EXHIBIT 10.7
2002 STOCK OPTION PLAN OF
UMDN, INC.
UMDN, Inc., a corporation organized under the laws of the State of Delaware (the
"Company"), hereby adopts this 2002 Stock Option Plan (the "Plan"). The purposes
of this Plan are as follows:
(1) To further the growth, development and financial success of the Company
by providing additional incentives to its Non-Employee Directors, Employees (as
such terms are defined below) and consultants by assisting them to become owners
of capital stock of the Company and thus permitting them to benefit directly
from its growth, development and financial success.
(2) To enable the Company to obtain and retain the services of the type of
directors, employees and consultants considered essential to the long-range
success of the Company by providing and offering them an opportunity to become
owners of capital stock of the Company under options, including options that are
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code of 1986, as amended.
ARTICLE I
DEFINITIONS
1.1 GENERAL. Whenever the following terms are used in this Plan, they have
the meanings specified below unless the context clearly indicates to the
contrary. The masculine pronoun includes the feminine and neuter, and the
singular includes the plural, where the context so indicates.
1.2 BOARD. "Board" means the Board of Directors of the Company.
1.3 CODE. "Code" means the Internal Revenue Code of 1986, as amended.
1.4 COMMITTEE. "Committee" means a Committee of the Board appointed as
provided in Section 6.1 or, if a Committee is not appointed, the Board.
1.5 COMPANY. "Company" means UMDN, Inc. In addition, "Company" means any
corporation assuming or issuing new employee stock options in substitution for
Options outstanding under the Plan, in a transaction to which Section 424(a) of
the Code applies.
1.6 EMPLOYEE. "Employee" means any employee (as defined in accordance with
the regulations and revenue rulings then applicable under Section 3401(c) of the
Code) of the Company or any of its Subsidiaries, whether such employee is so
employed at the time this Plan is adopted or becomes so employed subsequent to
the adoption of this Plan, and includes employees who are directors or officers
of the Company or any such Subsidiary.
1.7 EXCHANGE ACT. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.8 INCENTIVE STOCK OPTION. "Incentive Stock Option" means an Option
which, when granted, qualifies under Section 422 of the Code and which is
designated as an Incentive Stock Option by the Committee.
1.9 NON-EMPLOYEE DIRECTOR. "Non-Employee Director" has the meaning set
forth in Rule 16b-3 promulgated under the Exchange Act.
1.10 NON-QUALIFIED OPTION. "Non-Qualified Option" means an Option, which is
not an Incentive Stock Option, or which ceases to be an Incentive Stock Option
through some disqualifying event and that does not cause the cancellation of the
Incentive Stock Option.
1.11 OPTION. "Option" means an option to purchase capital stock of the
Company granted under the Plan. "Options" include both Incentive Stock Options
and Non-Qualified Options.
1.12 OPTIONEE. "Optionee" means a Non-Employee Director, Employee or
consultant to whom an Option is granted under the Plan.
1.13 PLAN. "Plan" means this 2002 Stock Option Plan of the Company.
1.14 SECRETARY. "Secretary" means the Secretary of the Company.
1.15 SECURITIES ACT. "Securities Act" means the Securities Act of 1933, as
amended.
1.16 SUBSIDIARY. "Subsidiary" means any corporation or other entity in
which the Company owns, directly or through another Subsidiary, stock or other
equity interests possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock or other equity securities.
