Exhibit 10.12

 

 

2007 STOCK INCENTIVE PLAN

OF
 

SILVERSTAR HOLDINGS, LTD.

1.     Purposes of the Plan. This stock incentive plan (the "Plan") is intended
to provide an incentive to employees (including directors and officers who are
employees), consultants and non-employee directors of Silverstar Holdings, Ltd.
(the "Company"), a Bermuda corporation, or any Parent or Subsidiaries (as such
terms are defined in Paragraph 17), and to offer an additional inducement in
obtaining the services of such individuals. The Plan provides for the grant of
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), stock options which do
not qualify as ISOs ("NQSOs"), and shares of stock of the Company that may be
subject to contingencies or restrictions ("Stock Awards"; collectively, with an
ISO or NQSO, each an “Award”). The Company makes no representation or warranty,
express or implied, as to the qualification of any option as an "incentive stock
option" or any other treatment of an Award under the Code.

2.     Stock Subject to the Plan. Subject to the provisions of Paragraph 10, the
aggregate number of shares of the Company's common stock, par value $.01 per
share ("Common Stock"), for which Awards may be granted under the Plan shall not
exceed 2,000,000 shares. ISOs may be granted up to the full number of shares
available under the Plan. Such shares of Common Stock may, in the discretion of
the Board of Directors of the Company (the "Board of Directors"), consist either
in whole or in part of authorized but unissued shares of Common Stock or shares
of Common Stock held in the treasury of the Company. Subject to the termination
provisions of Paragraph 11, any shares of Common Stock subject to an Award which
for any reason expires or is forfeited, canceled, or terminated unexercised or
which ceases for any reason to be exercisable, shall again become available for
the granting of Awards under the Plan. The Company shall at all times during the
term of the Plan reserve and keep available such number of shares of Common
Stock as will be sufficient to satisfy the requirements of the Plan. As further
set forth in Section 9 hereof, all Awards shall be granted by one or more
written instruments (the "Contract") which shall set forth all terms and
conditions of the Award.

3.      Administration of the Plan. The Plan will be administered by the Board
of Directors, or by a committee (the “Committee”) consisting of two or more
directors appointed by the Board of Directors. Those administering the Plan
shall be referred to herein as the "Administrators." Notwithstanding the
foregoing, if the Company is or becomes a corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to the extent
necessary to preserve any deduction under Section 162(m) of the Code or to
comply with Rule 16b-3 promulgated under the Exchange Act, or any successor rule
("Rule 16b-3"), any Committee appointed by the Board of Directors to administer
the Plan shall be comprised of two or more directors each of whom shall be a
"non-employee director," within the meaning of Rule 16b-3, and an "outside
director," within the meaning of Treasury Regulation Section 1.162-27(e)(3), and
the delegation of powers to the Committee shall be consistent with applicable
laws and regulations (including, without limitation, applicable state law and
Rule 16b-3).  Unless

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otherwise provided in the By -Laws of the Company, by resolution of the Board of
Directors or applicable law, a majority of the members of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, and any acts approved in writing by all
members without a meeting, shall be the acts of the Committee.

Subject to the express provisions of the Plan, the Administrators shall have the
authority, in their sole discretion, to determine each person who shall be
granted an Award; the type of Award to be granted, the times when an Award shall
be granted; whether an option granted to an Award Holder (as such term is
defined in Paragraph 4) shall be an ISO or a NQSO; the number of shares of
Common Stock to be subject to each Award; the term of each Award; the date each
Award shall become exercisable; whether an Award shall be exercisable in whole
or in installments, and, if in installments, the number of shares of Common
Stock to be subject to each installment; whether the installments shall be
cumulative; the date each installment shall become exercisable and the term of
each installment; whether to accelerate the date of exercise of any Award or
installment thereof in the event of the death of the Award Holder or upon other
conditions to be specified by the Administrators in the applicable Contract or
subsequent thereto; whether shares of Common Stock may be issued upon the
exercise of an Award as partly paid, and, if so, the dates when future
installments of the exercise price shall become due and the amounts of such
installments; the exercise price or other amount to be paid in connection with
the exercise of an Award; the form of payment of the exercise price; subject to
Section 7 of the Plan, the fair market value of a share of Common Stock; the
restrictions, if any, imposed with respect to an Award and whether and under
what conditions to waive any such restrictions; whether and under what
conditions to restrict the sale or other disposition of the shares of Common
Stock acquired upon the grant or exercise of an Award and, if so, whether and
under what conditions to waive any such restriction; whether and under what
conditions to subject the grant or exercise of all or any portion of an Award,
the vesting of an Award, or the shares acquired pursuant to the exercise of an
Award, to the fulfillment of certain restrictions or contingencies all as
specified in the Contract, including without limitation restrictions or
contingencies relating to (a) entering into a covenant not to compete with the
Company, any Parent (if any) (as such term is defined in Paragraph 17) and any
of its Subsidiaries (as such term is defined in Paragraph 17), (b) financial
objectives for the Company, any of its Subsidiaries, a division, a product line
or other category and/or (c) the period of continued employment, consultancy or
directorship with the Company or any of its Subsidiaries, and to determine
whether such restrictions or contingencies have been met; the amount, if any,
necessary to satisfy the obligation of the Company, any of its Subsidiaries or
any Parent to withhold taxes or other amounts; whether an Award Holder has a
Disability (as such term is defined in Paragraph 17); with the consent of the
Award Holder, to cancel or modify an Award, provided, however, that the modified
provision is permitted to be included in an Award granted under the Plan on the
date of the modification; provided, further, however, that in the case of a
modification (within the meaning of Section 424(h) of the Code) of an ISO, such
option as modified would be permitted to be granted on the date of such
modification under the terms of the Plan; to construe the respective Contracts
and the Plan; to prescribe, amend and rescind rules and regulations relating to
the Plan; to approve any provision of the Plan or any Award granted under the
Plan or any amendment to either which, under Rule 16b-3 or Section 162(m) of the
Code, requires the approval of the Board of Directors, a committee of
non-employee directors or the stockholders, in order to be exempt under Section
16(b) of the Exchange Act (unless otherwise specifically provided herein), or to
preserve any deduction under Section 162(m) of the Code or exemption

