Unassociated Document



EXHIBIT
4.1







2004
INCENTIVE STOCK OPTION PLAN 

(as
Amended MARCH 16, 2005)

 

ARTICLE
ONE  

 

GENERAL
PROVISIONS

 

I.   PURPOSE
OF THE PLAN

 

This 2004
INCENTIVE STOCK OPTION PLAN is intended to promote the interests of
INTERNATIONAL MICROCOMPUTER SOFTWARE, INC., a California corporation (the
“Corporation”), by providing eligible persons with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in the service of the
Corporation. 

 

Capitalized
terms herein shall have the meanings assigned to such terms in the attached
Appendix.

 

II.   STRUCTURE
OF THE PLAN

 

A.  The Plan
shall be divided into two (2) separate equity programs:

 

(i)  the
Option Grant Program under which eligible persons may, at the discretion of the
Plan Administrator, be granted options to purchase shares of Common Stock,
and

 

(ii)  the Stock
Issuance Program under which eligible persons may, at the discretion of the Plan
Administrator, be issued shares of Common Stock directly, either through the
immediate purchase of such shares or as a bonus for services rendered the
Corporation (or any Parent or Subsidiary).

 

B.  The
provisions of ‎Article
One and
‎Article
Four shall
apply to both equity programs under the Plan and shall accordingly govern the
interests of all persons under the Plan.

 

III.   ADMINISTRATION
OF THE PLAN

 

A.  The Plan
shall be administered by the Board. However, any or all administrative functions
otherwise exercisable by the Board may be delegated to the Committee. Members of
the Committee shall serve for such periods of time as the Board may determine
and shall be subject to removal by the Board at any time. The Board may also at
any time terminate the functions of the Committee and reassume all powers and
authority previously delegated to the Committee.

 

 







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B.  The Plan
Administrator shall have full power and authority (subject to the provisions of
the Plan) to establish such rules and regulations as it may deem appropriate for
proper administration of the Plan and to make such determinations under, and
issue such interpretations of, the Plan and any outstanding options or stock
issuances thereunder as it may deem necessary or advisable. Decisions of the
Plan Administrator shall be final and binding on all parties who have an
interest in the Plan or any option or stock issuance thereunder.

 

IV.   ELIGIBILITY

 

A.  The
persons eligible to participate in the Plan are as follows:

 

(i)  Employees,

 

(ii)  non-employee
members of the Board or the non-employee members of the board of directors of
any Parent or Subsidiary, and

 

(iii)  consultants
and other independent advisors who provide services to the Corporation (or any
Parent or Subsidiary).

 

B.  The Plan
Administrator shall have full authority to determine, (i) with respect to the
option grants under the Option Grant Program, which eligible persons are to
receive option grants, the time or times when such option grants are to be made,
the number of shares to be covered by each such grant, the status of the granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times at which each option is to become exercisable, the vesting schedule (if
any) applicable to the option shares and the maximum term for which the option
is to remain outstanding, and (ii) with respect to stock issuances under the
Stock Issuance Program, which eligible persons are to receive stock issuances,
the time or times when such issuances are to be made, the number of shares to be
issued to each Participant, the vesting schedule (if any) applicable to the
issued shares and the consideration to be paid by the Participant for such
shares.

 

V.   STOCK
SUBJECT TO THE PLAN

 

A.  The stock
issuable under the Plan shall be shares of authorized but unissued or reacquired
Common Stock. The maximum number of shares of Common Stock which may be issued
over the term of the Plan shall not exceed four million (4,000,000) shares (Plan
was originally issued with three million (3,000,000) shares and amended on March
`16, 2005 to four million (4,000,000)); provided, however, that the number of
shares issuable on exercise of outstanding options under the Plan and all other
stock option, stock bonus and similar plans or agreements of the Corporation
(except as otherwise provided by the California Corporations Code and
regulations promulgated thereunder) shall at no time exceed thirty percent (30%)
of the number of outstanding shares of the Corporation’s capital stock. In the
event that the Corporation’s Board of Directors authorizes the grant of options
under the Plan such that the 30% limit set forth above is exceeded, those
options authorized in excess of the 30% limit will not be considered granted
until such time as (i) additional shares are issued by the Corporation to bring
the authorized options within the 30% limit, or (ii) the consent of the holders
of at least two-thirds of the Company’s outstanding shares is obtained to the
issuance of options in excess of the 30% limit.

