Exhibit 10.4

 

Akerna Corp.

 

2019 Long Term Incentive Plan

 

Section 1. Purpose; Definitions.

 

1.1. Purpose. The purpose of the Plan is to enable the Company to offer to
employees, officers and directors of and consultants to the Company and its
Subsidiaries, Parent and Affiliates whose past, present and/or potential future
contributions to the Company and its Subsidiaries have been, are or will be
important to the success of the Company, an opportunity to share monetarily in
the success of and/or acquire a proprietary interest in the Company. The various
types of long-term incentive awards that may be provided under the Plan will
enable the Company to respond to changes in compensation practices, tax laws,
accounting regulations and the size and diversity of its businesses.

 

1.2. Definitions. For purposes of the Plan, the following terms shall be defined
as set forth below:

 

(a) “Affiliate” means a corporation, limited liability company or other entity
that controls, is controlled by, or is under common control with the Company and
designated by the Committee from time to time as such.

 

(b) “Agreement” means the agreement between the Company and the Holder, or such
other document as may be determined by the Committee, setting forth the terms
and conditions of an award under the Plan.

 

(c) “Asset Sale” means an acquisition by any one person, or more than one person
acting as a group, together with acquisitions during the 12-month period ending
on the date of the most recent acquisition by such person or persons, of assets
from the Company that have a total gross fair market value equal to or more than
50% of the total gross fair market value of all of the assets of the Company
immediately before such acquisition or acquisitions. For this purpose, gross
fair market value means the value of the assets of the Company, or the value of
the assets being disposed of, determined without regard to any liabilities
associated with such assets.

 

(d) “Board” means the Board of Directors of the Company.

 

(e) “Change of Control” means a transaction in which any one person, or more
than one person acting as a group, acquires the ownership of stock of the
Company that, together with the stock held by such person or group, constitutes
more than 50% of the total Fair Market Value or combined voting power of the
stock of the Company. A Change in Control caused by an increase in the
percentage of stock owned by any one person, or persons acting as a group, as a
result of a transaction in which the Company acquires its stock in exchange for
property is not treated as a Change of Control for purposes of the Plan.

 

(f) “Code” means the Internal Revenue Code of 1986, as amended from time to
time.

 

(g) “Committee” means the committee of the Board designated to administer the
Plan as provided in Section 2.1. If no Committee is so designated, then all
references in this Plan to “Committee” shall mean the Board.

 

(h) “Common Stock” means the Common Stock of the Company, par value $.0001 per
share.

 

(i) “Company” means Akerna Corp., a corporation organized under the laws of the
State of Delaware.

 

(j) “Disability” means physical or mental impairment as determined under
procedures established by the Committee for purposes of the Plan.

 

(k) “Effective Date” means the date determined pursuant to Section 11.1.

 

(l) “Fair Market Value,” unless otherwise required by any applicable provision
of the Code or any regulations issued thereunder, means, as of any given date:
(i) if the Common Stock is listed on a national securities exchange or is traded
over-the-counter and last sale information is available, unless otherwise
determined by the Committee, the last sale price of the Common Stock in the
principal trading market for the Common Stock on such date, as reported by the
exchange or by such source that the Committee deems reliable, as the case may
be; or (ii) if the fair market value of the Common Stock cannot be determined
pursuant to clause (i), such price as the Committee shall determine, in good
faith.

 

 

 

 

(m) “Holder” means a person who has received an award under the Plan.

 

(n) “Incentive Stock Option” means any Stock Option intended to be and
designated as an “incentive stock option” within the meaning of Section 422 of
the Code.

 

(o) “Non-qualified Stock Option” means any Stock Option that is not an Incentive
Stock Option.

 

(p) “Normal Retirement” means retirement from active employment with the Company
or any Subsidiary on or after such age which may be designated by the Committee
as “retirement age” for any particular Holder. If no age is designated, it shall
be 65.

 

(q) “Other Stock-Based Award” means an award under Section 8 that is valued in
whole or in part by reference to, or is otherwise based upon, Common Stock.

 

(r) “Parent” means any present or future “parent corporation” of the Company, as
such term is defined in Section 424(e) of the Code.

 

(s) “Plan” means the Company’s 2019 Long Term Incentive Plan, as hereinafter
amended from time to time.

 

(t) “Repurchase Value” shall mean the Fair Market Value if the award to be
settled under Section 2.2(e) or repurchased under Section 5.2(l) is comprised of
shares of Common Stock and the difference between Fair Market Value and the
exercise price (if lower than Fair Market Value) if the award is a Stock Option
or Stock Appreciation Right; in each case, multiplied by the number of shares
subject to the award. “Repurchase Value” if the award to be repurchased under
Section 9.2 is comprised of shares of Common Stock shall mean the greater of the
Fair Market Value or the value of such award based upon the price per share of
Common Stock received or to be received by other shareholders of the Company in
the event. “Repurchase Value” if the award to be repurchased under Section 9.2
is comprised of Stock Options or Stock Appreciation Rights shall mean the
difference between the greater of (1) the Fair Market Value or the value of such
award based upon the price per share of Common Stock received or to be received
by other shareholders of the Company in the event and (2) the exercise price (if
lower), multiplied by the number of shares subject to the award.

 

(u) “Restriction Period” means the time or times within which awards may be
subject to forfeiture, including upon termination of employment or failure of
performance conditions.

 

(v) “Restricted Stock” means Common Stock received under an award made pursuant
to Section 7 that is subject to restrictions under Section 7.

 

(w) “Restricted Stock Unit” means an unfunded, unsecured right to receive, on
the applicable settlement date, one share or an amount in cash or other
consideration determined by the Committee to be of equal value as of such
settlement date, subject to certain vesting conditions and other restrictions.

 

(x) “SAR Value” means the excess of the Fair Market Value (on the exercise date)
over (a) the exercise price that the participant would have otherwise had to pay
to exercise the related Stock Option or (b) if a Stock Appreciation Right is
granted unrelated to a Stock Option, the Fair Market Value of a share of Common
Stock on the date of grant of the Stock Appreciation Right, in either case,
multiplied by the number of shares for which the Stock Appreciation Right is
exercised.

