**Exhibit 10.14**

 

HORIZON ORGANIC HOLDING CORPORATION

 

1998 EQUITY INCENTIVE PLAN

 

ADOPTED OCTOBER 25, 1995

AMENDED AND RESTATED APRIL 14, 1998

APPROVED BY STOCKHOLDERS APRIL 30, 1998

AMENDED AND RESTATED MARCH 31, 2000

APPROVED BY STOCKHOLDERS MAY 16, 2000

AMENDED AND RESTATED JANUARY 31, 2002

APPROVED BY STOCKHOLDERS MAY 14, 2002

AMENDED AND RESTATED JULY 31, 2002

PLAN TERMINATION DATE: APRIL 13, 2008

 

1.                                       PURPOSES.

 

(a)                     The purpose of the Plan is to provide a means bywhich selected Employees and Directors of and Consultants to the Company andits Affiliates, may be given an opportunity to benefit from increases in valueof the stock of the Company through the granting of (i) Incentive StockOptions, (ii) Nonstatutory Stock Options, (iii) stock bonuses and (iv) rightsto acquire restricted stock.

 

(b)                    The Company, by means of the Plan, seeks to retainthe services of persons who are now Employees or Directors of or Consultants tothe Company or its Affiliates, to secure and retainthe services of new Employees, Directors and Consultants, and to provideincentives for such persons to exert maximum efforts for the success of theCompany and its Affiliates.

 

2.                                       DEFINITIONS.

 

(a)                     “AFFILIATE” means any parentcorporation or subsidiary corporation of the Company, whether now or hereafterexisting, as those terms are defined in Sections 424(e) and (f) respectively,of the Code.

 

(b)                    “BOARD” means the Board ofDirectors of the Company.

 

(c)                     “CODE” means the Internal Revenue Code of 1986, asamended.

 

(d)                    “COMMITTEE” means a Committeeappointed by the Board in accordance with subsection 3(c) of the Plan.

 

(e)                     “COMMON STOCK” means the commonstock of the Company:

 

(f)                       “COMPANY” means Horizon OrganicHolding Corporation, a Delaware corporation.

 

(g)                    “CONSULTANT” means any person, including anadvisor, (i) engaged by the Company or an Affiliate to render consultingservices and who is compensated for such services or (ii) who is a member ofthe Board of Directors of an Affiliate. However, the term “Consultant” shallnot include Directors who are paid only a director’s fee by the Company or whoare not compensated by the Company for their services as Directors.

(h)                    “CONTINUOUS SERVICE” means the Stock Awardholder’s service with the Company or an Affiliate, whether as an Employee,Director or Consultant is not interrupted or terminated. The Board or the chiefexecutive officer of the Company may determine, in that party’s solediscretion, whether Continuous Service shall be considered interrupted in thecase of: (i) any leave of absence approved by the Board or the chief executiveofficer of the Company, including sick leave, military leave, or any otherpersonal leave; or (ii) transfers between locations of the Company or betweenthe Company, Affiliates or their successors.

 

(i)                        “COVERED EMPLOYEE” means the chief executiveofficer and the four (4) other highest compensated officers of the Company forwhom total compensation is required to be reported to stockholders under theExchange Act, as determined for purposes of Section 162(m) of the Code.

 

(j)                        “DIRECTOR” means a member of the Board ofDirectors of the Company.

 

(k)                     “DISABILITY” means the inability of a person toperform the normal duties of the person’s position with the Company or anAffiliate of the Company, provided that such inability to perform must becertified in writing (a “Physician’s Certificate”) by a medical doctor,reasonably acceptable to the Company.

 

(l)                        “EMPLOYEE” means any person employed by theCompany or any Affiliate. Neither service as a Director nor payment of adirector’s fee by the Company or an Affiliate shall be sufficient to constitute“employment” by the Company or an Affiliate.

 

(m)                  “EXCHANGE ACT” means the Securities Exchange Act of1934, as amended.

