Proton Laboratories, Inc.
April 18, 2007 Stock and Stock Option Plan
1. PURPOSE. The purpose of the Proton Laboratories, Inc., dated April 18,2007
Stock and Stock Option Plan ("the Plan") is to promote the financial interests
of the Company, its subsidiaries and its shareholders by providing incentives in
the form of stock and stock options to consultants, key employees and directors
who contribute materially to the success and profitability of the Company. The
grants of stock or stock options will recognize and reward outstanding
individual performances and contributions and will give such persons a
proprietary interest in the Company, thus enhancing their personal interest in
the Company's continued success and progress. This Plan will also assist the
Company and its subsidiaries in attracting, retaining and motivating key
employees and directors. The options granted under this Plan may be either
Incentive Stock Options, as that term is defined in Section 422 of the Internal
Revenue Code of 1986, as amended, or Nonqualified options taxed under Section 83
of the Internal Revenue Code of 1986, as amended.
RULE 16B-3 PLAN. The Company is subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
therefore the Plan is intended to comply with all applicable conditions of Rule
16b-3 (and all subsequent revisions thereof) promulgated under the Exchange Act.
To the extent any provision of the Plan or action by the Committee or the Board
of Directors or Committee fails to so comply, it shall be deemed null and void,
to the extent permitted by law and deemed advisable by the Committee. In
addition, the Committee or the Board of Directors may amend the Plan from time
to time as it deems necessary in order to meet the requirements of any
amendments to Rule 16b-3 without the consent of the shareholders of the Company.
EFFECTIVE DATE OF PLAN. The effective date of this Plan shall be April 18,
2007(the "Effective Date". The Board of Directors shall, within one year of the
Effective Date, submit the Plan for approval to the shareholders of the Company.
The plan shall be approved by at least a majority of shareholders voting in
person or by proxy at a duly held shareholders' meeting, or if the provisions of
the corporate charter, by-laws or applicable state law prescribes a greater
degree of shareholder approval for this action, the approval by the holders of
that percentage, at a duly held meeting of shareholders. No Incentive Option or
Nonqualified Stock 0ption shall be granted pursuant to the Plan ten years after
the Effective Date. In the event that the Plan is not approved by the
shareholders of the Company, the Plan shall be deemed to be a non-qualified
stock option plan.
REGISTRATION OF SHARES IN THE PLAN. The Company may register some or all
the shares in this plan on SEC Form S-8 or other appropriate form from time to
time.
2. DEFINITIONS. The following definitions shall apply to this Plan:
(a) "Affiliate" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at the
time of the action or transaction, each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain. The term
"subsidiary corporation" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of the
action or transaction, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in the
chain.
(b) "Agreement" means, individually or collectively, any agreement entered
into pursuant to the Plan pursuant to which Stock or Stock Options are granted
to a participant.
(c) "Award" means each of the following granted under this Plan: Stock,
Incentive Stock Options or Nonqualified Stock Options.
(d) "Board" means the board of directors of the Company.
(e) "Cause" shall mean, for purposes of whether and when a participant has
incurred a Termination of Employment for Cause: (i) any act or omission which
permits the Company to terminate the written agreement or arrangement between
the participant and the Company or a Subsidiary or Parent for Cause as defined
in such agreement or arrangement; or (ii) in the event there is no such
agreement or arrangement or the agreement or arrangement does not define the
term "cause," then Cause shall mean an act or acts of dishonesty by the
participant resulting or intending to result directly or indirectly
in gain to or personal enrichment of the participant at the Company's
expense and/or gross negligence or willful misconduct on the part of the
participant.
(f) "Change in Control" means, for purposes of this Plan:
i. there shall be consummated (a) any consolidation or merger of the
Company in which the Company is not the continuing or surviving corporation or
pursuant to which shares of the Company's common stock would be converted into
cash, securities or other property, other than a merger of the Company in which
the holders of the Company's common stock immediately prior to the merger have
substantially the same proportionate ownership of common stock of the surviving
corporation immediately after the merger; or (b) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all
or substantially all of the assets of the Company; (iii) after the effective
date of this Plan a new person becomes the new owner of a simple majority of the
outstanding common stock of the Company, or,
ii. the shareholders of the Company shall approve any plan or proposal
for the liquidation or dissolution of the Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended, final
Treasury Regulations thereunder and any subsequent Internal Revenue Code.