 

(y) “Stock Appreciation Right” means the right to receive from the Company,
without a cash payment to the Company, either a number of shares of Common Stock
equal to the SAR Value divided by the Fair Market Value (on the exercise date),
or, at the Company’s election, cash in the amount of the SAR Value.

 

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(z) “Stock Option” or “Option” means any option to purchase shares of Common
Stock which is granted pursuant to the Plan.

 

(aa) “Subsidiary” means any present or future “subsidiary corporation” of the
Company, as such term is defined in Section 424(f) of the Code.

 

(bb) “Vest” means to become exercisable or to otherwise obtain ownership rights
in an award. No award shall vest in less than a one-year period.

 

Section 2. Administration.

 

2.1. Committee Membership. The Plan shall be administered by the Board or a
Committee. If administered by a Committee, such Committee shall be composed of
at least two directors, all of whom are “non-employee” directors within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended.
Committee members shall serve for such term as the Board may in each case
determine and shall be subject to removal at any time by the Board.

 

2.2. Powers of Committee. The Committee shall have full authority to award,
pursuant to the terms of the Plan: (i) Stock Options, (ii) Stock Appreciation
Rights, (iii) Restricted Stock, (iv) Restricted Stock Units, and/or (v) Other
Stock-Based Awards. For purposes of illustration and not of limitation, the
Committee shall have the authority (subject to the express provisions of this
Plan):

 

(a) to select the officers, employees, directors and consultants of the Company,
Parent, Subsidiary or Affiliate to whom Stock Options, Stock Appreciation
Rights, Restricted Stock, Restricted Stock Units and/or Other Stock-Based Awards
may from time to time be awarded hereunder;

 

(b) to determine the terms and conditions, not inconsistent with the terms of
the Plan, of any award granted hereunder (including, but not limited to, number
of shares, share exercise price or types of consideration paid upon exercise of
such options, such as other securities of the Company or other property, any
restrictions or limitations, and any vesting, exchange, surrender, cancellation,
acceleration, termination, exercise or forfeiture provisions, as the Committee
shall determine);

 

(c) to determine any specified performance goals or such other factors or
criteria which need to be attained for the vesting of an award granted
hereunder;

 

(d) to determine the terms and conditions under which awards granted hereunder
are to operate on a tandem basis and/or in conjunction with or apart from other
awards under this Plan and cash and non-cash awards made by the Company, Parent,
Subsidiary and/or Affiliate outside of this Plan; and

 

(e) to make payments and distributions with respect to awards (i.e., to “settle”
awards) through cash payments in an amount equal to the Repurchase Value.

 

The Committee may not modify or amend any outstanding Option or Stock
Appreciation Right to reduce the exercise price of such Option or Stock
Appreciation Right, as applicable, below the exercise price as of the date of
grant of such Option or Stock Appreciation Right. In addition, no payment of
cash or other property having a value greater than the Repurchase Value may be
made, and no Option or Stock Appreciation Right with a lower exercise price may
be granted, in exchange for, or in connection with, the cancellation or
surrender of an Option or Stock Appreciation Right.

 

Non-employee directors may not be granted any awards covering more than [●]
shares of Common Stock in any year.

 

2.3. Interpretation of Plan. Subject to Section 10, the Committee shall have the
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the Plan as it shall from time to time deem advisable, to
interpret the terms and provisions of the Plan and any award issued under the
Plan (and to determine the form and substance of all Agreements relating
thereto), and to otherwise supervise the administration of the Plan. Subject to
Section 10, all decisions made by the Committee pursuant to the provisions of
the Plan shall be made in the Committee’s sole discretion and shall be final and
binding upon all persons, including the Company, its Parent, Subsidiaries,
Affiliates and Holders.

 

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Section 3. Stock Subject to Plan.

 

3.1. Number of Shares. The total number of shares of Common Stock reserved and
available for issuance under the Plan shall be up to 1,565,038 shares. Shares of
Common Stock under the Plan (“Shares”) may consist, in whole or in part, of
authorized and unissued shares or treasury shares. If any shares of Common Stock
that have been granted pursuant to a Stock Option cease to be subject to a Stock
Option, or if any shares of Common Stock that are subject to any Stock
Appreciation Right, Restricted Stock award, Restricted Stock Units or Other
Stock-Based Award granted hereunder are forfeited, or any such award otherwise
terminates without a payment being made to the Holder in the form of Common
Stock, such shares shall again be available for distribution in connection with
future grants and awards under the Plan. If a Holder pays the exercise price of
a Stock Option by surrendering any previously owned shares and/or arranges to
have the appropriate number of shares otherwise issuable upon exercise withheld
to cover the withholding tax liability associated with the Stock Option
exercise, then, in the Committee’s discretion, the number of shares available
under the Plan may be increased by the lesser of (i) the number of such
surrendered shares and shares used to pay taxes; and (ii) the number of shares
purchased under such Stock Option.

 

3.2. Adjustment Upon Changes in Capitalization, Etc. In the event of any common
stock dividend payable on shares of Common Stock, Common Stock split or reverse
split, combination or exchange of shares of Common Stock, or other extraordinary
or unusual event which results in a change in the shares of Common Stock of the
Company as a whole, the Committee shall determine, in its sole discretion,
whether such change equitably requires an adjustment in the terms of any award
in order to prevent dilution or enlargement of the benefits available under the
Plan (including number of shares subject to the award and the exercise price) or
the aggregate number of shares reserved for issuance under the Plan. Any such
adjustments will be made by the Committee, whose determination will be final,
binding and conclusive.

 

3.3. Administrative Stand Still. In the event of any changes in capitalization
described above in Section 3.2, or any other extraordinary transaction or change
affecting the shares or the share price of Common Stock, including any equity
restructuring or any securities offering or other similar transaction, for
administrative convenience, the Committee may refuse to permit the exercise of
any award for up to sixty days before and/or after such transaction; provided,
however, that the Committee may not refuse to permit the exercise of any award
during the last five trading days prior to the expiration of such award.