 

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under Section 409A of the Code; and to make all other determinations necessary
or advisable for administering the Plan. Any controversy or claim arising out of
or relating to the Plan, any Award granted under the Plan or any Contract shall
be determined unilaterally by the Administrators in their sole discretion. The
determinations of the Administrators on matters referred to in this Paragraph 3
shall be conclusive and binding on all parties. No Administrator or former
Administrator shall be liable for any action or determination made in good faith
with respect to the Plan or any Award granted hereunder.

4.      Eligibility. The Administrators may from time to time, consistent with
the purposes of the Plan, grant Awards to (a) employees (including officers and
directors who are employees) of the Company, any Parent or any of its
Subsidiaries, (b) consultants to the Company, any Parent, or any of its
Subsidiaries, and/or (c) to such directors of the Company who, at the time of
grant, are not common law employees of the Company, any Parent or of any of its
Subsidiaries, as the Administrators may determine in their sole discretion
(each, an “Award Holder”). Such Awards granted shall cover such number of shares
of Common Stock as the Administrators may determine in their sole discretion;
provided, however, that if on the date of grant of an Award, any class of common
stock of the Company (including without limitation the Common Stock) is required
to be registered under Section 12 of the Exchange Act, the maximum number of
shares subject to an Award that may be granted to any Award Holder during any
calendar year under the Plan shall be 210,000 shares (the "Section 162(m)
Maximum"); provided, further, however, that the aggregate market value
(determined at the time the option is granted) of the shares of Common Stock for
which any eligible employee may be granted ISOs under the Plan or any other plan
of the Company, or of a Parent or a Subsidiary of the Company, which are
exercisable for the first time by such employee during any calendar year shall
not exceed $100,000. The $100,000 ISO limitation amount shall be applied by
taking ISOs into account in the order in which they were granted. Any option (or
portion thereof) granted in excess of such ISO limitation amount shall be
treated as a NQSO to the extent of such excess number of shares.

5.      Options.

(a)      Grant. The Administrators may from time to time, in their sole
discretion, consistent with the purposes of the Plan, grant options to one or
more Award Holders.

(b)      Exercise Price. The exercise price of the shares of Common Stock under
each option shall be determined by the Administrators in their sole discretion;
provided, however, that the exercise price of an ISO, or of any Award intended
to satisfy the performance-based compensation exemption to the deduction
limitation under Section 162(m) of the Code or the exemption to the requirements
of Section 409A of the Code, shall not be less than the fair market value of the
Common Stock subject to such option on the date of grant; and provided, further,
however, that if, at the time an ISO is granted, the Award Holder owns (or is
deemed to own under Section 424(d) of the Code) stock constituting more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, of any of its Subsidiaries or of a Parent, the exercise price of such
ISO shall not be less than one hundred ten percent (110%) of the fair market
value of the Common Stock subject to such ISO on the date of grant.

(c)      Term. Each option granted pursuant to the Plan shall be for such

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term as is established by the Administrators, in their sole discretion, at or
before the time such option is granted; provided, however, that the term of each
option granted pursuant to the Plan shall be for a period not exceeding ten (10)
years from the date of grant thereof, and provided further, that if, at the time
an ISO is granted, the Award Holder owns (or is deemed to own under Section
424(d) of the Code) stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company, of any of its
Subsidiaries, or of a Parent, the term of the ISO shall be for a period not
exceeding five (5) years from the date of grant. Options shall be subject to
earlier termination as hereinafter provided.