(h) "Committee" means the Compensation Committee of the Board of Directors
or such other committee designated by the Board of Directors. The Committee
shall be comprised solely of at least two members who are both Disinterested
Persons and Outside Directors.
(i) "Common Stock" means the Common Stock, par value per share of the
Company whether presently or hereafter issued, or such other class of shares or
securities as to which the Plan may be applicable, pursuant to Section 11
herein.
(j) "Company" means Proton Laboratories, Inc., a State of Washington
Corporation and includes any successor or assignee company corporations into
which the Company may be merged, changed or consolidated; any company for whose
securities the securities of the Company shall be exchanged; and any assignee of
or successor to substantially all of the assets of the Company.
(k) "Continuous Service" means the absence of any interruption or
termination of employment with or service to the Company or any Parent or
Subsidiary of the Company that now exists or hereafter is organized or acquired
by or acquires the Company. Continuous Service shall not be
considered interrupted in the case of sick leave, military leave, or any other
bona fide leave of absence of less than ninety (90) days (unless the
participants right to reemployment is guaranteed by statute or by contract)or in
the case of transfers between locations of the Company or between the Company,
its Parent, its Subsidiaries or its successors (l) "Date of Grant" means the
date on which the Committee grants Stock or Stock Options.
(m) "Director" means any member of the Board of Directors of the Company or
any Parent or subsidiary of the Company that now exists or hereafter is
organized or acquired by or acquires the Company.
(n) "Non Employee Director" means a "Non Employee Director" as that term is
defined in Rule 16b-3 under the Exchange Act.
(o) "Eligible Persons" shall mean, with respect to the Plan, those persons
who, at the time that an Award is granted, are (i)officers, directors or
employees of the Company or Affiliate or (ii) vendors, consultants, attorneys or
subcontractors of the Company or its affiliates.
(p) "Employee" means any person employed on an hourly or salaried basis by
the Company or any Parent or Subsidiary of the Company that now exists or
thereafter is organized or acquired by or acquires the Company.
(q) "Exchange Act" means the Securities Exchange Act of 1934, as amended
and the rules and regulations promulgated thereunder.
(r) "Fair Market Value" means (i) if closing prices for the Common Stock
are not furnished through a quotation medium such as the NYSE, Amex, Nasdaq,
OTCBB or Pink Sheets, the value established by the
Committee, in its sole discretion, for purposes of the Plan; (ii) if the Common
Stock is listed or admitted to trade on a quotation medium such as the NYSE,
Amex, Nasdaq, OTCBB or Pink Sheets, the closing price of the Common Stock so
listed or admitted to trade on such date or, if there is no trading of the
Common Stock on such date, then the closing price of the Common Stock on the
next preceding day on which there was trading in such shares; or (iii)if trading
in the stock or a price quotation does not occur on the Date of Grant, the next
preceding date on which the stock was traded or a price was quoted will
determine the fair market value.
(s) "Incentive Stock Option" means a stock option, granted pursuant to
either this Plan or any other plan of the Company, that satisfies the
requirements of Section 422 of the Code and that entitles the Optionee to
purchase stock of the Company or in a corporation that at the time of grant of
the option was a Parent or subsidiary of the Company or a predecessor company of
any such company.
(t) "Nonqualified Stock Option" means an Option to purchase Common Stock in
the Company granted under the Plan other than an Incentive Stock Option within
the meaning of Section 422 of the Code.
(u) "Option" means a stock option granted pursuant to the Plan.
(v) "Option Period" means the period beginning on the Date of Grant and
ending on the day prior to the tenth anniversary of the Date of Grant or such
shorter termination date as set by the Committee.
(w) "Optionee" means an Employee, Officer Director, vendors, consultants,
attorneys or subcontractors who receives an Option.
(x) "Parent" means any corporation which owns 50% or more of the voting
securities of the Company.
(y) "Plan" means this April 18, 2007 Stock and Stock Option Plan as amended
from time to time.