 

3.4. Substitute Awards. In connection with an entity’s merger or consolidation
with the Company or any Subsidiary or Affiliate or the Company’s or any
Subsidiary’s or Affiliate’s acquisition of an entity’s property or stock, the
Committee may grant awards in substitution for any options or other stock or
stock-based awards granted before such merger or consolidation by such entity or
its affiliate. Substitute awards may be granted on such terms as the Committee
deems appropriate, notwithstanding limitations on awards in the Plan. Substitute
awards will not count against the plan limit, except that shares acquired by
exercise of substitute Incentive Stock Options will count against the maximum
number of shares that may be issued pursuant to the exercise of Incentive Stock
Options under the Plan.

 

Section 4. Eligibility.

 

Awards may be made or granted to employees, officers, directors and consultants
of the Company or its Subsidiaries, Parent or Affiliates who are deemed to have
rendered or to be able to render significant services to the Company or its
Subsidiaries and who are deemed to have contributed or to have the potential to
contribute to the success of the Company or Subsidiary and which recipients are
qualified to receive options under the regulations governing Form S-8
registration statements under the Securities Act of 1933, as amended
(“Securities Act”). No Incentive Stock Option shall be granted to any person who
is not an employee of the Company, a Subsidiary, Parent or Affiliate (including
any non-employee directors) at the time of grant or so qualified as set forth in
the immediately preceding sentence. Notwithstanding anything to the contrary, an
award may be made or granted to a person in connection with his hiring or
retention, or at any time on or after the date he reaches an agreement (oral or
written) with the Company or its Subsidiaries, Parent or Affiliates with respect
to such hiring or retention, even though it may be prior to the date the person
first performs services for the Company or its Subsidiaries; provided, however,
that no portion of any such award shall vest prior to the date the person first
performs such services and the date of grant shall be deemed to be the date
hiring or retention commences.

 

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Section 5. Stock Options.

 

5.1. Grant and Exercise. Stock Options granted under the Plan may be of two
types: (i) Incentive Stock Options and (ii) Non-qualified Stock Options. Any
Stock Option granted under the Plan shall contain such terms, not inconsistent
with this Plan, or with respect to Incentive Stock Options, not inconsistent
with the Plan and the Code, as the Committee may from time to time approve. The
Committee shall have the authority to grant Incentive Stock Options or
Non-qualified Stock Options, or both types of Stock Options which may be granted
alone or in addition to other awards granted under the Plan.

 

5.2. Terms and Conditions. Stock Options granted under the Plan shall be subject
to the following terms and conditions:

 

(a) Option Term. The term of each Stock Option shall be fixed by the Committee;
provided, however, that no Stock Option may be exercisable after the expiration
of ten years from the date of grant; provided, further, that no Incentive Stock
Option granted to a person who, at the time of grant, owns stock possessing more
than 10% of the total combined voting power of all classes of voting stock of
the Company (“10% Shareholder”) may be exercisable after the expiration of five
years from the date of grant.

 

(b) Exercise Price. The exercise price per share of Common Stock purchasable
under a Stock Option shall be determined by the Committee at the time of grant;
provided, however, that the exercise price of a Stock Option may not be less
than 100% of the Fair Market Value on the date of grant or, if greater, the par
value of a share of Common Stock; provided, further, that the exercise price of
an Incentive Stock Option granted to a 10% Shareholder may not be less than 110%
of the Fair Market Value on the date of grant.

 

(c) Exercisability. Stock Options shall be exercisable at such time or times and
subject to such terms and conditions as shall be determined by the Committee.
The Committee intends generally to provide that Stock Options be exercisable
only in installments, i.e., that they vest over time, typically over a two- to
five-year period. The Committee may waive such installment exercise provisions
at any time at or after the time of grant in whole or in part, based upon such
factors as the Committee determines.

 

(d) Method of Exercise. Subject to whatever installment, exercise and waiting
period provisions are applicable in a particular case, Stock Options may be
exercised in whole or in part at any time during the term of the Option by
giving written notice of exercise to the Company specifying the number of shares
of Common Stock to be purchased. Such notice shall be accompanied by payment in
full of the purchase price, which shall be in cash or, if provided in the
Agreement, either in shares of Common Stock (including Restricted Stock and
other contingent awards under this Plan) or partly in cash and partly in such
Common Stock, or such other means which the Committee determines are consistent
with the Plan’s purpose and applicable law. Cash payments shall be made by wire
transfer, certified or bank check or personal check, in each case payable to the
order of the Company; provided, however, that the Company shall not be required
to deliver certificates for shares of Common Stock with respect to which an
Option is exercised until the Company has confirmed the receipt of good and
available funds in payment of the purchase price thereof (except that, in the
case of an exercise arrangement approved by the Committee and described in the
next sentence of this section, payment may be made as soon as practicable after
the exercise). The Committee may permit a Holder to elect to pay the exercise
price upon the exercise of a Stock Option by irrevocably authorizing a third
party to sell shares of Common Stock (or a sufficient portion of the shares)
acquired upon exercise of the Stock Option and remit to the Company a sufficient
portion of the sale proceeds to pay the entire exercise price and any tax
withholding resulting from such exercise. The Committee may also authorize other
means for paying the exercise price of a Stock Option, including using the value
of the Stock Option (as determined by the difference in the Fair Market Value of
the Common Stock and the exercise price of the Stock Option or other means
determined by the Committee).

 

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(e) Stock Payments. Payments in the form of Common Stock shall be valued at the
Fair Market Value on the date of exercise. Such payments shall be made by
delivery of stock certificates in negotiable form that are effective to transfer
good and valid title thereto to the Company, free of any liens or encumbrances.

