transaction, the
Plan Administrator shall determine whether provision will be made in
connection with the Corporate Transaction for an appropriate assumption
of the Options theretofore granted under the Plan (which assumption may
be effected by means of a payment to each Optionee (by the Company or
any other person or entity involved in the Corporate Transaction), in
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exchange for the cancellation of the Options held by such Optionee, of
the difference between the then Fair Market Value of the aggregate
number of shares of Common Stock then subject to such Options and the
aggregate exercise price that would have to be paid to acquire such
shares) or for substitution of appropriate new options covering stock
of a successor corporation to the Company or stock of an affiliate of
such successor corporation. If the Plan Administrator determines that
such an assumption or substitution will be made, the Plan Administrator
shall give notice of such determination to the Optionees, and the
provisions of such assumption or substitution, and any adjustments made
(i) to the number and kind of shares subject to the outstanding Options
(or to the options in substitution therefor), (ii) to the exercise
prices, and/or (iii)to the terms and conditions of the stock options,
shall be binding on the Optionees. Any such determination shall be made
in the sole discretion of the Plan Administrator and shall be final,
conclusive and binding on all Optionees. If the Plan Administrator, in
its sole discretion, determines that no such assumption or substitution
will be made, the Plan Administrator shall give notice of such
determination to the Optionees, and each Option that is at the time
outstanding shall automatically accelerate so that each such Option
shall, immediately prior to the specified effective date for the
Corporate Transaction, become 100% vested and exercisable, except that
such acceleration will not occur if, in the opinion of the Company's
outside accountants, it would render unavailable "pooling of interest"
accounting for a Corporate Transaction that would otherwise qualify for
such accounting treatment. All such Options shallterminate and cease to
remain outstanding immediately following the consummation of the
Corporate Transaction, except to the extent assumed by the successor
corporation or an affiliate thereof.
10.3 FURTHER ADJUSTMENT OF OPTIONS Subject to Section 10.2, the Plan
Administrator shall have the discretion, exercisable at any time before
a sale, merger, consolidation, reorganization, liquidation or change in
control of the Company, as defined by the Plan Administrator, to take
such further action as it determines to be necessary or advisable, and
fair and equitable to Optionees, with respect to Options. Such
authorized action may include (but shall not be limited to)
establishing, amending or waiving the type, terms, conditions or
duration of, or restrictions on, Options so as to provide for earlier,
later, extended or additional time for exercise and other
modifications, and the Plan Administrator may take such actions with
respect to all Optionees, to certain categories of Optionees or only to
individual Optionees. The Plan Administrator may take such action
before or after granting Options to which the action relates and before
or after any public announcement with respect to such sale, merger,
consolidation, reorganization, liquidation or change in control that is
the reason for such action.
10.4 LIMITATIONS The grant of Options will in no way affect the Company's
right to adjust, reclassify, reorganize or otherwise
change its capital or business structure orto merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of
its business or assets. S
11. WITHHOLDING The Company may require the Optionee to pay to the Company
the amount of any withholding taxes that the Company
is required to withhold with respect to the grant or exercise of any
Option. Subject to the Plan and applicable law, the Plan
Administrator may, in its sole discretion, permit the Optionee to satisfy
withholding obligations, in whole or in part, by paying
cash, by electing to have the Company withhold shares of Common Stock or
by transferring shares of Common Stock to the Company,
in such amounts as are equivalent to the Fair Market Value of the
withholding obligation. The Company shall have the right to
withhold from any shares of Common Stock issuable pursuant to an Option
or from any cash amounts otherwise due or to become due
from the Company to the Optionee an amount equal to such taxes. The
Company may also deduct from any Option anyother amounts due
from the Optionee to the Company or a Subsidiary.
12. LOANS, INSTALLMENT PAYMENTS AND LOAN GUARANTEES To assist an Optionee
(including an Optionee who is an officer or a director
of the Company) in acquiring shares of Common Stock pursuant to an Option
granted under the Plan, the Plan Administrator, in its
sole discretion, may authorize, either at the Grant Date or at any time
before the acquisition of Common Stock pursuant to the
Option, (a) the extension of a loan to the Optionee by the Company, (b)
the payment by the Optionee of the purchase price, if
any, of the Common Stock in installments, or (c) the guarantee by the
Company of a loan obtained by the Optionee from a third
party. The terms of any loans, installment payments or loan guarantees,
including the interest rate and terms of repayment, will
be subject to the Plan Administrator's discretion. Loans, installment
payments and loan guarantees may be granted with or without
security. The maximum credit available is the purchase price, if any, of
the Common Stock acquired, plus the maximum federal and
state income and employment tax liability that may be incurred in
connection with the acquisition.