(z) "Share" means the Common Stock, as adjusted in accordance with
Paragraph 11 of the Plan.
(aa) "Ten Percent Shareholder" means an individual who, at the time the
Stock or Option is granted, owns Stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of any
Affiliate. An individual shall be considered as owning the Stock owned, directly
or indirectly, by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants; and Stock owned, directly or
indirectly, by or for a corporation, partnership, estate, or trust, shall be
considered as being owned proportionately by or for its shareholders, partners,
or beneficiaries.
(bb) "Termination" or "Termination of Employment" means the occurrence of
any act or event whether pursuant to an employment agreement or otherwise that
actually or effectively causes or results in the person's ceasing, for whatever
reason, to be an officer or employee of the Company or of any Subsidiary or
Parent including,
without limitation, death, disability, dismissal, severance at the election of
the participant, retirement, or severance as a result of the discontinuance,
liquidation, sale or transfer by the Company or its Subsidiaries or Parent of
all businesses owned or operated by the Company or its Subsidiaries. A
Termination of Employment shall occur to an employee who is employed by a
Subsidiary if the Subsidiary shall cease to be a Subsidiary and the participant
shall not immediately thereafter become an employee of the Company or a
Subsidiary.
(cc) "Subsidiary" means any corporation 50% or more of the voting
securities of which are owned directly or indirectly by the Company at any
time during the existence of this Plan.
In addition, certain other terms used in this Plan shall have the
definitions given to them in the first place in which they are used.
3. ADMINISTRATION.
a. This Plan will be administered by the Committee. A majority of the full
Committee constitutes a quorum for purposes of administering the Plan, and all
determinations of the Committee shall be made by a majority of the members
present at a meeting at which a quorum is present or by the unanimous written
consent of the Committee.
b. If no Committee has been appointed, members of the Board may vote on any
matters affecting the administration of the Plan or the grant of any Stock or
Stock Option pursuant to the Plan, except that no such member shall act on the
granting of Stock or a Stock Option to himself, but such member may be counted
in determining the existence of a quorum at any meeting of the Board during
which action is taken with respect to the granting of Stock or Stock Options to
him.
c. Subject to the terms of this Plan, the Committee has the sole and exclusive
power to:
i. select the participants in this Plan.
ii. establish the terms of the Stock or Stock Options granted to each
participant which may not be the same in each case.
iii. determine the total number of Stock or Stock Options to grant to an
Optionee, which may not be the same in each case.
iv. fix the Option period for any Option granted which may not be the same
in each case.
v. make all other determinations necessary or advisable under the Plan.
vi. determine the minimum number of shares with respect to which Options
may be exercised in part at any time.
vii. The Committee has the sole and absolute discretion to determine
whether the performance of an eligible Employee warrants an award under this
Plan, and to determine the amount of the award.
viii. The Committee has full and exclusive power to construe and interpret
this Plan, to prescribe and rescind rules and regulations relating to this Plan,
and take all actions necessary or advisable for the Plan's administration. Any
such determination made by the Committee will be final and binding on all
persons.
d. A member of the Committee will not be liable for performing any act or
making any determination in good faith.
4. SHARES SUBJECT TO THIS PLAN. Subject to the provisions of Paragraph 11 of
the Plan, the maximum aggregate number of Shares that may be granted or optioned
and sold under the Plan shall be 4,200,000 Shares. Such shares may be authorized
but unissued, or may be treasury shares. If an Option shall expire or become
unexercisable for any reason without having been exercised in full, the
unpurchased Shares that were subject to the Option shall, unless the Plan has
then terminated, be available for other Options under the Plan.
a. Eligible Persons. Every Eligible Person, as the Committee in its sole
discretion designates, is eligible to participate in this Plan. Directors who
are not employees of the Company or any subsidiary or Parent shall only be
eligible to receive Stock and Incentive Stock Options if and as permitted be
applicable law and regulations. The Committee's award to a participant in any
year does not require the Committee to make an award that participant in any
other year. Furthermore, the Committee may award different amounts of Stock or
Stock Options to different participants. The Committee may consider such factors
as it deems pertinent in selecting participants and in determining the amount of
their Stock or Stock Options, including, without limitation:
(i) the financial condition of the Company or its Subsidiaries;
(ii) expected profits for the current or future years;
(iii) the contributions of a prospective participant to the profitability
and success of the Company or its Subsidiaries; and
(iv) the adequacy of the prospective participant's other compensation.