 

(f) Transferability. Except as may be set forth in the next sentence of this
Section or in the Agreement, no Stock Option shall be transferable by the Holder
other than by will or by the laws of descent and distribution, and all Stock
Options shall be exercisable, during the Holder’s lifetime, only by the Holder
(or, to the extent of legal incapacity or incompetency, the Holder’s guardian or
legal representative). Notwithstanding the foregoing, a Holder, with the
approval of the Committee, may transfer a Non-Qualified Stock Option (i) (A) by
gift, for no consideration, or (B) pursuant to a domestic relations order, in
either case, to or for the benefit of the Holder’s “Immediate Family” (as
defined below), or (ii) to an entity in which the Holder and/or members of
Holder’s Immediate Family own more than fifty percent of the voting interest,
subject to such limits as the Committee may establish and the execution of such
documents as the Committee may require, and the transferee shall remain subject
to all the terms and conditions applicable to the Non-Qualified Stock Option
prior to such transfer. The term “Immediate Family” shall mean 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 Holder’s household (other than a tenant or
employee), a trust in which these persons have more than fifty percent
beneficial interest, and a foundation in which these persons (or the Holder)
control the management of the assets. The Committee may, in its sole discretion,
permit transfer of an Incentive Stock Option in a manner consistent with
applicable tax and securities law upon the Holder’s request.

 

(g) Termination by Reason of Death. If a Holder’s employment by, or association
with, the Company, Parent, Subsidiary or Affiliate terminates by reason of
death, any Stock Option held by such Holder, unless otherwise determined by the
Committee and set forth in the Agreement, shall thereupon automatically
terminate, except that the portion of such Stock Option that has vested on the
date of death may thereafter be exercised by the legal representative of the
estate or by the legatee of the Holder under the will of the Holder, for a
period of one year (or such other greater or lesser period as the Committee may
specify in the Agreement) from the date of such death or until the expiration of
the stated term of such Stock Option, whichever period is shorter.

 

(h) Termination by Reason of Disability. If a Holder’s employment by, or
association with, the Company, Parent, Subsidiary or Affiliate terminates by
reason of Disability, any Stock Option held by such Holder, unless otherwise
determined by the Committee and set forth in the Agreement, shall thereupon
automatically terminate, except that the portion of such Stock Option that has
vested on the date of termination may thereafter be exercised by the Holder for
a period of one year (or such other greater or lesser period as the Committee
may specify in the Agreement) from the date of such termination or until the
expiration of the stated term of such Stock Option, whichever period is shorter.

 

(i) Termination by Reason of Normal Retirement. Subject to the provisions of
Section 12.3, if such Holder’s employment by, or association with, the Company,
Parent, Subsidiary or Affiliate terminates due to Normal Retirement, any Stock
Option held by such Holder, unless otherwise determined by the Committee and set
forth in the Agreement, shall thereupon automatically terminate, except that the
portion of such Stock Option that has vested on the date of termination may
thereafter be exercised by the Holder for a period of one year in the case of a
Non-Qualified Stock Option or three months in the case of an Incentive Stock
Option (or such other greater or lesser period as the Committee may specify in
the Agreement) from the date of such termination or until the expiration of the
stated term of such Stock Option, whichever period is shorter.

 

(j) Other Termination. Subject to the provisions of Section 12.3, if such
Holder’s employment by, or association with, the Company, Parent, Subsidiary or
Affiliate terminates for any reason other than death, Disability or Normal
Retirement, any Stock Option held by such Holder, unless otherwise determined by
the Committee and set forth in the Agreement, shall thereupon automatically
terminate, except that, if the Holder’s employment is terminated by the Company,
Parent, Subsidiary or Affiliate without cause, the portion of such Stock Option
that has vested on the date of termination may thereafter be exercised by the
Holder for a period of three months (or such other greater or lesser period as
the Committee may specify in the Agreement) from the date of such termination or
until the expiration of the stated term of such Stock Option, whichever period
is shorter.

 

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(k) Incentive Stock Options. The aggregate Fair Market Value (on the date of
grant of the Stock Option) of shares of Common Stock with respect to which
Incentive Stock Options become exercisable for the first time by a Holder during
any calendar year (under all such plans of the Company and its Parent and
Subsidiaries) shall not exceed $100,000. To the extent that any Stock Option
intended to qualify as an Incentive Stock Option does not so qualify, including
by reason of the immediately preceding sentence, it shall constitute a separate
Non-qualified Stock Option. The Company shall have no liability to any Holder or
any other person if a Stock Option designated as an Incentive Stock Option fails
to qualify as such at any time or if a Stock Option is determined to constitute
“nonqualified deferred compensation” within the meaning of Section 409A of the
Code and the terms of such Stock Option do not satisfy the requirements of
Section 409A of the Code.

 

(l) Buyout and Settlement Provisions. The Committee may at any time, in its sole
discretion, offer to repurchase a Stock Option previously granted, at a purchase
price not to exceed the Repurchase Value, based upon such terms and conditions
as the Committee shall establish and communicate to the Holder at the time that
such offer is made.

 

(m) Rights as Shareholder. A Holder shall have none of the rights of a
Shareholder with respect to the shares subject to the Option until such shares
shall be transferred to the Holder upon the exercise of the Option.

 

Section 6. Stock Appreciation Rights.

 

6.1. Grant and Exercise. Subject to the terms and conditions of the Plan, the
Committee may grant Stock Appreciation Rights in tandem with an Option or alone
and unrelated to an Option. The Committee may grant Stock Appreciation Rights to
participants who have been or are being granted Stock Options under the Plan as
a means of allowing such participants to exercise their Stock Options without
the need to pay the exercise price in cash. In the case of a Non-qualified Stock
Option, a Stock Appreciation Right may be granted either at or after the time of
the grant of such Non-qualified Stock Option. In the case of an Incentive Stock
Option, a Stock Appreciation Right may be granted only at the time of the grant
of such Incentive Stock Option.

 

6.2. Terms and Conditions. Stock Appreciation Rights shall be subject to the
following terms and conditions:

 

(a) Exercisability. Stock Appreciation Rights shall be exercisable as shall be
determined by the Committee and set forth in the Agreement, subject, for Stock
Appreciation Rights granted in tandem with an Incentive Stock Option, to the
limitations, if any, imposed by the Code with respect to related Incentive Stock
Options.

 

(b) Termination. All or a portion of a Stock Appreciation Right granted in
tandem with a Stock Option shall terminate and shall no longer be exercisable
upon the termination or after the exercise of the applicable portion of the
related Stock Option.