 

(n)                    “FAIR MARKET VALUE” means, as of any date, thevalue of the Common Stock of the Company determined as follows:

 

(1)                         If the Common Stock islisted on any established stock exchange or traded on The Nasdaq NationalMarket or The Nasdaq SmallCap Market, the Fair Market Value of a share ofCommon Stock shall be the closing sales price for such stock (or the closingbid, if no sales were reported) as quoted on such exchange or market (or theexchange or market with the greatest volume of trading in the Common Stock) onthe last market trading day prior to the day of determination, as reported inThe Wall Street Journal or such other source as the Board deems reliable; or

 

(2)                         In the absence of anestablished market for the Common Stock, the Fair Market Value shall bedetermined in good faith by the Board.

 

(o)                    “INCENTIVE STOCK OPTION” means an Option intendedto qualify as an incentive stock option within the meaning of Section 422 ofthe Code and the regulations promulgated thereunder.

 

(p)                    “LISTING DATE” means the first date upon which anysecurity of the Company is listed (or approved for listing) upon notice ofissuance on any securities exchange, or designated (or approved fordesignation) upon notice of issuance as a national market security on aninterdealer quotation system.

(q)                    “NON-EMPLOYEE DIRECTOR” means a Director whoeither (i) is not a current Employee or Officer of the Company or its parent orsubsidiary, does not receive compensation (directly or indirectly) from theCompany or its parent or subsidiary for services rendered as a consultant or inany capacity other than as a Director (except for an amount as to whichdisclosure would not be required under Item 404(a) of Regulation S-Kpromulgated pursuant to the Securities Act (“Regulation S-K”)), does notpossess an interest in any other transaction as to which disclosure would berequired under Item 404(a) of Regulation S-K, and is not engaged in a businessrelationship as to which disclosure would be required under Item 404(b) ofRegulation S-K; or (ii) is otherwise considered a “non- employee director” forpurposes of Rule 16b-3.

 

(r)                       “NONSTATUTORY STOCK OPTION” means an Option notintended to qualify as an Incentive Stock Option.

 

(s)                     “OFFICER” means a person who is an officer of theCompany within the meaning of Section 16 of the Exchange Act and the rules andregulations promulgated thereunder.

 

(t)                       “OPTION” means an Incentive Stock Option or aNonstatutory Stock Option granted pursuant to the Plan.

 

(u)                    “OPTION AGREEMENT” means a written agreementbetween the Company and an Optionee evidencing the terms and conditions of anindividual Option grant. Each Option Agreement shall be subject to the termsand conditions of the Plan.

 

(v)                    “OPTIONEE” means a person to whom an Option isgranted pursuant to the Plan, or if applicable, such other person who holds anoutstanding Option.

 

(w)                  “OUTSIDE DIRECTOR” means a Director who either (i) isnot a current employee of the Company or an “affiliated corporation” (withinthe meaning of the Treasury regulations promulgated under Section 162(m) of theCode), is not a former employee of the Company or an “affiliated corporation”receiving compensation for prior services (other than benefits under a taxqualified pension plan), was not an officer of the Company or an “affiliatedcorporation” at any time, and is not currently receiving direct or indirectremuneration from the Company or an “affiliated corporation” for services inany capacity other than as a Director, or (ii) is otherwise considered an“outside director” for purposes of Section 162(m) of the Code.

 

(y)                    “PLAN” means this 1998 Equity Incentive Plan.

 

(z)                      “RULE 16B-3” means Rule 16b-3 of the Exchange Actor any successor to Rule 16b-3, as in effect when discretion is being exercisedwith respect to the Plan.

 

(aa)               “SECURITIES ACT” means the Securities Act of 1933, asamended.

 

(bb)             “STOCK AWARD” means any right granted under the Plan,including any Option, a stock bonus and any right to acquire restricted stock.

 

(cc)               “STOCK AWARD AGREEMENT” means a written agreementbetween the Company and a holder of a Stock Award evidencing the terms andconditions of an individual Stock Award grant. Each Stock Award Agreement shallbe subject to the terms and conditions of the Plan.

3.                                       ADMINISTRATION.

 

(a)                     The Plan shall be administered by the Board unlessand until the Board delegates administration to a Committee, as provided insubsection 3(c).

 

(b)                    The Board shall have the power, subject to, andwithin the limitations of, the express provisions of the Plan:

 

(1)                         To determine from timeto time which of the persons eligible under the Plan shall be granted StockAwards; when and how each Stock Award shall be granted; what type of StockAward shall be granted; the provisions of each Stock Award granted (which neednot be identical), including the time or times when a person shall be permittedto receive stock pursuant to a Stock Award; and the number of shares withrespect to which a Stock Award shall be granted to each such person.