(d)      Termination of Relationship. Except as may otherwise be expressly
provided in the applicable Contract, any Award Holder, whose employment or
consulting relationship with the Company, any Parent or any of its Subsidiaries,
has terminated for any reason other than the death or Disability of the Award
Holder, may exercise any option granted to the Award Holder as an employee or
consultant, to the extent exercisable on the date of such termination, at any
time within three (3) months after the date of termination, but not thereafter
and in no event after the date the option would otherwise have expired;
provided, however, that if such relationship is terminated for Cause (as defined
in Paragraph 17), such option shall terminate immediately.

For the purposes of the Plan, an employment relationship shall be deemed to
exist between an individual and the Company if, at the time of the
determination, the individual was an employee of the Company, its Parent or any
of its Subsidiaries for purposes of Section 422(a) of the Code. As a result, an
individual on military leave, sick leave or other bona fide leave of absence
shall continue to be considered an employee for purposes of the Plan during such
leave if the period of the leave does not exceed three months, or, if longer, so
long as the individual's right to re-employment with the Company, any of its
Subsidiaries, a Parent, is guaranteed either by statute or by contract. If the
period of leave exceeds three months and the individual's right to re-employment
is not guaranteed by statute or by contract, the employment shall be deemed to
have terminated on the first day after the end of such three-month period.

Except as may otherwise be expressly provided in the applicable Contract, an
Award Holder whose directorship with the Company has terminated for any reason
other than the Award Holder’s death or Disability, may exercise the options
granted to the Award Holder as a director who was not an employee of or
consultant to the Company, any Parent or any of its Subsidiaries, to the extent
exercisable on the date of such termination, at any time within three (3) months
after the date of termination, but not thereafter and in no event after the date
the option would otherwise have expired; provided, however, that if the Award
Holder’s directorship is terminated for Cause, such option shall terminate
immediately.

Except as may otherwise be expressly provided in the applicable Contract,
options granted under this Plan to a director, officer, employee, consultant or
advisor shall not be affected by any change in the status of the Award Holder so
long as such Award Holder continues to be a director of the Company, or an
officer or employee of, or a consultant or advisor to, the Company or any of its
Subsidiaries or a Parent (regardless of having changed from one to the other or
having been transferred from one entity to another), except that if an Award
Holder who was an employee becomes a consultant and does not exercise vested
options within the above specified three-month time period after the date of
termination of employment, such options will no longer have the status of ISOs.

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Nothing in the Plan or in any option granted under the Plan shall confer on any
person any right to continue in the employ of or as a consultant or advisor of
the Company, its Parent or any of its Subsidiaries, or as a director of the
Company, or interfere in any way with any right of the Company, any Parent or
any of its Subsidiaries to terminate such relationship at any time for any
reason whatsoever without liability to the Company, any Parent or any of its
Subsidiaries.

     (e)     Death or Disability of an Award Holder. Except as may otherwise be
expressly provided in the applicable Contract, if an Award Holder dies (a) while
the Award Holder is employed by, or is a consultant to, the Company, its Parent,
or any of its Subsidiaries, (b) within three (3) months after the termination of
the Award Holder's employment or consulting relationship with the Company, its
Parent, and any its Subsidiaries (unless such termination was for Cause) or (c)
within one (1) year following the termination of such employment or consulting
relationship by reason of the Award Holder's Disability, the options granted to
the Award Holder as an employee of, or consultant to, the Company or any Parent
or any of its Subsidiaries, may be exercised, to the extent exercisable on the
date of the Award Holder's death, by the Award Holder's Legal Representative (as
such term is defined in Paragraph 17), at any time within one (1) year after
death, but not thereafter and in no event after the date the option would
otherwise have expired. Except as may otherwise be expressly provided in the
applicable Contract, any Award Holder whose employment or consulting
relationship with the Company, its Parent, and any of its Subsidiaries has
terminated by reason of the Award Holder's Disability may exercise such options,
to the extent exercisable upon the effective date of such termination, at any
time within one (1) year after such date, but not thereafter and in no event
after the date the option would otherwise have expired.

Except as may otherwise be expressly provided in the applicable Contract, if an
Award Holder dies (a) while the Award Holder is a director of the Company, (b)
within three (3) months after the termination of the Award Holder's directorship
with the Company (unless such termination was for Cause) or (c) within one (1)
year after the termination of the Award Holder's directorship by reason of the
Award Holder's Disability, the options granted to the Award Holder as a director
who was not an employee of or consultant to the Company, its Parent, or any of
its Subsidiaries, may be exercised, to the extent exercisable on the date of the
Award Holder's death, by the Award Holder's Legal Representative at any time
within one (1) year after death, but not thereafter and in no event after the
date the option would otherwise have expired. Except as may otherwise be
expressly provided in the applicable Contract, an Award Holder whose
directorship with the Company has terminated by reason of Disability, may
exercise such options, to the extent exercisable on the effective date of such
termination, at any time within one (1) year after such date, but not thereafter
and in no event after the date the option would otherwise have expired.

