EXHIBIT 10.1


 


APOGEE TECHNOLOGY, INC.


 


2007 EMPLOYEE, DIRECTOR AND
CONSULTANT STOCK PLAN


 


1.  DEFINITIONS.


 


Unless
otherwise specified or unless the context otherwise requires, the following
terms, as used in this Apogee Technology, Inc. 2007 Employee, Director and
Consultant Stock Plan, have the following meanings:


 


Administrator   means the Board of Directors, unless it
has delegated power to act on its behalf to the Committee, in which case the
Administrator means the Committee.


 


Affiliate   means a corporation which, for purposes
of Section 424 of the Code, is a parent or subsidiary of the Company,
direct or indirect.


 


Agreement   means an agreement between the Company
and a Participant delivered pursuant to the Plan, in such form as the
Administrator shall approve.


 


Board of Directors   means the Board of Directors of the
Company.


 


Change of Control   means the occurrence of any of the
following events:


 


(i)   
Ownership.   Any “Person” (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
becomes the “Beneficial Owner” (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing 50% or more
of the total voting power represented by the Company’s then outstanding voting
securities (excluding for this purpose any such voting securities held by the
Company or its Affiliates or by any employee benefit plan of the Company)
pursuant to a transaction or a series of related transactions which the Board
of Directors does not approve; or


 


(ii)  
Merger/Sale of Assets.   (A) A merger or consolidation of the
Company whether or not approved by the Board of Directors, other than a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or the parent of such corporation) at least 50% of the total
voting power represented by the voting securities of the Company or such
surviving entity or parent of such corporation, as the case may be,
outstanding immediately after such merger or consolidation; or (B) the
stockholders of the Company approve an agreement for the sale or disposition by
the Company of all or substantially all of the Company’s assets; or


 


(iii)  Change in
Board Composition.   A change in the composition of the Board of
Directors, as a result of which fewer than a majority of the directors are
Incumbent Directors. “Incumbent Directors” shall mean directors who either
(A) are directors of the Company as of [insert date], or
(B) are elected, or nominated for election, to the Board of Directors
with the affirmative votes of at least a majority of the Incumbent Directors at
the time of such election or nomination (but shall not include an individual
whose election or nomination is in connection with an actual or threatened
proxy contest relating to the election of directors to the Company).


 


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Code   means the United States Internal Revenue Code of 1986, as
amended.


 


Committee   means the committee of the Board of
Directors to which the Board of Directors has delegated power to act under or
pursuant to the provisions of the Plan.


 


Common Stock   means shares of the Company’s common
stock, $.01 par value per share.


 


Company   means Apogee Technology, Inc., a
Delaware corporation.


 


Disability   or Disabled
means permanent and total disability as defined in
Section 22(e)(3) of the Code.


 


Employee   means any employee of the Company or of
an Affiliate (including, without limitation, an employee who is also serving as
an officer or director of the Company or of an Affiliate), designated by the
Administrator to be eligible to be granted one or more Stock Rights under the
Plan.


 


Fair Market Value   of a Share of Common Stock means:


 


(1)   If the
Common Stock is listed on a national securities exchange or traded in the
over-the-counter market and sales prices are regularly reported for the Common
Stock, the closing or last price of the Common Stock on the composite tape or
other comparable reporting system for the trading day on the applicable date
and if such applicable date is not a trading day, the last market trading day
prior to such date;


 


(2)   If the
Common Stock is not traded on a national securities exchange but is traded on
the over-the-counter market, if sales prices are not regularly reported for the
Common Stock for the trading day referred to in clause (1), and if bid and
asked prices for the Common Stock are regularly reported, the mean between the
bid and the asked price for the Common Stock at the close of trading in the
over-the-counter market for the trading day on which Common Stock was traded on
the applicable date and if such applicable date is not a trading day, the last
market trading day prior to such date; and


 


(3)   If the
Common Stock is neither listed on a national securities exchange nor traded in
the over-the-counter market, such value as the Administrator, in good faith,
shall determine.


 


ISO   means an option meant to qualify as an incentive stock
option under Section 422 of the Code.


 


Non-Qualified Option   means an option which is not intended to
qualify as an ISO.


 


Option   means an ISO or Non-Qualified Option granted under the
Plan.


 


Participant   means an Employee, director or consultant
of the Company or an Affiliate to whom one or more Stock Rights are granted
under the Plan. As used herein, “Participant” shall include “Participant’s
Survivors” where the context requires.


 


Plan   means this Apogee Technology, Inc. 2007 Employee, Director and Consultant Stock
Plan.


 


Shares   means shares of the Common Stock as to which Stock Rights
have been or may be granted under the Plan or any shares of capital stock into
which the Shares are changed or for which they are exchanged within the
provisions of Paragraph 3 of the Plan. The Shares issued under the Plan
may be authorized and unissued shares or shares held by the Company in its
treasury, or both.


 


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Stock-Based Award   means a grant by the Company under the
Plan of an equity award or an equity based award which is not an Option or a
Stock Grant.


 


Stock Grant   means a grant by the Company of Shares
under the Plan.


 


Stock Right   means a right to Shares or the value of
Shares of the Company granted pursuant to the Plan—an ISO, a Non-Qualified
Option, a Stock Grant or a Stock-Based Award.


 


Survivor   means a deceased Participant’s legal
representatives and/or any person or persons who acquired the Participant’s
rights to a Stock Right by will or by the laws of descent and distribution.


 


2.  PURPOSES OF THE PLAN.


 


The
Plan is intended to encourage ownership of Shares by Employees and directors of
and certain consultants to the Company and its Affiliates in order to attract
and retain such people, to induce them to work for the benefit of the Company
or of an Affiliate and to provide additional incentive for them to promote the
success of the Company or of an Affiliate. The Plan provides for the granting
of ISOs, Non-Qualified Options, Stock Grants and Stock-Based Awards.


 


3.  SHARES SUBJECT TO THE
PLAN.


 


(a)  
The number of Shares which may be issued from time to time pursuant to this
Plan shall be 750,000, or the equivalent of such number of Shares after the
Administrator, in its sole discretion, has interpreted the effect of any stock
split, stock dividend, combination, recapitalization or similar transaction in
accordance with Paragraph 24 of the Plan.