 

 







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B.  Shares of
Common Stock subject to outstanding options shall be available for subsequent
issuance under the Plan to the extent (i) the options expire or terminate for
any reason prior to exercise in full or (ii) the options are cancelled in
accordance with the cancellation-regrant provisions of ‎Article
Two.
Unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the option exercise price paid per share, pursuant to the
Corporation’s repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan.

 

C.  Should
any change be made to the Common Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the
Corporation’s receipt of consideration, appropriate adjustments shall be made to
(i) the maximum number and/or class of securities issuable under the Plan and
(ii) the number and/or class of securities and the exercise price per share in
effect under each outstanding option in order to prevent the dilution or
enlargement of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive. In no event shall any such
adjustments be made in connection with the conversion of one or more outstanding
shares of the Corporation’s preferred stock into shares of Common
Stock.

 

ARTICLE
TWO  

 

OPTION
GRANT PROGRAM

 

I.   OPTION
TERMS

 

Each
option shall be evidenced by one or more documents in the form approved by the
Plan Administrator; provided,
however, that each such document shall comply with the terms specified below.
Each document evidencing an Incentive Option shall, in addition, be subject to
the provisions of the Plan applicable to such options.

 

A.  Exercise
Price.

 

1.  The
exercise price per share shall be fixed by the Plan Administrator in accordance
with the following provisions:

 

(i)  The
exercise price per share shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the option grant
date.

 

(ii)  If the
person to whom the option is granted is a 10% Shareholder, then the exercise
price per share shall not be less than one hundred ten percent (110%) of the
Fair Market Value per share of Common Stock on the option grant
date.

 

 







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2.  The
exercise price shall become immediately due upon exercise of the option and
shall, subject to the documents evidencing the option, be payable in cash or
check made payable to the Corporation or by a promissory note as described in
Section ‎I of
‎Article
Four. Should
the Common Stock be registered under Section 12(g) of the 1934 Act at the time
the option is exercised, then the exercise price may also be paid as
follows:

 

(i)  in shares
of Common Stock held for the requisite period necessary to avoid a charge to the
Corporation’s earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date, or

 

(ii)  to the
extent the option is exercised for vested shares, through a special sale and
remittance procedure pursuant to which the Optionee shall concurrently provide
irrevocable written instructions to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in order
to complete the sale.

 

Except to
the extent such sale and remittance procedure is utilized, payment of the
exercise price for the purchased shares must be made on the Exercise
Date.

 

B.  Exercise
and Term of Options.   Each
option shall be exercisable at such time or times, during such period and for
such number of shares as shall be determined by the Plan Administrator and set
forth in the documents evidencing the option grant. However, no option shall
have a term in excess of ten (10) years measured from the option grant
date.

 

C.  Effect
of Termination of Service.

 

1.  The
following provisions shall govern the exercise of any options held by the
Optionee at the time of cessation of Service or death:

 

(i)  Should
the Optionee cease to remain in Service for any reason other than Disability or
death, then the Optionee shall have a period of three (3) months following the
date of such cessation of Service during which to exercise each outstanding
option held by such Optionee.

 

(ii)  Should
Optionee’s Service terminate by reason of Disability, then the Optionee shall
have a period of twelve (12) months following the date of such cessation of
Service during which to exercise each outstanding option held by such
Optionee.

 

(iii)  If the
Optionee dies while holding an outstanding option, then the personal
representative of his or her estate or the person or persons to whom the option
is transferred pursuant to the Optionee’s will or the laws of inheritance shall
have a twelve (12)-month period following the date of the Optionee’s death to
exercise such option.

 

(iv)  Under no
circumstances, however, shall any such option be exercisable after the specified
expiration of the option term.