 

(2)                         To construe andinterpret the Plan and Stock Awards granted under it, and to establish, amendand revoke rules and regulations for its administration.The Board, in theexercise of this power, may correct any defect, omission or inconsistency inthe Plan or in any Stock Award Agreement, in a manner and to the extent itshall deem necessary or expedient to make the Plan fully effective.

 

(3)                         To amend the Plan or aStock Award as provided in Section 12.

 

(c)                     The Board may delegate administration of the Planto a committee composed of two (2) or more members (the “Committee”), all ofthe members of which Committee may be Non-Employee Directors and/or OutsideDirectors. If administration is delegated to a Committee, the Committee shallhave, in connection with the administration of the Plan, the powers theretoforepossessed by the Board including the power to delegate to a subcommittee of twoor more Directors (who may or may not be Outside Directors or Non-EmployeeDirectors) any of the administrative powers to the Committee is authorized toexercise (and references in this Plan to the Board shall thereafter mean theCommittee or such a subcommittee), subject, however, to such resolutions, notinconsistent with the provisions of the Plan, as may be adopted from time totime by the Board. The Board may abolish the Committee at any time and revestin the Board the administration of the Plan. Notwithstanding anything in thisSection 3 to the contrary, the Board or the Committee may delegate to acommittee of one or more members of the Board the authority to grant StockAwards to eligible persons who (x) are not then subject to Section 16 of theExchange Act and/or (y) are either (i) not then Covered Employees and are notexpected to be Covered Employees at the time of recognition of income resultingfrom such Option, or (ii) not persons with respect to whom the Company wishesto comply with Section 162(m) of the Code.

 

(d)                    All actions taken and all interpretations anddeterminations made by the Board or Committee in good faith (includingdeterminations of Fair Market Value) shall be final and binding upon allOptionees, the Company and all other interested persons. No member of the Boardor Committee shall be personally liable for any action, determination orinterpretation made in good faith with respect to the Plan, and all members ofthe Board and Committee shall, in addition to their right as directors, befully protected by the Company with respect to any such action, determinationor interpretation.

4.                                       SHARES SUBJECT TO THEPLAN.

 

(a)                     Subject to the provisions of Section 11 relating toadjustments upon changes in stock, the stock that may be issued pursuant toStock Awards shall not exceed in the aggregate Two Million Two-Hundred FiftyThousand (2,250,000) shares of the Common Stock.If any Stock Award shall forany reason expire or otherwise terminate, in whole or in part, without havingbeen exercised in full, the stock not acquired under such Stock Award shallrevert to and again become available for issuance under the Plan. If any sharesof Common Stock acquired pursuant to the exercise of an Option shall for anyreason be repurchased by the Company under a repurchase option provided underthe Plan, the stock repurchased by the Company under such repurchase optionshall revert to and again become available for issuance under the Plan.

 

(b)                    The stock subject to the Plan may be unissuedshares or reacquired shares, bought on the market or otherwise.

 

5.                                       ELIGIBILITY.

 

(a)                     Incentive Stock Options may be granted only toEmployees. Stock Awards other than Incentive Stock Options may be granted onlyto Employees, Directors or Consultants.

 

(b)                    No person shall be eligible for the grant of anIncentive Stock Option if, at the time of grant, such person owns (or is deemedto own pursuant to Section 424(d) of the Code) stock possessing more than tenpercent (10%) of the total combined voting power of all classes of stock of theCompany or of any of its Affiliates unless the exercise price of such IncentiveStock Option is at least one hundred ten percent (110%) of the Fair MarketValue of such stock at the date of grant and the Incentive Stock Option is notexercisable after the expiration of five (5) years from the date of grant.

