EXHIBIT 10.13

 

FLIR SYSTEMS, INC.

2002 STOCK INCENTIVE PLAN

(As Amended As Of April 21, 2004

and As Adjusted for Stock Splits of May 29, 2003 and February 2, 2005)

 

1.    Purposes of the Plan.    The purposes of this Stock Incentive Plan are to
attract, retain and reward individuals who can and do contribute to the
Company’s success by providing Employees and Consultants an opportunity to share
in the equity of the Company and to more closely align their interests with the
Company and its shareholders.

 

Options granted hereunder may be either “incentive stock options,” as defined in
Section 422 of the Internal Revenue Code of 1986, as amended, or “nonqualified
stock options,” at the discretion of the Board and as reflected in the terms of
the written option agreement. In addition, shares of the Company’s Common Stock
may be sold hereunder independent of any Option grant.

 

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

 

2.1 “Administrator”    shall mean the Board or any of its Committees as shall be
administering the Plan, in accordance with Section 4.1 of the Plan.

 

2.2 “Board”    shall mean the Board of Directors of the Company.

 

2.3 “Code”    shall mean the Internal Revenue Code of 1986, as amended.

 

2.4 “Committee”    shall mean a committee appointed by the Board in accordance
with Section 4.1 of the Plan.

 

2.5 “Common Stock”    shall mean the Common Stock of the Company.

 

2.6 “Company”    shall mean FLIR Systems, Inc., an Oregon corporation.

 

2.7 “Consultant”    shall mean any person who is engaged by the Company or any
Parent or Subsidiary to render consulting services and is compensated for such
consulting services and any Director of the Company whether compensated for such
services or not.

 

2.8 “Continuous Status as an Employee or Consultant”    shall mean the absence
of any interruption or termination of service as an Employee or Consultant.
Continuous Status as an Employee or Consultant shall not be considered
interrupted in the case of: (i) any sick leave, military leave, or any other
leave of absence approved by the Company; provided, however, that for purposes
of Incentive Stock Options, any such leave is for a period of not more than
ninety days or reemployment upon the expiration of such leave is guaranteed by
contract or statute, provided, further, that on the ninety-first day of such
leave (where re-employment is not guaranteed by contract or statute) the
Optionee’s Incentive Stock Option shall automatically convert to a Nonqualified
Stock Option; or (ii) transfers between locations of the Company or between the
Company, its Parent, its Subsidiaries or its successor.

 

2.9 “Director”    shall mean a member of the Board.

 

2.10 “Disability”    shall mean total and permanent disability as defined in
Section 22(e)(3) of the Code.

 

2.11 “Employee”    shall mean any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary. Neither the payment of a
director’s fee by the Company nor service as a Director shall be sufficient to
constitute “employment” by the Company.

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2.12    “Exchange Act”    shall mean the Securities Exchange Act of 1934, as
amended.

 

2.13    “Fair Market Value”    shall mean, as of any date, the value of Common
Stock determined as follows:

 

2.13.1    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 the Common Stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system on the date of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; provided, if the date of determination does
not fall on a day on which the Common Stock has traded on such securities
exchange or market system, the date on which the Fair Market Value shall be
established shall be the last day on which the Common Stock was so traded prior
to the date of determination, or such other appropriate day as shall be
determined by the Administrator, in its sole discretion;

 

2.13.2    If the Common Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock on the date
of determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; provided, if the date of determination does
not fall on a day on which the Common Stock has been so quoted, the date on
which the Fair Market Value shall be established shall be the last day on which
the Common Stock was so quoted prior to the date of determination, or such other
appropriate day as shall be determined by the Administrator, in its sole
discretion;

 

2.13.3    In the absence of an established market for the Common Stock, the Fair
Market Value shall be determined in good faith by the Administrator.

 

2.14 “Incentive Stock Option”    shall mean an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.

 

2.15 “Nonqualified Stock Option”    shall mean an Option not intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.

 

2.16 “Notice of Grant”    shall mean a written notice evidencing certain terms
and conditions of an individual Option grant. The Notice of Grant is part of the
Option Agreement.

 

2.17 “Officer”    shall mean a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

 

2.18 “Option”    shall mean a stock option granted pursuant to the Plan.

 

2.19 “Option Agreement”    shall mean a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.

 

2.20 “Optioned Stock”    shall mean the Common Stock subject to an Option.

 

2.21 “Optionee”    shall mean an Employee or Consultant who holds an Option.

 

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

 

2.23 “Plan”    shall mean this 2002 Stock Incentive Plan.

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2.24 “Rule 16b-3”    shall mean Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.