1.17 TERMINATION OF CONSULTANCY. "Termination of Consultancy" means the
time when the engagement of Optionee as a consultant to the Company or a
Subsidiary or its successor resulting from a Change Transaction referred to in
Section 4.5 hereof is terminated for any reason, with or without cause,
including, without limitation, resignation, non-renewal, discharge, death or
retirement; but excluding terminations where there is a simultaneous
commencement of employment with the Company or election of the former consultant
to the Board of Directors of the Company as a Non-Employee Director. Except as
provided in Section 4.5 hereof, the Committee, in its absolute discretion, shall
determine the effect of all matters and questions relating to Termination of
Consultancy, including, but not by way of limitation, the question of whether a
Termination of Consultancy resulted from a discharge for good cause and all
questions of whether particular leaves of absence constitute Terminations of
Consultancy. Notwithstanding any other provision of this Plan, the Company has
an absolute and unrestricted right to terminate a consultant's services at any
time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
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1.18 TERMINATION OF EMPLOYMENT. "Termination of Employment" means the time
when the employee-employer relationship or directorship between the Optionee and
the Company or its Subsidiaries or its successor resulting from a Change
Transaction referred to in Section 4.5 hereof is terminated for any reason, with
or without cause, including, but not by way of limitation, a termination by
resignation, discharge, non-renewal, death or retirement, but excluding (i)
terminations where there is a simultaneous reemployment or continuing employment
of an Optionee by the Company, (ii) at the discretion of the Committee,
terminations which result in a temporary severance of the employee-employer
relationship, and (iii) at the discretion of the Committee, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company or a subsidiary with the former employee or by the election of the
former employee to the Board of Directors of the Company as a Non-Employee
Director. Except as provided in Section 4.5 hereof, the Committee, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment; provided, however, that, with respect to
Incentive Stock Options, a leave of absence, change in status from an Employee
to an independent contractor or other change in the employee-employer
relationship shall constitute a Termination of Employment if and to the extent
that such leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section. Notwithstanding
any other provision of this Plan, the Company has an absolute and unrestricted
right to terminate an Employee's employment at any time for any reason
whatsoever, with or without cause, except to the extent expressly provided
otherwise in writing.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1 SHARES SUBJECT TO PLAN. The shares of stock subject to Options shall
be authorized but unissued shares and reacquired shares of the Company's Common
Stock, par value $.0001 per share (the "Common Stock"). The aggregate number of
shares that may be issued upon exercise of Options shall not exceed twenty
percent of the total number of shares of the Company's Common Stock outstanding
at the time of the calculation thereof, excluding all shares of Common Stock
then held in the Treasury of the Company; provided, however, that the total
number of shares of Common Stock that may be issued upon exercise of Options
that are incentive stock options under Section 422 of the Code shall not exceed
2,000,000, subject to the last sentence of Section 2.3 hereof.
2.2 UNEXERCISED OPTIONS. If any Option expires or is canceled without
having been fully exercised, a new Option may be granted hereunder, subject to
the limitations of Sections 2.1 and 2.2, with respect to the number of shares
subject to such expired or cancelled Option as to which such expired or
cancelled Option was not exercised prior to its expiration or cancellation.
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2.3 CHANGES IN COMPANY'S SHARES. In case the Company shall (i) pay a
dividend in shares of Common Stock or make a distribution in shares of Common
Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, or (iv) issue, by reclassification of its shares of Common Stock or other
securities of the Company (including any such reclassification in connection
with a consolidation or merger in which the Company is the surviving
corporation), the number of shares of Common Stock purchasable upon exercise of
an Option outstanding immediately prior thereto shall be adjusted so that the
Optionee shall be entitled to receive the kind and number of shares of Common
Stock or other securities of the Company which Optionee would have owned or have
been entitled to receive after the happening of any of the events described
above, had such Option been exercised immediately prior to the happening of such
event or any record date with respect thereto. Such adjustment in the Option
shall be made without change in the total exercise price applicable to the
Option or the unexercised portion of the Option (except for any change in the
aggregate price resulting from rounding-off of share quantities or prices) but
with any necessary corresponding adjustment in Option exercise price per share;
provided, however, in the case of Incentive Stock Options, each such adjustment
shall be made in such manner as not to constitute a "modification" within the
meaning of Section 424(h)(3) of the Code. An adjustment made pursuant to this
Section 2.3 shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event. Any such
adjustment made by the Committee shall be final and binding on the Optionee, the
Company and all interested parties. In any of the events referred to in the
first sentence of this Section 2.3, the Committee shall also adjust, in such
manner as it shall deem equitable, the number and type of shares (or other
securities or property) that may thereafter be made the subject of Options to be
granted thereafter under the Plan.
ARTICLE III
GRANTING OF OPTIONS
3.1 ELIGIBILITY. Any Non-Employee Director, Employee or consultant of the
Company shall be eligible to be granted Options, except as provided in Sections
3.3 and 6.1. Each Non-Employee Director of the Company shall be eligible to be
granted Options at the times and in the manner set forth in Section 3.4(d).
3.2 DISQUALIFICATION. No person may be granted an Incentive Stock Option
under this Plan if such person, at the time the Incentive Stock Option is
granted, owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any then existing
subsidiary unless such Incentive Stock Option (i) conforms to the applicable
provisions of Section 422 of the Code and (ii) is priced in accordance with
Section 4.2(a) hereof. No consultant may be granted Options under this Plan if
the primary services of such consultant are provided in connection with the
offer and sale of securities in a capital raising transaction.
