Exhibit 10.1
IXYS CORPORATION
2011 EQUITY INCENTIVE PLAN
(Effective June 2, 2011)
     IXYS CORPORATION hereby adopts in its entirety the IXYS Corporation 2011
Equity Incentive (“Plan”), as of June 2, 2011 (“Plan Adoption Date”). Unless
otherwise defined, terms with initial capital letters are defined in Section 2
below.
SECTION 1
BACKGROUND AND PURPOSE
     1.1 Background The Plan permits the grant of Nonqualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights (SARs), Restricted Stock, and
Restricted Stock Units.
     1.2 Purpose of the Plan The Plan is intended to attract, motivate and
retain the following individuals: (a) employees of the Company or its
Affiliates; (b) consultants who provide significant services to the Company or
its Affiliates and (c) directors of the Company or any of its Affiliates who are
employees of neither the Company nor any Affiliate. The Plan is also designed to
encourage stock ownership by such individuals, thereby aligning their interests
with those of the Company’s shareholder.
SECTION 2
DEFINITIONS
     The following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:
     2.1 “1934 Act” means the Securities Exchange Act of 1934, as amended.
Reference to a specific section of the Act shall include such section, any valid
rules or regulations promulgated under such section, and any comparable
provisions of any future legislation, rules or regulations amending,
supplementing or superseding any such section, rule or regulation.
     2.2 “Administrator” means, collectively the Board, and/or one or more
Committees, and/or one or more executive officers of the Company designated by
the Board to administer the Plan or specific portions thereof; provided,
however, that Awards to Section 16 Persons may only be administered by a
committee of Independent Directors (as defined in Section 2.23) or the Board as
a whole. The Plan permits coextensive administrative authority; provided,
however, that the scope of any such authority is specifically approved by the
Board in accordance with the Plan.

 

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     2.3 “Affiliate” means any corporation or any other entity (including, but
not limited to, Subsidiaries, partnerships and joint ventures) controlling,
controlled by, or under common control with the Company.
     2.4 “Applicable Law” means the legal requirements relating to the
administration of Options, SARs, Restricted Stock, Restricted Stock Units and
similar incentive plans under any applicable laws, including but not limited to
the laws of the United States and any applicable foreign country, including
employment, labor, privacy, securities, and tax laws, the Code, and applicable
rules and regulations promulgated by the Nasdaq, New York Stock Exchange,
American Stock Exchange or the requirements of any other stock exchange or
quotation system upon which the Shares may then be listed or quoted.
     2.5 “Award” means, individually or collectively, a grant under the Plan of
Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, and
Restricted Stock Units.
     2.6 “Award Agreement” means the written agreement setting forth the terms
and provisions applicable to each Award granted under the Plan, including the
Grant Date.
     2.7 “Board” or “Board of Directors” means the Board of Directors of the
Company.
     2.8 “Change in Control” means the occurrence of any of the following:

  2.8.1   Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the total voting power represented by the
Company’s then outstanding voting capital stock, other than a group of two or
more persons not (A) acting in concert for the purpose of acquiring, holding or
disposing of such stock or (B) otherwise required to file any form or report
with any governmental agency or regulatory authority having jurisdiction over
the Company which requires the reporting of any change in control;     2.8.2  
The consummation of the sale or disposition by the Company of all or
substantially all of the Company’s assets (whether by stock sale, merger,
consolidation or otherwise);     2.8.3   The consummation of a liquidation or
dissolution of the Company; or     2.8.4   The consummation of a merger or
consolidation of the Company with any other corporation, other than (i) a merger
or consolidation for the sole purpose of changing the Company’s jurisdiction of
incorporation or (ii) a consolidation or merger of the Company in which the
holders of the voting capital stock of the Company immediately prior to the
consolidation or merger (other than Persons who are parties to such
consolidation or merger and their respective Affiliates) hold at least fifty
percent (50%) of the voting power represented by the Company’s then outstanding
voting capital stock of the Company or the surviving entity (or its parent
entity) immediately after the consolidation or merger.

     2.9 “Code” means the Internal Revenue Code of 1986, as amended. Reference
to a specific section of the Code or regulation thereunder shall include such
section or regulation, any valid

 

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regulation promulgated under such section, and any comparable provision of any
future legislation or regulation amending, supplementing or superseding such
section or regulation.
     2.10 “Committee” means any committee appointed by the Board of Directors to
administer the Plan.
     2.11 “Company” means IXYS Corporation, or any successor thereto.
     2.12 “Consultant” means any consultant, independent contractor or other
person who provides significant services to the Company or its Affiliates or any
employee or Affiliate of any of the foregoing, but who is neither an Employee
nor a Director.
     2.13 “Continuous Status” as an Employee, Consultant or Director means that
a Participant’s employment or service relationship with the Company or any
Affiliate is not interrupted or terminated. “Continuous Status” shall not be
considered interrupted in the following cases: (i) any leave of absence approved
by the Company or (ii) transfers between locations of the Company or between the
Company and any Subsidiary or successor. A leave of absence approved by the
Company shall include sick leave, military leave or any other personal leave
approved by an authorized representative of the Company. For purposes of
Incentive Stock Options, no leave of absence may exceed ninety (90) days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract.
If such reemployment is approved by the Company but not guaranteed by statute or
contract, then such employment will be considered terminated on the ninety-first
(91st) day of such leave and on such date any Incentive Stock Option held by the
Participant shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonqualified Stock Option. In the event a
Participant’s status changes among the positions of Employee, Director and
Consultant, the Participant’s Continuous Status as an Employee, Director or
Consultant shall be deemed to be continuous and uninterrupted.
     2.14 “Director” means any individual who is a member of the Board of
Directors of the Company or an Affiliate of the Company.
     2.15 “Disability” means a permanent and total disability within the meaning
of Section 22(e)(3) of the Code, provided that in the case of Awards other than
Incentive Stock Options, the Administrator in its discretion may determine
whether a permanent and total disability exists in accordance with uniform and
non-discriminatory standards adopted by the Administrator from time to time.
     2.16 “Employee” means any individual who is a common-law employee of the
Company or of an Affiliate.
     2.17 “Exercise Price” means the price at which a Share may be purchased by
a Participant pursuant to the exercise of an Option, and the price used to
determine the amount of cash or number of Shares payable to a Participant upon
the exercise of a SAR.
     2.18 “Fair Market Value” means, as of any date, provided the Common Stock
is listed on an established stock exchange or a national market system,
including without limitation the NASDAQ, the Fair Market Value of a share of
Common Stock shall be the closing sales price

