EXHIBIT 10.1

 

Notice of Grant of Stock Option

and Option Agreement (continued)

 

Definitions:

 

1. Date of Award is the effective date as stated in the Notice of Grant of Stock
Option and Option Agreement (the “Notice”).

 

2. Expiration Date is the date on the Notice under the column heading
“Expiration.”

 

3. Post-Termination Exercise Period is three (3) months.

 

Vesting Schedule:

 

Subject to the Grantee’s Continuous Service and other limitations set forth in
this Notice and the Option Agreement, the Option may be exercised, in whole or
in part, in accordance with the schedule on page 1 of this Notice.

 

During any authorized leave of absence, the vesting of the Option as provided in
this schedule shall cease after the leave of absence exceeds a period of ninety
(90) days. Vesting of the Option shall resume upon the Grantee’s termination of
the leave of absence and return to service to the Company or a Related Entity.
The Vesting Schedule of the Option shall be extended by the length of the
suspension.

 

In the event of the Grantee’s change in status from Employee to Consultant or
from an Employee whose customary employment is 20 hours or more per week to an
Employee whose customary employment is fewer than 20 hours per week, vesting of
the Option shall continue only to the extent determined by the Administrator as
of such change in status.

 

IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice and
agree that the Option is to be governed by the terms and conditions of this
Notice and the Option Agreement.

 

Pericom Semiconductor Corporation,

a California corporation

By:

 

 

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Title:

 

 

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Notice of Grant of Stock Option

and Option Agreement (continued)

 

THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SUBJECT TO THE OPTION SHALL
VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE GRANTEE’S CONTINUOUS SERVICE (NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THE OPTION OR ACQUIRING SHARES
HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS
NOTICE OR THE OPTION AGREEMENT SHALL CONFER UPON THE GRANTEE ANY RIGHT WITH
RESPECT TO FUTURE AWARDS OR CONTINUATION OF THE GRANTEE’S CONTINUOUS SERVICE,
NOR SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEE’S RIGHT OR THE RIGHT OF THE
COMPANY OR RELATED ENTITY TO WHICH THE GRANTEE PROVIDES SERVICES TO TERMINATE
THE GRANTEE’S CONTINUOUS SERVICE, WITH OR WITHOUT CAUSE, AND WITH OR WITHOUT
NOTICE. THE GRANTEE ACKNOWLEDGES THAT UNLESS THE GRANTEE HAS A WRITTEN
EMPLOYMENT AGREEMENT WITH THE COMPANY TO THE CONTRARY, THE GRANTEE’S STATUS IS
AT WILL.

 

The Grantee acknowledges receipt of a copy of the Option Agreement, and
represents that he or she is familiar with the terms and provisions thereof, and
hereby accepts the Option subject to all of the terms and provisions hereof and
thereof. The Grantee has reviewed this Notice and the Option Agreement in their
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Notice, and fully understands all provisions of this Notice and
the Option Agreement. The Grantee hereby agrees that all disputes arising out of
or relating to this Notice and the Option Agreement shall be resolved in
accordance with Section 13 of the Option Agreement. The Grantee further agrees
to notify the Company upon any change in the residence address indicated in this
Notice.

 

Dated:

 

 

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Signed:

 

 

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            Grantee

 

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PERICOM SEMICONDUCTOR CORPORATION

 

STOCK OPTION AWARD AGREEMENT

 

1. Grant of Option. Pericom Semiconductor Corporation, a California corporation
(the “Company”), hereby grants to the Grantee (the “Grantee”) named in the
Notice of Stock Option Award (the “Notice”), a non-qualified stock option (the
“Option”) to purchase the Total Number of Shares of Common Stock subject to the
Option (the “Shares”) set forth in the Notice, at the Exercise Price per Share
set forth in the Notice (the “Exercise Price”) subject to the terms and
provisions of this Stock Option Award Agreement (the “Option Agreement”) and the
Notice which are incorporated herein by reference.