 

(c) Method of Exercise. Stock Appreciation Rights shall be exercisable upon such
terms and conditions as shall be determined by the Committee and set forth in
the Agreement and, for Stock Appreciation Rights granted in tandem with a Stock
Option, by surrendering the applicable portion of the related Stock Option. Upon
exercise of all or a portion of a Stock Appreciation Right and, if applicable,
surrender of the applicable portion of the related Stock Option, the Holder
shall be entitled to receive a number of shares of Common Stock equal to the SAR
Value divided by the Fair Market Value on the date the Stock Appreciation Right
is exercised or, at the Company’s election, cash for the value so calculated.

 

(d) Shares Available Under Plan. The granting of a Stock Appreciation Right in
tandem with a Stock Option shall not affect the number of shares of Common Stock
available for awards under the Plan. The number of shares available for awards
under the Plan will, however, be reduced by the number of shares of Common Stock
acquirable upon exercise of the Stock Option to which such Stock Appreciation
Right relates.

 

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Section 7. Restricted Stock; Restricted Stock Units.

 

7.1. Grant. Shares of Restricted Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the eligible persons to whom, and the time or times at which, grants of
Restricted Stock will be awarded, the number of shares to be awarded, the price
(if any) to be paid by the Holder, any Restriction Period, the vesting schedule
and rights to acceleration thereof, and all other terms and conditions of the
awards. In addition, the Committee may award Restricted Stock Units, which may
be subject to vesting and forfeiture conditions during the applicable
Restriction Period, as set forth in an Agreement.

 

7.2. Restricted Stock Terms and Conditions. Each Restricted Stock award shall be
subject to the following terms and conditions:

 

(a) Certificates. Restricted Stock, when issued, will be represented by a stock
certificate or certificates registered in the name of the Holder to whom such
Restricted Stock shall have been awarded. During the Restriction Period,
certificates representing the Restricted Stock and any securities constituting
Retained Distributions (as defined below) shall bear a legend to the effect that
ownership of the Restricted Stock (and such Retained Distributions) and the
enjoyment of all rights appurtenant thereto are subject to the restrictions,
terms and conditions provided in the Plan and the Agreement. Such certificates
shall be deposited by the Holder with the Company, together with stock powers or
other instruments of assignment, each endorsed in blank, which will permit
transfer to the Company of all or any portion of the Restricted Stock and any
securities constituting Retained Distributions that shall be forfeited or that
shall not become vested in accordance with the Plan and the Agreement.

 

(b) Rights of Holder. Restricted Stock shall constitute issued and outstanding
shares of Common Stock for all corporate purposes. The Holder will have the
right to vote such Restricted Stock and to exercise all other rights, powers and
privileges of a holder of Common Stock with respect to such Restricted Stock,
with the exceptions that (i) the Holder will not be entitled to delivery of the
stock certificate or certificates representing such Restricted Stock until the
Restriction Period shall have expired and unless all other vesting requirements
with respect thereto shall have been fulfilled; (ii) the Company will retain
custody of the stock certificate or certificates representing the Restricted
Stock during the Restriction Period; (iii) the Company will retain custody of
all dividends and distributions (“Retained Distributions”) made, paid or
declared with respect to the Restricted Stock (and such Retained Distributions
will be subject to the same restrictions, terms and conditions as are applicable
to the Restricted Stock) until such time, if ever, as the Restricted Stock with
respect to which such Retained Distributions shall have been made, paid or
declared shall have become vested and with respect to which the Restriction
Period shall have expired; and (iv) a breach by the Holder of any of the
restrictions, terms or conditions contained in this Plan or the Agreement or
otherwise established by the Committee with respect to any Restricted Stock or
Retained Distributions will cause a forfeiture of such Restricted Stock and any
Retained Distributions with respect thereto.

 

(c) Vesting; Forfeiture. Upon the expiration of the Restriction Period with
respect to each award of Restricted Stock and the satisfaction of any other
applicable restrictions, terms and conditions (i) all or part of such Restricted
Stock shall become vested in accordance with the terms of the Agreement, and
(ii) any Retained Distributions with respect to such Restricted Stock shall
become vested to the extent that the Restricted Stock related thereto shall have
become vested. Any such Restricted Stock and Retained Distributions that do not
vest shall be forfeited to the Company and the Holder shall not thereafter have
any rights with respect to such Restricted Stock and Retained Distributions that
shall have been so forfeited.

 

7.3. Restricted Stock Units Terms and Conditions. Each Restricted Stock Units
award shall be subject to the following terms and conditions:

 

(a) Settlement. The Committee may provide that settlement of Restricted Stock
Units will occur upon or as soon as reasonably practicable after the Restricted
Stock Units vest or will instead be deferred, on a mandatory basis or at the
Holder’s election, in a manner intended to comply with Section 409A.

 

(b) Stockholder Rights. A Holder will have no rights of a holder of Common Stock
with respect to shares subject to any Restricted Stock Unit unless and until the
shares are delivered in settlement of the Restricted Stock Unit.

 

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(c) Dividend Equivalents. If the Committee provides, a grant of Restricted Stock
Units may provide a Holder with the right to receive dividend equivalents.
Dividend equivalents may be paid currently or credited to an account for the
Holder, settled in cash or shares and subject to the same restrictions on
transferability and forfeitability as the Restricted Stock Units with respect to
which the dividend equivalents are granted and subject to other terms and
conditions as set forth in the Agreement.

 

Section 8. Other Stock-Based Awards.

 

Other Stock-Based Awards may be awarded, subject to limitations under applicable
law, that are denominated or payable in, valued in whole or in part by reference
to, or otherwise based on or related to, shares of Common Stock, as deemed by
the Committee to be consistent with the purposes of the Plan, including, without
limitation, purchase rights, shares of Common Stock awarded which are not
subject to any restrictions or conditions, convertible or exchangeable
debentures, or other rights convertible into shares of Common Stock and awards
valued by reference to the value of securities of or the performance of
specified Subsidiaries. These Other Stock-Based Awards may include performance
shares or options, whose award is tied to specific performance goals. Other
Stock-Based Awards may be awarded either alone or in addition to or in tandem
with any other awards under this Plan or any other plan of the Company. Each
Other Stock-Based Award shall be subject to such terms and conditions as may be
determined by the Committee.

 

Section 9. Accelerated Vesting and Exercisability.