 

(c)                     Subject to the provisions of Section 11 relatingto adjustments upon changes in stock, no person shall be eligible to be grantedOptions covering more than two hundred fifty thousand (250,000) shares ofCommon Stock in any calendar year.This subsection 5(c) shall not apply prior tothe Listing Date and, following the Listing Date, shall not apply until (i) theearliest of:(A) the first material modification of the Plan (including anyincrease to the number of shares reserved for issuance under the Plan inaccordance with Section 4); (B) the issuance of all of the shares of CommonStock reserved for issuance under the Plan; (C) the expiration of the Plan; or(D) the first meeting of stockholders at which directors are to be elected thatoccurs after the close of the third calendar year following the calendar yearin which occurred the first registration of an equity security under section 12of the Exchange Act; or (ii) such other date required by Section 162(m) of theCode and the rules and regulations promulgated thereunder.

 

6.                                       OPTION PROVISIONS.

 

Each Option shall be in suchform and shall contain such terms and conditions as the Board shall deemappropriate.All Options shall be separately designated Incentive Stock Optionsor Nonstatutory Stock Options at the time of grant, and a separate certificateor certificates will be issued for shares purchased on exercise of each type ofOption. The provisions of separate Options need not be identical, but eachOption shall include (through incorporation of provisions hereof by referencein the Option or otherwise) the substance of each of the following provisions:

(a)                     TERM.No Option shall be exercisable after theexpiration of ten (10) years from the date it was granted.

 

(b)                    PRICE.The exercise price of each Incentive StockOption shall be not less than one hundred percent (100%) of the Fair MarketValue of the stock subject to the Incentive Stock Option on the date theIncentive Stock Option is granted or such greater amount as required by Section5(b).The exercise price of each Nonstatutory Stock Option shall be determinedby the Board. Notwithstanding the foregoing, an Option (whether an IncentiveStock Option or a Nonstatutory Stock Option) may be granted with an exerciseprice lower than that set forth in the preceding sentence if such Option isgranted pursuant to an assumption or substitution for another option in a mannersatisfying the provisions of Section 424(a) of the Code.

 

(c)                     CONSIDERATION.The purchase price of stock acquiredpursuant to an Option shall be paid at the time the Option is exercised, to theextent permitted by applicable statutes and regulations, either (i) in cash orby check or (ii) at the discretion of the Board, at the time of the grant ofthe Option, under one of the following alternatives:

 

(1)                         Provided that at thetime of exercise the Common Stock is publicly traded and quoted regularly inThe Wall Street Journal, pursuant to a program developed under Regulation T aspromulgated by the Federal Reserve Board which, prior to the issuance of CommonStock, results in either the receipt of cash (or check) by the Company or thereceipt of irrevocable instructions to pay the aggregate exercise price to theCompany from the sales proceeds;

 

(2)                         Provided that at thetime of exercise the Common Stock is publicly traded and quoted regularly inThe Wall Street Journal, by delivery of already-owned shares of Common Stock,held for the period required to avoid a charge to the Company’s reportedearnings, and owned free and clear of any liens, claims, encumbrances orsecurity interests, which Common Stock shall be valued at its fair market valueon the date of exercise;

 

(3)                         Pursuant to a deferredpayment alternative as described in the Option Agreement, provided that, at anytime that the Company is incorporated in Delaware, payment of the CommonStock’s “par value” (as defined in the Delaware General Corporation Law) shallnot be made by deferred payment;

 

(4)                         In any other form oflegal consideration that may be acceptable to the Board; or

 

(5)                         By any combination ofthe above methods.

(d)                    TRANSFERABILITY.An Incentive Stock Option shallnot be transferable except by will or by the laws of descent and distribution,and shall be exercisable during the lifetime of the person to whom the Optionis granted only by such person.A Nonstatutory Stock Option may be transferableto the extent expressly provided in the Option Agreement; provided, however,that if the Option Agreement does not specifically provide for transferability,then such Nonstatutory Stock Option shall not be transferable except by will orby the laws of descent and distribution or pursuant to a domestic relationsorder, and shall be exercisable during the lifetime of the person to whom theNonstatutory Stock Option is granted only by such person or any transfereepursuant to a domestic relations order. Notwithstanding the foregoing, theperson to whom the Option is granted may, by delivering written notice to theCompany, in a form satisfactory to the Company, designate a third party who, inthe event of the death of the Optionee, shall thereafter be entitled toexercise the Option.

 

(e)                     VESTING. The total number of shares of stocksubject to an Option shall vest and become exercisable as provided in theOption Agreement.