6.      Stock Awards. The Administrators, in their sole discretion, may from
time to time, consistent with the purposes of the Plan, grant shares of Common
Stock to persons eligible for such grant under Paragraph 4. The grant may be for
no consideration (except the minimum required by Bermuda law), or may require
the Award Holder to pay such price per share therefor, if any, as the
Administrators may determine, in their sole discretion. Payment for

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any shares so granted may be made in such manner (including for services),
consistent with Bermuda law, as the Administrators may determine. Such shares
may be subject to such contingencies and restrictions as the Administrators may
determine, as set forth in the Contract, including the right to repurchase such
shares upon specified events determined by the Administrators as set forth in
the Contract, or events of forfeiture as determined by the Administrators as set
forth in the Contract. Such rights of repurchase or forfeiture may be based on
such factors as determined by the Administrators, including but not limited to
factors relating to the tenure of the employment or consulting relationship
between the Award Holder and the Company, performance criteria related to the
Award Holder or the Company, and whether the relationship between the Award
Holder and the Company has terminated with or without Cause or with or without
the Company's consent. Upon the issuance of the stock certificate for a Stock
Award, or in the case of uncertificated shares, the entry on the books of the
Company’s transfer agent representing such shares, notwithstanding any
contingencies or restrictions to which the shares are subject, the Award Holder
shall be considered to be the record owner of the shares, and subject to the
contingencies and restrictions set forth in the Award Agreement, shall have all
rights of a shareholder of record with respect to such shares, including the
right to vote and to receive distributions. The shares shall vest in the Award
Holder when all of the vesting restrictions and contingencies lapse, including
the lapse of any rights of repurchase or forfeiture as provided in the Contract.
Until such time, the Administrators may require that such shares be held by the
Company, together with a stock power duly endorsed in blank by the Award Holder.

7.      Rules of Operation.

(a)      Fair Market Value. The fair market value of a share of Common Stock on
any day shall be (i) if the principal market for the Common Stock is a national
securities exchange, the closing prices per share of the Common Stock on such
day as reported by such exchange or on a consolidated tape reflecting
transactions on such exchange or the first preceding day on which closing prices
were reported, (ii) if the principal market for the Common Stock is not a
national securities exchange and the Common Stock is quoted on the Nasdaq Stock
Market ("Nasdaq"), and (A) if actual sales price information is available with
respect to the Common Stock, the closing sales price per share of the Common
Stock on such day on Nasdaq or on the first preceding day on which sales price
information is available, or (B) if such information is not available, the
closing bid and the asked prices per share for the Common Stock on such day on
Nasdaq or the first preceding day on which sales price information is available,
or (iii) if the principal market for the Common Stock is not a national
securities exchange and the Common Stock is not quoted on Nasdaq, the closing
bid and asked prices per share for the Common Stock on such day or the first
preceding day as reported on the OTC Bulletin Board Service or by National
Quotation Bureau, Incorporated or a comparable service; provided, however, that
if clauses (i), (ii) and (iii) of this Paragraph 7(a) are all inapplicable
because the Company's Common Stock is not publicly traded, or if no trades have
been made or no quotes are available, the fair market value of a share of Common
Stock shall be determined by the Administrators by any method consistent with
any applicable regulations adopted by the Treasury Department relating to ISOs
and that is a reasonable valuation method for purposes of Section 409A of the
Code.

(b)      Exercise. An Award (or any installment thereof), to the extent then
exercisable, shall be exercised by giving written notice to the Company at its
principal

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xxx office identifying which Award is being exercised, specifying the number of
shares of Common Stock as to which such Award is being exercised and accompanied
by payment in full of the aggregate exercise price therefor (or the amount due
on exercise if the applicable Contract permits installment payments) and any
applicable withholding under Section 13 (i) in cash and/or by certified check,
(ii) with the authorization of the Administrators, with previously acquired
shares of Common Stock having an aggregate fair market value, on the date of
exercise, equal to the aggregate exercise price of all Awards being exercised,
(iii) with the authorization of the Administrators and to the extent not
prohibited under the Sarbanes-Oxley Act of 2002, by delivering a full or limited
recourse, interest bearing promissory note payable in one or more installments
and secured by the shares of Common Stock for which the Award is exercised, for
any amount of the purchase price in excess of the minimum required under Bermuda
law to be paid upon issuance, or (iv) some combination thereof; provided,
however, that in no case may shares be tendered if such tender would require the
Company to incur a charge against its earnings for financial accounting
purposes. The Company shall not be required to issue any shares of Common Stock
pursuant to the exercise of any Award until all required payments with respect
thereto, including payments for any required withholding amounts, have been
made.

The Administrators may, in their sole discretion, permit payment of the exercise
price of an Award by the Award Holder’s delivery of a properly executed notice,
together with a copy of the Award Holder's irrevocable instructions to a broker
acceptable to the Administrators to deliver promptly to the Company the amount
of sale or loan proceeds sufficient to pay such exercise price. In connection
therewith, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.

In no case may a fraction of a share of Common Stock be purchased or issued
under the Plan.