 

2.25 “Sale” or “Sold”     shall include, with respect to the sale of Shares
under the Plan, the sale of Shares for any form of consideration specified in
Section 8.2, as well as a grant of Shares for consideration in the form of past
or future services.

 

2.26 “Share”    shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.

 

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

 

3. Stock Subject to the Plan.

 

3.1    Subject to the provisions of Section 3.2 below and the provisions of
Section 11 of the Plan, the maximum aggregate number of Shares that may be
optioned and/or Sold under the Plan is 12,000,000 shares of Common Stock. The
Shares may be authorized, but unissued, or reacquired Common Stock.

 

3.2    If an Option should expire or become unexercisable for any reason, or is
otherwise terminated or forfeited, without having been exercised in full, the
unpurchased Shares which were subject thereto shall, unless the Plan shall have
been terminated, become available for future Option grants and/or Sales under
the Plan. If any Shares issued pursuant to a Sale or exercise of an Option shall
be reacquired, canceled or forfeited for any reason, such Shares shall become
available for future Option grants and/or Sales under the Plan, unless the Plan
shall have been terminated. If any reacquired, canceled or forfeited Shares were
originally issued upon exercise of an Incentive Stock Option, then once so
reacquired, canceled or forfeited, such Shares shall not be considered to have
been issued for purposes of applying the limitation set forth in Section 3.3
below. If the exercise price of any Option granted under the Plan is satisfied
by tendering shares of Common Stock to the Company (by either actual delivery or
by attestation), only the number of shares of Common Stock issued net of the
Shares of Common Stock tendered shall be deemed delivered for purposes of
determining the maximum number of Shares available for delivery under the Plan.

 

3.3    Notwithstanding any other provision of this Section 3, the maximum number
of Shares that may be issued upon the exercise of Incentive Stock Options shall
be 12,000,000.

 

4. Administration of the Plan.

 

4.1    Procedure.

 

4.1.1    Multiple Administrative Bodies.    If permitted by Rule 16b-3, the Plan
may be administered by different bodies with respect to Directors, Officers who
are not Directors, and Employees who are neither Directors nor Officers.

 

4.1.2    Administration With Respect to Directors and Officers Subject to
Section 16(b).    With respect to Option grants made to Employees who are also
Officers or Directors subject to Section 16(b) of the Exchange Act, the Plan
shall be administered by (A) the Board, if the Board may administer the Plan in
compliance with the rules governing a plan intended to qualify as a
discretionary plan under Rule 16b-3, or (B) a Committee designated by the Board
to administer the Plan, which Committee shall be constituted to comply with the
rules, if any, governing a plan intended to qualify as a discretionary plan
under Rule 16b-3. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time the
Board may increase the size of the Committee and appoint additional members,
remove members (with or without cause) and substitute new members, fill
vacancies

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(however caused), and remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted by the rules, if any,
governing a plan intended to qualify as a discretionary plan under Rule 16b-3.
With respect to persons subject to Section 16 of the Exchange Act, transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3. To the extent any provision of the Plan or action by the Administrator
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Administrator.

 

4.1.3    Administration With Respect to Other Persons.    With respect to Option
grants made to Employees or Consultants who are neither Directors nor Officers
of the Company, the Plan shall be administered by the Board or a Committee
designated by the Board, which Committee shall be constituted to satisfy the
legal requirements relating to the administration of stock option plans under
applicable corporate and securities laws and the Code. Once appointed, such
Committee shall serve in its designated capacity until otherwise directed by the
Board. The Board may increase the size of the Committee and appoint additional
members, remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
legal requirements relating to the administration of stock option plans under
state corporate and securities laws and the Code.

 

4.2    Powers of the Administrator.     Subject to the provisions of the Plan,
and in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:

 

4.2.1    to grant Incentive Stock Options in accordance with Section 422 of the
Code, or Nonqualified Stock Options;

 

4.2.2    to authorize Sales of Shares of Common Stock hereunder;

 

4.2.3    to determine, upon review of relevant information, the Fair Market
Value of the Common Stock;

 

4.2.4    to determine the exercise/purchase price per Share of Options to be
granted or Shares to be Sold, which exercise/purchase price shall be determined
in accordance with Section 8.1 of the Plan;

 

4.2.5    to determine the Employees or Consultants to whom, and the time or
times at which, Options shall be granted and the number of Shares to be
represented by each Option;

 

4.2.6    to determine the Employees or Consultants to whom, and the time or
times at which, Shares shall be Sold and the number of Shares to be Sold;

 

4.2.7    to interpret the Plan;