Participants may include persons to whom stock, stock options, or other
benefits previously were granted under this or another plan of the Company or
any Subsidiary, whether or not the previously granted benefits have been fully
exercised.
b. No Right of Employment. An Eligible Person's right, if any, to
continue to serve the Company and its Subsidiaries as an Employee will not be
enlarged or otherwise affected by his designation as a
participant under this Plan, and such designation will not in any way restrict
the right of the Company or any Subsidiary, as the case may be, to terminate at
any time the employment of any Eligible Person.
5. REQUIREMENTS OF OPTION GRANTS. Each Option granted under this Plan shall
satisfy the following requirements.
a. Written Option. An Option shall be evidenced by a written Agreement
specifying:
(i) the number of Shares that may be purchased by its exercise, (ii)
the intent of the Committee as to whether the Option is be an Incentive Stock
Option or a Non-qualified Stock Option, (iii) the Option period for any Option
granted and (iv) such terms and conditions consistent with the Plan as the
Committee shall determine, all of which may differ between various Optionees and
various Agreements.
b. Duration of Option. Each Option may be exercised only during the
Option Period designated for the Option by the Committee. At the end of the
Option Period the Option shall expire.
c. Option Exerciseability. The Committee, on the grant of an Option, each
Option shall be exercisable only in accordance with its terms.
d. Acceleration of Vesting. Subject to the provisions of Section 5(b),
the Committee may, it its sole discretion, provide for the exercise of Options
either as to an increased percentage of shares per year or as to all remaining
shares. Such acceleration of vesting may be declared by the Committee at any
time before the end of the Option Period, including, if applicable, after
termination of the Optionee's Continuous Service by reason of death, disability,
retirement or termination of employment.
e. Option Price. Except as provided in Section 6(a) the Option price of
each Share subject to the Option shall equal the Fair Market Value of the Share
on the Option's Date of Grant.
f. Termination of Employment Any Option which has not vested at the time
the Optionee ceases Continuous Service for any reason other than death,
disability or retirement shall terminate upon the last day that the Optionee is
employed by the Company. Incentive Stock Options must be exercised within three
months of cessation of Continuous Service for reasons other death, disability or
retirement in order to qualify for Incentive Stock Option tax treatment.
Nonqualified Options may be exercised any time during the Option Period
regardless of employment status.
g. Death. In the case of death of the Optionee, the beneficiaries
designated by the Optionee shall have one year from the Optionee's demise or to
the end of the Option Period, whichever is earlier, to exercise the Option,
provided, however, the Option may be exercised only for the number of Shares for
which it could have been exercised at the time the Optionee died, subject to any
adjustment under Sections 5(d) and 11.
h. Retirement. Any Option which has not vested at the time the Optionee
ceases Continuous Service due to retirement shall terminate upon the last day
that the Optionee is employed by the Company. Upon retirement Incentive Stock
Options must be exercised within three months of cessation of Continuous Service
in order to qualify for Incentive Stock Option tax treatment. Nonqualified
Options may be exercised any time during the Option Period regardless of
employment status.
i. Disability. In the event of termination of Continuous Service due to
total and permanent disability (within the meaning of Section 422 of the Code),
the Option shall lapse at the earlier of the end of the Option Period or twelve
months after the date of such termination, provided, however, the Option can be
exercised at the time the Optionee became disabled, subject to any adjustment
under Sections 5(d) and 11.