 

 







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(v)  During
the applicable post-Service exercise period, the option may not be exercised in
the aggregate for more than the number of vested shares for which the option is
exercisable on the date of the Optionee’s cessation of Service. Upon the
expiration of the applicable exercise period or (if earlier) upon the expiration
of the option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However, the
option shall, immediately upon the Optionee’s cessation of Service, terminate
and cease to be outstanding with respect to any and all option shares for which
the option is not otherwise at the time exercisable or in which the Optionee is
not otherwise at that time vested.

 

2.  The Plan
Administrator shall have the discretion, exercisable either at the time an
option is granted or at any time while the option remains outstanding,
to:

 

(i)  extend
the period of time for which the option is to remain exercisable following
Optionee’s cessation of Service or death from the limited period otherwise in
effect for that option to such greater period of time as the Plan Administrator
shall deem appropriate, but in no event beyond the expiration of the option
term, and/or

 

(ii)  permit
the option to be exercised, during the applicable post-Service exercise period,
not only with respect to the number of vested shares of Common Stock for which
such option is exercisable at the time of the Optionee’s cessation of Service
but also with respect to one or more additional installments in which the
Optionee would have vested under the option had the Optionee continued in
Service.

 

D.  Shareholder
Rights.   The
holder of an option shall have no shareholder rights with respect to the shares
subject to the option until such person shall have exercised the option, paid
the exercise price and become a holder of record of the purchased
shares.

 

E.  Unvested
Shares.   The Plan
Administrator shall have the discretion to grant options which are exercisable
for unvested shares of Common Stock. Should the Optionee cease Service while
holding such unvested shares, the Corporation shall have the right to
repurchase, at the exercise price paid per share, all or (at the discretion of
the Corporation and with the consent of the Optionee) any of those unvested
shares. The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase
right.

 

F.  First
Refusal Rights.   Until
such time as the Common Stock is first registered under Section 12(g) of
the 1934 Act, the Corporation shall have the right of first refusal with respect
to any proposed disposition by the Optionee (or any successor in interest) of
any shares of Common Stock issued under the Plan. Such right of first refusal
shall be exercisable in accordance with the terms established by the Plan
Administrator and set forth in the document evidencing such right.

 

 







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G.  Limited
Transferability of Options.   During
the lifetime of the Optionee, the option shall be exercisable only by the
Optionee and shall not be assignable or transferable other than by will or by
the laws of descent and distribution following the Optionee’s
death.

 

H.  Withholding.   The
Corporation’s obligation to deliver shares of Common Stock upon the exercise of
any options granted under the Plan shall be subject to the satisfaction of all
applicable federal, state and local income and employment tax withholding
requirements.

 

II.   INCENTIVE
OPTIONS

 

The terms
specified below shall be applicable to all Incentive Options. Except as modified
by the provisions of this Section II, all the provisions of the Plan shall be
applicable to Incentive Options. Options which are specifically designated as
Non-Statutory Options shall not
be
subject to the terms of this Section II.

 

A.  Eligibility.   Incentive
Options may only be granted to Employees.

 

B.  Exercise
Price.   The
exercise price per share shall not be less than one hundred percent (100%) of
the Fair Market Value per share of Common Stock on the option grant
date.

 

C.  Dollar
Limitation.   The
aggregate Fair Market Value of the shares of Common Stock (determined as of the
respective date or dates of grant) for which one or more options granted to any
Employee under the Plan (or any other option plan of the Corporation or any
Parent or Subsidiary) may for the first time become exercisable as Incentive
Options during any one (1) calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more
such options which become exercisable for the first time in the same calendar
year, the foregoing limitation on the exercisability of such options as
Incentive Options shall be applied on the basis of the order in which such
options are granted.

 

D.  10%
Shareholder.  If any
Employee to whom an Incentive Option is granted is a 10% Shareholder, then the
option term shall not exceed five (5) years measured from the option grant
date.

 

III.   CORPORATE
TRANSACTION

 

A.  The
shares subject to each option outstanding under the Plan at the time of a
Corporate Transaction shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the time
subject to that option and may be exercised for any or all of those shares as
fully vested shares of Common Stock. However, the shares subject to an
outstanding option shall not vest on
such an accelerated basis if and to the extent: (i) such option is assumed by
the successor corporation (or parent thereof) in the Corporate Transaction and
the Corporation’s repurchase rights with respect to the unvested option shares
are concurrently assigned to such successor corporation (or parent thereof) or
(ii) such option is to be replaced with a cash incentive program of the
successor corporation which preserves the spread existing on the unvested option
shares at the time of the Corporate Transaction and provides for subsequent
payout in accordance with the same vesting schedule applicable to those unvested
option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option
grant.