 

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for such stock on the Grant Date of the Award. If no sales were reported on such
Grant Date of the Award, the Fair Market Value of a share of Common Stock shall
be the closing price for such stock as quoted on the NASDAQ (or the exchange
with the greatest volume of trading in the Common Stock) on the last market
trading day with reported sales prior to the date of determination. In the case
where the Company is not listed on an established stock exchange or national
market system, Fair Market Value shall be determined by the Board in good faith
in accordance with Code Section 409A and the applicable Treasury regulations.
     2.19 “Fiscal Year” means a fiscal year of the Company.
     2.20 “Full-Value Award Limitation” means an aggregate limit of one thousand
(1,000) Shares, which is the total number of Shares that may be granted to all
Participants combined as “full value awards,” which includes both Restricted
Stock and Restricted Stock Units.
     2.21 “Grant Date” means the date the Administrator approves the Award.
     2.22 “Incentive Stock Option” means an Option to purchase Shares, which is
designated as an Incentive Stock Option and is intended to meet the requirements
of Section 422 of the Code.
     2.23 “Independent Director” means a Nonemployee Director who is (i) a
“nonemployee director” within the meaning of Section 16b-3 of the 1934 Act and
(ii) “independent” as determined under the applicable rules of the NASDAQ, as
either of these definitions may be modified or supplemented from time to time.
     2.24 “Misconduct” shall include commission of any act in competition with
any activity of the Company (or any Affiliate) or any act contrary or harmful to
the interests of the Company (or any Affiliate) as determined in good faith by
the Administrator and shall include, without limitation: (a) conviction of a
felony or crime involving moral turpitude or dishonesty, (b) violation of
Company (or any Affiliate) policies, with or acting against the interests of the
Company (or any Affiliate), including employing or recruiting any present,
former or future employee of the Company (or any Affiliate), (c) misuse of any
confidential, secret, privileged or non-public information relating to the
Company’s (or any Affiliate’s) business, or (d) participating in a hostile
takeover attempt of the Company or an Affiliate. The foregoing definition shall
not be deemed to be inclusive of all acts or omissions that the Company (or any
Affiliate) may consider as Misconduct for purposes of the Plan.
     2.25 “NASDAQ” means The NASDAQ Stock Market, LLC.
     2.26 “Nonemployee Director” means a Director who is not employed by the
Company or an Affiliate.
     2.27 “Nonqualified Stock Option” means an option to purchase Shares that is
not intended to be an Incentive Stock Option.
     2.28 “Option” means an Incentive Stock Option or a Nonqualified Stock
Option.
     2.29 “Participant” means an Employee, Consultant or Nonemployee Director
who has an outstanding Award.

 

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     2.30 “Performance Goals” means the goal(s) (or combined goal(s)) determined
by the Administrator (in its discretion) to be applicable to a Participant with
respect to an Award. As determined by the Administrator, the Performance Goals
applicable to an Award may provide for a targeted level or levels of
achievement, including without limitation goals tied to individual objectives
and/or the Company’s (or a business unit’s) return on assets, return on
shareholders’ equity, efficiency ratio, earnings per share, net income, or other
financial measures determined in accordance with U.S. generally accepted
accounting principles (“GAAP”), with or without adjustments determined by the
Administrator. The foregoing definition shall not be deemed to be inclusive of
all Performance Goals for purposes of this Plan. The Performance Goals may
differ from Participant to Participant and from Award to Award.
     2.31 “Restricted Stock Units” means an Award granted to a Participant
pursuant to Section 8 of the Plan that entitles the Participant to receive a
prescribed number of Shares, or the equivalent value in cash, upon achievement
of Performance Goals associated with such Award. The Participant’s Award
Agreement shall specify whether the Restricted Stock Units will be settled in
Shares or cash.
     2.32 “Period of Restriction” means the period during which Shares of
Restricted Stock are subject to restrictions that subject the Shares to a
substantial risk of forfeiture. As provided in Section 7, such restrictions may
be based on the passage of time in which case the restrictions may lapse over
the Period of Restriction, the achievement of Performance Goals, or the
occurrence of other events as determined by the Administrator, in its
discretion.
     2.33 “Plan” means this IXYS Corporation 2011 Equity Incentive Plan, as set
forth in this instrument and as hereafter amended from time to time.
     2.34 “Restricted Stock” means an Award granted to a Participant pursuant to
Section 7. An Award of Restricted Stock constitutes a transfer of ownership of
Shares to a Participant from the Company subject to restrictions against
transferability, assignment, and hypothecation. Under the terms of the Award,
the restrictions against transferability are removed when the Participant has
met the specified vesting requirement. Vesting can be based on continued
employment or service over a stated service period, or on the attainment of
specified Performance Goals. If employment or service is terminated prior to
vesting, the unvested restricted stock reverts back to the Company.
     2.35 “Rule 16b-3” means the rule so designated promulgated under Section 16
of the 1934 Act, and any future rule or regulation amending, supplementing or
superseding such rule.
     2.36 “SEC” means the U.S. Securities Exchange Commission.
     2.37 “Section 16 Person” means a person who, with respect to the Shares, is
subject to Section 16 of the 1934 Act.
     2.38 “Shares” means shares of common stock of the Company.
     2.39 “Stock Appreciation Right” or “SAR” means an Award granted to a
Participant pursuant to Section 6. Upon exercise, a SAR gives a Participant a
right to receive a payment in cash, or the equivalent value in Shares, equal to
the difference between the Fair Market Value of the