6. INCENTIVE STOCK OPTIONS. Any Options intended to qualify as an Incentive
Stock Option shall satisfy the following requirements in addition to the other
requirements of the Plan:
a. Ten Percent Shareholders. An Option intended to qualify as an
Incentive Stock Option granted to an individual who, on the Date of Grant,
owns stock possessing more than ten (10) percent of the total combined voting
power of all classes of stock of either the Company or any Parent or Subsidiary,
shall be granted at a price of 110 percent of Fair Market Value on the Date of
Grant and shall be exercised only during the five-year period immediately
following the Date of Grant. In calculating stock ownership of any person, the
attribution rules of Section 425(d) of the Code will apply. Furthermore, in
calculating stock ownership, any stock that the individual may purchase under
outstanding options will not be considered.
b. Limitation on Incentive Stock Options. The aggregate Fair Market
Value, determined on the date of Grant, of stock in the Company exercisable for
the first time by any Optionee during any calendar year, under the Plan and all
other plans of the Company or its Parent or Subsidiaries (within the meaning of
Subsection (d) of Section 422 of the Code) in any calendar year shall not exceed
$100,000.00.
c. Exercise of Incentive Stock Options. No disposition of the shares
underlying an Incentive Stock Option may be made within two years from the Date
of Grant nor within one year after the exercise of such incentive Stock Option.
d. Approval of Plan. No Option shall qualify as an Incentive Stock Option
unless this Plan is approved by the shareholders within one year of the Plan's
adoption by the Board.
7. NONQUALIFIED AND INCENTIVE STOCK OPTIONS. Any Option not intended to
qualify as an Incentive Stock Option shall be a Nonqualified Stock Option.
Nonqualified Stock Options shall satisfy each of the requirements of Section 5
of the Plan. An Option intended to qualify as an Incentive Stock Option, but
which does not meet all the requirements of an Incentive Stock Option shall be
treated as a Nonqualified Stock Option.
8. METHOD OF EXERCISE. An Option granted under this Plan can be exercised when
the person entitled to exercise the Option (i) delivers written notice to the
President of the Company of the decision to exercise; (ii) concurrently tenders
to the Company full payment for the Shares to be purchased pursuant to the
exercise; and (iii) complies with such other reasonable requirements as the
Committee establishes pursuant to Section 3 of the Plan. The day that the items
in this Section 8.(i), (ii) and (iii) are completed shall be deemed to be the
Exercise Day (the "Exercise Day"). During the lifetime of the Employee to whom
an Option is granted, such Option may be exercised only by him. Payment to the
Company by the Option holder of the Exercise Price of the Option may be in: (i)
cash, (ii) cashier's check, (iii) certified check, or, (iv) wholly or partially
in the form of Common Stock of the Company that has been held by the option
holder for at least six months prior to the Exercise Day (the "In-Kind Exercise
Payment Stock"). The value of the In-Kind Exercise Payment Stock shall be the
closing bid price of the Company's Common Stock on the business day immediately
prior to the Exercise Day. No person shall have the rights of a shareholder with
respect to Shares subject to an Option granted under this Plan until a
certificate or certificates for the Shares have been delivered to him.
An Option granted under this Plan may be exercised in increments of not
less than 10% of the full number of Shares as to which it can be exercised. A
partial exercise of an Option will not affect the holder's right to exercise the
Option from time to time in accordance with this Plan as to the remaining Shares
subject to the Option.
9. TAXES. COMPLIANCE WITH LAW: APPROVAL OF REGULATORY BODIES. The Company, if
necessary or desirable, may pay or withhold the amount of any tax attributable
to any Shares deliverable or amounts payable under this Plan, and the Company
may defer making delivery or payment until it is indemnified to its satisfaction
for the tax. Only in compliance with all applicable federal and state laws and
regulations, including, without limitation, state and federal securities laws,
and the rules of all stock exchanges on which the Company's stock is listed at
any time shall Options under the Plan be exerciseable, or shall Stock approved
for issuance under this Plan be deliverable. Further, an Option is exercisable
only if either (i) a registration statement pertaining to the Shares to be
issued upon exercise of the Option has been filed with and declared effective by
the Securities and Exchange Commission and remains effective on the date of
exercise, or (ii) an exemption from the registration requirements of applicable
securities laws is available. This plan does not require the Company, however,
to file such registration statement or to assure the availability of such
exemptions. Any certificate issued to evidence Shares issued under the Plan may
bear such legends and statements, and shall be subject to such transfer
restrictions, as the Committee deems advisable to assure compliance with federal
and state laws and regulations and with the requirements of this Section 9 of
the Plan. No Option may be exercised, and no Shares may be issued under this
Plan, until the Company has obtained the consent or approval of every regulatory
body, federal or state, having jurisdiction over such matter as the Committee
deems advisable.