 

(c)      Stockholder Rights. An Award Holder shall not have the rights of a
stockholder with respect to such shares of Common Stock to be received upon the
exercise or grant of an Award until the date of issuance of a stock certificate
to the Award Holder for such shares or, in the case of uncertificated shares,
until the date an entry is made on the books of the Company's transfer agent
representing such shares; provided, however, that until such stock certificate
is issued or until such book entry is made, any Award Holder using previously-
acquired shares of Common Stock in payment of an option exercise price shall
continue to have the rights of a stockholder with respect to such previously -
acquired shares.

8.      Compliance with Securities Laws It is a condition to the receipt or
exercise of any Award that either (a) a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of Common Stock to be issued upon such grant or exercise shall be
effective and current at the time of such grant or exercise, or (b) there is an
exemption from registration under the Securities Act for the issuance of the
shares of Common Stock upon such grant or exercise. Nothing herein shall be
construed as requiring the Company to register shares subject to any Award under
the Securities Act or to keep any Registration Statement effective or current.

The Administrators may require, in their sole discretion, as a condition to the
grant or exercise of an Award, that the Award Holder execute and deliver to the
Company the Award Holder's representations and warranties, in form, substance
and scope satisfactory to the

 

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Administrators, which the Administrators determine is necessary or convenient to
facilitate the perfection of an exemption from the registration requirements of
the Securities Act, applicable state securities laws or other legal
requirements, including without limitation, that (a) the shares of Common Stock
to be issued upon the receipt or exercise of an Award are being acquired by the
Award Holder for the Award Holder's own account, for investment only and not
with a view to the resale or distribution thereof, and (b) any subsequent resale
or distribution of shares of Common Stock by such Award Holder will only be made
pursuant to (i) a Registration Statement under the Securities Act which is
effective and current with respect to the shares of Common Stock being sold, or
(ii) a specific exemption from the registration requirements of the Securities
Act, but in claiming such exemption, the Award Holder, prior to any offer of
sale or sale of such shares of Common Stock, shall provide the Company with a
favorable written opinion of counsel satisfactory to the Company, in form,
substance and scope satisfactory to the Company, as to the applicability of such
exemption to the proposed sale or distribution.

In addition, if at any time the Administrators shall determine that the listing
or qualification of the shares of Common Stock subject to any Award on any
securities exchange, Nasdaq or under any applicable law, or that the consent or
approval of any governmental agency or regulatory body, is necessary or
desirable as a condition to, or in connection with, the granting of an Award or
the issuance of shares of Common Stock upon exercise of an Award, such Award may
not be granted or exercised in whole or in part, as the case may be, unless such
listing, qualification, consent or approval has been effected or obtained free
of any conditions unacceptable to the Administrators.

9.      Award Contracts. Each Award shall be evidenced by an appropriate
Contract, which shall be duly executed by the Company and the Award Holder. Such
Contract shall contain such terms, provisions and conditions not inconsistent
herewith as may be determined by the Administrators in their sole discretion.
The terms of Awards and Contracts issued under the Plan need not be identical.

10.      Adjustments upon Changes in Common Stock. Notwithstanding any other
provision of the Plan, and except as set forth below in the event of a Change in
Control, in the event of a stock dividend, recapitalization, merger,
consolidation, spin-off, stock-split, combination or exchange of shares or the
like which results in a change in the number or kind of shares of Common Stock
which are outstanding immediately prior to such event, the aggregate number and
kind of shares subject to the Plan, the aggregate number and kind of shares
subject to each outstanding Award, the exercise price of each Award, and the
maximum number of shares subject to each Award that may be granted to any
employee in any calendar year, and the Section 162(m) Maximum, shall be
appropriately adjusted by the Board of Directors, whose determination shall be
conclusive and binding on all parties. Such adjustment may provide for the
elimination of fractional shares that might otherwise be subject to options
without payment therefor. Notwithstanding the foregoing, no adjustment shall be
made pursuant to this Paragraph 10 if such adjustment (a) would cause the Plan
to fail to comply with Section 422 of the Code or with Rule 16b-3 of the
Exchange Act (if applicable to such Award), and (b) would be considered as the
adoption of a new plan requiring stockholder approval or would cause any Award
to lose its exemption from Section 409A of the Code. The conversion of one or
more outstanding shares of preferred stock that the Company may issue from time
to time into Common Stock shall not in and of itself require any adjustment
under this Paragraph 10.