 

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Shares on the exercise date and the Exercise Price. Both the number of SARs and
the Exercise Price are determined on the Grant Date. For example, assume a
Participant is granted 100 SARs at an Exercise Price of $10 and the award
agreement specifies that the SARs will be settled in Shares. Also assume that
the SARs are exercised when the underlying Shares have a Fair Market Value of
$20 per Share. Upon exercise of the SAR, the Participant is entitled to receive
50 Shares [(($20-$10)*100)/$20].
     2.40 “Subsidiary” means any corporation, LLC or partnership (collectively
referred to as “Entities”) in an unbroken chain of Entities beginning with the
Company if each of the Entities other than the last Entity in the unbroken chain
then owns fifty percent (50%) or more of the total combined voting power in one
of the other Entities in such chain.
SECTION 3
ADMINISTRATION
     3.1 The Administrator. The Administrator, if not the Board of Directors,
shall be appointed by the Board of Directors from time to time. Grants of
authority in a committee charter shall be deemed appointment.
     3.2 Authority of the Administrator. It shall be the duty of the
Administrator to administer the Plan in accordance with the Plan’s provisions
and in accordance with Applicable Law. The Administrator, if the Board of
Directors or a Committee, shall have all powers and discretion necessary or
appropriate to administer the Plan and to control its operation, including, but
not limited to, the following: (a) which Employees, Consultants and Directors
shall be granted Awards; (b) the terms and conditions of the Awards at initial
grant and any subsequent revisions or changes to the terms and conditions of
Awards, including, but not limited to, changes to, or removal of restrictions
on, outstanding Awards relating to vesting, Period of Restriction or
exercisability periods, (c) interpretation of the Plan, (d) adoption of rules
for the administration, interpretation and application of the Plan as are
consistent therewith and (e) interpretation, amendment or revocation of any such
rules.
     3.3 Decisions Binding. All determinations and decisions made by the
Administrator shall be final, conclusive and binding on all persons, and shall
be given the maximum deference permitted by Applicable Law.
SECTION 4
SHARES SUBJECT TO THE PLAN
     4.1 Number of Shares. Subject to adjustment, as provided in Section 4.3,
the total number of Shares initially available for grant under the Plan shall be
six hundred thousand (600,000). Shares granted under the Plan may be authorized
but unissued Shares or reacquired Shares bought on the market or otherwise.
Awards settled in cash shall not count against the limitation set forth in this
Section 4.1.
     4.2 Reversion of Shares to the Plan. If any Award made under the Plan
expires, or is forfeited or cancelled, the Shares underlying such Awards shall
become available for future Awards under the Plan.

 

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     4.3 Adjustments in Awards and Authorized Shares. The number of Shares
covered by the Plan, each outstanding Award, and the per Share exercise price of
each such Award, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of common stock resulting from a stock split,
reverse stock split, recapitalization, spin-off, combination, reclassification,
the payment of a stock dividend on the common stock or any other increase or
decrease in the number of such Shares of common stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been “effected
without receipt of consideration.” Such adjustment shall be made by the
Administrator whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issue by the Company of
Shares of stock of any class, or securities convertible into Shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of common stock subject to an Option.
     4.4 Legal Compliance. Shares shall not be issued pursuant to the making or
exercise of an Award unless the exercise of Options and rights and the issuance
and delivery of Shares shall comply with the Securities Act of 1933, as amended,
the 1934 Act and other Applicable Law, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. Any Award
made in violation hereof shall be null and void.
     4.5 Investment Representations. As a condition to the exercise of an Option
or other right, the Company may require the person exercising such Option or
right to represent and warrant at the time of exercise that the Shares are being
acquired only for investment 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.
SECTION 5
STOCK OPTIONS
     The provisions of this Section 5 are applicable to Options granted to
Employees, Consultants and Nonemployee Directors. Such Participants shall also
be eligible to receive other types of Awards as set forth in the Plan.
     5.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted at any time and from time to time as determined by the
Administrator in its discretion. The Administrator may grant Incentive Stock
Options, Nonqualified Stock Options, or a combination thereof, and the
Administrator, in its discretion and subject to Sections 4.1, shall determine
the number of Shares subject to each Option.
     5.2 Award Agreement. Each Option shall be evidenced by an Award Agreement
that shall specify the Exercise Price, the expiration date of the Option, the
number of Shares to which the Option pertains, any conditions to exercise the
Option, and such other terms and conditions as the Administrator, in its
discretion, shall determine. The Award Agreement shall also specify whether the
Option is intended to be an Incentive Stock Option or a Nonqualified Stock
Option.
     5.3 Exercise Price. The Administrator shall determine the Exercise Price
for each Option subject to the provisions of this Section 5.3.