Each Person who acquires the right to exercise an Option by bequest or
inheritance may be required by the Committee to furnish reasonable evidence of
ownership of the Option as a condition to his exercise of the Option. In
addition, the Committee may require such consents and release of taxing
authorities as the Committee deems advisable.
10. ASSIGNABILITY. An Option granted under this Plan is not transferable except
by will or the laws of descent and distribution. The Option may be exercised
only by the Optionee during the life of the Optionee. More particularly, but
without limitation of the foregoing, the Option may be not be assigned or
transferred except as provided above and shall not be assignable by operation of
law and shall not be subject to execution, attachment or similar process. Any
attempted assignment, transfer or distribution contrary to the provisions hereof
shall be null and void and without effect.
11. ADJUSTMENT UPON CHANGE OF SHARES. If a reorganization, merger,
consolidation, reclassification, recapitalization, combination or exchange of
shares, stock split, stock dividend, rights offering, or other expansion or
contraction of the Common Stock of the Company occurs, the number and class of
Shares for which Options are authorized to be granted under this Plan, the
number and class of Shares then subject to Options previously granted under this
Plan, and the price per Share payable upon exercise of each Option outstanding
under this Plan shall be equitably adjusted by the Committee to reflect such
changes. To the extent deemed equitable and appropriate by the Committee or the
Board, subject to any required action by shareholders, in any merger,
consolidation, reorganization, liquidation or dissolution, any Option granted
under the Plan shall pertain to the securities and other property to which a
holder of the number of Shares of stock covered by the Option would have been
entitled to receive in connection with such event.
12. ACCELERATIONS OF OPTIONS UPON CHANGE IN CONTROL. In the event that a Change
of Control has occurred with respect to the Company, any and all Options will
become fully vested and immediately exercisable with such acceleration to occur
without the requirement of any further act by either the Company or the
participant, subject to Section 9 hereof.
13. LIABILITY OF THE COMPANY. The Company, its Parent and any Subsidiary that
is in existence or hereafter comes into existence shall not be liable to any
person for any tax consequences expected but not realized by an Eligible Person
or other person due to the exercise of an Option.
14. EXPENSES OF PLAN. The Company shall bear the expenses of administering the
Plan.
15. DURATION OF PLAN. Stock may be granted and Options may be granted under
this Plan only within 10 years from the effective date of the Plan.
16. AMENDMENT, SUSPENSION OR TERMINATION OF PLAN. The Board of Directors of the
Company may amend, terminate or suspend this Plan at any time, in its sole and
absolute discretion; provided, however, that to the extent required to qualify
this Plan under Rule 16b-3
promulgated under Section 16 of the Exchange Act, no amendment that would (a)
materially increase the number of shares of Stock that may be issued under this
Plan, (b) materially modify the requirements as to eligibility for participation
in this Plan, or (c) otherwise materially increase the benefits accruing to
participants under this Plan, shall be made without the approval of the
Company's shareholders; provided further, however, that to the extent required
to maintain the status of any Incentive Option under the Code, no amendment that
would (a) change the aggregate number of shares of Stock which may be issued
under Incentive Options, (b) change the class of employees eligible to receive
Incentive Options, or (c) decrease the Option price for Incentive Options below
the Fair Market Value of the Stock at the time it is granted, shall be made
without the approval of the Company's shareholders. Subject to the preceding
sentence, the Board of Directors shall have the power to make any changes in the
Plan and in the regulations and administrative provisions under it or in any
outstanding Incentive Option as in the opinion of counsel for the Company may be
necessary or appropriate from time to time to enable any Incentive Option
granted under this Plan to continue to qualify as an incentive stock option or
such other stock option as may be defined under the Code so as to receive
preferential federal income tax treatment. Notwithstanding the foregoing, no
amendment, suspension or termination of the Plan shall act to impair or
extinguish rights in Options already granted at the date of such amendment,
suspension or termination.