3.3 QUALIFICATION OF INCENTIVE STOCK OPTIONS. No Incentive Stock Option
shall be granted to any person who is not an Employee.
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3.4 GRANTING OF OPTIONS.
(a) The Committee shall from time to time, in its absolute discretion:
(i) Determine which Employees, Non-Employee Directors and
consultants (including those to whom Options have been previously
granted under the Plan) are to be granted Options;
(ii) Determine the number of shares to be subject to such Options
granted to such selected persons; and
(iii) Determine the terms and conditions of such Options, consistent
with the Plan.
(b) Upon the selection of a Non-Employee Director, Employee or
consultant to be granted an Option, the Committee shall instruct the
Secretary to issue such Option and may impose such conditions on the grant
of such Option as it deems appropriate. Without limiting the generality of
the preceding sentence, the Committee may, in its discretion and on such
terms as it deems appropriate, require as a condition to the grant of an
Option to an Employee or consultant that the Employee or consultant
surrender for cancellation some or all of the unexercised Options which
have been previously granted to him under this Plan or otherwise or that
the Optionee refrain from competing with the Company so long as any of his
Options remain outstanding and unexercised. An Option, the grant of which
is conditioned upon such surrender, may have an option price lower (or
higher) than the exercise price of such surrendered Option or other award,
may cover the same (or a lesser or greater) number of shares as such
surrendered Option or other award, may contain such other terms as the
Committee deems appropriate, and shall be exercisable in accordance with
its terms, without regard to the number of shares, price, exercise period
or any other term or condition of such surrendered Option or other award.
(c) Any Incentive Stock Option granted under this Plan may be modified
by the Committee to disqualify such option from treatment as an "incentive
stock option" under Section 422 of the Code in which event such Incentive
Stock Option shall thereafter be a Non-Qualified Option.
(d) When a Non-Employee Director is initially elected to the Board,
each such new Non-Employee Director automatically shall be granted an
Option to purchase one hundred thousand (100,000) shares of Common Stock
(subject to adjustment as provided in Section 2.4) on the date of his or
her election to the Board at an exercise price of 100% of the Fair Market
Value (as defined in Section 4.2(b) hereof) on such date. Such Option shall
vest and have such other terms as are described in Section 4.3 hereof.
Members of the Board who are Employees who subsequently retire from the
Company and remain on the Board will not receive an Option grant pursuant
to this Section 3.4(d).
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ARTICLE IV
TERMS OF OPTIONS
4.1 OPTION AGREEMENT. Each Option shall be evidenced by a written Stock
Option, which shall be executed by an authorized Officer of the Company and
which shall contain such terms and conditions as the Committee shall determine,
consistent with the Plan. Stock Options evidencing Incentive Stock Options shall
contain such terms and conditions as may be necessary to qualify such Options as
"Incentive Stock Options" under Section 422 of the Code. Each Optionee, by
accepting a Stock Option shall be deemed to acknowledge and agree to all of the
terms and conditions thereof.
4.2 OPTION PRICE.
(a) The price of the shares subject to each Option shall be set by the
Committee; provided, however, that the price per share for an Incentive
Stock Option shall not be less than 100% of the fair market value of such
shares on the date such Option is granted, or 110% of the fair market value
of such shares on the date such Option is granted in the case of an
individual then owning (within the meaning of Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of stock of
the Company or any subsidiary.
(b) For purposes of the Plan, the fair market value of a share of the
Company's stock as of a given date ("Fair Market Value") shall be: (i) the
closing price of a share of the Company's stock on the principal exchange
on which shares of the Company's stock are then trading, if any, on such
date, or, if shares were not traded on such date, then on the next
preceding trading day during which a sale occurred; or (ii) if such stock
is not traded on an exchange but is quoted on NASDAQ or a successor
quotation system, the last sale price as reported by NASDAQ or such
successor quotation system; (iii) if such stock is not publicly traded on
an exchange and not quoted on NASDAQ or a successor quotation system, the
mean between the closing bid and asked prices for the stock on such date as
determined in good faith by the Committee; or (iv) if the Company's stock
is not publicly traded, the fair market value established by the Committee
acting in good faith.