 

9.1. Non-Approved Transactions. If there is a Change of Control, and the Board
does not authorize or otherwise approve such transaction, then the vesting
periods of any and all Stock Options and other awards granted and outstanding
under the Plan shall be accelerated and all such Stock Options and awards will
immediately and entirely vest, and the respective holders thereof will have the
immediate right to purchase and/or receive any and all Common Stock subject to
such Stock Options and awards on the terms set forth in this Plan and the
respective Agreements respecting such Stock Options and awards, and all
performance goals will be deemed achieved at 100% of target levels and all other
terms and conditions will be deemed met.

 

9.2. Approved Transactions. In the event of an Asset Sale or if there is a
Change of Control that has been approved by the Company’s Board of Directors,
then the Committee may (i) accelerate the vesting of any and all Stock Options
and other awards granted and outstanding under the Plan; (ii) require a Holder
of any Stock Option, Stock Appreciation Right, Restricted Stock award or Other
Stock-Based Award granted under this Plan to relinquish such award to the
Company upon the tender by the Company to Holder of cash, stock or other
property, or any combination thereof, in an amount equal to the Repurchase Value
of such award; provided, however, that the obligation to tender the Repurchase
Value to such Holders may be subject to any terms and conditions to which the
tender of consideration to the Company’s stockholders in connection with the
acquisition is subject, including any terms and conditions of the acquisition
providing for an adjustment to or escrow of such consideration; and provided,
further, that in the case of any Stock Option or Stock Appreciation Right with
an exercise price that equals or exceeds the price paid for a share of Common
Stock in connection with the acquisition, the Committee may cancel the Stock
Option or Stock Appreciation Right without the payment of consideration
therefor; and/or (iii) terminate all incomplete performance periods in respect
of awards in effect on the date the acquisition occurs, determine the extent to
which performance goals have been met based upon such information then available
as it deems relevant and cause to be paid to the Holder all or the applicable
portion of the award based upon the Committee’s determination of the degree of
attainment of performance goals, or on such other basis determined by the
Committee.

 

9.3. Code Section 409A. Notwithstanding any provisions of this Plan or any award
granted hereunder to the contrary, no acceleration shall occur with respect to
any award to the extent such acceleration would cause the Plan or an award
granted hereunder to fail to comply with Code Section 409A.

 

Section 10. Amendment and Termination.

 

The Board may at any time, and from time to time, amend alter, suspend or
discontinue any of the provisions of the Plan or any Agreement, but no
amendment, alteration, suspension or discontinuance shall be made that would
impair the rights of a Holder under any Agreement theretofore entered into
hereunder, without the Holder’s consent, except as set forth in this Plan or the
Agreement. Notwithstanding anything to the contrary herein, no amendment to the
provisions of the Plan shall be effective unless approved by the shareholders of
the Company to the extent shareholder approval is necessary to satisfy any
provision of the Code or other applicable law or the listing requirements of any
national securities exchange on which the Company’s securities are listed.

 

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Section 11. Term of Plan.

 

11.1. Effective Date. The Plan shall be effective upon the approval of the
Company’s shareholders.

 

11.2. Termination Date. Unless terminated by the Board, this Plan shall continue
to remain effective until such time as no further awards may be granted and all
awards granted under the Plan are no longer outstanding. Notwithstanding the
foregoing, grants of Incentive Stock Options may be made only during the
ten-year period beginning on the Effective Date.

 

Section 12. General Provisions.

 

12.1. Written Agreements. Each award granted under the Plan shall be confirmed
by, and shall be subject to the terms of, the Agreement executed by the Company
and the Holder, or such other document as may be determined by the Committee.
The Committee may terminate any award made under the Plan if the Agreement
relating thereto is not executed and returned to the Company within 10 days
after the Agreement has been delivered to the Holder for his or her execution.

 

12.2. Unfunded Status of Plan. The Plan is intended to constitute an “unfunded”
plan for incentive and deferred compensation. With respect to any payments not
yet made to a Holder by the Company, nothing contained herein shall give any
such Holder any rights that are greater than those of a general creditor of the
Company.

 

12.3. Employees.

 

(a) Engaging in Competition With the Company; Solicitation of Customers and
Employees; Disclosure of Confidential Information. If a Holder’s employment with
the Company, Parent, Subsidiary or Affiliate is terminated for any reason
whatsoever, and Holder (i) within three months after the date thereof, accepts
employment with any competitor of, or otherwise engages in competition with, the
Company, Parent, Subsidiary or Affiliate, (ii) within two years after the date
thereof, solicits any customers or employees of the Company, Parent, Subsidiary
or Affiliate to do business with or render services to the Holder or any
business with which the Holder becomes affiliated or to which the Holder renders
services or (iii) at any time uses or discloses to anyone outside the Company
any confidential information of the Company, Parent, Subsidiary or Affiliate in
violation of the Company’s policies or any agreement between the Holder and the
Company, Parent, Subsidiary or Affiliate, the Committee, in its sole discretion,
may require such Holder to return (through the payment of cash, return and
transfer to the Company of shares of Common Stock or by other methods determined
by the Committee) to the Company the economic value of any award that was
realized or obtained by such Holder at any time during the period beginning on
the date that is six months prior to the date such Holder’s employment with the
Company is terminated; provided, however, that if the Holder is a resident of
the State of California, such right must be exercised by the Company for cash
within six months after the date of termination of the Holder’s service to the
Company or within six months after exercise of the applicable Stock Option,
whichever is later. In such event, Holder agrees to (1) remit to the Company, in
cash, an amount equal to the difference between the Fair Market Value of the
shares subject to the award on the date of termination (or the sales price of
such Shares if the Shares were sold during such six month period) and the price
the Holder paid the Company for such shares, or (2) in the case of SARs, shall,
at the Company’s election, return the full amount paid to the Holder in
connection therewith.