 

2. Exercise of Option.

 

(a) Right to Exercise. The Option shall be exercisable during its term in
accordance with the Vesting Schedule set out in the Notice and with the
applicable provisions of this Option Agreement. The Option shall be subject to
the provisions of Section 16 of this Option Agreement relating to the
exercisability or termination of the Option in the event of a Corporate
Transaction, Change in Control or Related Entity Disposition. The Grantee shall
be subject to reasonable limitations on the number of requested exercises during
any monthly or weekly period as determined by the Administrator. In no event
shall the Company issue fractional Shares.

 

(b) Method of Exercise. The Option shall be exercisable by delivery of an
exercise notice or by such other procedure as specified from time to time by the
Administrator which shall state the election to exercise the Option, the whole
number of Shares in respect of which the Option is being exercised, and such
other provisions as may be required by the Administrator. The exercise notice
shall be delivered in person, by certified mail, or by such other method
(including electronic transmission) as determined from time to time by the
Administrator to the Company accompanied by payment of the Exercise Price. The
Option shall be deemed to be exercised upon receipt by the Company of such
notice accompanied by the Exercise Price, which, to the extent selected, shall
be deemed to be satisfied by use of the broker-dealer sale and remittance
procedure to pay the Exercise Price provided in Section 3(d), below.

 

(c) Taxes. No Shares will be delivered to the Grantee or other person pursuant
to the exercise of the Option until the Grantee or other person has made
arrangements acceptable to the Administrator for the satisfaction of applicable
income tax and employment tax withholding obligations, including, without
limitation, obligations incident to the receipt of Shares. Upon exercise of the
Option, the Company or the Grantee’s employer may offset or withhold (from any
amount owed by the Company or the Grantee’s employer to the Grantee) or collect
from the Grantee or other person an amount sufficient to satisfy such tax
obligations and/or the employer’s withholding obligations.

 

3. Method of Payment. Payment of the Exercise Price shall be made by any of the
following, or a combination thereof, at the election of the Grantee; provided,
however, that such exercise method does not then violate any Applicable Law:

 

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(a) cash;

 

(b) check;

 

(c) surrender of Shares or delivery of a properly executed form of attestation
of ownership of Shares as the Administrator may require (including withholding
of Shares otherwise deliverable upon exercise of the Option) which have a Fair
Market Value on the date of surrender or attestation equal to the aggregate
Exercise Price of the Shares as to which the Option is being exercised (but only
to the extent that such exercise of the Option would not result in an accounting
compensation charge with respect to the Shares used to pay the exercise price);

 

(d) payment through a broker-dealer sale and remittance procedure pursuant to
which the Grantee (i) shall provide written instructions to a Company-designated
brokerage firm to effect the immediate sale of some or all of the purchased
Shares and remit to the Company sufficient funds to cover the aggregate exercise
price payable for the purchased Shares and (ii) shall provide written directives
to the Company to deliver the certificates for the purchased Shares directly to
such brokerage firm in order to complete the sale transaction; or

 

(e) any other method acceptable to the Administrator in its sole discretion.

 

4. Restrictions on Exercise. The Option may not be exercised if the issuance of
the Shares subject to the Option upon such exercise would constitute a violation
of any Applicable Laws.

 

5. Termination or Change of Continuous Service. In the event the Grantee’s
Continuous Service terminates, other than for Cause, the Grantee may, but only
during the Post-Termination Exercise Period (subject to the provisions for
extended exercisability in Section (b)(ii)), exercise the portion of the Option
that was vested at the date of such termination (the “Termination Date”). In the
event of termination of the Grantee’s Continuous Service for Cause, the
Grantee’s right to exercise the Option shall, except as otherwise determined by
the Administrator, terminate concurrently with the termination of the Grantee’s
Continuous Service (also the “Termination Date”). In no event shall the Option
be exercised later than the Expiration Date set forth in the Notice. In the
event of the Grantee’s change in status from Employee, Director or Consultant to
any other status of Employee, Director or Consultant, the Option shall remain in
effect and, except to the extent otherwise determined by the Administrator,
vesting of the Option shall continue. Except as provided in Sections 6 and 7
below, to the extent that the Option was unvested on the Termination Date, or if
the Grantee does not exercise the vested portion of the Option within the
Post-Termination Exercise Period, the Option shall terminate.