 


(b)  
Notwithstanding Subparagraph (a) above, on the first day of each fiscal
year of the Company during the period beginning on and including the first day
of fiscal year 2008, and ending on the second day of fiscal year 2017, the
number of Shares that may be issued from time to time pursuant to the Plan,
shall be increased by an amount equal to the lesser of (i) 750,000 or the
equivalent of such number of Shares after the Administrator, in its sole
discretion, has interpreted the effect of any stock split, stock dividend, combination,
recapitalization or similar transaction in accordance with Paragraph 24 of the
Plan; and (ii) an amount determined by the Board. However this “evergreen”
feature shall, in no event, increase the number of shares eligible for issuance
under the Plan to an amount greater than 7% of the number of shares of Common
Stock outstanding on a fully diluted basis on the close of business on the on
the day prior to the increase (calculated by adding to the number of shares of
Common Stock outstanding, all outstanding securities convertible into Common
Stock on such date on an as converted basis).


 


(c)  
If an Option ceases to be “outstanding”, in whole or in part (other than by
exercise), or if the Company shall reacquire (at not more than its original
issuance price) any Shares issued pursuant to a Stock Grant or Stock-Based
Award, or if any Stock Right expires or is forfeited, cancelled, or otherwise
terminated or results in any Shares not being issued, the unissued Shares which
were subject to such Stock Right shall again be available for issuance from
time to time pursuant to this Plan. Notwithstanding the foregoing, if a Stock
Right is exercised, in whole or in part, by tender of Shares or if the Company’s
tax withholding obligation is satisfied by withholding Shares, the number of
Shares deemed to have been issued under the Plan for purposes of the limitation
set forth in Paragraph 3(a) above shall be the number of Shares that were
subject to the Stock Right or portion thereof, and not the net number of Shares
actually issued.


 


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4.  ADMINISTRATION OF THE
PLAN.


 


The
Administrator of the Plan will be the Board of Directors, except to the extent
the Board of Directors delegates its authority to the Committee, in which case
the Committee shall be the Administrator. Subject to the provisions of the
Plan, the Administrator is authorized to:


 


a.  Interpret the provisions of the Plan and
all Stock Rights and to make all rules and determinations which it deems
necessary or advisable for the administration of the Plan;


 


b.  Determine which Employees, directors and
consultants shall be granted Stock Rights;


 


c.  Determine the number of Shares for which
a Stock Right or Stock Rights shall be granted;


 


d.  Specify the terms and conditions upon
which a Stock Right or Stock Rights may be granted;


 


e.  Make changes to any outstanding Stock
Right, including, without limitation, to reduce or increase the exercise price
or purchase price, accelerate the vesting schedule or extend the expiration
date, provided that no such change shall impair the rights of a Participant
under any grant previously made without such Participant’s consent;


 


f.  Buy out for a payment in cash or Shares,
a Stock Right previously granted and/or cancel any such Stock Right and grant
in substitution therefor other Stock Rights, covering the same or a different
number of Shares and having an exercise price or purchase price per share which
may be lower or higher than the exercise price or purchase price of the cancelled
Stock Right, based on such terms and conditions as the Administrator shall
establish and the Participant shall accept; and


 


g.  Adopt any sub-plans applicable to
residents of any specified jurisdiction as it deems necessary or appropriate in
order to comply with or take advantage of any tax or other laws applicable to
the Company or to Plan Participants or to otherwise facilitate the
administration of the Plan, which sub-plans may include additional restrictions
or conditions applicable to Stock Rights or Shares issuable pursuant to a Stock
Right;


 


provided, however, that
all such interpretations, rules, determinations, terms and conditions shall be
made and prescribed in the context of preserving the tax status under
Section 422 of the Code of those Options which are designated as ISOs.
Subject to the foregoing, the interpretation and construction by the
Administrator of any provisions of the Plan or of any Stock Right granted under
it shall be final, unless otherwise determined by the Board of Directors, if
the Administrator is the Committee. In addition, if the Administrator is the
Committee, the Board of Directors may take any action under the Plan that would
otherwise be the responsibility of the Committee.


 


To the
extent permitted under applicable law, the Board of Directors or the Committee
may allocate all or any portion of its responsibilities and powers to any one
or more of its members and may delegate all or any portion of its
responsibilities and powers to any other person selected by it. The Board of
Directors or the Committee may revoke any such allocation or delegation at any
time.


 


5.  ELIGIBILITY FOR
PARTICIPATION.


 


The
Administrator will, in its sole discretion, name the Participants in the Plan,
provided, however, that each Participant must be an Employee, director or
consultant of the Company or of an Affiliate at the


 


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time a Stock Right is
granted. Notwithstanding the foregoing, the Administrator may authorize the
grant of a Stock Right to a person not then an Employee, director or consultant
of the Company or of an Affiliate; provided, however, that the actual grant of
such Stock Right shall be conditioned upon such person becoming eligible to
become a Participant at or prior to the time of the execution of the Agreement
evidencing such Stock Right. ISOs may be granted only to Employees.
Non-Qualified Options, Stock Grants and Stock-Based Awards may be granted to
any Employee, director or consultant of the Company or an Affiliate. The granting
of any Stock Right to any individual shall neither entitle that individual to,
nor disqualify him or her from, participation in any other grant of Stock
Rights.


 


6.  TERMS AND CONDITIONS OF
OPTIONS.


 


Each
Option shall be set forth in writing in an Option Agreement, duly executed by
the Company and, to the extent required by law or requested by the Company, by
the Participant. The Administrator may provide that Options be granted subject
to such terms and conditions, consistent with the terms and conditions
specifically required under this Plan, as the Administrator may deem
appropriate including, without limitation, subsequent approval by the
shareholders of the Company of this Plan or any amendments thereto. The Option
Agreements shall be subject to at least the following terms and conditions:


 


a.  Non-Qualified Options:   Each Option intended to be a
Non-Qualified Option shall be subject to the terms and conditions which the
Administrator determines to be appropriate and in the best interest of the
Company, subject to the following minimum standards for any such Non-Qualified
Option:


 


i.  Option Price:   Each Option Agreement shall
state the option price (per share) of the Shares covered by each Option, which
option price shall be determined by the Administrator but shall not be less
than the Fair Market Value per share of Common Stock.