 

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  5.3.1   Nonqualified Stock Options. In the case of a Nonqualified Stock
Option, the per Share exercise price shall not be less than one hundred percent
(100%) of the Fair Market Value of a Share on the Grant Date, as determined by
the Administrator.     5.3.2   Incentive Stock Options. The grant of Incentive
Stock Options shall be subject to the following limitations:

     (a) The Exercise Price of an Incentive Stock Option shall be not less than
one hundred percent (100%) of the Fair Market Value of a Share on the Grant
Date; provided, however, that if on the Grant Date, the Employee (together with
persons whose stock ownership is attributed to the Employee pursuant to Section
424(d) of the Code) owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any of its Subsidiaries,
the Exercise Price shall be not less than one hundred and ten percent (110%) of
the Fair Market Value of a Share on the Grant Date;
     (b) Incentive Stock Options may be granted only to persons who are, as of
the Grant Date, Employees of the Company or a Subsidiary, and may not be granted
to Consultants or Nonemployee Directors.
     (c) To the extent that the aggregate Fair Market Value of the Shares with
respect to which Incentive Stock Options are exercisable for the first time by
the Participant during any calendar year (under all plans of the Company and any
parent or Subsidiary) exceeds $100,000, the Options to acquire Shares in excess
of such amount shall be treated as Nonqualified Stock Options. For purposes of
this Section 5.3.2(c), Incentive Stock Options shall be taken into account in
the order in which they were granted. For purposes of this limitation, the Fair
Market Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted; and
     (d) In the event of a Participant’s change of status from Employee to
Consultant or Nonemployee Director, an Incentive Stock Option held by the
Participant shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonqualified Stock Option three (3) months and one
(1) day following such change of status.

  5.3.3   Substitute Options. Notwithstanding the provisions of Sections 5.3.1
and 5.3.2, in the event that the Company or an Affiliate consummates a
transaction described in Section 424(a) of the Code (e.g., the acquisition of
property or stock from an unrelated corporation), persons who become Employees,
Directors or Consultants on account of such transaction may be granted Options
in substitution for options granted by their former employer, and such Options
may be granted with an Exercise Price less than the Fair Market Value of a Share
on the Grant Date; provided, however, the grant of such substitute Option shall
not constitute a “modification” as defined in Code Section 424(h)(3) and the
applicable Treasury regulations.

     5.4 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions as set forth in
the Award Agreement and conditions as the Administrator shall determine in its
discretion. Except as set forth in Section 9.1, in all cases involving
termination of Continuous Status as an Employee, Director or Consultant
(including, but not limited to, the reasons described in subsections (c), (d),
(e) and (f) of Section 5.5.1), such

 

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Option shall be exercisable only to the extent the Participant was entitled to
exercise it at the date of such termination.
     5.5 Expiration of Options

  5.5.1   Expiration Dates. Unless otherwise specified in the Award Agreement,
but in any event no later than ten (10) years from the Grant Date, each Option
shall terminate no later than the first to occur of the following events:  

     (a) Date in Award Agreement. The date for termination of the Option set
forth in the written Award Agreement;
     (b) Termination of Continuous Status as Employee, Director or Consultant.
The last day of the three (3)-month period following the date the Participant
ceases his/her/its Continuous Status as an Employee, Director or Consultant
(other than termination for a reason described in subsections (c), (d), (e), or
(f) below).
     (c) Misconduct. In the event a Participant’s Continuous Status as an
Employee, Director or Consultant terminates because the Participant has
performed an act of Misconduct as determined by the Administrator, all
unexercised Options held by such Participant shall expire five (5) business days
following Participant’s receipt of written notice from the Company of
Participant’s termination due to Misconduct; provided, however, that the
Administrator may, in its sole discretion, prior to the expiration of the five
(5) day period, reinstate the Options by giving written notice of such
reinstatement to Participant. In the event of such reinstatement, the
Participant may exercise the Option only to such extent, for such time, and upon
such terms and conditions as if the Participant had ceased to be employed by or
affiliated with the Company or a Subsidiary upon the date of such termination
for a reason other than Misconduct, disability or death;
     (d) Disability. In the event that a Participant’s Continuous Status as an
Employee, Director or Consultant terminates as a result of the Participant’s
Disability, the Participant may exercise his or her Option at any time within
twelve (12) months from the date of such termination (but in no event later than
the expiration of the term of such Option as set forth in the Award Agreement).
If, at the date of termination, the Participant is not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable portion of the
Option shall revert to the Plan. If, after termination, the Participant does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan;
     (e) Death. In the event of the death of a Participant, the Participant’s
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Award Agreement), by the Participant’s estate or by a person
who acquired the right to exercise the Option by bequest or inheritance. If, at
the time of death, the Participant was not entitled to exercise his or her
entire Option, the Shares covered by the unexercisable portion of the Option
shall immediately revert to the Plan. If, after death, the Participant’s estate
or a person who acquired the right to exercise the Option by bequest or
inheritance does not exercise the Option within the time specified

 

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herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan; or
     (f) 10 Years from Grant. An Option shall expire no more than ten (10) years
from the Grant Date; provided, however, that if an Incentive Stock Option is
granted to an Employee who, together with persons whose stock ownership is
attributed to the Employee pursuant to Section 424(d) of the Code, owns stock
possessing more than 10% of the total combined voting power of all classes of
the stock of the Company or any of its Subsidiaries, such Incentive Stock Option
may not be exercised after the expiration of five (5) years from the Grant Date.

  5.5.2   Administrator Discretion. Notwithstanding the foregoing the
Administrator may, after an Option is granted, extend the exercise period that
an Option is exercisable following a Participant’s termination of Continuous
Service (recognizing in some such circumstances the Options would cease to be
Incentive Stock Options); provided, however, in no event may any such extension
extend beyond the stated expiration date of the Option.