4.3 OPTION VESTING.
(a) Subject to the provisions of Section 3.4 (d) hereof, the period
during which the right to exercise an Option in whole or in part vests in
the Optionee shall be set by the Committee and the Committee may determine
that an Option may not be exercised in whole or in part for a specified
period after it is granted. At any time after grant of an Option, the
Committee may, in its sole discretion and subject to whatever terms and
conditions it selects, accelerate the period during which an Option vests.
Notwithstanding the foregoing, all Options granted to Non-Employee
Directors shall become exercisable in cumulative annual installments of 25%
on the date of grant and 25% on each of the first, second and third
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anniversaries thereof, and the term of each such Option shall be ten (10)
years without variation or acceleration, except (i) as provided in Section
4.5, (ii) that the Board may authorize the acceleration of Options granted
to a Non-Employee Director upon the retirement of a Non-Employee Director
and (iii) that such Option shall terminate immediately upon removal of such
Non-Employee Director with cause by the shareholders of the Company
pursuant to Section 141(k) of the Delaware General Corporation Law or any
successor thereto.
(b) No portion of an Option that is unexercisable at Termination of
Employment or Termination of Consultancy, as applicable, shall thereafter
become exercisable, except as may be otherwise provided by the Committee
with respect to Options granted to Employees or consultants in the Stock
Option or in a resolution adopted following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which Incentive Stock Options (within the meaning of Section 422
of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any calendar year
(under the Plan and all other incentive stock option plans of the Company)
exceeds $100,000, such Options shall be treated as Non-Qualified Options to
the extent required by Section 422 of the Code. The rule set forth in the
preceding sentence shall be applied by taking Options into account in the
order in which they were granted. For purposes of this Section 4.3(c), the
Fair Market Value of stock shall be determine as of the time the Option
with respect to such stock is granted.
4.4 EXPIRATION OF OPTIONS
(a) No Incentive Stock Option may be exercised to any extent by anyone
after the first to occur of the following events:
(i) the later of the expiration of ten (10) years from the date the
Option was granted (five (5) years in case of an individual owning at
the time of grant (within the meaning of Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of
stock of the Company or any Subsidiary); or
(ii) except in the case of any Optionee who is disabled (within the
meaning of Section 22(e)(3) of the Code), the expiration of three
months from the date of the Optionee's Termination of Employment for
any reason other than such Optionee's death unless the Optionee dies
within said three-month period, in which event the Incentive Stock
Option shall continue to be exercisable until it may no longer be
exercised pursuant to (i) above; or
(iii) in the case of an Optionee who is disabled (within the meaning
of Section 22(e)(3) of the Code), the expiration of one year from the
date of the Optionee's Termination of Employment for any reason other
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than such Optionee's death unless the Optionee dies within said one
year period, in which event the Incentive Stock Option shall continue
to be exercisable until it may no longer be exercised pursuant to (i)
above.
(b) Subject to the provisions of Section 4.4(a), the Committee shall
provide, in terms of each individual Option, when such Option expires and
becomes unexercisable.
4.5 MERGER, CONSOLIDATION, ACQUISITION OR CHANGE IN CONTROL. In the event
of the merger or consolidation of the Company with or into another corporation
in which the Company is not the surviving corporation, or the acquisition by
another corporation or person of all or substantially all of the Company's
assets or at least eighty percent of its then outstanding Common Stock
(collectively, a "Change Transaction"), all Options theretofore granted
hereunder shall immediately fully vest and become exercisable as to all shares
of Common Stock covered thereby, notwithstanding Sections 4.3(a) or 4.3(b), or
any installment provisions of such Options, and such Options shall be and remain
exercisable for a period of thirty (30) days following such Change Transaction
and shall terminate at the close of business on the thirtieth day following such
Change Transaction. Upon the exercise of the Options following a Change
Transaction, Optionees shall be entitled to receive the kind and amount of
shares, other securities, cash or property receivable upon such Change
Transaction by a holder of the number of shares of Common Stock which might have
been purchased upon exercise of the Option immediately prior to such Change
Transaction and shall have no other conversion rights. In any such event,
effective provision shall be made in the certificate or articles of
incorporation of the surviving corporation, in any contract of sale or
conveyance, or otherwise, so that so far as appropriate and as nearly as
reasonably may be, the provisions set forth herein for the protection of the
rights of Optionees shall thereafter be made applicable.