 


ii.  Number of Shares:   Each Option Agreement shall
state the number of Shares to which it pertains.


 


iii.  Option Periods:   Each Option Agreement shall
state the date or dates on which it first is exercisable and the date after
which it may no longer be exercised, and may provide that the Option rights
accrue or become exercisable in installments over a period of months or years,
or upon the occurrence of certain conditions or the attainment of stated goals
or events.


 


iv.  Option Conditions:   Exercise of any Option may
be conditioned upon the Participant’s execution of a Share purchase agreement
in form satisfactory to the Administrator providing for certain protections for
the Company and its other shareholders, including requirements that:


 


A.  The Participant’s or the Participant’s
Survivors’ right to sell or transfer the Shares may be restricted; and


 


B.  The Participant or the Participant’s
Survivors may be required to execute letters of investment intent and must also
acknowledge that the Shares will bear legends noting any applicable
restrictions.


 


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b.  ISOs:   Each Option intended to be
an ISO shall be issued only to an Employee and be subject to the following
terms and conditions, with such additional restrictions or changes as the
Administrator determines are appropriate but not in conflict with
Section 422 of the Code and relevant regulations and rulings of the Internal
Revenue Service:


 


i.  Minimum standards:   The ISO shall meet the
minimum standards required of Non-Qualified Options, as described in Paragraph
6(a) above, except clause (i) thereunder.


 


ii.  Option Price:   Immediately before the ISO
is granted, if the Participant owns, directly or by reason of the applicable
attribution rules in Section 424(d) of the Code:


 


A.  10% or
less of the total combined voting power of all classes of stock of
the Company or an Affiliate, the Option price per share of the Shares covered
by each ISO shall not be less than 100% of the Fair Market Value per share of
the Shares on the date of the grant of the Option; or


 


B.  More than 10% of the total combined
voting power of all classes of stock of the Company or an Affiliate, the Option
price per share of the Shares covered by each ISO shall not be less than 110%
of the Fair Market Value on the date of grant.


 


iii.  Term of Option:   For Participants who own:


 


A.  10% or
less of the total combined voting power of all classes of stock of the
Company or an Affiliate, each ISO shall terminate not more than ten years from
the date of the grant or at such earlier time as the Option Agreement may
provide; or


 


B.  More than 10% of the total combined
voting power of all classes of stock of the Company or an Affiliate, each ISO
shall terminate not more than five years from the date of the grant or at such
earlier time as the Option Agreement may provide.


 


iv.  Limitation on Yearly
Exercise:  
The Option Agreements shall restrict the amount of ISOs which may become
exercisable in any calendar year (under this or any other ISO plan of the
Company or an Affiliate) so that the aggregate Fair Market Value (determined at
the time each ISO is granted) of the stock with respect to which ISOs are
exercisable for the first time by the Participant in any calendar year does not
exceed $100,000.


 


7.  TERMS AND CONDITIONS OF
STOCK GRANTS.


 


Each
offer of a Stock Grant to a Participant shall state the date prior to which the
Stock Grant must be accepted by the Participant, and the principal terms of
each Stock Grant shall be set forth in an Agreement, duly executed by the
Company and, to the extent required by law or requested by the Company, by the
Participant. The Agreement shall be in a form approved by the Administrator and
shall contain terms and conditions which the Administrator determines to be
appropriate and in the best interest of the Company, subject to the following
minimum standards:


 


(a)  Each Agreement shall state the purchase
price (per share), if any, of the Shares covered by each Stock Grant, which
purchase price shall be determined by the Administrator but shall not be less
than the minimum consideration required by the Delaware General Corporation Law
on the date of the grant of the Stock Grant;


 


(b)  Each Agreement shall state the number of
Shares to which the Stock Grant pertains; and


 


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(c)  Each Agreement shall include the terms of
any right of the Company to restrict or reacquire the Shares subject to the
Stock Grant, including the time and events upon which such rights shall accrue
and the purchase price therefor, if any.


 


8.  TERMS AND CONDITIONS OF
OTHER STOCK-BASED AWARDS.


 


The
Administrator shall have the right to grant other Stock-Based Awards based upon
the Common Stock having such terms and conditions as the Administrator may
determine, including, without limitation, the grant of Shares based upon
certain conditions, the grant of securities convertible into Shares and the
grant of stock appreciation rights, phantom stock awards or stock units. The
principal terms of each Stock-Based Award shall be set forth in an Agreement,
duly executed by the Company and, to the extent required by law or requested by
the Company, by the Participant. The Agreement shall be in a form approved by
the Administrator and shall contain terms and conditions which the
Administrator determines to be appropriate and in the best interest of the
Company.


 


9.  EXERCISE OF OPTIONS AND
ISSUE OF SHARES.


 


An
Option (or any part or installment thereof) shall be exercised by giving
written notice to the Company or its designee, together with provision for
payment of the full purchase price in accordance with this Paragraph for the
Shares as to which the Option is being exercised, and upon compliance with any
other condition(s) set forth in the Option Agreement. Such notice shall be
signed by the person exercising the Option, shall state the number of Shares
with respect to which the Option is being exercised and shall contain any representation
required by the Plan or the Option Agreement. Payment of the purchase price for
the Shares as to which such Option is being exercised shall be made (a) in
United States dollars in cash or by check, or (b) at the discretion of the
Administrator, through delivery of shares of Common Stock having a Fair Market
Value equal as of the date of the exercise to the cash exercise price of the
Option and held for at least six months, or (c) at the discretion of the
Administrator, by having the Company retain from the shares otherwise issuable
upon exercise of the Option, a number of shares having a Fair Market Value
equal as of the date of exercise to the exercise price of the Option, or
(d) at the discretion of the Administrator, in accordance with a cashless
exercise program established with a securities brokerage firm, and approved by
the Administrator, or (e) at the discretion of the Administrator, by any
combination of (a), (b), (c) and (d) above or (f) at the
discretion of the Administrator, payment of such other lawful consideration as
the Administrator may determine. Notwithstanding the foregoing, the
Administrator shall accept only such payment on exercise of an ISO as is
permitted by Section 422 of the Code.