 

 







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B.  All
outstanding repurchase rights shall also terminate automatically, and the shares
of Common Stock subject to those terminated rights shall immediately vest in
full, in the event of any Corporate Transaction, except to the extent: (i) those
repurchase rights are assigned to the successor corporation (or parent thereof)
in connection with such Corporate Transaction or (ii) such accelerated vesting
is precluded by other limitations imposed by the Plan Administrator at the time
the repurchase right is issued.

 

C.  Immediately
following the consummation of the Corporate Transaction, all outstanding options
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).

 

D.  Each
option which is assumed in connection with a Corporate Transaction shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
to the number and class of securities which would have been issuable to the
Optionee in consummation of such Corporate Transaction, had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to (i) the number and class of securities
available for issuance under the Plan following the consummation of such
Corporate Transaction and (ii) the exercise price payable per share under each
outstanding option, provided the
aggregate exercise price payable for such securities shall remain the
same.

 

E.  The Plan
Administrator shall have the discretion, exercisable either at the time the
option is granted or at any time while the option remains outstanding, to
provide for the automatic acceleration (in whole or in part) of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights, with the immediate vesting of the shares of Common Stock
subject to those terminated rights) upon the occurrence of a Corporate
Transaction, whether or not those options are to be assumed or replaced (or
those repurchase rights are to be assigned) in the Corporate
Transaction.

 

F.  The Plan
Administrator shall also have full power and authority, exercisable either at
the time the option is granted or at any time while the option remains
outstanding, to structure such option so that the shares subject to that option
will automatically vest on an accelerated basis should the Optionee’s Service
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which the option is assumed and the repurchase rights
applicable to those shares do not otherwise terminate. Any such option shall
remain exercisable for the fully vested option shares until the earlier of (i)
the expiration of the option term or (ii) the expiration of the one (1)-year
period measured from the effective date of the Involuntary Termination. In
addition, the Plan Administrator may provide that one or more of the outstanding
repurchase rights with respect to shares held by the Optionee at the time of
such Involuntary Termination shall immediately terminate on an accelerated
basis, and the shares subject to those terminated rights shall accordingly
vest.

 

 







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G.  The
portion of any Incentive Option accelerated in connection with a Corporate
Transaction shall remain exercisable as an Incentive Option only to the extent
the applicable One Hundred Thousand Dollar limitation is not exceeded. To the
extent such dollar limitation is exceeded, the accelerated portion of such
option shall be exercisable as a Non-Statutory Option under the Federal tax
laws.

 

H.  The grant
of options under the Plan shall in no way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.

 

IV.   CANCELLATION
AND REGRANT OF OPTIONS

 

The Plan
Administrator shall have the authority to effect, at any time and from time to
time, with the consent of the affected option holders, the cancellation of any
or all outstanding options under the Plan and to grant in substitution therefor
new options covering the same or different number of shares of Common Stock but
with an exercise price per share based on the Fair Market Value per share of
Common Stock on the new option grant date.

 

ARTICLE
THREE

 

STOCK
ISSUANCE PROGRAM

 

I.   STOCK
ISSUANCE TERMS

 

Shares of
Common Stock may be issued under the Stock Issuance Program through direct and
immediate issuances without any intervening option grants. Each such stock
issuance shall be evidenced by a Stock Issuance Agreement which complies with
the terms specified below.

 

A.  Purchase
Price.

 

1.  The
purchase price per share shall be fixed by the Plan Administrator but shall not
be less than eighty-five percent (85%) of the Fair Market Value per share of
Common Stock on the issue date. However, the purchase price per share of Common
Stock issued to a 10% Shareholder shall not be less than one hundred and ten
percent (110%) of such Fair Market Value.