     5.6 No “Re-Pricing” Without Shareholder Approval. Except as provided in
Section 4.3, in no event may the Administrator directly or indirectly reduce the
exercise price of an Option after it has been granted without the approval of a
majority of the shareholders eligible to vote.
     5.7 Exercise and Payment. Options shall be exercised by the Participant’s
delivery of a written notice of exercise to the Secretary of the Company (or its
designee), setting forth the number of Shares with respect to which the Option
is to be exercised, accompanied by full payment for the Shares and payment of
any additional amount that the Administrator specifies is necessary for the
Company to pay any required withholding taxes in accordance with Section 11.

  5.7.1   Form of Consideration. Upon the exercise of any Option, the Exercise
Price shall be payable to the Company in full in cash or its equivalent. The
Administrator, in its discretion, also may permit the exercise of Options and
same-day sale of related Shares, or exercise by tendering previously acquired
Shares having an aggregate Fair Market Value at the time of exercise equal to
the total Exercise Price, or by any other means which the Administrator, in its
discretion, determines to provide legal consideration for the Shares, and to be
consistent with the purposes of the Plan. The Administrator, in its discretion,
may also permit a “net issuance” of any Option, where the term “net issuance”
means the issuance of a number of Shares (rounded down to the nearest whole
number of Shares) that is equivalent in value to the difference between the fair
market value of the underlying stock on the exercise date, less the exercise
price and minimum tax withholding. Such discretion may be exercised by the
Administrator either in the Award Agreement or at any other time.     5.7.2  
Delivery of Shares. As soon as practicable after receipt of a written
notification of exercise and full payment for the Shares purchased and taxes
required to be withheld, the Company shall deliver to the Participant (or the
Participant’s designated broker), Share certificates (which may be in book entry
form) representing such Shares.

 

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SECTION 6
STOCK APPRECIATION RIGHTS
     6.1 Grant of SARs. Subject to the terms of the Plan, a SAR may be granted
to Employees, Consultants and Nonemployee Directors at any time and from time to
time as shall be determined by the Administrator.

  6.1.1   Number of Shares. The Administrator shall have complete discretion to
determine the number of SARs granted to any Participant.     6.1.2   Exercise
Price and Other Terms. The Administrator, subject to the provisions of the Plan,
shall have discretion to determine the terms and conditions of SARs granted
under the Plan, including whether upon exercise the SARs will be settled in
Shares or cash, which must be determined at the time of grant and set forth in
the Award Agreement. However, the Exercise Price of a SAR shall be not less than
one hundred percent (100%) of the Fair Market Value of a Share on the Grant
Date.

          
     6.2 Exercise of SARs. SARs granted under the Plan shall be exercisable at
such times and be subject to such restrictions as set forth in the Award
Agreement and conditions as the Administrator shall determine in its discretion.
     6.3 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the Exercise Price, the term of the SAR, the conditions of
exercise and such other terms and conditions as the Administrator shall
determine.
     6.4 Expiration of SARs. A SAR granted under the Plan shall expire upon the
date determined by the Administrator in its discretion as set forth in the Award
Agreement, or otherwise pursuant to the provisions relating to the expiration of
Options as set forth in Section 5.5.
     6.5 No “Re-Pricing” Without Shareholder Approval. Except as provided in
Section 4.3, in no event may the Administrator directly or indirectly reduce the
exercise price of a SAR after it has been granted without the approval of a
majority of the shareholders eligible to vote.
     6.6 Payment of SAR Amount. Upon exercise of a SAR, a Participant shall be
entitled to receive (whichever is specified in the Award Agreement) from the
Company either (a) a cash payment in an amount equal to (x) the difference
between the Fair Market Value of a Share on the date of exercise and the SAR
Exercise Price, multiplied by (y) the number of Shares with respect to which the
SAR is exercised, or (b) a number of Shares by dividing such cash amount by the
Fair Market Value of a Share on the exercise date. If the Administrator
designates in the Award Agreement that the SAR will be settled in cash, upon
Participant’s exercise of the SAR the Company shall make a cash payment to
Participant as soon as reasonably practicable.
SECTION 7
RESTRICTED STOCK
     7.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Administrator, at any time and from time to time, may grant Shares of
Restricted Stock to

 

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Employees, Directors and Consultants in such amounts as the Administrator, in
its discretion, shall determine. However, the award of Restricted Stock under
this Section 7 is subject to the Full-Value Award Limitation, as described in
Section 2.20. The Administrator shall determine the number of Shares to be
granted to each Participant and the purchase price, if any, to be paid by the
Participant for such Shares. At the discretion of the Administrator, such
purchase price may be paid by Participant with cash or through services
rendered.
     7.2 Restricted Stock Agreement. Each Award of Restricted Stock shall be
evidenced by an Award Agreement that shall specify the Period of Restriction,
the number of Shares granted, and such other terms and conditions as the
Administrator, in its discretion, shall determine. Unless the Administrator
determines otherwise, Shares of Restricted Stock shall be held by the Company as
escrow agent until the restrictions on such Shares have lapsed.
     7.3 Transferability. Except as provided in this Section 7, Shares of
Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until expiration of the applicable Period of
Restriction.
     7.4 Other Restrictions. The Administrator, in its discretion, may impose
such other restrictions on Shares of Restricted Stock as it may deem advisable
or appropriate, in accordance with this Section 7.4, including, without
limitation, provisions relating to expiration of restrictions.