 


The
Company shall then reasonably promptly deliver the Shares as to which such
Option was exercised to the Participant (or to the Participant’s Survivors, as
the case may be). In determining what constitutes “reasonably promptly,” it is
expressly understood that the issuance and delivery of the Shares may be
delayed by the Company in order to comply with any law or regulation
(including, without limitation, state securities or “blue sky” laws) which
requires the Company to take any action with respect to the Shares prior to
their issuance. The Shares shall, upon delivery, be fully paid, non-assessable
Shares.


 


The
Administrator shall have the right to accelerate the date of exercise of any
installment of any Option; provided that the Administrator shall not accelerate
the exercise date of any installment of any Option granted to an Employee as an
ISO (and not previously converted into a Non-Qualified Option pursuant to
Paragraph 27) without the prior approval of the Employee if such acceleration
would violate the annual vesting limitation contained in
Section 422(d) of the Code, as described in Paragraph 6(b)(iv).


 


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The
Administrator may, in its discretion, amend any term or condition of an
outstanding Option provided (i) such term or condition as amended is
permitted by the Plan, (ii) any such amendment shall be made only with the
consent of the Participant to whom the Option was granted, or in the event of
the death of the Participant, the Participant’s Survivors, if the amendment is
adverse to the Participant, and (iii) any such amendment of any Option
shall be made only after the Administrator determines whether such amendment
would constitute a “modification” of any Option which is an ISO (as that term
is defined in Section 424(h) of the Code) or would cause any adverse
tax consequences for the holder of such Option including, but not limited to,
pursuant to Section 409A of the Code.


 


10.  ACCEPTANCE OF STOCK
GRANTS AND STOCK-BASED AWARDS AND ISSUE OF SHARES.


 


A
Stock Grant or Stock-Based Award (or any part or installment thereof) shall be
accepted by executing the applicable Agreement and delivering it to the Company
or its designee, together with provision for payment of the full purchase
price, if any, in accordance with this Paragraph for the Shares as to which
such Stock Grant or Stock-Based Award is being accepted, and upon compliance
with any other conditions set forth in the applicable Agreement. Payment of the
purchase price for the Shares as to which such Stock Grant or Stock-Based Award
is being accepted shall be made (a) in United States dollars in cash or by
check, or (b) at the discretion of the Administrator, through delivery of
shares of Common Stock held for at least six months and having a Fair Market
Value equal as of the date of acceptance of the Stock Grant or Stock
Based-Award to the purchase price of the Stock Grant or Stock-Based Award, or
(c) at the discretion of the Administrator, by any combination of
(a) and (b) above; or (d) at the discretion of the Administrator,
payment of such other lawful consideration as the Administrator may determine.


 


The
Company shall then, if required by the applicable Agreement, reasonably
promptly deliver the Shares as to which such Stock Grant or Stock-Based Award
was accepted to the Participant (or to the Participant’s Survivors, as the case
may be), subject to any escrow provision set forth in the applicable Agreement.
In determining what constitutes “reasonably promptly,” it is expressly
understood that the issuance and delivery of the Shares may be delayed by the
Company in order to comply with any law or regulation (including, without
limitation, state securities or “blue sky” laws) which requires the Company to
take any action with respect to the Shares prior to their issuance.


 


The
Administrator may, in its discretion, amend any term or condition of an
outstanding Stock Grant, Stock-Based Award or applicable Agreement provided
(i) such term or condition as amended is permitted by the Plan,
(ii) any such amendment shall be made only with the consent of the
Participant to whom the Stock Grant or Stock-Based Award was made, if the
amendment is adverse to the Participant and (iii) any such amendment shall
be made only after the Administrator determines whether such amendment would
cause any adverse tax consequences to the Participant, including, but not
limited to, pursuant to Section 409A of the Code.


 


11.  RIGHTS AS A
SHAREHOLDER.


 


No
Participant to whom a Stock Right has been granted shall have rights as a
shareholder with respect to any Shares covered by such Stock Right, except
after due exercise of the Option or acceptance of the Stock Grant or as set
forth in any Agreement, and tender of the full purchase price, if any, for the
Shares being purchased pursuant to such exercise or acceptance and registration
of the Shares in the Company’s share register in the name of the Participant.


 


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12.  ASSIGNABILITY AND
TRANSFERABILITY OF STOCK RIGHTS.


 


By its
terms, a Stock Right granted to a Participant shall not be transferable by the
Participant other than (i) by will or by the laws of descent and
distribution, or (ii) as approved by the Administrator in its discretion
and set forth in the applicable Agreement.(1) Notwithstanding the foregoing, an
ISO transferred except in compliance with clause (i) above shall no longer
qualify as an ISO. The designation of a beneficiary of a Stock Right by a
Participant, with the prior approval of the Administrator and in such form as
the Administrator shall prescribe, shall not be deemed a transfer prohibited by
this Paragraph. Except as provided above, a Stock Right shall only be
exercisable or may only be accepted, during the Participant’s lifetime, by such
Participant (or by his or her legal representative) and shall not be assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment or similar process. Any
attempted transfer, assignment, pledge, hypothecation or other disposition of
any Stock Right or of any rights granted thereunder contrary to the provisions
of this Plan, or the levy of any attachment or similar process upon a Stock
Right, shall be null and void.


 


13.  EFFECT ON OPTIONS OF
TERMINATION OF SERVICE OTHER THAN “FOR CAUSE” OR DEATH OR DISABILITY.


 


Except
as otherwise provided in a Participant’s Option Agreement, in the event of a
termination of service (whether as an employee, director or consultant) with
the Company or an Affiliate before the Participant has exercised an Option, the
following rules apply:


 


a.  A Participant who ceases to be an
employee, director or consultant of the Company or of an Affiliate (for any
reason other than termination “for cause”, Disability, or death for which
events there are special rules in Paragraphs 14, 15, and 16,
respectively), may exercise any Option granted to him or her to the extent that
the Option is exercisable on the date of such termination of service, but only
within such term as the Administrator has designated in a Participant’s Option
Agreement.