 

2.  Shares of
Common Stock may be issued under the Stock Issuance Program for any of the
following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

 

(i)  cash or
check made payable to the Corporation, or

 

(ii)  past
services rendered to the Corporation (or any Parent or Subsidiary).

 

(iii)  a
promissory note as described in Section ‎I of
‎Article
Four.

 

 







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B.  Vesting
Provisions.

 

1.  Shares of
Common Stock issued under the Stock Issuance Program may, in the discretion of
the Plan Administrator, be fully and immediately vested upon issuance or may
vest in one or more installments over the Participant’s period of Service or
upon attainment of specified performance objectives. However, the Plan
Administrator may not impose a vesting schedule upon any stock issuance effected
under the Stock Issuance Program which is more restrictive than twenty percent
(20%) per year vesting, with initial vesting to occur not later than one (1)
year after the issuance date.

 

2.  Any new,
substituted or additional securities or other property (including money paid
other than as a regular cash dividend) which the Participant may have the right
to receive with respect to the Participant’s unvested shares of Common Stock by
reason of any stock dividend, stock split, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation’s receipt of consideration shall be
issued subject to (i) the same vesting requirements applicable to the
Participant’s unvested shares of Common Stock and (ii) such escrow arrangements
as the Plan Administrator shall deem appropriate.

 

3.  The
Participant shall have full shareholder rights with respect to any shares of
Common Stock issued to the Participant under the Stock Issuance Program, whether
or not the Participant’s interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends paid on such shares.

 

4.  Should
the Participant cease to remain in Service while holding one or more unvested
shares of Common Stock issued under the Stock Issuance Program or should the
performance objectives not be attained with respect to one or more such unvested
shares of Common Stock, then those shares shall be immediately surrendered to
the Corporation for cancellation, and the Participant shall have no further
shareholder rights with respect to those shares. To the extent the surrendered
shares were previously issued to the Participant for consideration paid in cash
or cash equivalent (including the Participant’s purchase-money indebtedness),
the Corporation shall repay to the Participant the cash consideration paid for
the surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to such
surrendered shares.

 

5.  The Plan
Administrator may in its discretion waive the surrender and cancellation of one
or more unvested shares of Common Stock (or other assets attributable thereto)
which would otherwise occur upon the non-completion of the vesting schedule
applicable to such shares. Such waiver shall result in the immediate vesting of
the Participant’s interest in the shares of Common Stock as to which the waiver
applies. Such waiver may be effected at any time, whether before or after the
Participant’s cessation of Service or the attainment or non-attainment of the
applicable performance objectives.

 

 







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C.  First
Refusal Rights.   Until
such time as the Common Stock is first registered under Section 12(g) of
the 1934 Act, the Corporation shall have the right of first refusal with respect
to any proposed disposition by the Participant (or any successor in interest) of
any shares of Common Stock issued under the Stock Issuance Program. Such right
of first refusal shall be exercisable in accordance with the terms established
by the Plan Administrator and set forth in the document evidencing such
right.

 

II.   CORPORATE
TRANSACTION

 

A.  Upon the
occurrence of a Corporate Transaction, all outstanding repurchase rights under
the Stock Issuance Program shall terminate automatically, and the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
except to the extent: (i) those repurchase rights are assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.

 

B.  The Plan
Administrator shall have the discretionary authority, exercisable either at the
time the unvested shares are issued or any time while the Corporation’s
repurchase rights with respect to those shares remain outstanding, to provide
that those rights shall automatically terminate on an accelerated basis, and the
shares of Common Stock subject to those terminated rights shall immediately
vest, in the event the Participant’s Service should subsequently terminate by
reason of an Involuntary Termination within a designated period (not to exceed
eighteen (18) months) following the effective date of any Corporate Transaction
in which those repurchase rights are assigned to the successor corporation (or
parent thereof).

 

III.   SHARE
ESCROW/LEGENDS

 

Unvested
shares may, in the Plan Administrator’s discretion, be held in escrow by the
Corporation until the Participant’s interest in such shares vests or may be
issued directly to the Participant with restrictive legends on the certificates
evidencing those unvested shares.