13. REPURCHASE RIGHTS; ESCROW
13.1 REPURCHASE RIGHTS The Plan Administrator shall have the discretion to
authorize the issuance of unvested shares of Common Stock pursuant to
the exercise of an Option. In the event of termination of the
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Optionee's employment or services, all shares of Common Stock issued
upon exercise of an Option which are unvested at the time of cessation
of employment or services shall be subject to repurchase at the
exercise price paid for such shares. The terms and conditions upon
which such repurchase right shall be exercisable (including the period
and procedure for exercise) shall be established by the Plan
Administrator and set forth in the agreement evidencing such right. All
of the Company's outstanding repurchase rights under this Section 13.1
are assignable by the Company at any time and shall remain in full
force and effect in the event of a Corporate Transaction; provided that
if the vesting of Options is accelerated pursuant to Section 10.2, the
repurchase rights under this Section 13.1 shall terminate and all
shares subject to such terminated rights shall immediately vest in
full. The Plan Administrator shall have the discretionary authority,
exercisable either before or after the Optionee's cessation of
employment or services, to cancel the Company's outstanding repurchase
rights with respect to one or more shares purchased or purchasable by
the Optionee under an Option and thereby accelerate the vesting of such
shares in whole or in part at any time.
13.2 ESCROW To ensure that shares of Common Stock acquired upon exercise of
an Option that are subject to any repurchase right, stockholders
agreement and/or security for any promissory note will be available for
repurchase, the Plan Administrator may require the Optionee to deposit
the certificate or certificates evidencing such shares with an agent
designated by the Plan Administrator under the terms and conditions of
escrow and security agreements approved by the Plan Administrator. If
the Plan Administrator does not require such deposit as a condition of
exercise of an Option, the Plan Administrator reserves the right at any
time to require the Optionee to so deposit the certificate or
certificates in escrow. The Company shall bear the expenses of the
escrow. As soon as practicable after the expiration of any repurchase
rights or stockholders agreement, and after full repayment of any
promissory note secured by the shares in escrow, the agent shall
deliver to the Optionee the shares no longer subject to such
restrictions and no longer security for any promissory note. In the
event shares held in escrow are subject to the Company's exercise of a
repurchase option or stockholders agreement, the notices required to be
given to the Optionee shall be given to the agent and any payment
required to be given to the Optionee shall be given to the agent.
Within 30 days after payment by the Company, the agent shall deliver
the shares which the Company has purchased to the Company and shall
deliver the payment received from the Company to the Optionee. In the
event of any stock dividend, stock split or consolidation of shares or
any like capital adjustment of any of the outstanding securities of the
Company, any and all new, substituted or additional securities or other
property to which the Optionee is entitled by reason of ownership of
shares acquired upon exercise of an Option shall be subject to any
repurchase rights, stockholders agreement, and/or security for any
promissory note with the same force and effect as the shares subject to
such repurchase rights, stockholders agreement and/or security interest
immediately before such event.
14. MARKET STANDOFF In connection with any underwritten public offering
by the Company of its equity securities pursuant to an
effective registration statement filed under the Securities Act,
including the Company's initial public offering, a person shall
not sell, or make any short sale of, loan, hypothecate, pledge, grant
any option for the purchase of, or otherwise dispose or
transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to, any shares issued pursuant
to an Option granted under the Plan without the prior written consent of
the Company or its underwriters. Such limitations shall
be in effect only if and to the extent and for such period of time as may
be requested by the Company or such underwriters and
agreed to by the Company's officers and directors; provided, however,
that in no event shall the weighted average number of days
in such period exceed 180 days. The limitations of this paragraph shall
in all events terminate two years after the effective
date of the Company's initial public offering. In the event of any stock
split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the Company's
outstanding Common Stock effected as a class without the
Company's receipt of consideration, then any new, substituted or
additional securities distributed with respect to the purchased
shares shall be immediately subject tothe provisions of this Section 14,
to the same extent the purchased shares are at such time
covered by s uch provisions. In order to enforce the limitations of
this Section 14, the Company may impose stop-transfer
instructions with respect to the purchased shares and any new, substituted
or additional securities distributed with respect to
the purchased shares until the end of the applicable standoff period.
15. AMENDMENT AND TERMINATION OF PLAN
15.1 AMENDMENT OF PLAN The Plan may be amended only by the Board in such
respects as it shall deem advisable; however, to the extent required
for compliance with Section 422 of the Code or any applicable law or
regulation, stockholder approval will be required for any amendment
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that will (a) increase the total number of shares as to which Options
may be granted under the Plan, (b) modify the class of persons eligible
to receive Options, or (c) otherwise require stockholder approval under
any applicable law or regulation.
15.2 TERMINATION OF PLAN The Board may suspend or terminate the Plan at any
time. The Plan will have no fixed expiration date; provided, however,
that no Incentive Stock Options may be granted more than 10 years after
the earlier of the Plan's adoption by the Board and approval by the
stockholders.