 


b.  Except as provided in Subparagraph
(c) below, or Paragraph 15 or 16, in no event may an Option intended to be
an ISO, be exercised later than three months after the Participant’s
termination of employment.


 


c.  The provisions of this Paragraph, and not
the provisions of Paragraph 15 or 16, shall apply to a Participant who
subsequently becomes Disabled or dies after the termination of employment,
director status or consultancy; provided, however, in the case of a Participant’s
Disability or death within three months after the termination of employment,
director status or consultancy, the Participant or the Participant’s Survivors
may exercise the Option within one year after the date of the Participant’s
termination of service, but in no event after the date of expiration of the
term of the Option.


 






(1)  The form of non-qualified option
agreement contains a provision allowing for options to be transferred but
remain eligible for exercise pursuant to Form S-8.  Optionees should be
encouraged to discuss the gifting of options with their tax advisors as under
current law only the transfer of a vested option is deemed to be a completed
gift and the income tax liability associated with the exercise of the option
continues to be the responsibility of the original optionee.


 


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d.  Notwithstanding anything herein to the
contrary, if subsequent to a Participant’s termination of employment,
termination of director status or termination of consultancy, but prior to the
exercise of an Option, the Board of Directors determines that, either prior or
subsequent to the Participant’s termination, the Participant engaged in conduct
which would constitute “cause”, then such Participant shall forthwith cease to
have any right to exercise any Option.


 


e.  A Participant to whom an Option has been
granted under the Plan who is absent from the Company or an Affiliate because
of temporary disability (any disability other than a Disability as defined in
Paragraph 1 hereof), or who is on leave of absence for any purpose, shall not,
during the period of any such absence, be deemed, by virtue of such absence
alone, to have terminated such Participant’s employment, director status or
consultancy with the Company or with an Affiliate, except as the Administrator
may otherwise expressly provide; provided however that for ISOs any leave of
absence granted by the Administrator of greater than ninety days unless
pursuant to a contract or statute that guarantees the right to reemployment
shall cause such ISO to become a Non-Qualified Option.


 


f.  Except as required by law or as set forth
in a Participant’s Option Agreement, Options granted under the Plan shall not
be affected by any change of a Participant’s status within or among the Company
and any Affiliates, so long as the Participant continues to be an employee,
director or consultant of the Company or any Affiliate.


 


14.  EFFECT ON OPTIONS OF
TERMINATION OF SERVICE “FOR CAUSE”.


 


Except
as otherwise provided in a Participant’s Option Agreement, the following
rules apply if the Participant’s service (whether as an employee, director
or consultant) with the Company or an Affiliate is terminated “for cause” prior
to the time that all his or her outstanding Options have been exercised:


 


a.  All outstanding and unexercised Options
as of the time the Participant is notified his or her service is terminated “for
cause” will immediately be forfeited.


 


b.  For purposes of this Plan, “cause” shall
include (and is not limited to) dishonesty with respect to the Company or any
Affiliate, insubordination, substantial malfeasance or non-feasance of duty,
unauthorized disclosure of confidential information, breach by the Participant
of any provision of any employment, consulting, advisory, nondisclosure, non-competition
or similar agreement between the Participant and the Company, and conduct
substantially prejudicial to the business of the Company or any Affiliate. The
determination of the Administrator as to the existence of “cause” will be
conclusive on the Participant and the Company.


 


c.  “Cause” is not limited to events which
have occurred prior to a Participant’s termination of service, nor is it
necessary that the Administrator’s finding of “cause” occur prior to
termination. If the Administrator determines, subsequent to a Participant’s
termination of service but prior to the exercise of an Option, that either
prior or subsequent to the Participant’s termination the Participant engaged in
conduct which would constitute “cause”, then the right to exercise any Option
is forfeited.


 


d.  Any provision in an agreement between the
Participant and the Company or an Affiliate, which contains a conflicting
definition of “cause” for termination and which is in effect at the time of
such termination, shall supersede the definition in this Plan with respect to
that Participant.


 


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15.  EFFECT ON OPTIONS OF
TERMINATION OF SERVICE FOR DISABILITY.


 


Except
as otherwise provided in a Participant’s Option Agreement:


 


a.  A Participant who ceases to be an
employee, director or consultant of the Company or of an Affiliate by reason of
Disability may exercise any Option granted to such Participant:


 


(i)    To
the extent that the Option has become exercisable but has not been exercised on
the date of Disability; and


 


(ii)   In the
event rights to exercise the Option accrue periodically, to the extent of a pro
rata portion through the date of Disability of any additional vesting rights
that would have accrued on the next vesting date had the Participant not become
Disabled. The proration shall be based upon the number of days accrued in the
current vesting period prior to the date of Disability.


 


b.  A Disabled Participant may exercise such
rights only within the period ending one year after the date of the Participant’s
Disability, notwithstanding that the Participant might have been able to
exercise the Option as to some or all of the Shares on a later date if the
Participant had not become Disabled and had continued to be an employee,
director or consultant or, if earlier, within the originally prescribed term of
the Option.


 


c.  The Administrator shall make the
determination both of whether Disability has occurred and the date of its
occurrence (unless a procedure for such determination is set forth in another
agreement between the Company and such Participant, in which case such
procedure shall be used for such determination). If requested, the Participant
shall be examined by a physician selected or approved by the Administrator, the
cost of which examination shall be paid for by the Company.


 


16.  EFFECT ON OPTIONS OF
DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.


 


Except
as otherwise provided in a Participant’s Option Agreement:


 


a.  In the event of the death of a
Participant while the Participant is an employee, director or consultant of the
Company or of an Affiliate, such Option may be exercised by the Participant’s
Survivors:


 


(i)    To
the extent that the Option has become exercisable but has not been exercised on
the date of death; and


 


(ii)   In the
event rights to exercise the Option accrue periodically, to the extent of a pro
rata portion through the date of death of any additional vesting rights that
would have accrued on the next vesting date had the Participant not died. The
proration shall be based upon the number of days accrued in the current vesting
period prior to the Participant’s date of death.