 

ARTICLE
FOUR

 

MISCELLANEOUS

 

I.   FINANCING

 

The Plan
Administrator may permit any Optionee or Participant to pay the option exercise
price or the purchase price for shares issued to such person under the Plan by
delivering a full-recourse, interest-bearing promissory note payable in one or
more installments and secured by the purchased shares. However, any promissory
note delivered by a consultant must be secured by property in addition to the
purchased shares of Common Stock. In no event shall the maximum credit available
to the Optionee or Participant exceed the sum of (i)
the aggregate option exercise price or purchase price payable for the purchased
shares plus (ii) any federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.

 







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II.   EFFECTIVE
DATE AND TERM OF PLAN

 

A.  The Plan
shall become effective when adopted by the Board, but no option granted under
the Plan may be exercised, and no shares shall be issued under the Plan, until
the Plan is approved by the Corporation’s shareholders. If such shareholder
approval is not obtained within twelve (12) months after the date of the Board’s
adoption of the Plan, then all options previously granted under the Plan shall
terminate and cease to be outstanding, and no further options shall be granted
and no shares shall be issued under the Plan. Subject to such limitation, the
Plan Administrator may grant options and issue shares under the Plan at any time
after the effective date of the Plan and before the date fixed herein for
termination of the Plan.

 

B.  The Plan
shall terminate upon the earliest of (i)
the expiration of the ten (10) year period measured from the date the Plan is
adopted by the Board, (ii) the date on which all shares available for issuance
under the Plan shall have been issued or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. All options and
unvested stock issuances outstanding at that time under the Plan shall continue
to have full force and effect in accordance with the provisions of the documents
evidencing such options or issuances.

 

III.   AMENDMENT
OF THE PLAN

 

A.  The Board
shall have complete and exclusive power and authority to amend or modify the
Plan in any or all respects. However, no such amendment or modification shall
adversely affect the rights and obligations with respect to options or unvested
stock issuances at the time outstanding under the Plan unless the Optionee or
the Participant consents to such amendment or modification. In addition, certain
amendments may require shareholder approval pursuant to applicable laws and
regulations.

 

B.  Options
may be granted under the Option Grant Program and shares may be issued under the
Stock Issuance Program which are in each instance in excess of the number of
shares of Common Stock then available for issuance under the Plan, provided any
excess shares actually issued under those programs shall be held in escrow until
there is obtained shareholder approval of an amendment sufficiently increasing
the number of shares of Common Stock available for issuance under the Plan. If
such shareholder approval is not obtained within twelve (12) months after the
date the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees and
the Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.

 

IV.   USE
OF PROCEEDS

 

Any cash
proceeds received by the Corporation from the sale of shares of Common Stock
under the Plan shall be used for general corporate purposes.

 

 







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V.   WITHHOLDING

 

The
Corporation’s obligation to deliver shares of Common Stock upon the exercise of
any options or upon the issuance or vesting of any shares issued under the Plan
shall be subject to the satisfaction of all applicable federal, state and local
income and employment tax withholding requirements.

 

VI.   REGULATORY
APPROVALS

 

The
implementation of the Plan, the granting of any options under the Plan and the
issuance of any shares of Common Stock (i) upon the exercise of any option or
(ii) under the Stock Issuance Program shall be subject to the Corporation’s
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options granted under it and the shares
of Common Stock issued pursuant to it.

 

VII.   NO
EMPLOYMENT OR SERVICE RIGHTS

 

Nothing
in the Plan shall confer upon the Optionee or the Participant any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee or the
Participant, which rights are hereby expressly reserved by each, to terminate
such person’s Service at any time for any reason, with or without
cause.

 

VIII.   FINANCIAL
REPORTS

 

The
Corporation shall deliver a balance sheet and an income statement at least
annually to each individual holding an outstanding option under the Plan, unless
such individual is a key Employee whose duties in connection with the
Corporation (or any Parent or Subsidiary) assure such individual access to
equivalent information.













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APPENDIX

 

The
following definitions shall be in effect under the Plan:

 

A.   Board shall
mean the Corporation’s Board of Directors.

 

B.   Code shall
mean the Internal Revenue Code of 1986, as amended.

 

C.   Committee shall
mean a committee of two (2) or more Board members appointed by the Board to
exercise one or more administrative functions under the Plan.