 

4.2.8    to prescribe, amend and rescind rules and regulations relating to the
Plan;

 

4.2.9    to determine the terms and provisions of each Option granted (which
need not be identical) and, with the consent of the holder thereof, modify or
amend each Option;

 

4.2.10    to determine the terms and provisions of each Sale of Shares (which
need not be identical) and, with the consent of the purchaser thereof, modify or
amend each Sale;

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4.2.11    to accelerate or defer (with the consent of the Optionee) the exercise
date of any Option;

 

4.2.12    to accelerate or defer (with the consent of the Optionee or purchaser
of Shares) the vesting restrictions applicable to Shares Sold under the Plan or
pursuant to Options granted under the Plan;

 

4.2.13    to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option or Sale of Shares
previously granted or authorized by the Administrator;

 

4.2.14    to determine the restrictions on transfer, vesting restrictions,
repurchase rights, or other restrictions applicable to Shares issued under the
Plan;

 

4.2.15    to effect, at any time and from time to time, with the consent of the
affected Optionees, the cancellation of any or all outstanding Options under the
Plan and to grant in substitution therefore new Options under the Plan covering
the same or different numbers of Shares, but having an Option price per Share
consistent with the provisions of Section 8 of this Plan as of the date of the
new Option grant;

 

4.2.16    to establish, on a case-by-case basis, different terms and conditions
pertaining to exercise or vesting rights upon termination of employment, whether
at the time of an Option grant or Sale of Shares, or thereafter;

 

4.2.17    to approve forms of agreement for use under the Plan;

 

4.2.18    to determine whether and under what circumstances an Option may be
settled in cash under subsection 9.6 instead of Common Stock; and

 

4.2.19    to make all other determinations deemed necessary or advisable for the
administration of the Plan.

 

4.3    Effect of Administrator’s Decision.    All decisions, determinations and
interpretations of the Administrator shall be final and binding on all Optionees
and any other holders of any Options granted under the Plan or Shares Sold under
the Plan.

 

5. Eligibility.

 

5.1    Persons Eligible.    Options may be granted and/or Shares Sold only to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option or Sold
Shares may, if he or she is otherwise eligible, be granted an additional Option
or Options or sold additional Shares.

 

5.2    ISO Limitation.    To the extent that the aggregate Fair Market Value of
Shares subject to an Optionee’s Incentive Stock Options granted by the Company,
any Parent or Subsidiary that become exercisable for the first time during any
calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options shall be treated as Nonqualified Stock
Options. For purposes of this Section 5.2, Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time of grant.

 

5.3    Section 5.2 Limitations.    Section 5.2 of the Plan shall apply only to
an Incentive Stock Option evidenced by an Option Agreement that sets forth the
intention of the Company and the Optionee that such Option shall qualify as an
Incentive Stock Option. Section 5.2 of the Plan shall not apply to any Option
evidenced by a Option Agreement which sets forth the intention of the Company
and the Optionee that such Option shall be a Nonqualified Stock Option.

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5.4    No Right to Continued Employment.    The Plan shall not confer upon any
Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company’s right to terminate his employment or consulting
relationship at any time, with or without cause.

 

5.5    Other Limitations.    The following limitations shall apply to grants of
Options to Employees:

 

5.5.1    No Employee shall be granted, in any fiscal year of the Company,
Options to purchase more than 1,200,000 Shares.

 

5.5.2    In connection with his or her initial employment, an Employee may be
granted Options to purchase up to an additional 800,000 Shares, which shall not
count against the limit set forth in subsection 5.5.1 above.

 

5.5.3    The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company’s capitalization as described in
Section 11.

 

5.5.4    If an Option is canceled in the same fiscal year of the Company in
which it was granted (other than in connection with a transaction described in
Section 11), the canceled Option shall be counted against the limits set forth
in subsections 5.5.1 and 5.5.2 above. For this purpose, if the exercise price of
an Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.

 

6.    Term of Plan.    The Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the shareholders of the Company
as described in Section 17 of the Plan. It shall continue in effect for a term
of ten (10) years, unless sooner terminated under Section 13 of the Plan.

 

7.    Term of Option.    The term of each Option shall be stated in the Notice
of Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant. However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant
thereof or such shorter term as may be provided in the Notice of Grant.

 

8.    Exercise/Purchase Price and Consideration.

 

8.1    Exercise/Purchase Price.    The per-Share exercise/purchase price for the
Shares to be issued pursuant to exercise of an Option or a Sale shall be such
price as is determined by the Administrator, but shall be subject to the
following:

 

8.1.1    In the case of an Incentive Stock Option

 

(1)    granted to an Employee who, at the time of the grant of such Incentive
Stock Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than one hundred ten percent (110%) of
the Fair Market Value per Share on the date of the grant.