 

6. Disability of Grantee. In the event the Grantee’s Continuous Service
terminates as a result of his or her Disability, the Grantee may, but only
within twelve (12) months from the Termination Date (and in no event later than
the Expiration Date), exercise the portion of the Option that was vested on the
Termination Date. To the extent that the Option was unvested on the Termination
Date, or if the Grantee does not exercise the vested portion of the Option
within the time specified herein, the Option shall terminate.

 

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7. Death of Grantee. In the event of the termination of the Grantee’s Continuous
Service as a result of his or her death, or in the event of the Grantee’s death
during the Post-Termination Exercise Period or during the twelve (12) month
period following the Grantee’s termination of Continuous Service as a result of
his or her Disability, the Grantee’s estate, or a person who acquired the right
to exercise the Option by bequest or inheritance, may exercise the portion of
the Option that was vested at the date of termination within twelve (12) months
from the date of death (but in no event later than the Expiration Date). To the
extent that the Option was unvested on the date of death, or if the vested
portion of the Option is not exercised within the time specified herein, the
Option shall terminate.

 

8. Transferability of Option. The Option may not be transferred in any manner
other than by will or by the laws of descent and distribution, provided,
however, that the Option may be transferred to members of the Grantee’s
Immediate Family to the extent and in the manner authorized by the
Administrator. Notwithstanding the foregoing, the Grantee may designate a member
of the Grantee’s Immediate Family as a beneficiary of the Grantee’s Option in
the event of the Grantee’s death on a beneficiary designation form provided by
the Administrator. The terms of the Option shall be binding upon the executors,
administrators, heirs and successors of the Grantee.

 

9. Term of Option. The Option must be exercised no later than the Expiration
Date set forth in the Notice or such earlier date as otherwise provided herein.
After the Expiration Date or such earlier date, the Option shall be of no
further force or effect and may not be exercised.

 

10. Tax Consequences. Set forth below is a brief summary as of the date of this
Option Agreement of some of the federal tax consequences of exercise of the
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE GRANTEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.

 

(a) Exercise of Non-Qualified Stock Option. On exercise of a Non-Qualified Stock
Option, the Grantee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price. If
the Grantee is an Employee or a former Employee, the Company will be required to
withhold from the Grantee’s compensation or collect from the Grantee and pay to
the applicable taxing authorities an amount in cash equal to a percentage of
this compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

 

(b) Disposition of Shares. If Shares are held for more than one year, any gain
realized on disposition of the Shares will be treated as long-term capital gain
for federal income tax purposes.

 

11. Entire Agreement: Governing Law. The Notice and this Option Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and

 

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supersede in their entirety all prior undertakings and agreements of the Company
and the Grantee with respect to the subject matter hereof, and may not be
modified adversely to the Grantee’s interest except by means of a writing signed
by the Company and the Grantee. Nothing in the Notice and this Option Agreement
(except as expressly provided therein) is intended to confer any rights or
remedies on any persons other than the parties. The Notice and this Option
Agreement are to be construed in accordance with and governed by the internal
laws of the State of California without giving effect to any choice of law rule
that would cause the application of the laws of any jurisdiction other than the
internal laws of the State of California to the rights and duties of the
parties. Should any provision of the Notice or this Option Agreement be
determined by a court of law to be illegal or unenforceable, such provision
shall be enforced to the fullest extent allowed by law and the other provisions
shall nevertheless remain effective and shall remain enforceable.

 

12. Headings. The captions used in the Notice and this Option Agreement are
inserted for convenience and shall not be deemed a part of the Option for
construction or interpretation.