 

(f)                       TERMINATION OF CONTINUOUS SERVICE. In the event anOptionee’s Continuous Service terminates (other than upon the Optionee’s deathor Disability), the Optionee may exercise his or her Option (to the extent thatthe Optionee was entitled to exercise it at the date of termination) but onlywithin such period of time ending on the earlier of (i) the date three (3)months after the termination of the Optionee’s Continuous Service (or suchlonger or shorter period specified in the Option Agreement) or (ii) theexpiration of the term of the Option as set forth in the Option Agreement. If,after termination, the Optionee does not exercise his or her Option within thetime specified in the Option Agreement, the Option shall terminate, and theshares covered by such Option shall revert to and again become available forissuance under the Plan.

 

An Optionee’s Option Agreement may also provide that ifthe exercise of the Option following the termination of the Optionee’sContinuous Service (other than upon the Optionee’s death or Disability) wouldbe prohibited at any time solely because the issuance of shares would violatethe registration requirements under the Securities Act or any materialregulatory requirements of any foreign jurisdiction, then the Option shallterminate on the earlier of (i) the expiration of the term of the Option as setforth in the Option Agreement, or (ii) the expiration of a period of three (3)months after the termination of the Optionee’s Continuous Service during whichthe exercise of the Option would not be in violation of such registrationrequirements.

 

(g)                    DISABILITY OF OPTIONEE.In the event an Optionee’sContinuous Service terminates as a result of the Optionee’s Disability, theOptionee may exercise his or her Option, but only within such period of timeending on the earlier of (i) the date twelve (12) months following suchtermination (or such longer or shorter period specified in the OptionAgreement), or (ii) the expiration of the term of the Option as set forth inthe Option Agreement.If, at the date of termination, the Optionee is notentitled to exercise the entire Option, the shares covered by the unexercisableportion of the Option shall revert to and again become available for issuanceunder the Plan no later than thirty (30) days following the date oftermination.If, after termination, the Optionee does not exercise his or herOption within the time specified herein, the Option shall terminate, and theshares covered by such Option shall revert to and again become available forissuance under the Plan.

(h)                    DEATH OF OPTIONEE. In the event of the death of anOptionee during, or within the three (3) month or twelve (12) month periodsreferred to above after the termination of, the Optionee’s Continuous Service,the Option may be exercised by the Optionee’s estate, by a person who acquiredthe right to exercise the Option by bequest or inheritance or by a person designatedto exercise the option upon the Optionee’s death pursuant to subsection 6(d),but only within the period ending on the earlier of (i) the date twelve (12)months following the date of death (or such longer or shorter period specifiedin the Option Agreement), or (ii) the expiration of the term of such Option asset forth in the Option Agreement. If, at the time of death, the Optionee wasnot entitled to exercise the entire Option, the shares covered by theunexercisable portion of the Option shall revert to and again become availablefor issuance under the Plan no later than thirty (30) days following the dateof termination. If, after death, the Option is not exercised within the timespecified herein, the Option shall terminate, and the shares covered by suchOption shall revert to and again become available for issuance under the Plan.

 

(i)                        QUALIFIED RETIREMENT OF OPTIONEE. In the event anOptionee’s Continuous Service terminates as a result of the Optionee’sQualified Retirement (as determined by the Board of Directors or theCommittee), the Optionee may exercise his or her Option, but only within suchperiod of time ending on the expiration of the term of the Option as set forthin the Option Agreement (or such shorter period specified in the OptionAgreement). If, at the date of such termination, the Optionee is not entitledto exercise the entire Option, the shares covered by the unexercisable portionof the Option shall revert to and again become available for issuance under thePlan no later than thirty (30) days following the date of termination. If,after such termination, the Optionee does not exercise his or her Option withinthe time specified herein, the Option shall terminate, and the shares coveredby such Option shall revert to and again become available for issuance underthe Plan.

 

(j)                        EARLY EXERCISE.The Option may, but need not,include a provision whereby the Optionee may elect at any time before theOptionee’s Continuous Service terminates to exercise the Option as to any partor all of the shares subject to the Option prior to the full vesting of theOption.Any unvested shares so purchased shall be subject to a repurchase rightin favor of the Company or any other restriction the Board determinesappropriate.