 

(b) Termination for Cause. If a Holder’s employment with the Company, Parent,
subsidiary or Affiliate is terminated for cause, the Committee may, in its sole
discretion, require such Holder to return to the Company the economic value of
any award that was realized or obtained by such Holder at any time during the
period beginning on that date that is six months prior to the date such Holder’s
employment with the Company is terminated. In such event, Holder agrees to (1)
remit to the Company, in cash, an amount equal to the difference between the
Fair Market Value of the shares on the date of termination (or the sales price
of such Shares if the shares were sold during such six month period) and the
price the Holder paid the Company for such shares, (2) with the consent of the
Company, which may be withheld for any reason or no reason, surrender to the
Company shares of Common Stock having Fair Market Value equal to the Fair Market
Value on the date they were acquired upon exercise of the Option or (3) in the
case of SARs, shall return the full amount paid to the Holder in connection
therewith.

 

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(c) No Right of Employment. Nothing contained in the Plan or in any award
hereunder shall be deemed to confer upon any Holder who is an employee of the
Company, Parent, Subsidiary or Affiliate any right to continued employment with
the Company, Parent, Subsidiary or Affiliate, nor shall it interfere in any way
with the right of the Company, Parent, Subsidiary or Affiliate to terminate the
employment of any Holder who is an employee at any time.

 

12.4. No Fractional Shares. No fractional shares of Common Stock shall be issued
or delivered pursuant to the Plan. The Committee shall determine whether cash,
additional awards or other securities or property shall be issued or paid in
lieu of fractional shares of Common Stock or whether any fractional shares
should be rounded, forfeited or otherwise eliminated.

 

12.5. Provisions for Foreign Participants. The Committee may modify awards
granted to Holders who are foreign nationals or employed outside the United
States or establish subplans or procedures under the Plan to address differences
in laws, rules, regulations or customs of such foreign jurisdictions with
respect to tax, securities, currency, employee benefit or other matters.

 

12.6. Limitations on Liability.

 

(a) Notwithstanding any other provisions of the Plan, no individual acting as a
director, officer, other employee or agent of the Company or any Subsidiary,
Parent or Affiliate will be liable to any Holder, former Holder, spouse,
beneficiary, or any other person for any claim, loss, liability, or expense
incurred in connection with the Plan or any award, and such individual will not
be personally liable with respect to the Plan because of any contract or other
instrument executed in his or her capacity as member of the Committee, director,
officer, other employee or agent of the Company or any Subsidiary, Parent or
Affiliate. The Company will indemnify and hold harmless each director, officer,
other employee and agent of the Company or any Subsidiary, Parent or Affiliate
that has been or will be granted or delegated any duty or power relating to the
Plan’s administration or interpretation, against any cost or expense (including
attorneys’ fees) or liability (including any sum paid in settlement of a claim
with the Committee’s approval) arising from any act or omission concerning this
Plan unless arising from such person’s own fraud or bad faith.

 

(b) Neither the Company nor any Subsidiary shall be liable to a Holder or any
other person as to: (i) the non-issuance or sale of shares as to which the
Company has been unable to obtain from any regulatory body having jurisdiction
the authority deemed by the Company’s counsel to be necessary to the lawful
issuance and sale of any shares hereunder; and (ii) any tax consequence
expected, but not realized, by any Holder or other person due to the receipt,
exercise or settlement of any Award granted hereunder.

 

12.7. Lock-Up Period. The Company may, at the request of any underwriter,
placement agent or otherwise, in connection with the registered offering of any
Company securities under the Securities Act or pursuant to an exemption
therefrom, prohibit Holders from, directly or indirectly, selling or otherwise
transferring any shares or other Company securities acquired under this Plan
during a period of up to one hundred eighty days following either the effective
date of a Company registration statement filed under the Securities Act, in the
case of a registered offering, or the closing date of the sale of the Company
securities, in the case of an offering exempt from registration, or for such
longer period as determined by the underwriter or placement agent.

 

12.8. Data Privacy. As a condition for receiving any award, each Holder
explicitly and unambiguously consents to the collection, use and transfer, in
electronic or other form, of personal data as described in this paragraph by and
among the Company and its Parent, Subsidiaries and Affiliates exclusively for
implementing, administering and managing the Holder’s participation in the Plan.
The Company and its Parent, Subsidiaries and Affiliates may hold certain
personal information about a Holder, including the Holder’s name, address and
telephone number; birthdate; social security, insurance number or other
identification number; salary; nationality; job title(s); any shares held in the
Company or its Parent, Subsidiaries and Affiliates; and award details, to
implement, manage and administer the Plan and awards (the “Data”). The Company
and its Parent, Subsidiaries and Affiliates may transfer the Data amongst
themselves as necessary to implement, administer and manage a Holder’s
participation in the Plan, and the Company and its Parent, Subsidiaries and
Affiliates may transfer the Data to third parties assisting the Company with
Plan implementation, administration and management. These recipients may be
located in the Holder’s country, or elsewhere, and the Holder’s country may have
different data privacy laws and protections than the recipients’ country. By
accepting an award, each Holder authorizes such recipients to receive, possess,
use, retain and transfer the Data, in electronic or other form, to implement,
administer and manage the Holder’s participation in the Plan, including any
required Data transfer to a broker or other third party with whom the Company or
the Holder may elect to deposit any shares. The Data related to a Holder will be
held only as long as necessary to implement, administer, and manage the Holder’s
participation in the Plan. A Holder may, at any time, view the Data that the
Company holds regarding such Holder, request additional information about the
storage and processing of the Data regarding such Holder, recommend any
necessary corrections to the Data regarding the Holder or refuse or withdraw the
consents in this Section 12.8 in writing, without cost, by contacting the local
human resources representative. The Company may cancel Holder’s ability to
participate in the Plan and, in the Committee’s discretion, the Holder may
forfeit any outstanding awards if the Holder refuses or withdraws the consents
in this Section 12.8. For more information on the consequences of refusing or
withdrawing consent, Holders may contact their local human resources
representative.

 

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12.9. Successor. The obligations of the Company under the Plan shall be binding
upon any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any successor
corporation or organization succeeding to all or substantially all of the assets
and business of the Company and its Subsidiaries, taken as a whole.