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Except as may otherwise be expressly provided in an applicable Contract, in the
event of a Change in Control (as defined in Paragraph 17) outstanding options
shall vest in full at such date, with respect to each Award Holder who is then
an employee or consultant of the Company, any Parent or any of its Subsidiaries,
or a director of the Company, so that each such Option shall, immediately prior
to the effective date of the Change in Control, become fully exercisable for all
of the shares of Common Stock at the time subject to that Option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock
and all outstanding options (whether or not vesting has been so accelerated)
shall otherwise terminate as of the effective date of the Change in Control;
provided, however, that the Award Holder shall be given notice of the Change in
Control not less than five (5) days in advance so he will be given an
opportunity to exercise any options prior to the Change in Control (to the
extent then exercisable), which exercise may be conditioned upon consummation of
such Change in Control. However, except as may be expressly provided in an
applicable Contract, the shares subject to an outstanding Option shall not vest
on such an accelerated basis, and such Option shall not terminate, if and to the
extent that: (a) such Option is assumed (i.e., appropriate provision for any
outstanding options is made by substitution on an equitable basis of appropriate
stock of the Company or of the successor corporation which will be issuable in
respect to one share of Common Stock of the Company) by the successor
corporation (or parent thereof) in the Change in Control and the Company's
repurchase rights, if any, are concurrently assigned to such successor
corporation (or parent thereof), or if the Change in Control is of the type
specified in Paragraph 17(c)(i)(C) the Company expressly agrees to allow the
option to continue or (b) such Option is to be replaced with a cash incentive
program of the successor corporation which preserves the spread existing on the
unvested Option shares at the time of the Change in Control and provides for
subsequent payout in accordance with the same vesting schedule applicable to
those unvested Option shares, or (c) the acceleration of such Option is subject
to other limitations imposed by the Administrators at the time of the Award
grant. Except as may otherwise be expressly provided in an applicable Contract,
all outstanding repurchase rights under a Contract (for shares acquired pursuant
to the exercise of an Option or shares acquired pursuant to a Stock Award), with
respect to each Award Holder who is then an employee or consultant of the
Company, any Parent or any of its Subsidiaries, or a director of the Company,
shall also terminate automatically, and the shares of Common Stock subject to
those terminated rights shall immediately vest in full, in the event of a Change
in Control, and any other Stock Awards for which outstanding purchase rights
have not then terminated pursuant to vesting of the shares of Common Stock in
the event of the Change in Control shall be terminated, without the vesting of
the shares of Common Stock covered thereby and the applicable repurchase rights
exercised as of the effective date of the Change in Control, except to the
extent that (x) those repurchase rights are assigned to the successor
corporation (or Parent thereof) in connection with such transaction or, if the
Change in Control is of the type specified in Paragraph 17(c)(i)(C) the Company
expressly agrees to provide for the continuation of such repurchase rights or
(y) such accelerated vesting is precluded by other limitations imposed by the
Administrators at the time the Award is granted.

The Administrators shall have the discretionary authority, exercisable at the
time the unvested Award shares are issued or any time while the repurchase
rights with respect to those shares remain outstanding, to provide that those
rights shall automatically terminate on an accelerated basis, and the shares
subject to those terminated rights shall immediately vest, in the event that the
Award Holder's employment, consultancy or directorship should subsequently be

 

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terminated by the Company or the successor without Cause within a designated
period (not to exceed eighteen (18) months) following the effective date of any
Change in Control in which those repurchase rights are assigned to the successor
corporation (or parent thereof).

11.      Amendments and Termination of the Plan. The Plan was adopted by the
Board of Directors on June 27, 2007. No Award may be granted under the Plan
after June 27, 2017. The Board of Directors, without further approval of the
Company's stockholders, may at any time suspend or terminate the Plan, in whole
or in part, or amend it from time to time in such respects as it may deem
advisable, including without limitation, in order that ISOs granted hereunder
meet the requirements for "incentive stock options" under the Code, or to comply
with the provisions of Rule 16b-3 or Sections 162(m) or 409A of the Code or any
change in applicable laws or regulations, ruling or interpretation of any
governmental agency or regulatory body; provided, however, that no amendment
shall be effective, without the requisite prior or subsequent stockholder
approval, which would (a) except as contemplated in Paragraph 10, increase the
maximum number of shares of Common Stock for which any Awards may be granted
under the Plan or change the Section 162 Maximum, (b) change the eligibility
requirements for individuals entitled to receive Awards hereunder, or (c) make
any change for which applicable law or any governmental agency or regulatory
body requires stockholder approval. No termination, suspension or amendment of
the Plan shall adversely affect the rights of an Award Holder under any Award
previously granted under the Plan without such Award Holder's consent. The power
of the Administrators to construe and administer any Award granted under the
Plan prior to the termination or suspension of the Plan shall continue after
such termination or during such suspension.

12.      Non-Transferability. Except as may otherwise be expressly provided in
the applicable Contract, no option granted under the Plan shall be transferable
other than by will or the laws of descent and distribution, and Awards may be
exercised, during the lifetime of the Award Holder, only by the Award Holder or
the Award Holder's Legal Representatives. Except as may otherwise be expressly
provided in the applicable Contract, a Stock Award, to the extent not vested,
shall not be transferable otherwise than by will or the laws or descent and
distribution. Except to the extent provided above, Awards may not be assigned,
transferred, pledged, hypothecated or disposed of in any way (whether by
operation of law or otherwise) and shall not be subject to execution, attachment
or similar process, and any such attempted assignment, transfer, pledge,
hypothecation or disposition shall be null and void ab initio and of no force or
effect.