 

13. Dispute Resolution. The provisions of this Section 13 shall be the exclusive
means of resolving disputes arising out of or relating to the Notice and this
Option Agreement. The Company, the Grantee, and the Grantee’s assignees (the
“parties”) shall attempt in good faith to resolve any disputes arising out of or
relating to the Notice and this Option Agreement by negotiation between
individuals who have authority to settle the controversy. Negotiations shall be
commenced by either party by notice of a written statement of the party’s
position and the name and title of the individual who will represent the party.
Within thirty (30) days of the written notification, the parties shall meet at a
mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary, to resolve the dispute. If the dispute has not been resolved by
negotiation, the parties agree that any suit, action, or proceeding arising out
of or relating to the Notice or this Option Agreement shall be brought in the
United States District Court for the Northern District of California located in
the city of San Jose, California (or should such court lack jurisdiction to hear
such action, suit or proceeding, in a California state court in the County of
Santa Clara) and that the parties shall submit to the jurisdiction of such
court. The parties irrevocably waive, to the fullest extent permitted by law,
any objection the party may have to the laying of venue for any such suit,
action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY
RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR
PROCEEDING. If any one or more provisions of this Section 13 shall for any
reason be held invalid or unenforceable, it is the specific intent of the
parties that such provisions shall be modified to the minimum extent necessary
to make it or its application valid and enforceable.

 

14. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, upon
deposit for delivery by an internationally recognized express mail courier
service or upon deposit in the United States mail by certified mail (if the
parties are within the United States), with postage and fees prepaid, addressed
to the other party at its address as shown in these instruments, or to such
other address as such party may designate in writing from time to time to the
other party.

 

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15. Adjustments Upon Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of Shares covered by the Option,
the exercise price of the Option, as well as any other terms that the
Administrator determines require adjustment shall be proportionately adjusted
for (i) any increase or decrease in the number of issued Shares resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Shares, or similar transaction affecting the Shares,
(ii) any other increase or decrease in the number of issued Shares effected
without receipt of consideration by the Company, or (iii) as the Administrator
may determine in its discretion, any other transaction with respect to Common
Stock including a corporate merger, consolidation, acquisition of property or
stock, separation (including a spin-off or other distribution of stock or
property), reorganization, liquidation (whether partial or complete) or any
similar transaction; 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
and its determination shall be final, binding and conclusive. Except as the
Administrator determines, no issuance 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 hereof shall be made with respect to, the
number or price of Shares subject to the Option.

 

16. Corporate Transactions/Changes in Control/Related Entity Dispositions.

 

(a) Termination of Option to Extent Not Assumed in Corporate Transaction or
Related Entity Disposition. Effective upon the consummation of a Corporate
Transaction or Related Entity Disposition, the Option shall terminate. However,
the Option shall not terminate to the extent it is Assumed in connection with
the Corporate Transaction or Related Entity Disposition.

 

(b) Acceleration of Option Upon Corporate Transaction or Change in Control.

 

(i) Corporate Transaction. In the event of a Corporate Transaction:

 

(A) for the portion of the Option that is Assumed or Replaced, then the Option
(if Assumed), the replacement award (if Replaced), or the cash incentive program
(if Replaced) automatically shall become fully vested, exercisable and payable
for all of the Shares at the time represented by such Assumed or Replaced
portion of the Option, immediately upon termination of the Grantee’s Continuous
Service if such Continuous Service is terminated by the successor company, the
Company or a Related Entity without Cause or voluntarily by the Grantee with
Good Reason within twelve (12) months after the Corporate Transaction; and

 

(B) for the portion of the Option that is neither Assumed nor Replaced, such
portion of the Option shall automatically become fully vested and exercisable
for all of the Shares at the time represented by such portion of the Option,
immediately prior to the specified effective date of such Corporate Transaction.

 

(ii) Change in Control. Following a Change in Control (other than a Change in
Control which also is a Corporate Transaction) and upon the termination of the
Continuous Service of the Grantee if such Continuous Service is terminated by
the Company or a

 

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Related Entity without Cause or voluntarily by the Grantee with Good Reason
twelve (12) months after a Change in Control, the Grantee shall be treated as if
his or her Continuous Service continued for an additional twelve (12) months
following such termination for purposes of vesting and exercisability.