 

(2)    granted to any other Employee, the per Share exercise price shall be no
less than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.

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8.1.2    In the case of a Nonqualified Stock Option or Sale, the per Share
exercise/purchase price shall be no less than one hundred percent (100%) of the
Fair Market Value per Share on the date of grant.

 

8.1.3    Any determination to establish an Option exercise price or effect a
Sale of Common Stock at less than Fair Market Value on the date of the Option
grant or authorization of Sale shall be accompanied by an express finding by the
Administrator specifying that the Option grant or Sale is in the best interest
of the Company, and specifying both the Fair Market Value and the Option
exercise price or Sale price of the Common Stock.

 

8.2    Consideration.    The consideration to be paid for the Shares to be
issued upon exercise of an Option or pursuant to a Sale, including the method of
payment, shall be determined by the Administrator. In the case of an Incentive
Stock Option, the Administrator shall determine the acceptable form of
consideration at the time of grant. Such consideration may consist of:

 

8.2.1    cash;

 

8.2.2    check;

 

8.2.3    promissory note;

 

8.2.4    transfer to the Company of Shares which

 

(1)    in the case of Shares acquired upon exercise of an Option, have been
owned by the Optionee for more than six months on the date of surrender, and

 

(2)    have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares to be acquired;

 

8.2.5    if and so long as the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, delivery of a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale or loan proceeds required to pay the exercise price;

 

8.2.6    such other consideration and method of payment for the issuance of
Shares to the extent permitted by legal requirements relating to the
administration of stock option plans and issuances of capital stock under
applicable corporate and securities laws and the Code; or

 

8.2.7    any combination of the foregoing methods of payment.

 

If the Fair Market Value of the number of whole Shares transferred or the number
of whole Shares surrendered is less than the total exercise price of the Option,
the shortfall must be made up in cash or by check. Notwithstanding the foregoing
provisions of this Section 8.2, the consideration for Shares to be issued
pursuant to a Sale may not include, in whole or in part, the consideration set
forth in subsection 8.2.5 above.

 

9.    Exercise of Option.

 

9.1    Procedure for Exercise; Rights as a Shareholder.    Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Administrator, including performance criteria with respect to
the Company and/or the Optionee, and as shall be permissible under the terms of
the Plan.

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An Option may not be exercised for a fraction of a Share.

 

An Option shall be deemed to be exercised when written notice of such exercise
has been given to the Company in accordance with the terms of the Option by the
person entitled to exercise the Option and full payment for the Shares with
respect to which the Option is exercised has been received by the Company. Full
payment may, as authorized by the Administrator, consist of any consideration
and method of payment allowable under the Option Agreement and Section 8.2 of
the Plan. Each Optionee who exercises an Option shall, upon notification of the
amount due (if any) and prior to or concurrent with delivery of the certificate
representing the Shares, pay to the Company amounts necessary to satisfy
applicable federal, state and local tax withholding requirements. An Optionee
must also provide a duly executed copy of any stock transfer agreement then in
effect and determined to be applicable by the Administrator. Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock represented by such
stock certificate, notwithstanding the exercise of the Option. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the stock certificate is issued, except as provided in Section 11 of
the Plan.

 

9.2    Termination of Employment or Consulting Relationship.    In the event
that an Optionee’s Continuous Status as an Employee or Consultant terminates
(other than upon the Optionee’s death or Disability), the Optionee may exercise
his or her Option, but only within such period of time as is determined by the
Administrator, and only to the extent that the Optionee was entitled to exercise
it at the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant). In the case of an
Incentive Stock Option, the Administrator shall determine such period of time
(in no event to exceed three (3) months from the date of termination) when the
Option is granted. If, at the date of termination, the Optionee 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
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.

 

9.3    Disability of Optionee.    In the event that an Optionee’s Continuous
Status as an Employee or Consultant terminates as a result of the Optionee’s
Disability, the Optionee may exercise his or her Option at any time within
twelve (12) months from the date of such termination, but only to the extent
that the Optionee was entitled to exercise it at the date of such termination
(but in no event later than the expiration of the term of such Option as set
forth in the Notice of Grant). If, at the date of termination, the Optionee 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 Optionee 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.

 

9.4    Death of Optionee.    In the event of the death of an Optionee, the
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 Notice of Grant), by the Optionee’s estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was 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 death, the Optionee’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 herein, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.