ARTICLE V
EXERCISE OF OPTIONS
5.1. PERSON ELIGIBLE TO EXERCISE. During the lifetime of the Optionee, only
he, she, or his or her legal representative may exercise an Option granted to
him or her, or any portion thereof. After the death of the Optionee, any
exercisable portion of an Option may, prior to the time when such portion
becomes unexercisable under Section 4.4, be exercised by his or her personal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.
5.2 PARTIAL EXERCISE. At any time and from time to time prior to the time
when any exercisable portion thereof becomes unexercisable under Section 4.4,
such Option or portion thereof may be exercised in whole or in part; provided,
however that the Company shall not be required to issue fractional shares and
the Committee may, by the terms of the Option, require any partial exercise to
be with respect to a specified minimum number of shares.
5.3 MANNER OF EXERCISE. An exercisable Option, or any exercisable portion
thereof, may be exercised solely by delivery to the Secretary or his or her
office of all of the following prior to the time when such Option or such
portion becomes unexercisable under Section 4.4:
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(a) The original Stock Option. If the Optionee is not exercising such
Option for all the shares that are purchasable thereunder (whether or not
vested), the Company shall annotate the original Stock Option to specify
the number of shares with respect to which it has been exercised and the
date of such exercise and shall return the original Stock Option to the
Optionee.
(b) Notice in writing signed by the Optionee or other person then
entitled to exercise such Option or portion, stating that such Option or
portion is exercised, such notice complying with all applicable rules
established by the Committee.
(c) Full payment (in cash or by check) for the shares with respect to
which such Option or portion is hereby exercised. At the discretion of the
Committee (or the Board, in the case of Options granted to members of the
Committee), the terms of the Option may (i) allow payment, in whole or in
part, through the delivery of shares of Common Stock owned by the Optionee,
duly endorsed for transfer to the Company with a Fair Market Value on the
date of delivery equal to the aggregate exercise price of the Option or
exercised portion thereof; (ii) subject to the timing requirements of
Section 5.4, allow payment, in whole or in part, through the surrender of
shares of Common Stock then issuable upon exercise of the Option having a
Fair Market Value on the date of Option exercise equal to the aggregate
exercise price of the Option or exercised portion thereof; (iii) allow
payment, in whole or in part, through the delivery of property of any kind
which constitutes good and valuable consideration; (iv) allow payment, in
whole or in part, through the delivery of a full recourse promissory note
bearing interest (at no less than such rate as shall then preclude the
imputation of interest under the Code) and payable upon such terms as may
be prescribed by the Committee; or (v) allow payment through any
combination of the consideration provided in the foregoing subparagraphs
(i), (ii), (iii) and (iv). In the case of a promissory note, the Committee
or the Board may also prescribe the form of such note and the security to
be given for such note. The Option may not be exercised, however, by
delivery of a promissory note or by a loan from the Company when or where
such loan or other extension of credit is prohibited by law;
(d) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with
all applicable provisions of the Securities Act and any other federal or
state securities laws or regulations. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate to
effect such compliance, including, without limitation, placing legends on
share certificates and issuing stop-transfer orders to transfer agents and
registrars; and
(e) In the event that the Option or portion thereof shall be exercised
pursuant to Section 5.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the
Option or portion thereof.
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5.4 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The shares of stock
issuable and deliverable upon the exercise of an Option, or any portion thereof,
may be either previously authorized but unissued shares or issued shares that
the Company has then reacquired. The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon the
exercise of any Option or portion thereof prior to fulfillment of all of the
following conditions:
(a) There is available an exemption from registration or other
qualification of such shares under any state or federal securities laws, or
there has been completed a registration or qualification of such shares
under any state or federal securities laws or under the rules and
regulations of the Securities and Exchange Commission or any other
government regulatory body, which the Committee shall, in its absolute
discretion, deem necessary or advisable;
(b) The obtaining of any approval or other clearance from any state or
federal government agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;
(c) The payment to the Company of all amounts which it is required to
withhold under federal, state, or local law in connection with the exercise
of the Option in accordance with Section 7.4 hereof.