 


b.  If the Participant’s Survivors wish to
exercise the Option, they must take all necessary steps to exercise the Option
within one year after the date of death of such Participant, notwithstanding
that the decedent might have been able to exercise the Option as to some or all
of the Shares on a later date if he or she had not died and had continued to be
an employee, director or consultant or, if earlier, within the originally
prescribed term of the Option.


 


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17.  EFFECT OF TERMINATION
OF SERVICE ON UNACCEPTED STOCK GRANTS.


 


In the
event of a termination of service (whether as an employee, director or
consultant) with the Company or an Affiliate for any reason before the
Participant has accepted a Stock Grant, such offer shall terminate.


 


For
purposes of this Paragraph 17 and Paragraph 18 below, a Participant to whom a
Stock Grant has been offered and accepted under the Plan who is absent from
work with the Company or with an Affiliate because of temporary disability (any
disability other than a Disability as defined in Paragraph 1 hereof), or who is
on leave of absence for any purpose, shall not, during the period of any such
absence, be deemed, by virtue of such absence alone, to have terminated such
Participant’s employment, director status or consultancy with the Company or
with an Affiliate, except as the Administrator may otherwise expressly provide.


 


In
addition, for purposes of this Paragraph 17 and Paragraph 18 below, any change
of employment or other service within or among the Company and any Affiliates
shall not be treated as a termination of employment, director status or
consultancy so long as the Participant continues to be an employee, director or
consultant of the Company or any Affiliate.


 


18.  EFFECT ON STOCK GRANTS
OF TERMINATION OF SERVICE OTHER THAN “FOR CAUSE” OR DEATH OR DISABILITY.


 


Except
as otherwise provided in a Participant’s Stock Grant Agreement, in the event of
a termination of service (whether as an employee, director or consultant),
other than termination “for cause,” Disability, or death for which events there
are special rules in Paragraphs 19, 20, and 21, respectively, before all
forfeiture provisions or Company rights of repurchase shall have lapsed, then
the Company shall have the right to cancel or repurchase that number of Shares
subject to a Stock Grant as to which the Company’s forfeiture or repurchase
rights have not lapsed.


 


19.  EFFECT ON STOCK GRANTS
OF TERMINATION OF SERVICE “FOR CAUSE”.


 


Except
as otherwise provided in a Participant’s Stock Grant Agreement, the following
rules apply if the Participant’s service (whether as an employee, director
or consultant) with the Company or an Affiliate is terminated “for cause”:


 


a.  All Shares subject to any Stock Grant
that remain subject to forfeiture provisions or as to which the Company shall
have a repurchase right shall be immediately forfeited to the Company as of the
time the Participant is notified his or her service is terminated for Cause.


 


b.  For purposes of this Plan, “cause” shall
include (and is not limited to) dishonesty with respect to the employer,
insubordination, substantial malfeasance or non-feasance of duty, unauthorized
disclosure of confidential information, breach by the Participant of any
provision of any employment, consulting, advisory, nondisclosure,
non-competition or similar agreement between the Participant and the Company,
and conduct substantially prejudicial to the business of the Company or any
Affiliate. The determination of the Administrator as to the existence of “cause”
will be conclusive on the Participant and the Company.


 


c.  “Cause” is not limited to events which
have occurred prior to a Participant’s termination of service, nor is it
necessary that the Administrator’s finding of “cause” occur prior to
termination. If the Administrator determines, subsequent to a Participant’s
termination of service, that either


 


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prior or subsequent to the Participant’s termination
the Participant engaged in conduct which would constitute “cause,” then the
Company’s right to repurchase all of such Participant’s Shares shall apply.


 


d.  Any provision in an agreement between the
Participant and the Company or an Affiliate, which contains a conflicting
definition of “cause” for termination and which is in effect at the time of
such termination, shall supersede the definition in this Plan with respect to
that Participant.


 


20.  EFFECT ON STOCK GRANTS
OF TERMINATION OF SERVICE FOR DISABILITY.


 


Except
as otherwise provided in a Participant’s Stock Grant Agreement, the following
rules apply if a Participant ceases to be an employee, director or
consultant of the Company or of an Affiliate by reason of Disability:  to
the extent the forfeiture provisions or the Company’s rights of repurchase have
not lapsed on the date of Disability, they shall be exercisable; provided,
however, that in the event such forfeiture provisions or rights of repurchase
lapse periodically, such provisions or rights shall lapse to the extent of a
pro rata portion of the Shares subject to such Stock Grant through the date of
Disability as would have lapsed had the Participant not become Disabled. The
proration shall be based upon the number of days accrued prior to the date of
Disability.


 


The
Administrator shall make the determination both of whether Disability has
occurred and the date of its occurrence (unless a procedure for such
determination is set forth in another agreement between the Company and such
Participant, in which case such procedure shall be used for such
determination). If requested, the Participant shall be examined by a physician
selected or approved by the Administrator, the cost of which examination shall
be paid for by the Company.


 


21.  EFFECT ON STOCK GRANTS
OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.


 


Except
as otherwise provided in a Participant’s Stock Grant Agreement, the following
rules apply in the event of the death of a Participant while the
Participant is an employee, director or consultant of the Company or of an
Affiliate:  to the extent the forfeiture provisions or the Company’s
rights of repurchase have not lapsed on the date of death, they shall be
exercisable; provided, however, that in the event such forfeiture provisions or
rights of repurchase lapse periodically, such provisions or rights shall lapse
to the extent of a pro rata portion of the Shares subject to such Stock Grant
through the date of death as would have lapsed had the Participant not died.
The proration shall be based upon the number of days accrued prior to the
Participant’s death.