 

(iii) Related Entity Disposition. In the event of a Related Entity Disposition:

 

(A) for the portion of the Option that is Assumed or Replaced, then the Option
(if Assumed), the replacement award (if Replaced), or the cash incentive program
(if Replaced) automatically shall become fully vested, exercisable and payable
for all of the Shares at the time represented by such Assumed or Replaced
portion of the Option, immediately upon termination of the Grantee’s Continuous
Service if such Continuous Service is terminated by the successor company, the
Company or a Related Entity without Cause or voluntarily by the Grantee with
Good Reason within twelve (12) months after the Related Entity Disposition; and

 

(B) for the portion of the Option that is neither Assumed nor Replaced, such
portion of the Option shall automatically become fully vested and exercisable
for all of the Shares at the time represented by such portion of the Option,
immediately prior to the specified effective date of such Related Entity
Disposition.

 

17. No Effect on Retirement and Other Benefit Plans. Except as specifically
provided in a retirement or other benefit plan of the Company or a Related
Entity, the Option shall not be deemed compensation for purposes of computing
benefits or contributions under any retirement plan of the Company or a Related
Entity, and shall not affect any benefits under any other benefit plan of any
kind or any benefit plan subsequently instituted under which the availability or
amount of benefits is related to level of compensation. The Option is not, and
is not granted pursuant to, a “Retirement Plan” or “Welfare Plan” under the
Employee Retirement Income Security Act of 1974, as amended.

 

18. Definitions. As used herein, the following definitions shall apply:

 

(a) “Administrator” means the Board or any of the Committee of the Board
appointed to administer the Option.

 

(b) “Affiliate” and “Associate” shall have the respective meanings ascribed to
such terms in Rule 12b-2 promulgated under the Exchange Act.

 

(c) “Applicable Laws” means the legal requirements applicable to Options, if
any, under applicable provisions of federal securities laws, state corporate and
securities laws, the Code, the rules of any applicable stock exchange or
national market system, and the rules of any foreign jurisdiction applicable to
Options granted to residents therein.

 

(d) “Assumed” means that pursuant to a Corporate Transaction or a Related Entity
Disposition either (i) the Option is expressly affirmed by the Company or (ii)
the contractual obligations represented by the Option are expressly assumed (and
not simply by operation of law) by the successor entity or its Parent in
connection with the Corporate

 

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Transaction or Related Entity Disposition with appropriate adjustments to the
number and type of securities of the successor entity or its Parent subject to
the Option and the exercise price thereof which preserves the compensation
element of the Option existing at the time of the Corporate Transaction or
Related Entity Disposition as determined in accordance with the instruments
evidencing the agreement to assume the Option.

 

(e) “Board” means the Board of Directors of the Company and shall include any
committee of the Board or Officer of the Company to which the Board has
delegated its authority under this Agreement.

 

(f) “Cause” means, with respect to the termination by the Company or a Related
Entity of the Grantee’s Continuous Service, that such termination is for “Cause”
as such term is expressly defined in a then-effective written agreement between
the Grantee and the Company or such Related Entity, or in the absence of such
then-effective written agreement and definition, is based on, in the
determination of the Administrator, the Grantee’s: (i) refusal or failure to act
in accordance with any specific, lawful direction or order of the Company or a
Related Entity; (ii) unfitness or unavailability for service or unsatisfactory
performance (other than as a result of Disability); (iii) performance of any act
or failure to perform any act in bad faith and to the detriment of the Company
or a Related Entity; (iv) dishonesty, intentional misconduct or material breach
of any agreement with the Company or a Related Entity; or (v) commission of a
crime involving dishonesty, breach of trust, or physical or emotional harm to
any person.

 

(g) “Change in Control” means a change in ownership or control of the Company
effected through either of the following transactions:

 

(i) the direct or indirect acquisition by any person or related group of persons
(other than an acquisition from or by the Company or by a Company-sponsored
employee benefit plan or by a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities
possessing more than fifty percent (50%) of the total combined voting power of
the Company’s outstanding securities pursuant to a tender or exchange offer made
directly to the Company’s shareholders which a majority of the Continuing
Directors who are not Affiliates or Associates of the offeror do not recommend
such shareholders accept, or

 

(ii) a change in the composition of the Board over a period of thirty-six (36)
months or less such that a majority of the Board members (rounded up to the next
whole number) ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who are Continuing Directors.