5.5 TRANSFER RESTRICTIONS. The Committee, in its absolute discretion, may
impose such restrictions on the transferability of the shares purchasable upon
the exercise of an Option as it deems appropriate. Any such restriction shall be
set forth in the respective Stock Option and may be referred to on the
certificates evidencing such shares. The Committee may require the Employee to
give the Company prompt notice of any disposition of shares of stock acquired by
exercise of an Incentive Stock Option within two years from the date of granting
such Option, or one year after the transfer of such shares to such Employee. The
Committee may direct that the certificates evidencing shares acquired by
exercise of an Option refer to such requirements to give prompt notice of
disposition.
5.6 RIGHTS AS STOCKHOLDERS. The holders of Options shall not be, nor have
any of the rights or privileges of, stockholders of the Company in respect to
any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.
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ARTICLE VI
ADMINISTRATION
6.1 COMMITTEE. The Committee shall consist of at least two Non-Employee
Directors, appointed by and holding office at the pleasure of the Board.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board and may be replaced at any time by the Board. The Board
shall fill vacancies in the Committee.
No person shall be eligible to serve on the Compensation Committee
unless he is then a Non-Employee Director and an "outside director" for purposes
of Section 162(m) of the Code.
6.2 DUTIES AND POWERS OF COMMITTEE. The Committee shall conduct the
general administration of the Plan in accordance with its provisions. The
Committee shall have the power to interpret the Plan and the Options and to
adopt or amend such rules for the administration, interpretation and application
of the Plan as are consistent therewith and to interpret, amend or revoke any
such rules. The Committee may accelerate the exercise date of any Option and
determine the right of any person to exercise the rights on behalf of any
Optionee. Notwithstanding the foregoing, the full Board, acting by a majority of
its members in office, other than the members of the Committee, shall conduct
the general administration of the Plan with respect to Options granted to
members of the Committee. Any such interpretations and rules in regard to
Incentive Stock Options shall be consistent with the basic purpose of the Plan
to grant "Incentive Stock Options" within the meaning of Section 422 of the
Code. In its absolute discretion, the Board may at any time and from time to
time exercise any and all rights and duties of the Committee under this Plan
except with respect to matters which under Rule 16b-3 promulgated under the
Exchange Act or Section 162(m) of the Code, or any regulations or rules issued
thereunder, are required to be determined in the sole discretion of the
Committee.
6.3 MAJORITY RULE. The Committee shall act by a majority of its members in
office. The Committee may act either by vote at a meeting or by a memorandum or
other written instrument signed by a majority of the members of the Committee.
6.4 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS. Members of
the Committee shall receive such compensation for their services as members as
may be determined by the Board. All expenses and liabilities incurred by members
of the Committee in connection with the administration of the Plan shall be
borne by the Company. The Committee may, with the approval of the Board, employ
attorneys, consultants, accountants, appraisers, brokers or other persons. The
Committee, the Company and its officers and directors shall be entitled to rely
upon the advice, opinions or valuations of any such persons. All actions taken
and all interpretations and determinations made by the Committee in good faith
shall be final and binding upon all Optionees, the Company and all other
interested persons. No member of the Committee shall be personally liable for
any action, determination or interpretation made in good faith with respect to
the Plan or the Options. The Company shall indemnify, defend and hold harmless
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each member of the Committee against any cost or expense (including counsel
fees) or liability (including any sum paid in settlement of a claim with
approval of the Committee) arising out of any action, omission or determination
relating to the Plan, unless, in either case, such action, omission or
determination was taken or made by such member in bad faith and without
reasonable belief that it was in the best interests of the Company.
ARTICLE VII
OTHER PROVISIONS
7.1 OPTIONS NOT TRANSFERABLE. Options shall not be transferable except by
testamentary will or the laws of descent and distribution, and shall be
exercisable during any Optionee's lifetime only by the Optionee regardless of
any community property interest therein of the spouse of the Optionee, or such
spouse's successors in interest. If the spouse of the Optionee shall have
acquired a community property interest in an Option pursuant to a domestic
relations order as defined in the Code in Title 1 of the Employee Retirement
Income Security Act of 1974, as amended, the Optionee, or the Optionee's
permitted successors in interest, may exercise the Option on behalf of the
spouse of the Optionee or such spouse's successors in interest. Except as
permitted by the preceding sentence, no Option granted under the Plan or any of
the rights and privileges thereby conferred shall be transferred, assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise),
and no such Option, right or privilege shall be subject to execution,
attachment, or similar process. Upon any attempt so to transfer, assign, pledge,
hypothecate or otherwise dispose of the Option, or of any right or privilege
conferred thereby, contrary to the provisions hereof, or upon the levy of any
attachment or similar process upon such Option, right or privilege, the Option
and such rights and privileges shall immediately become null and void.