 

9.5    Rule 16b-3.    Options granted to persons subject to Section 16(b) of the
Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.

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9.6    Buyout Provisions.    The Administrator may at any time offer to buy out,
in whole or in part, for a payment in cash or Shares, an Option previously
granted, based on such terms and conditions as the Administrator shall establish
and communicate to the Optionee at the time that such offer is made.

 

10.    Nontransferability of Options.    Except as otherwise specifically
provided in the Option Agreement, an Option may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will, or by
the laws of descent and distribution, and may be exercised during the lifetime
of the Optionee only by the Optionee or, if incapacitated, by his or her legal
guardian or legal representative.

 

11.    Adjustments Upon Changes in Capitalization or Merger.

 

11.1    Changes in Capitalization.    Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or Sales made or which have been returned to the Plan upon cancellation
or expiration of an Option, as well as the price per share of Common Stock
covered by each such outstanding Option, 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, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued 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 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 thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.

 

11.2    Dissolution or Liquidation.    In the event of the proposed dissolution
or liquidation of the Company, each outstanding Option will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Administrator. The Administrator may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate as of
a date fixed by the Board and give each Optionee the right to exercise
Optionee’s Option as to all or any part of the Common Stock subject to the
Option, including Shares as to which the Option would not otherwise be
exercisable.

 

11.3    Merger or Asset Sale.    Except as otherwise provided in an Option
Agreement, in the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, each outstanding Option shall be assumed or an equivalent option
shall be substituted by such successor corporation or a Parent or Subsidiary of
such successor corporation, unless the Administrator determines, in the exercise
of its sole discretion and in lieu of such assumption or substitution, that each
Optionee shall have the right to exercise Optionee’s Option as to all or any
part of the Common Stock subject to the Option, including Shares as to which the
Option would not otherwise be exercisable. If the Administrator determines that
an Option shall be exercisable in lieu of assumption or substitution in the
event of a merger or sale of assets, the Administrator shall notify the Optionee
that the Option shall be so exercisable for a period of thirty (30) days from
the date of such notice or such shorter period as the Administrator may specify
in the notice, and the Option will terminate upon the expiration of such period.
For the purposes of this paragraph, the Option shall be considered assumed or
substituted for if, following the merger or sale of assets, the Option confers
the right to purchase, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in

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the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets was not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option, for each Share of Optioned Stock subject to the Option,
to be solely common stock of the successor corporation or its Parent
substantially equal in Fair Market Value to the per share consideration received
by holders of Common Stock in the merger or sale of assets. The determination of
such substantial equality of value of consideration shall be made by the
Administrator and its determination shall be conclusive and binding.

 

12.    Time of Granting Options.    The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option. Notice of the determination shall be given to each
Optionee within a reasonable time after the date of such grant.

 

13.    Amendment and Termination of the Plan.

 

13.1    Amendment and Termination.    The Board may amend or terminate the Plan
from time to time in such respects as the Board may deem advisable.

 

13.2    Shareholder Approval.    The Company shall obtain shareholder approval
of any Plan amendment to the extent necessary and desirable to comply with Rule
16b-3 or with Section 422 of the Code (or any successor rule or statute or other
applicable law, rule or regulation, including the requirements of any exchange
or quotation system on which the Common Stock is listed or quoted). Such
shareholder approval, if required, shall be obtained in such a manner and to
such a degree as is required by the applicable law, rule or regulation.

 

13.3    Effect of Amendment or Termination.    Any such amendment or termination
of the Plan shall not affect Options already granted, and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company.

 

14.    Conditions Upon Issuance of Shares.    Shares shall not be issued
pursuant to the exercise of an Option or a Sale unless the exercise of such
Option or consummation of the Sale and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, applicable state
securities laws, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange (including NASDAQ) upon
which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.

 

15.    Reservation of Shares.    The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

 

16.    Liability of Company.

 

16.1    Inability to Obtain Authority.    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 issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

 

As a condition to the exercise of an Option or a Sale, the Company may require
the person exercising such Option or to whom Shares are being Sold to represent
and warrant at the time of any such exercise or Sale that the Shares are being
purchased 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 by any of the aforementioned relevant provisions of
law.

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16.2    Grants Exceeding Allotted Shares.    If the Optioned Stock covered by an
Option exceeds, as of the date of grant, the number of Shares which may be
issued under the Plan without additional shareholder approval, such Option shall
be void with respect to such excess Optioned Stock, unless shareholder approval
of an amendment sufficiently increasing the number of Shares subject to the Plan
is timely obtained in accordance with Section 13 of the Plan.

 

17.    Shareholder Approval.    Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.