13.      Withholding Taxes. The Company, or its Parent or Subsidiary, as
applicable, may withhold (a) cash or (b) with the consent of the Administrators
(in the Contract or otherwise), shares of Common Stock to be issued under an
Award or a combination of cash and shares, having an aggregate fair market equal
to the amount which the Administrators determine is necessary to satisfy the
minimum obligation of the Company, a Subsidiary or Parent to withhold federal,
state and local income taxes or other amounts incurred by reason of the grant,
vesting, exercise or disposition of an option or the disposition of the
underlying shares of Common Stock. Alternatively, the Company may require the
Award Holder to pay to the Company such amount, in cash, promptly upon demand.

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14.      Legends; Payment of Expenses; Share Escrow. The Company may endorse
such legend or legends upon the certificates for shares of Common Stock issued
upon the grant or exercise of an Award and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares as it determines,
in its sole discretion, to be necessary or appropriate to (a) prevent a
violation of, or to perfect an exemption from, the registration requirements of
the Securities Act, applicable state securities laws or other legal
requirements, (b) implement the provisions of the Plan or any agreement between
the Company and the Award Holder with respect to such shares of Common Stock, or
(c) permit the Company to determine the occurrence of a "disqualifying
disposition," as described in Section 421(b) of the Code, of the shares of
Common Stock transferred upon the exercise of an ISO granted under the Plan.

The Company shall pay all issuance taxes with respect to the issuance of shares
of Common Stock upon grant or exercise of an Award, as well as all fees and
expenses incurred by the Company in connection with such issuance.

Shares with respect to Stock Awards may, in the Administrator's discretion, be
held in escrow by the Company until the Award Holder's interest in such shares
vests.

15.      Use of Proceeds. The cash proceeds to be received upon the grant or
exercise of an Award shall be added to the general funds of the Company and used
for such corporate purposes as the Board of Directors may determine, in its sole
discretion.

16.      Substitutions and Assumptions of Awards of Certain Constituent
Corporations. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the stockholders, substitute new
Awards for prior Awards of a Constituent Corporation (as such term is defined in
Paragraph 17) or assume the prior options or restricted stock of such
Constituent Corporation

17.      Definitions.

(a)     " Cause," in connection with the termination of an Award Holder, shall
mean (i) "cause," as such term (or any similar term, such as "with cause") is
defined in any employment, consulting or other applicable agreement for services
between the Company and such Award Holder, or (ii) in the absence of such an
agreement, "cause" as such term is defined in the Contract executed by the
Company and such Award Holder, or (iii) in the absence of both of the foregoing,
(A) conviction of such Award Holder for any felony or the entering by him of a
plea of guilty or nolo contendere with respect thereto, (B) willful and repeated
failures in any material respect of such Award Holder to perform any of the
Award Holder's reasonable duties and responsibilities assigned to him and the
failure of the Award Holder to cure such failures hereunder within thirty (30)
days after written notice thereof from the Company, (C) the commission of any
act or failure to act by such Award Holder that involves moral turpitude,
dishonesty, theft, destruction of property, fraud, embezzlement or unethical
business conduct, or that is otherwise injurious to the Company, any of its
Subsidiaries or any Parent or any other affiliate of the Company (or its or
their respective employees), whether financially or otherwise, or (D) any
material violation by such Award Holder of the requirements of such Contract,
any other contract or agreement between the Company and such Award Holder or
this Plan (as in effect from time to time); in each case, with respect to
subsections (A) through (D), as determined by the Board of Directors.

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(b)     " Constituent Corporation" shall mean any corporation which engages with
the Company, its Parent or any Subsidiary in a transaction to which Section
424(a) of the Code applies (or would apply if the option assumed or substituted
were an ISO), or any Parent or any Subsidiary of such corporation.

(c)     " Change in Control" shall mean

(i)     any of the following transactions effected with a Person not an
Affiliate of the Company immediately prior to the transaction:

(A) a merger or consolidation of the Company with or into another entity; (B)
the exchange or sale of all or a portion of the outstanding shares of the
Company for securities of another entity, or other consideration provided by
such entity; or (C) the issuance of equity securities of the Company or
securities convertible into equity securities, in exchange for securities of
another entity or other consideration provided by such entity; and in the case
of either (A), (B) or (C) the Company's shareholders prior to the transaction,
do not possess, immediately after such transaction, more than fifty percent
(50%) (not including the holdings of the other entity or Affiliate thereof, if
such person was a shareholder of the Company prior to the transaction) of the
voting power of any of the following: (X) the Company; (Y) such other entity; or
(Z) any direct or indirect Parent of such other entity; provided, however, that
the above percentage will be seventy percent (70%) (in lieu of fifty percent
(50%)) if the Company is at the time of the event described in this subparagraph
(c)(i) a reporting company under the Securities Exchange Act of 1934;

 

(ii)     a sale of all or substantially all of the Company's assets to a third
party not an Affiliate of the Company immediately prior to such transaction;
excluding, however, a sale of assets pursuant to a reorganization, merger,
consolidation or other transaction involving the Company that will not itself
constitute a Change in Control pursuant to subsections (c)(i) or (iii) of this
definition. 