  7.4.1   General Restrictions. The Administrator may set restrictions based
upon the achievement of specific Performance Goals (Company-wide, business unit,
or individual), or any other basis determined by the Administrator in its
discretion.       7.4.2   Section 162(m) Performance Restrictions. For purposes
of qualifying grants of Restricted Stock as “performance-based compensation”
under Section 162(m) of the Code, the Administrator, in its discretion, may set
restrictions based upon the achievement of Performance Goals. The Performance
Goals shall be set by the Administrator on or before the latest date permissible
to enable the Restricted Stock to qualify as “performance-based compensation”
under Section 162(m) of the Code. In granting Restricted Stock which is intended
to qualify under Section 162(m) of the Code, the Administrator shall follow any
procedures determined by it from time to time to be necessary or appropriate to
ensure qualification of the Restricted Stock under Section 162(m) of the Code
(e.g., in determining the Performance Goals).     7.4.3   Legend on
Certificates. The Administrator, in its discretion, may place a legend or
legends on the certificates representing Restricted Stock to give appropriate
notice of such restrictions.

     7.5 Removal of Restrictions. Except as otherwise provided in this
Section 7, Shares of Restricted Stock covered by each Restricted Stock grant
made under the Plan shall be released from escrow as soon as practicable after
expiration of the Period of Restriction. After the restrictions have lapsed, the
Participant shall be entitled to have any legend or legends under Section 7.4.3
removed from his or her Share certificate, and the Shares shall be freely
transferable by the Participant, subject to Applicable Law.

 

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     7.6 Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares, unless otherwise provided in the Award Agreement.
     7.7 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock shall be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the Award Agreement. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.
     7.8 Return of Restricted Stock to Company. On the date that any forfeiture
event set forth in the Award Agreement occurs, the Restricted Stock for which
restrictions have not lapsed shall revert to the Company and again shall become
available for grant under the Plan. Such reverted Restricted Stock shall credit
the Full-Value Award Limitation.
SECTION 8
RESTRICTED STOCK UNITS
     8.1 Grant of Restricted Stock Units. Subject to the terms and conditions of
the Plan, Restricted Stock Units may be granted to Employees, Consultants and
Nonemployee Directors at any time and from time to time, as shall be determined
by the Administrator in its discretion. However, the award of Restricted Stock
Units under this Section 8 is subject to the “Full-Value Award Limitation,” as
described in Section 2.20.

  8.1.1   Number of Units. The Administrator will have complete discretion in
determining the number of Restricted Stock Units granted to any Participant,
subject to the limitations in Sections 4.1.     8.1.2   Value of Restricted
Stock Units. Each Performance Unit shall have a value equal to the Fair Market
Value of one Share.

     8.2 Performance Goals and Other Terms. The Administrator will set
Performance Goals or other vesting provisions, including, without limitation,
time-based vesting provisions, in its discretion which, depending on the extent
to which they are met, will determine the number Restricted Stock Units that are
converted into Shares or into the equivalent value of cash that shall be paid to
Participants. The time period during which the Performance Goals or other
vesting provisions must be met will be called the “Performance Period.” Each
Award of Restricted Stock Units will be evidenced by an Award Agreement that
will specify the Performance Period, and such other terms and conditions as the
Administrator, in its discretion, will determine. The Administrator may set
Performance Goals based upon the achievement of Company-wide or Individual
Objectives or any other basis determined by the Administrator in its discretion.
     8.3 Earning of Restricted Stock Units. After the applicable Performance
Period has ended, the holder of Restricted Stock Units will be entitled to
receive a payment based on the number of Restricted Stock Units earned by the
Participant over the Performance Period, to be determined

 

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as a function of the extent to which the corresponding Performance Goals or
other vesting provisions have been achieved.
     8.4 Form and Timing of Payment of Restricted Stock Units. Each Award
Agreement of Restricted Stock Units shall specify the form of payment, which may
be in the form of Shares or in cash. Payment with respect to earned Restricted
Stock Units shall be made as soon as reasonably practical (an in no event more
than two and one-half months) after the expiration of the Performance Period.
     8.5 Cancellation of Restricted Stock Units. On the date that any forfeiture
event set forth in the Award Agreement occurs, all unearned or unvested
Restricted Stock Units will revert to the Company, and again will be available
for grant under the Plan. Such reverted Restricted Stock Units shall credit the
Full-Value Award Limitation.
SECTION 9
MISCELLANEOUS
     9.1 Change In Control. Unless otherwise provided in the Award Agreement, in
the event of a Change in Control, unless an Award is assumed or substituted by
the successor corporation, then (i) such Awards shall become fully exercisable
during the ten (10) day period immediately prior to the Change in Control,
whether or not otherwise then exercisable and (ii) all restrictions and
conditions on any Award then outstanding shall lapse as of the date of the
Change in Control. Unless an Award is assumed or substituted by the successor
corporation, such Award shall terminate and shall no longer be exercisable
immediately upon the Change in Control, Participant shall be provided written
notification of whether Options granted under the Plan will be assumed,
substituted or shall become fully exercisable no later than ten (10) days prior
to the Change in Control date.
     9.2 Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Participant as
soon as practicable prior to the effective date of such proposed transaction.
Notwithstanding anything to the contrary contained in this Plan or in any Award
Agreement, the Participant shall have the right to exercise his or her Award for
a period of not less than ten (10) days immediately prior to such dissolution or
transaction as to all of the Shares covered thereby, including Shares as to
which the Award would not otherwise be exercisable.
     9.3 No Effect on Employment or Service. Nothing in the Plan shall interfere
with or limit in any way the right of the Company or an Affiliate to terminate
any Participant’s employment or service at any time, with or without cause.
Unless otherwise provided by written contract, employment or service with the
Company or any of its Affiliates is on an at-will basis only. Additionally, the
Plan shall not confer upon any Director any right with respect to continuation
of service as a Director or nomination to serve as a Director, nor shall it
interfere in any way with any rights which such Director or the Company may have
to terminate his or her directorship at any time.