 

12.10. Investment Representations; Company Policy. The Committee may require
each person acquiring shares of Common Stock pursuant to a Stock Option or other
award under the Plan to represent to and agree with the Company in writing that
the Holder is acquiring the shares for investment without a view to distribution
thereof. Each person acquiring shares of Common Stock pursuant to a Stock Option
or other award under the Plan shall be required to abide by all policies of the
Company in effect at the time of such acquisition and thereafter with respect to
the ownership and trading of the Company’s securities.

 

12.11. Additional Incentive Arrangements. Nothing contained in the Plan shall
prevent the Board from adopting such other or additional incentive arrangements
as it may deem desirable, including, but not limited to, the granting of Stock
Options and the awarding of Common Stock and cash otherwise than under the Plan;
and such arrangements may be either generally applicable or applicable only in
specific cases.

 

12.12. Withholding Taxes. Not later than the date as of which an amount must
first be included in the gross income of the Holder for Federal income tax
purposes with respect to any Stock Option or other award under the Plan, the
Holder shall pay to the Company, or make arrangements satisfactory to the
Committee regarding the payment of, any Federal, state and local taxes of any
kind required by law to be withheld or paid with respect to such amount. If
permitted by the Committee, tax withholding or payment obligations may be
settled with Common Stock, including Common Stock that is part of the award that
gives rise to the withholding requirement. The obligations of the Company under
the Plan shall be conditioned upon such payment or arrangements and the Company
or the Holder’s employer (if not the Company) shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Holder from the Company or any Subsidiary.

 

12.13. Clawback. Notwithstanding any other provisions of the Plan, any award
which is subject to recovery under any law, government regulation or listing
requirement of any national securities exchange on which the Company’s
securities are listed, will be subject to such deductions and clawback as may be
required to be made pursuant to such law, government regulation or listing
requirement (or any policy adopted by the Company pursuant to any such law,
government regulation or listing requirement).

 

12.14. Governing Law. The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the law of the State of
Delaware (without regard to choice of law provisions).

 

12.15. Other Benefit Plans. Any award granted under the Plan shall not be deemed
compensation for purposes of computing benefits under any retirement plan of the
Company or any Parent, Subsidiary or Affiliate and shall not affect any benefits
under any other benefit plan now or subsequently in effect under which the
availability or amount of benefits is related to the level of compensation
(unless required by specific reference in any such other plan to awards under
this Plan).

 

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12.16. Non-Transferability. Except as otherwise expressly provided in the Plan
or the Agreement, no right or benefit under the Plan may be alienated, sold,
assigned, hypothecated, pledged, exchanged, transferred, encumbranced or
charged, and any attempt to alienate, sell, assign, hypothecate, pledge,
exchange, transfer, encumber or charge the same shall be void.

 

12.17. Applicable Laws. The obligations of the Company with respect to all Stock
Options and other awards under the Plan shall be subject to (i) all applicable
laws, rules and regulations and such approvals by any governmental agencies as
may be required, including, without limitation, the Securities Act, and (ii) the
rules and regulations of any securities exchange on which the Common Stock may
be listed. Notwithstanding anything herein to the contrary, the Plan and all
awards will be administered only in conformance with such applicable laws. To
the extent such applicable laws permit, the Plan and all Agreements will be
deemed amended as necessary to conform to such applicable laws.

 

12.18. Conflicts. If any of the terms or provisions of the Plan or an Agreement
conflict with the requirements of Section 422 of the Code, then such terms or
provisions shall be deemed inoperative to the extent they so conflict with such
requirements. Additionally, if this Plan or any Agreement does not contain any
provision required to be included herein under Section 422 of the Code, such
provision shall be deemed to be incorporated herein and therein with the same
force and effect as if such provision had been set out at length herein and
therein. If any of the terms or provisions of any Agreement conflict with any
terms or provisions of the Plan, then such terms or provisions shall be deemed
inoperative to the extent they so conflict with the requirements of the Plan.
Additionally, if any Agreement does not contain any provision required to be
included therein under the Plan, such provision shall be deemed to be
incorporated therein with the same force and effect as if such provision had
been set out at length therein.

 

12.19. Compliance with Section 409A of the Code. The Company intends that any
awards be structured in compliance with, or to satisfy an exemption from,
Section 409A of the Code, such that there are no adverse tax consequences,
interest, or penalties pursuant to Section 409A of the Code as a result of the
awards. Notwithstanding the Company’s intention, in the event any award is
subject to Section 409A of the Code, the Committee may, in its sole discretion
and without a participant’s prior consent, amend this Plan and/or outstanding
Agreements, adopt policies and procedures, or take any other actions (including
amendments, policies, procedures and actions with retroactive effect) as are
necessary or appropriate to (i) exempt this Plan and/or any award from the
application of Section 409A of the Code, (ii) preserve the intended tax
treatment of any such award, or (iii) comply with the requirements of Section
409A of the Code, including without limitation any such regulations guidance,
compliance programs and other interpretive authority that may be issued after
the date of grant of an award. This Plan shall be interpreted at all times in
such a manner that the terms and provisions of the Plan and the awards are
exempt from or comply with Section 409A of the Code.

 

12.20. Sub-Plans. The Committee may from time to time establish sub-plans under
the Plan for purposes of satisfying blue sky, securities, tax or other laws of
various jurisdictions in which the Company intends to grant awards. Any
sub-plans shall contain such limitations and other terms and conditions as the
Committee determines are necessary or desirable. All sub-plans shall be deemed a
part of the Plan, but each sub-plan shall apply only to the participants in the
jurisdiction for which the sub-plan was designed.

 

12.21. Non-Registered Stock. The shares of Common Stock to be distributed under
this Plan have not been, as of the Effective Date, registered under the
Securities Act or any applicable state or foreign securities laws and the
Company has no obligation to any Holder to register the Common Stock or to
assist the Holder in obtaining an exemption from the various registration
requirements, or to list the Common Stock on a national securities exchange or
any other trading or quotation system.

 

12.22. Non-Uniform Treatment. The Committee’s determinations under the Plan need
not be uniform and may be made by it selectively among persons who are eligible
to receive, or actually receive, awards. Without limiting the generality of the
foregoing, the Committee shall be entitled to make non-uniform and selective
determinations, amendments and adjustments, and to enter into non-uniform and
selective Agreements.

 

 

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