 

(h) “Code” means the Internal Revenue Code of 1986, as amended.

 

(i) “Committee” means any committee appointed by the Board to administer the
Option.

 

(j) “Common Stock” means the common stock of the Company.

 

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(k) “Company” means Pericom Semiconductor Corporation, a California corporation.

 

(l) “Consultant” means any person (other than an Employee or a Director, solely
with respect to rendering services in such person’s capacity as a Director) who
is engaged by the Company or any Related Entity to render consulting or advisory
services to the Company or such Related Entity.

 

(m) “Continuing Directors” means members of the Board who either (i) have been
Board members continuously for a period of at least thirty-six (36) months or
(ii) have been Board members for less than thirty-six (36) months and were
elected or nominated for election as Board members by at least a majority of the
Board members described in clause (i) who were still in office at the time such
election or nomination was approved by the Board.

 

(n) “Continuous Service” means that the provision of services to the Company or
a Related Entity in any capacity of Employee, Director or Consultant, is not
interrupted or terminated. In jurisdictions requiring notice in advance of an
effective termination as an Employee, Director or Consultant, Continuous Service
shall be deemed terminated upon the actual cessation of providing services to
the Company or a Related Entity notwithstanding any required notice period that
must be fulfilled before a termination as an Employee, Director or Consultant
can be effective under Applicable Laws. Continuous Service shall not be
considered interrupted in the case of (i) any approved leave of absence, (ii)
transfers among the Company, any Related Entity, or any successor, in any
capacity of Employee, Director or Consultant, or (iii) any change in status as
long as the individual remains in the service of the Company or a Related Entity
in any capacity of Employee, Director or Consultant (except as otherwise
provided in the Option Agreement). An approved leave of absence shall include
sick leave, military leave, or any other authorized personal leave.

 

(o) “Corporate Transaction” means any of the following transactions:

 

(i) a merger or consolidation in which the Company is not the surviving entity,
except for a transaction the principal purpose of which is to change the state
in which the Company is incorporated;

 

(ii) the sale, transfer or other disposition of all or substantially all of the
assets of the Company (including the capital stock of the Company’s subsidiary
corporations);

 

(iii) the complete liquidation or dissolution of the Company;

 

(iv) any reverse merger or series of related transactions culminating in a
reverse merger (including, but not limited to, a tender offer followed by a
reverse merger) in which the Company is the surviving entity but in which
securities possessing more than fifty percent (50%) of the total combined voting
power of the Company’s outstanding securities are transferred to a person or
persons different from those who held such securities immediately prior to such
merger or the initial transaction culminating in such merger but excluding any
such transaction or series of related transactions that the Administrator
determines shall not be a Corporate Transaction; or

 

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(v) acquisition in a single or series of related transactions by any person or
related group of persons (other than the Company or by a Company-sponsored
employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3
of the Exchange Act) of securities possessing more than fifty percent (50%) of
the total combined voting power of the Company’s outstanding securities but
excluding any such transaction or series of related transactions that the
Administrator determines shall not be a Corporate Transaction.

 

(p) “Director” means a member of the Board or the board of directors of any
Related Entity.

 

(q) “Disability” shall have the same meaning as defined under the long-term
disability policy of the Company or the Related Entity to which the Grantee
provides services regardless of whether the Grantee is covered by such policy.
If the Company or the Related Entity to which the Grantee provides service does
not have a long-term disability plan in place, “Disability” means that the
Grantee is permanently unable to carry out the responsibilities and functions of
the position held by the Grantee by reason of any medically determinable
physical or mental impairment. The Grantee will not be considered to have
incurred a Disability unless he or she furnishes proof of such impairment
sufficient to satisfy the Administrator in its discretion.