 


22.  PURCHASE FOR
INVESTMENT.


 


Unless
the offering and sale of the Shares to be issued upon the particular exercise
or acceptance of a Stock Right shall have been effectively registered under the
Securities Act of 1933, as now in force or hereafter amended (the “1933 Act”),
the Company shall be under no obligation to issue the Shares covered by such
exercise unless and until the following conditions have been fulfilled:


 


a.  The person(s) who
exercise(s) or accept(s) such Stock Right shall warrant to the
Company, prior to the receipt of such Shares, that such person(s) are acquiring
such Shares for their own respective accounts, for investment, and not with a
view to, or for sale in connection with, the distribution of any such Shares,
in which event the person(s) acquiring such Shares shall be bound


 


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by the provisions of the following legend which shall
be endorsed upon the certificate(s) evidencing their Shares issued
pursuant to such exercise or such grant:


 


“The shares represented by this certificate have been
taken for investment and they may not be sold or otherwise transferred by any
person, including a pledgee, unless (1) either (a) a Registration
Statement with respect to such shares shall be effective under the Securities
Act of 1933, as amended, or (b) the Company shall have received an opinion
of counsel satisfactory to it that an exemption from registration under such
Act is then available, and (2) there shall have been compliance with all
applicable state securities laws.”


 


b.  At the discretion of the Administrator,
the Company shall have received an opinion of its counsel that the Shares may
be issued upon such particular exercise or acceptance in compliance with the
1933 Act without registration thereunder.


 


23.  DISSOLUTION OR
LIQUIDATION OF THE COMPANY.


 


Upon
the dissolution or liquidation of the Company, all Options granted under this
Plan which as of such date shall not have been exercised and all Stock Grants
and Stock-Based Awards which have not been accepted will terminate and become
null and void; provided, however, that if the rights of a Participant or a
Participant’s Survivors have not otherwise terminated and expired, the
Participant or the Participant’s Survivors will have the right immediately
prior to such dissolution or liquidation to exercise or accept any Stock Right
to the extent that the Stock Right is exercisable or subject to acceptance as
of the date immediately prior to such dissolution or liquidation. Upon the
dissolution or liquidation of the Company, any outstanding Stock-Based Awards
shall immediately terminate unless otherwise determined by the Administrator or
specifically provided in the applicable Agreement.


 


24.  ADJUSTMENTS.


 


Upon
the occurrence of any of the following events, a Participant’s rights with
respect to any Stock Right granted to him or her hereunder shall be adjusted as
hereinafter provided, unless otherwise specifically provided in a Participant’s
Agreement:


 


a.   Stock Dividends and Stock Splits.  
If (i) the shares of Common Stock shall be subdivided or combined into a
greater or smaller number of shares or if the Company shall issue any shares of
Common Stock as a stock dividend on its outstanding Common Stock, or
(ii) additional shares or new or different shares or other securities of
the Company or other non-cash assets are distributed with respect to such
shares of Common Stock, the number of shares of Common Stock deliverable upon
the exercise of an Option or acceptance of a Stock Grant shall be appropriately
increased or decreased proportionately, and appropriate adjustments shall be
made including, in the purchase price per share, to reflect such events. The
number of Shares subject to the limitations in Paragraph 3  shall also be proportionately adjusted
upon the occurrence of such events.


 


b.   Corporate Transactions.  
If the Company is to be consolidated with or acquired by another entity in a
merger, sale of all or substantially all of the Company’s assets other than a
transaction to merely change the state of incorporation (a “Corporate
Transaction”), the Administrator or the board of directors of any entity
assuming the obligations of the Company hereunder (the “Successor Board”),
shall, as to outstanding Options, either (i) make appropriate provision
for the continuation of such Options by substituting on an equitable basis for
the Shares then subject to such Options either the consideration payable with
respect to the outstanding shares of Common Stock in


 


A-14

















 


connection with the Corporate Transaction or securities
of any successor or acquiring entity; or (ii) upon written notice to the
Participants, provide that such Options must be exercised (either (A) to
the extent then exercisable or, (B) at the discretion of the
Administrator, any such Options being made fully exercisable for purposes of
this Subparagraph), within a specified number of days of the date of such
notice, at the end of which period such Options shall terminate; or
(iii) terminate such Options in exchange for a cash payment equal to the
excess of the Fair Market Value of the Shares subject to such Options (either
(A) to the extent then exercisable or, (B) at the discretion of the
Administrator, any such Options being made fully exercisable for purposes of
this Subparagraph) over the exercise price thereof.


 


Notwithstanding the
foregoing, in the event the Corporate Transaction also constitutes a Change of
Control, all Options outstanding on the date of the Corporate Transaction will
become fully exercisable, and will be available for exercise for a number of
days after the date of such notice and as specified by the Administrator, at
the end of which period the Options shall terminate.


 


With respect to
outstanding Stock Grants, the Administrator or the Successor Board, shall
either (i) make appropriate provisions for the continuation of such Stock
Grants on the same terms and conditions by substituting on an equitable basis
for the Shares then subject to such Stock Grants either the consideration
payable with respect to the outstanding Shares of Common Stock in connection
with the Corporate Transaction or securities of any successor or acquiring
entity; or (ii) terminate such Stock Grants in exchange for a cash payment
equal to the excess of the Fair Market Value of the Shares subject to such Stock
Grants over the purchase price thereof, if any. In addition, in the event of a
Corporate Transaction, the Administrator may waive any or all Company
forfeiture or repurchase rights with respect to outstanding Stock Grants.


 


c.   Recapitalization or Reorganization.  
In the event of a recapitalization or reorganization of the Company other than
a Corporate Transaction pursuant to which securities of the Company or of
another corporation are issued with respect to the outstanding shares of Common
Stock, a Participant upon exercising an Option or accepting a Stock Grant after
the recapitalization or reorganization shall be entitled to receive for the
purchase price paid upon such exercise or acceptance of the number of
replacement securities which would have been received if such Option had been
exercised or Stock Grant accepted prior to such recapitalization or
reorganization.


 


d.   Adjustments to Stock-Based Awards.  
Upon the happening of any of the events described in Subparagraphs a, b or c
above, any outstanding Stock-Based Award shall be appropriately adjusted to
reflect the events described in such Subparagraphs. The Administrator or the
Successor Board shall determine the specific adjustments to be made under this
Paragraph 24, including, but not limited to the effect if any, of a Change of
Control and, subject to Paragraph 4, its determination shall be conclusive.