 

D.   Common
Stock shall
mean the Corporation’s common stock.

 

E.   Corporate
Transaction shall
mean either of the following shareholder-approved transactions to which the
Corporation is a party:

 

(i)  a merger
or consolidation in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation’s outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such transaction, or

 

(ii)  the sale,
transfer or other disposition of all or substantially all of the Corporation’s
assets in complete liquidation or dissolution of the Corporation.

 

F.   Disability shall
mean the inability of the Optionee or the Participant to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances.

 

G.   Employee shall
mean an individual who is in the employ of the Corporation (or any Parent or
Subsidiary), subject to the control and direction of the employer entity as to
both the work to be performed and the manner and method of
performance.

 

H.   Exercise
Date shall
mean the date on which the Corporation shall have received written notice of the
option exercise.

 

 I.   Fair
Market Value per share
of Common Stock on any relevant date shall be determined in accordance with the
following provisions:

 

(i)  If the
Common Stock is at the time traded on the Nasdaq National Market, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the
date in question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor system. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

 

 







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(ii)  If the
Common Stock is at the time listed on any Stock Exchange, then the Fair Market
Value shall be the closing selling price per share of Common Stock on the date
in question on the Stock Exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which such
quotation exists.

 

(iii)  If the
Common Stock is at the time neither listed on any Stock Exchange nor traded on
the Nasdaq National Market, then the Fair Market Value shall be determined by
the Plan Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.

 

J.   Incentive
Option shall
mean an option which satisfies the requirements of Code
Section 422.

 

K.   Involuntary
Termination shall
mean the termination of the Service of any individual which occurs by reason
of:

 

(i)  such
individual’s involuntary dismissal or discharge by the Corporation for reasons
other than Misconduct, or

 

(ii)  such
individual’s voluntary resignation following (A) a change in his or her position
with the Corporation which materially reduces his or her level of
responsibility, (B) a reduction in his or her level of compensation (including
base salary, fringe benefits and target bonuses under any corporate-performance
based bonus or incentive programs) by more than fifteen percent (15%) or (C) a
relocation of such individual’s place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is effected
without the individual’s consent.

 

L.   Misconduct shall
mean the commission of any act of fraud, embezzlement or dishonesty by the
Optionee or Participant, any unauthorized use or disclosure by such person of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by such person adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
any Optionee, Participant or other person in the Service of the Corporation (or
any Parent or Subsidiary).

 

M.   1934
Act shall
mean the Securities Exchange Act of 1934, as amended.

 

N.   Non-Statutory
Option shall
mean an option not intended to satisfy the requirements of Code Section
422.

 

O.   Option
Grant Program shall
mean the option grant program in effect under the Plan.

 

 







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P.   Optionee shall
mean any person to whom an option is granted under the Plan.

 

Q.   Parent shall
mean any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation, provided each corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

 

R.   Participant shall
mean any person who is issued shares of Common Stock under the Stock Issuance
Program.

 

S.   Plan shall
mean the Corporation’s 2004 Incentive Stock Option Plan.

 

T.   Plan
Administrator shall
mean either the Board or the Committee acting in its capacity as administrator
of the Plan.

 

U.   Service shall
mean the provision of services to the Corporation (or any Parent or Subsidiary)
by a person in the capacity of an Employee, a non-employee member of the board
of directors or a consultant, except to the extent otherwise specifically
provided in the documents evidencing the option grant.

 

V.   Stock
Exchange shall
mean either the American Stock Exchange or the New York Stock
Exchange.

 

W.   Stock
Issuance Agreement shall
mean the agreement entered into by the Corporation and the Participant at the
time of issuance of shares of Common Stock under the Stock Issuance
Program.

 

 X.   Stock
Issuance Program shall
mean the stock issuance program in effect under the Plan.

 

 Y.   Subsidiary shall
mean any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, provided each corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

 

 Z.   10%
Shareholder shall
mean the owner of stock (as determined under Code Section 424(d)) possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Corporation (or any Parent or Subsidiary).

 








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