 

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     9.4 Participation. No Employee, Consultant or Nonemployee Director shall
have the right to be selected to receive an Award under this Plan, or, having
been so selected, to be selected to receive a future Award.
     9.5 Limitations on Awards. No Participant shall be granted an Award or
Awards in any Fiscal Year in which the combined number of Shares underlying such
Award(s) exceeds two hundred thousand (200,000) Shares; provided, however, that
such limitation shall be adjusted proportionately in connection with any change
in the Company’s capitalization as described in Section 4.3.
     9.6 Successors. All obligations of the Company under the Plan, with respect
to Awards granted hereunder, shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation or, otherwise, sale or disposition of all or
substantially all of the business or assets of the Company.
     9.7 Beneficiary Designations. If permitted by the Administrator, a
Participant under the Plan may name a beneficiary or beneficiaries to whom any
vested but unpaid Award shall be paid in the event of the Participant’s death.
Each such designation shall revoke all prior designations by the Participant and
shall be effective only if given in a form and manner acceptable to the
Administrator. In the absence of any such designation, any vested benefits
remaining unpaid at the Participant’s death shall be paid to the Participant’s
estate and, subject to the terms of the Plan and of the applicable Award
Agreement, any unexercised vested Award may be exercised by the administrator or
executor of the Participant’s estate.
     9.8 Limited Transferability of Awards. No Award granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. All rights with
respect to an Award granted to a Participant shall be available during his or
her lifetime only to the Participant. Notwithstanding the foregoing, the
Participant may, in a manner specified by the Administrator, (a) transfer a
Nonqualified Stock Option to a Participant’s spouse, former spouse or dependent
pursuant to a court-approved domestic relations order which relates to the
provision of child support, alimony payments or marital property rights and
(b) transfer a Nonqualified Stock Option or Restricted Stock by bona fide gift
and not for any consideration to (i) a member or members of the Participant’s
immediate family, (ii) a trust established for the exclusive benefit of the
Participant and/or member(s) of the Participant’s immediate family, (iii) a
partnership, limited liability company of other entity whose only partners or
members are the Participant and/or member(s) of the Participant’s immediate
family or (iv) a foundation in which the Participant an/or member(s) of the
Participant’s immediate family control the management of the foundation’s
assets.
     9.9 Restrictions on Share Transferability. The Administrator may impose
such restrictions on any Shares acquired pursuant to the exercise of an Award as
it may deem advisable, including, but not limited to, restrictions related to
applicable federal securities laws, the requirements of any national securities
exchange or system upon which Shares are then listed or traded or any blue sky
or state securities laws.
     9.10 Transfers Upon a Change in Control. In the sole and absolute
discretion of the Administrator, an Award Agreement may provide that in the
event of certain Change in Control

 

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events, which may include any or all of the Change in Control events described
in Section 2.8, Shares obtained pursuant to this Plan shall be subject to
certain rights and obligations, which include but are not limited to the
following: (i) the obligation to vote all such Shares in favor of such Change in
Control transaction, whether by vote at a meeting of the Company’s shareholders
or by written consent of such shareholders; (ii) the obligation to sell or
exchange all such Shares and all rights to acquire Shares, under this Plan
pursuant to the terms and conditions of such Change in Control transaction;
(iii) the right to transfer less than all but not all of such Shares pursuant to
the terms and conditions of such Change in Control transaction, and (iv) the
obligation to execute all documents and take any other action reasonably
requested by the Company to facilitate the consummation of such Change in
Control transaction.
     9.11 Performance-Based Awards. Each agreement for the grant of Restricted
Stock Units or other performance-based awards shall specify the number of Shares
or Units underlying the Award, the Performance Period and the Performance Goals
(each as defined below), and each agreement for the grant of any other award
that the Administrator determines to make subject to a Performance Goal
similarly shall specify the applicable number of shares of Common Stock, the
period for measuring performance and the Performance Goal. As used herein,
“Performance Goals” means performance goals specified in the agreement for a
Performance Unit Award, or for any other Award which the Administrator
determines to make subject to Performance Goals, upon which the vesting or
settlement of such award is conditioned and “Performance Period” means the
period of time specified in an agreement over which Restricted Stock Units, or
another Award which the Administrator determines to make subject to a
Performance Goal, are to be earned. Each agreement for a performance-based Award
shall specify in respect of a Performance Goal the minimum level of performance
below which no payment will be made, shall describe the method of determining
the amount of any payment to be made if performance is at or above the minimum
acceptable level, but falls short of full achievement of the Performance Goal,
and shall specify the maximum percentage payout under the agreement.