7.2 AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN. The Plan may be
wholly or partially amended or otherwise modified, suspended or terminated at
any time or from time to time by the Board or the Committee. Without approval of
the Company's stockholders, however, no action of the Committee may, except as
provided in Sections 2.3 and 4.5, increase the limits imposed in Section 2.1 on
the maximum number of shares which may be issued under this Plan, and no action
of the Committee may be taken that would otherwise require stockholder approval
as a matter of applicable laws, regulation or rule. Notwithstanding the
foregoing, the provisions of this Plan relating to Option grants to members of
the Committee, including the amount, price and timing thereof, shall not be
amended more than once in any six-month period other than to comport with
changes in the Code, the Employee Retirement Income Security Act, the Exchange
Act or the respective rules thereunder. Neither the amendment, suspension nor
termination of the Plan shall, without the consent of the holder of the Option,
alter or impair any rights or obligations under any Option theretofore granted.
No Option may be granted during any period of suspension or after termination of
the Plan, and in no event may any Incentive Stock Option be granted under this
Plan after the first to occur of the following events:
(a) The expiration of ten (10) years from the date the Plan is adopted
by the Board; or
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(b) The expiration of ten (10) years from the date the Plan is
approved by the Company's stockholders under Section 7.3.
7.3 APPROVAL OF PLAN BY STOCKHOLDERS. This Plan will be submitted for the
approval of the Company's stockholders within twelve (12) months after the date
of the Board's initial adoption of the Plan. Options may be granted prior to
such stockholder approval; provided, however that such Options shall not be
exercisable prior to the time when the Plan is approved by the stockholders;
provided, further, that if such approval has not been obtained at the end of
said twelve (12)-month period, all Options previously granted under the Plan
that are Incentive Stock Options shall thereupon be converted into Non-Qualified
Options.
7.4 TAX WITHHOLDING. The Company shall be entitled to require payment in
cash or deduction from other compensation payable to each Optionee of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting or exercise of any Option. The Committee (or the Board, in the
case of Options granted to members of the Committee) may in its discretion and
in satisfaction of the foregoing requirement allow such Optionee to elect to
have the Company withhold shares of common stock (or allow the return of shares
of common stock) having a Fair Market Value equal to the sums required to be
withheld.
7.5 LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND PERFORMANCE-BASED
COMPENSATION. Notwithstanding any other provision of this Plan, any Option
awarded to an Employee or Non-Employee Director who is then subject to Section
16 of the Exchange Act, shall be subject to any additional limitations set forth
in any applicable exemptive rule under Section 16 of the Exchange Act that are
requirements for the application of such exemptive rule, and this Plan shall be
deemed amended to the extent necessary to conform to such limitations.
Furthermore, notwithstanding any other provision of this Plan, any Option
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any amendment to Section 162(m)
of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as performance-based compensation as described in
Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the
extent necessary to conform to such requirements.
7.6 EFFECT OF PLAN UPON OTHER OPTION AND COMPENSATION PLANS. Nothing in
this Plan shall be construed to limit the right of the Company (a) to establish
any other forms of incentives or compensation for employees of the Company or
(b) to grant or assume options otherwise than under this Plan in connection with
any proper corporate purpose, including, but not by way of limitation, the grant
or assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise of the business, stock or assets of any
corporation, firm or association.
7.7 COMPLIANCE WITH LAWS. This Plan, the granting and vesting of Options
under this Plan and the issuance and delivery of shares of common stock or
Options granted hereunder are subject to compliance with all applicable federal
and state laws, rules and regulations (including but not limited to state and
federal securities law and federal margin requirements) and to such approvals by
any listing, regulatory or governmental authority as may, in the opinion of
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counsel for the Company, be necessary or advisable in connection therewith. Any
securities delivered under this Plan shall be subject to such restrictions, and
the person acquiring such securities shall, if requested by the Company, provide
such assurances and representations to the Company as the Company may deem
necessary or desirable to assure compliance with all applicable legal
requirements. To the extent permitted by applicable law, the Plan or Options
granted hereunder shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.
7.8 TITLES. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Plan.
7.9 GOVERNING LAW. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
California applicable to instruments made and to be performed entirely therein
without regard to conflicts of laws thereof.
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