17. FORFEITURE. Notwithstanding any other provisions of this Plan, if the
Committee finds by a majority vote after full consideration of the facts that an
Eligible Person, before or after termination of his employment with the Company
or an Affiliate for any reason (a) committed or engaged in fraud, embezzlement,
theft, commission of a felony, or proven dishonesty in the course of his
employment by the Company or an Affiliate, which conduct damaged the Company or
Affiliate, or disclosed trade secrets of the Company or an Affiliate, or (b)
participated, engaged in or had a material, financial or other interest, whether
as an employee, officer, director, consultant, attorney, contractor,
shareholder, owner, or otherwise, in any commercial endeavor anywhere which is
competitive with the business of the Company or an Affiliate without the written
consent of the Company or Affiliate, the Eligible Person shall forfeit all
outstanding Options, including all exercised Options and other situations
pursuant to which the Company has not yet delivered a stock certificate. Clause
(b) shall not be deemed to have been violated solely by reason of the Eligible
Person's ownership of stock or securities of any publicly owned corporation, if
that ownership does not result in effective control of the corporation. The
decision of the Committee as to the cause of an Employee's discharge, the damage
done to the Company or an Affiliate, and the extent of an Eligible Person's
competitive activity shall be final. No decision of the Committee, however,
shall affect the finality of the discharge of the Employee by the Company or an
Affiliate in any manner.
18. INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS. With respect
to administration of this Plan, the Company shall indemnify each present and
future member of the Committee and the Board of Directors against, and each
member of the Committee and the Board of Directors shall be entitled without
further act on his part to
indemnity from the Company for, all expenses (including attorney's fees, the
amount of judgments and the amount of approved settlements made with a view to
the curtailment of costs of litigation, other than amounts paid to the Company
itself) reasonably incurred by him in connection with or arising out of any
action, suit, or proceeding in which he may be involved by reason of his being
or having been a member of the Committee and/or the Board of Directors, whether
or not he continues to be a member of the Committee and/or the Board of
Directors at the time of incurring the expenses, including, without limitation,
matters as to which he shall be finally adjudged in any action, suit or
proceeding to have been found to have been negligent in the performance of his
duty as a member of the Committee or the Board of Directors. However, this
indemnity shall not include any expenses incurred by any member of the Committee
and/or the Board of Directors in respect of matters as to which he shall be
finally adjudged in any action, suit or proceeding to have been guilty of gross
negligence or willful misconduct in the performance of his duty as a member of
the Committee and the Board of Directors. In addition, no right of
indemnification under this Plan shall be available to or enforceable by any
member of the Committee and the Board of Directors unless, within 60 days after
institution of any action, suit or proceeding, he shall have offered the Company
the opportunity to handle and defend same at its own expense. The failure to
notify the Company within 60 days shall only affect a Director or committee
member's right to indemnification if said failure to notify results in an
impairment of the Company's rights or is detrimental to the Company. This right
of indemnification shall inure to the benefit of the heirs, executors or
administrators of each member of the Committee and the Board of Directors and
shall be in addition to all other rights to which a member of the Committee and
the Board of Directors may be entitled as a matter of law, contract, or
otherwise.
19. GENDER. If the context requires, words of one gender when used in this Plan
shall include the others and words used in the singular or plural shall include
the other.
20. HEADINGS. Headings of Articles and Sections are included for convenience of
reference only and do not constitute part of the Plan and shall not be used in
construing the terms of the Plan.
21. OTHER COMPENSATION PLANS. The adoption of this Plan shall not affect any
other stock, stock option, incentive or other compensation or benefit plans in
effect for the Company or any Affiliate, nor shall the Plan preclude the Company
from establishing any other forms of incentive or other compensation for
employees of the Company or any Affiliate.
22. OTHER OPTIONS OR AWARDS. The grant of an Option or Awards shall not confer
upon the Eligible Person the right to receive any future or other Options or
Awards under this Plan, whether or not Options or Awards may be granted to
similarly situated Eligible Persons, or the right to receive future Options or
Awards upon the same terms or conditions as previously granted.
23. GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of California.