  9.11.1   Performance Goals for Covered Employees. The Performance Goals for
Restricted Stock Units and any other performance-based award granted to a
Covered Employee, if deemed appropriate by the Administrator, shall be objective
and shall otherwise meet the requirements of Section 162(m)(4)(C) of the Code,
and shall be based upon one or more of the following performance-based business
criteria, either on a business unit or Company-specific basis or in comparison
with peer group performance: revenue, operating income, operating cash flows,
return on net assets, return on assets, return on equity, return on capital,
asset turnover, total stockholder return, net income, pre-tax income, gross
margin, profit margin, net income margin, cash flow, book value, earnings per
share, earnings growth, EBIT, EBITDA. Achievement of any such Performance Goal
shall be measured over a period of years not to exceed ten (10) as specified by
the Administrator in the agreement for the performance-based Award. No business
criterion other than those named above in this Section 9.11.1 may be used in
establishing the Performance Goal for an award to a Covered Employee under this
Section 9.11. For each such award relating to a Covered Employee, the
Administrator shall establish the targeted level or levels of performance for
each such business criterion. The Administrator may, in its discretion, reduce
the amount of a payout otherwise to be made in connection with an award under
this Section 9.11, but may not exercise discretion to increase such amount, and
the Administrator may consider other performance criteria in exercising such
discretion. All determinations by the Administrator as to the achievement of
Performance Goals under this

 

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     Section 9.11 shall be made in writing. The Administrator may not delegate
any responsibility under this Section 9.11. As used herein, “Covered Employee”
shall mean, with respect to any grant of an award, an executive of the Company
or any Subsidiary who is a member of the executive compensation group under the
Company’s compensation practices (not necessarily an executive officer) whom the
Administrator deems may be or become a covered employee as defined in Section
162(m)(3) of the Code for any year that such award may result in remuneration
over $1 million which would not be deductible under Section 162(m) of the Code
but for the provisions of the Program and any other “qualified performance-based
compensation” plan (as defined under Section 162(m) of the Code) of the Company;
provided, however, that the Administrator may determine that a Plan Participant
has ceased to be a Covered Employee prior to the settlement of any award.

  9.11.2   Mandatory Deferral of Income. The Administrator, in its sole
discretion, may require that one or more award agreements contain provisions
which provide that, in the event Section 162(m) of the Code, or any successor
provision relating to excessive employee remuneration, would operate to disallow
a deduction by the Company with respect to all or part of any award under the
Program, a Plan Participant’s receipt of the benefit relating to such award that
would not be deductible by the Company shall be deferred until the next
succeeding year or years in which the Plan Participant’s remuneration does not
exceed the limit set forth in such provisions of the Code; provided, however,
that such deferral does not violate Code Section 409A.

SECTION 10
AMENDMENT, SUSPENSION, AND TERMINATION
     10.1 Amendment, Suspension, or Termination. Except as provided in
Section 10.2, the Board, in its sole discretion, may amend, suspend or terminate
the Plan, or any part thereof, at any time and for any reason. The amendment,
suspension or termination of the Plan shall not, without the consent of the
Participant, alter or impair any rights or obligations under any Award
theretofore granted to such Participant. No Award may be granted during any
period of suspension or after termination of the Plan.
     10.2 No Amendment without Shareholder Approval. The Company shall obtain
shareholder approval of any material Plan amendment (including but not limited
to any provision to reduce the exercise or purchase price of any outstanding
Options or other Awards after the Grant Date (other than for adjustments made
pursuant Section 4.3), or to cancel and re-grant Options or other rights at a
lower exercise price), to the extent required to comply with the rules of the
NASDAQ, the Exchange Act, Section 422 of the Code, or other Applicable Law.
     10.3 Plan Effective Date and Duration of Awards. The Plan shall be
effective as of the Plan Adoption Date subject to the shareholders of the
Company approving the Plan by the required vote), subject to Sections 10.1 and
10.2 (regarding the Board’s right to amend or terminate the Plan), and shall
remain in effect thereafter. If the shareholders of the Company do not approve
the Plan by the required vote within twelve months of the Plan Adoption Date,
all Awards granted under this Plan, and this Plan in its entirety, shall
immediately terminate. However, without further shareholder approval, no Award
may be granted under the Plan more than ten (10) years after the Plan Adoption
Date.

 

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SECTION 11
TAX WITHHOLDING
     11.1 Withholding Requirements. Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof) or the release of Shares from escrow
arrangements or removal of legends, the Company shall have the power and the
right to deduct or withhold, or require a Participant to remit to the Company,
an amount sufficient to satisfy federal, state, and local taxes (including the
Participant’s FICA obligation) required to be withheld with respect to such
Award (or exercise thereof).
     11.2 Withholding Arrangements. The Administrator, in its discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part by
(a) electing to have the Company withhold otherwise deliverable Shares or
(b) delivering to the Company already-owned Shares having a Fair Market Value
equal to the minimum amount required to be withheld. The amount of the
withholding requirement shall be deemed to include any amount which the
Administrator agrees may be withheld at the time the election is made; provided,
however, in the case Shares are withheld by the Company to satisfy the tax
withholding that would otherwise by issued to the Participant, the amount of
such tax withholding shall be determined by applying the statutory minimum
federal, state or local income tax rates applicable to the Participant with
respect to the Award on the date that the amount of tax to be withheld is to be
determined. The Fair Market Value of the Shares to be withheld or delivered
shall be determined as of the date taxes are required to be withheld.
SECTION 12
LEGAL CONSTRUCTION
     12.1 Liability of Company. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the
Company’s counsel to be necessary to the lawful grant or any Award or the
issuance and sale of any Shares hereunder, shall relieve the Company, its
officers, Directors and Employees of any liability in respect of the failure to
grant such Award or to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
     12.2 Grants Exceeding Allotted Shares. If the Shares covered by an Award
exceed, as of the date of grant, the number of Shares, which may be issued under
the Plan without additional shareholder approval, such Award shall be void with
respect to such excess Shares, unless shareholder approval of an amendment
sufficiently increasing the number of Shares subject to the Plan is timely
obtained.
     12.3 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
     12.4 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.

 

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     12.5 Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
     12.6 Governing Law. The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of California.
     12.7 Captions. Captions are provided herein for convenience only, and shall
not serve as a basis for interpretation or construction of the Plan.