 


e.   Modification of ISOs.  
Notwithstanding the foregoing, any adjustments made pursuant to Subparagraph a,
b or c above with respect to ISOs shall be made only after the Administrator
determines whether such adjustments would constitute a “modification” of such
ISOs (as that term is defined in Section 424(h) of the Code) or would
cause any adverse tax consequences for the holders of such ISOs. If the
Administrator determines that such adjustments made with respect to ISOs would
constitute a modification of such ISOs, it may refrain from making such
adjustments, unless the holder of an ISO specifically agrees in writing that
such adjustment be made and such writing indicates that the holder has full
knowledge of the consequences of such “modification” on his or her income tax


 


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treatment with respect to the ISO. This paragraph
shall not apply to the acceleration of the vesting of any ISO that would cause
any portion of the ISO to violate the annual vesting limitation contained in
Section 422(d) of the Code, as described in Paragraph 6b(iv).


 


25.  ISSUANCES OF
SECURITIES.


 


Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares subject to Stock Rights. Except as expressly provided
herein, no adjustments shall be made for dividends paid in cash or in property
(including without limitation, securities) of the Company prior to any issuance
of Shares pursuant to a Stock Right.


 


26.  FRACTIONAL SHARES.


 


No
fractional shares shall be issued under the Plan and the person exercising a
Stock Right shall receive from the Company cash in lieu of such fractional
shares equal to the Fair Market Value thereof.


 


27.  CONVERSION  OF
ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.


 


The
Administrator, at the written request of any Participant, may in its discretion
take such actions as may be necessary to convert such Participant’s ISOs (or
any portions thereof) that have not been exercised on the date of conversion
into Non-Qualified Options at any time prior to the expiration of such ISOs,
regardless of whether the Participant is an employee of the Company or an
Affiliate at the time of such conversion. At the time of such conversion, the
Administrator (with the consent of the Participant) may impose such conditions
on the exercise of the resulting Non-Qualified Options as the Administrator in
its discretion may determine, provided that such conditions shall not be
inconsistent with this Plan. Nothing in the Plan shall be deemed to give any
Participant the right to have such Participant’s ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Administrator takes appropriate action. The Administrator, with the consent of
the Participant, may also terminate any portion of any ISO that has not been
exercised at the time of such conversion.


 


28.  WITHHOLDING.


 


In the
event that any federal, state, or local income taxes, employment taxes, Federal
Insurance Contributions Act (“F.I.C.A.”) withholdings or other amounts are
required by applicable law or governmental regulation to be withheld from the
Participant’s salary, wages or other remuneration in connection with the
exercise or acceptance of a Stock Right or in connection with a Disqualifying
Disposition (as defined in Paragraph 29) or upon the lapsing of any forfeiture
provision or right of repurchase or for any other reason required by law, the
Company may withhold from the Participant’s compensation, if any, or may
require that the Participant advance in cash to the Company, or to any
Affiliate of the Company which employs or employed the Participant, the
statutory minimum amount of such withholdings unless a different withholding
arrangement, including the use of shares of the Company’s Common Stock or a
promissory note, is authorized by the Administrator (and permitted by law). For
purposes hereof, the fair market value of the shares withheld for purposes of
payroll withholding shall be determined in the manner provided in Paragraph 1
above, as of the most recent practicable date prior to the date of exercise. If
the fair market value of the shares withheld is less than the amount of payroll
withholdings required, the Participant may be required to advance the
difference in cash to the Company or the Affiliate employer. The Administrator
in its discretion may condition the exercise of an


 


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Option for less than the
then Fair Market Value on the Participant’s payment of such additional
withholding.


 


29.  NOTICE TO COMPANY OF
DISQUALIFYING DISPOSITION.


 


Each
Employee who receives an ISO must agree to notify the Company in writing
immediately after the Employee makes a Disqualifying Disposition of any shares
acquired pursuant to the exercise of an ISO. A Disqualifying Disposition is
defined in Section 424(c) of the Code and includes any disposition
(including any sale or gift) of such shares before the later of (a) two
years after the date the Employee was granted the ISO, or (b) one year
after the date the Employee acquired Shares by exercising the ISO, except as
otherwise provided in Section 424(c) of the Code. If the Employee has
died before such stock is sold, these holding period requirements do not apply
and no Disqualifying Disposition can occur thereafter.


 


30.  TERMINATION OF THE
PLAN.


 


The
Plan will terminate on June 9, 2017, the date which is ten years from the earlier of the date of its adoption by the
Board of Directors and the date of its approval by the shareholders of the
Company. The Plan may be terminated at an earlier date by vote of the
shareholders or the Board of Directors of the Company; provided, however, that
any such earlier termination shall not affect any Agreements executed prior to
the effective date of such termination.


 


31.  AMENDMENT OF THE PLAN
AND AGREEMENTS.


 


The
Plan may be amended by the shareholders of the Company. The Plan may also be
amended by the Administrator, including, without limitation, to the extent
necessary to qualify any or all outstanding Stock Rights granted under the Plan
or Stock Rights to be granted under the Plan for favorable federal income tax
treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, and to the extent
necessary to qualify the shares issuable upon exercise or acceptance of any
outstanding Stock Rights granted, or Stock Rights to be granted, under the Plan
for listing on any national securities exchange or quotation in any national
automated quotation system of securities dealers. Any amendment approved by the
Administrator which the Administrator determines is of a scope that requires
shareholder approval shall be subject to obtaining such shareholder approval.
Any modification or amendment of the Plan shall not, without the consent of a
Participant, adversely affect his or her rights under a Stock Right previously
granted to him or her. With the consent of the Participant affected, the
Administrator may amend outstanding Agreements in a manner which may be adverse
to the Participant but which is not inconsistent with the Plan. In the
discretion of the Administrator, outstanding Agreements may be amended by the
Administrator in a manner which is not adverse to the Participant.


 


32.  EMPLOYMENT OR OTHER
RELATIONSHIP.


 


Nothing
in this Plan or any Agreement shall be deemed to prevent the Company or an
Affiliate from terminating the employment, consultancy or director status of a
Participant, nor to prevent a Participant from terminating his or her own
employment, consultancy or director status or to give any Participant a right
to be retained in employment or other service by the Company or any Affiliate
for any period of time.


 


33.  GOVERNING LAW.


 


This
Plan shall be construed and enforced in accordance with the law of the State of
Delaware.


 


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