 

7.                                       TERMS OF STOCK BONUSESAND PURCHASES OF RESTRICTED STOCK.

 

(a)                     Each stock bonus or restricted stock purchaseagreement shall be in such form and shall contain such terms and conditions asthe Board shall deem appropriate. The terms and conditions of stock bonus orrestricted stock purchase agreements may change from time to time, and theterms and conditions of separate agreements need not be identical, but eachstock bonus or restricted stock purchase agreement shall include (throughincorporation of provisions hereof by reference in the agreement or otherwise)the substance of each of the following provisions as appropriate:

 

(1)                         PURCHASE PRICE.Thepurchase price under each restricted stock purchase agreement shall be suchamount as the Board shall determine and designate in such agreement, but in noevent shall the purchase price be less than eighty-five percent (85%) of thestock’s Fair Market Value on the date such award is made.Notwithstanding theforegoing, the Board may determine that eligible participants in the Plan maybe awarded stock pursuant to a stock bonus agreement in consideration for pastservices actually rendered to the Company for its benefit.

(2)        TRANSFERABILITY.Astock bonus or restricted stock purchase agreement may be transferable to theextent expressly provided in the Stock Award Agreement; provided, however, thatif the Stock Award Agreement does not specifically provide for transferability,then such stock bonus or restricted stock purchase award shall not betransferable except by will or the laws of descent and distribution or pursuantto a domestic relations order, and shall be exercisable during the lifetime ofthe person to whom the stock bonus or restricted stock purchase award isgranted only by such person or any transferee pursuant to a domestic relationsorder, so long as stock awarded under such agreement remains subject to anyrestrictions pursuant to the agreement.

 

(3)        CONSIDERATION.Thepurchase price of stock acquired pursuant to a restricted stock purchaseagreement shall be paid either:(i) in cash at the time of purchase; (ii) at thediscretion of the Board, according to a deferred payment or other arrangementwith the person to whom the stock is sold; or (iii) in any other form of legalconsideration that may be acceptable to the Board in itsdiscretion.Notwithstanding the foregoing, the Board may award stock pursuant toa stock bonus agreement in consideration for past services actually rendered tothe Company or for its benefit.

 

(4)                         VESTING.Shares of stocksold or awarded under the Plan may, but need not, be subject to a repurchaseoption or reacquisition right in favor of the Company in accordance with avesting schedule to be determined by the Board.

 

(5)                         TERMINATION OFCONTINUOUS SERVICE.In the event a Participant’s Continuous Service terminates,the Company may repurchase or otherwise reacquire any or all of the shares ofstock held by that person which have not vested as of the date of terminationunder the terms of the stock bonus or restricted stock purchase agreement betweenthe Company and such person, subject to the provisions of Section 11.

 

8.                                       COVENANTS OF THECOMPANY.

 

(a)                     During the terms of the Stock Awards, the Companyshall keep available at all times the number of shares of stock required tosatisfy such Stock Awards.

 

(b)                    The Company shall seek to obtain from eachregulatory commission or agency having jurisdiction over the Plan suchauthority as may be required to grant Stock Awards and to issue and sell sharesof Common Stock upon exercise of the Stock Awards; provided, however, that thisundertaking shall not require the Company to register under the Securities Actthe Plan, any Stock Award or any stock issued or issuable pursuant to any suchStock Award.If, after reasonable efforts, the Company is unable to obtain fromany such regulatory commission or agency the authority which counsel for theCompany deems necessary for the lawful issuance and sale of stock under thePlan, the Company shall be relieved from any liability for failure to issue andsell stock upon exercise of such Stock Awards unless and until such authorityis obtained.

 

9.                                       USE OF PROCEEDS FROMSTOCK.

 

Proceeds from the sale of stock pursuant to Stock Awardsshall constitute general funds of the Company.

10.                                 MISCELLANEOUS.

 

(a)                     The Board shall have the power to accelerate thetime at which a Stock Award may first be exercised or the time during which aStock Award or any part thereof will vest, notwithstanding the provisions inthe Stock Award stating the time at which it may first be exercised or the timeduring which it will vest.

 

(b)                    No Optionee shall be deemed to be the holder of,or to have any of the rights of a holder with respect to, any shares subject tosuch Stock Award unless and until such person has satisfied all requirementsfor exercise of the Stock Award pursuant to its terms.