 

(r) “Employee” means any person, including an Officer or Director, who is in the
employ of the Company or any Related Entity, subject to the control and
direction of the Company or any Related Entity as to both the work to be
performed and the manner and method of performance. The payment of a director’s
fee by the Company or a Related Entity shall not be sufficient to constitute
“employment” by the Company.

 

(s) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(t) “Fair Market Value” means, as of any date, the value of Common Stock
determined as follows:

 

(i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation The Nasdaq National Market
or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or system on the date of determination
(or, if no closing sales price or closing bid was reported on that date, as
applicable, on the last trading date such closing sales price or closing bid was
reported), as reported in The Wall Street Journal or such other source as the
Administrator deems reliable;

 

(ii) If the Common Stock is regularly quoted on an automated quotation system
(including the OTC Bulletin Board) or by a recognized securities dealer, but
selling prices are not reported, the Fair Market Value of a Share of Common
Stock shall be the mean between the high bid and low asked prices for the Common
Stock on date of determination (or, if no such prices were reported on that
date, on the last date such prices were reported), as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or

 

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(iii) In the absence of an established market for the Common Stock of the type
described in (i) and (ii), above, the Fair Market Value thereof shall be
determined by the Administrator in good faith.

 

(u) “Good Reason” means the occurrence after a Corporate Transaction, Related
Entity Disposition or Change in Control of any of the following events or
conditions unless consented to by the Grantee (and the Grantee shall be deemed
to have consented to any such event or condition unless the Grantee provides
written notice of the Grantee’s non-acquiescence within 30 days of the effective
time of such event or condition):

 

(i) a change in the Grantee’s responsibilities or duties which represents a
material and substantial diminution in the Grantee’s responsibilities or duties
as in effect immediately preceding the consummation of a Corporate Transaction,
Related Entity Disposition or Change in Control; or

 

(ii) a reduction in the Grantee’s base salary to a level below that in effect at
any time within six (6) months preceding the consummation of a Corporate
Transaction, Related Entity Disposition or Change in Control or at any time
thereafter (except to the extent such reduction is part of a comprehensive
reduction in salary applicable to employees of the Company generally).

 

(v) “Immediate Family” means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
Grantee’s household (other than a tenant or employee), a trust in which these
persons (or the Grantee) have more than fifty percent (50%) of the beneficial
interest, a foundation in which these persons (or the Grantee) control the
management of assets, and any other entity in which these persons (or the
Grantee) own more than fifty percent (50%) of the voting interests.

 

(w) “Non-Qualified Stock Option” means an Option not intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.

 

(x) “Officer” means a person who is an officer of the Company or a Related
Entity within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

 

(y) “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.

 

(z) “Related Entity” means any Parent or Subsidiary of the Company and any
business, corporation, partnership, limited liability company or other entity in
which the Company or a Parent or a Subsidiary of the Company holds a substantial
ownership interest, directly or indirectly.

 

(aa) “Related Entity Disposition” means the sale, distribution or other
disposition by the Company, a Parent or a Subsidiary of all or substantially all
of the interests of the Company, a Parent or a Subsidiary in any Related Entity
effected by a sale, merger or

 

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consolidation or other transaction involving that Related Entity or the sale of
all or substantially all of the assets of that Related Entity, other than any
Related Entity Disposition to the Company, a Parent or a Subsidiary.

 

(bb) “Replaced” means that pursuant to a Corporate Transaction or Related Entity
Disposition the Option is replaced with a comparable stock award or a cash
incentive program of the Company, the successor entity (if applicable) or Parent
of either of them which preserves the compensation element of such Option
existing at the time of the Corporate Transaction or Related Entity Disposition
and provides for subsequent payout in accordance with the same (or a more
favorable) vesting schedule applicable to such Option. The determination of the
comparability of the replacement stock-based award or cash incentive program
shall be made by the Administrator and its determination shall be final, binding
and conclusive.

 

(cc) “Share” means a share of the Common Stock.

 

(dd) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter
existing, as defined in Section 424(f) of the Code.

 

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