15.3 CONSENT OF OPTIONEE The amendment or termination of the Plan shall not,
without the consent of the Optionee, impair or diminish any rights or
obligations under any Option theretofore granted under the Plan. Any
change or adjustment to an outstanding Incentive Stock Option shall
not, without the consent of the Optionee, be made in a manner so as to
constitute a "modification" that would cause such Incentive Stock
Option to fail to continue to qualify as an Incentive Stock Option.
16. GENERAL
16.1 OPTION AGREEMENTS Options granted under the Plan shall be evidenced by
a written agreement that shall contain such terms, conditions,
limitations and restrictions as the Plan Administrator shall deem
advisable and that are not inconsistent with the Plan.
16.2 CONTINUED EMPLOYMENT OR SERVICES; RIGHTS IN OPTIONS None of the Plan,
participation in the Plan or any action of the Plan Administrator taken
under the Plan shall be construed as giving any person any right to be
retained in the employ of the Company or limit the Company's right to
terminate the employment or services of any person.
16.3 REGISTRATION The Company shall be under no obligation to any Optionee
to register for offering or resale or to qualify for exemption under
the Securities Act, or to register or qualify under state securities
laws, any shares of Common Stock, security or interest in a security
paid or issued under, or created by, the Plan, or to continue in effect
any such registrations or qualifications if made. The Company may issue
certificates for shares with such legends and subject to such
restrictions on transfer and stop-transfer instructions as counsel for
the Company deems necessary or desirable for compliance by the Company
with federal and state securities laws. Inability of the Company to
obtain, from any regulatory body having jurisdiction, the authority
deemed by the Company's counsel to be necessary for the lawful issuance
and sale of any shares hereunder or the unavailability of an exemption
from registration for the issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the non
issuance or sale of such shares as to which such requisite authority
shall not have been obtained. As a condition to the exercise of an
Option, the Company may require the Optionee to represent and warrant
at the time of any such exercise or receipt that such shares are being
purchased or received only for the Optionee's own account and without
any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required
by any relevant provision of the aforementioned laws. At the option of
the Company, a stop-transfer order against any such shares may be
placed on the official stock books and records of the Company, and a
legend indicating that such shares may not be pledged, sold or
otherwise transferred, unless an opinion of counsel is provided
(concurred in by counsel for the Company) stating that such transfer is
not in violation of any applicable law or regulation, may be stamped on
stock certificates to ensure exemption from registration. The Plan
Administrator may also require such other action or agreement by the
Optionee as may from time to time be necessary to comply with the
federal and state securities laws.
16.4 NO RIGHTS AS A STOCKHOLDER No Option shall entitle the Optionee to any
dividend, voting or other right of a stockholder unless and until the
date of issuance under the Plan of the shares that are the subject of
such Option, free of all applicable restrictions.
16.5 COMPLIANCE WITH LAWS AND REGULATIONS Notwithstanding anything in the
Plan to the contrary, the Board, in its sole discretion, may bifurcate
the Plan so as to restrict, limit or condition the use of any provision
of the Plan to Optionees who are officers or directors subject to
Section 16 of the Exchange Act without so restricting, limiting or
conditioning the Plan with respect to other Optionees. Additionally, in
interpreting and applying the provisions of the Plan, any Option
granted as an Incentive Stock Option pursuant to the Plan shall, to the
extent permitted by law, be construed as an "incentive stock option"
within the meaning of Section 422 of the Code.
16.6 NO TRUST OR FUND The Plan is intended to constitute an "unfunded" plan.
Nothing contained herein shall require the Company to segregate any
monies or other property, or shares of Common Stock, or to create any
trusts, or to make any special deposits for any immediate or deferred
amounts payable to any Optionee, and no Optionee shall have any rights
that are greater than those of a general unsecured creditor of the
Company.
16.7 SEVERABILITY If any provision of the Plan or any Option is determined
to be invalid, illegal or unenforceable in any jurisdiction, or as to
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any person, or would disqualify the Plan or any Option under any law
deemed applicable by the Plan Administrator, such provision shall be
construed or deemed amended to conform to applicable laws, or, if it
cannot be so construed or deemed amended without, in the Plan
Administrator's determination, materially altering the intent of the
Plan or the Option, such provision shall be stricken as to such
jurisdiction, person or Option, and the remainder of the Plan and any
such Option shall remain in full force and effect.
17. EFFECTIVE DATE The Plan's effective date is the date on which it is adopted
by the Board, so long as it is approved by the Company's stockholders at any
time within 12 months of such adoption. Adopted by the Board on October 15, 1998
and approved by the Company's stockholders on October 15, 1998.
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