    

(iii)     any person or entity (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any Affiliate of the Company), is or becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing 30% or more of the combined voting power of the
Company’s then outstanding securities; excluding, however, any person or entity
acquiring such beneficial ownership (A) directly from the Company or from an
Affiliate of the company who acquired such beneficial ownership directly from
the Company (including any acquisition resulting from exercise of a conversion
or exchange privilege in respect of outstanding convertible or exchangeable
securities acquired from the Company or such an Affiliate), and (B) pursuant to
a reorganization, merger or consolidation involving the Company which does not
itself constitute a Change in Control pursuant to subsection (c)(i) of this
definition; provided, however, that the above percentage will be fifty percent
(50%) (in lieu of thirty percent (30%)) if the Company is at the time of an
event described in this subparagraph (c)(iii) a reporting company under the
Securities Exchange Act of 1934;

(iv)     during any period of not more than 12 months (not including any period
prior to the date of this Agreement), individuals who at the beginning of such
period constitute the Board cease for any reason to constitute at least a
majority thereof,

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unless the election, or the nomination for election, by shareholders of the
Company of each new director was approved or ratified by a vote of at least a
majority of the directors then still in office who were directors at the
beginning of the period or who were new directors approved by such a vote;
provided, however, that this subparagraph (c)(iv) shall be inapplicable if the
Company is not at the time of an event described in this subparagraph (c)(iv), a
reporting company under the Securities Exchange Act of 1934; or

(v)     the shareholders of the Company approve a plan of complete liquidation
or dissolution of the Company; excluding, however, a complete liquidation or
dissolution of the Company pursuant to a reorganization, merger or consolidation
involving the Company which does not itself constitute a Change in Control
pursuant to subsection (c)(i) of this definition.

                         For the purposes of this definition, the term
“Affiliate ” of any person or entity (“Person”) shall mean any other person or
entity which controls, is controlled by, or is under common control with such
Person. As used herein, “control” shall mean the possession, directly or
indirectly, of more than fifty percent (50%) of the total value or voting power
of the other person or entity.

(d)     " Disability" shall mean a permanent and total disability within the
meaning of Section 22(e)(3) of the Code.

(e)     " Legal Representative" shall mean the executor, administrator or other
person who at the time is entitled by law to exercise the rights of a deceased
or incapacitated Award Holder with respect to an Award granted under the Plan.

(f)     " Parent" shall mean a "parent corporation" within the meaning of
Section 424(e) of the Code.

(g)     "Subsidiary " shall mean a "subsidiary corporation" within the meaning
of Section 424(f) of the Code.

18.      Section 409A. Notwithstanding anything to the contrary contained
herein, none of the awards issuable under this Plan are intended to be deferred
compensation pursuant to Section 409A of the Code. Towards that end, all options
under the Plan shall contain such terms as will qualify the options for the
exemption from Section 409A of the Code in accordance with the Treasury
Regulation Section 1.409A-1(b)(5) and all Stock Awards under the Plan shall
contain such terms as will qualify the Stock Awards for exemption from Section
409A of the Code in accordance with Treasury Regulation Section 1.409A-1(b)(6).
This Plan’s provisions will be administered and construed by the Administrators
in a manner to fulfill such intent. Notwithstanding the foregoing, the Company
shall not be liable to any Award Holder if any Award fails to be exempt or in
compliance with Section 409A of the Code.

19.      Governing Law. The Plan, any Awards granted hereunder, the Contracts
and all related matters shall be governed by, and construed in accordance with,
the laws of Bermuda, other than those laws which would defer to the substantive
law of the other jurisdiction.

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Neither the Plan nor any Contract shall be construed or interpreted with any
presumption against the Company by reason of the Company causing the Plan or
Contract to be drafted. Whenever from the context it appears appropriate, any
term stated in either the singular or plural shall include the singular and
plural, and any term stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter.

20.      Partial Invalidity. The invalidity, illegality or unenforceability of
any provision in the Plan, any Award or Contract shall not affect the validity,
legality or enforceability of any other provision, all of which shall be valid,
legal and enforceable to the fullest extent permitted by applicable law.

21      Stockholder Approval. The Plan shall be subject to approval of the
Company's stockholders. No options granted hereunder may be exercised prior to
such approval, provided, however, that upon receiving stockholder’s approval the
date of grant of any option shall be determined as if the Plan had not been
subject to such approval. Notwithstanding the foregoing, if the Plan is not
approved by a vote of the stockholders of the Company on or before June 27,
2008, the Plan and any Awards granted hereunder shall terminate.