 

(c)                     Nothing in the Plan or any instrument executed orStock Award granted pursuant thereto shall confer upon any Optionee any rightto continue in the employ of the Company or any Affiliate (or to continue actingas a Director or Consultant) or shall affect the right of the Company or anyAffiliate to terminate the employment of any Employee with or without cause,the right of the Company’s Board of Directors and/or the Company’s stockholdersto remove any Director pursuant to the terms of the Company’s Bylaws and theprovisions of applicable laws, or the right to terminate the relationship ofany Consultant pursuant to the terms of such Consultant’s agreement with theCompany or Affiliate to which such Consultant is providing services.

 

(d)                    To the extent that the aggregate Fair Market Value(determined at the time of grant) of stock with respect to which IncentiveStock Options are exercisable for the first time by any Optionee during anycalendar year under all plans of the Company and its Affiliates exceeds onehundred thousand dollars ($100,000), the Options or portions thereof whichexceed such limit (according to the order in which they were granted) shall betreated as Nonstatutory Stock Options.

 

(e)                     The Company may require any person to whom a StockAward is granted, or any person to whom a Stock Award is transferred pursuantto subsection 6(d) or 7(a)(2), as a condition of exercising or acquiring stockunder any Stock Award, (1) to give written assurances satisfactory to theCompany as to such person’s knowledge and experience in financial and businessmatters and/or to employ a purchaser representative reasonably satisfactory tothe Company who is knowledgeable and experienced in financial and business matters,and that he or she is capable of evaluating, alone or together with thepurchaser representative, the merits and risks of exercising the Stock Award;and (2) to give written assurances satisfactory to the Company stating thatsuch person is acquiring the stock subject to the Stock Award for such person’sown account and not with any present intention of selling or otherwisedistributing the stock. The foregoing requirements, and any assurances givenpursuant to such requirements, shall be inoperative if (i) the issuance of theshares upon the exercise or acquisition of stock under the Stock Award has beenregistered under a then currently effective registration statement under theSecurities Act, or (ii) as to any particular requirement, a determination ismade by counsel for the Company that such requirement need not be met in thecircumstances under the then applicable securities laws.The Company may requirethe Stock Award holder to provide such other representations, writtenassurances or information which the Company shall determine is necessary,desirable or appropriate to comply with applicable securities and other laws asa condition of granting a Stock Award to such Stock Award holder or permittingthe Stock Award holder to exercisesuch Stock Award. The Company may, upon advice of counsel to the Company, placelegends on stock certificates issued under the Plan as such counsel deemsnecessary or appropriate in order to comply with applicable securities laws,including, but not limited to, legends restricting the transfer of the stock.

(f)                       To the extent provided by the terms of a StockAward Agreement, the Stock Award holder may satisfy any federal, state or localtax withholding obligation relating to the exercise or acquisition of stockunder a Stock Award by any of the following means or by a combination of suchmeans (in addition to the Company’s right to withhold from any compensationpaid to the Stock Award holder by the Company):(1) tendering a cash payment;(2) authorizing the Company to withhold shares from the shares of the CommonStock otherwise issuable to the Optionee as a result of the exercise oracquisition of stock under the Stock Award; or (3) delivering to the Companyowned and unencumbered shares of the Common Stock of the Company.

 

11.                                 ADJUSTMENTS UPON CHANGESIN STOCK.

 

(a)                     If any changeis made in the stock subject to the Plan, or subject to any Stock Award,without the receipt of consideration by the Company (through merger,consolidation, reorganization, recapitalization, reincorporation, stockdividend, dividend in property other than cash, stock split, liquidatingdividend, combination of shares, exchange of shares, change in corporatestructure or other transaction not involving the receipt of consideration bythe Company), the Plan will be appropriately adjusted in the class(es) andmaximum number of shares subject to the Plan pursuant to subsection 4(a) andthe maximum number of shares subject to award to any person pursuant tosubsection 5(c), and the outstanding Stock Awards will be appropriatelyadjusted in the class(es) and number of shares and price per share of stocksubject to such outstanding Stock Awards.Such adjustments shall be made by the Board, thedetermination of which shall be final, binding and conclusive.(The conversionof any convertible securities of the Company shall not be treated as a“transaction not involving the receipt of consideration by the Company”.)

 

(b)                    In the event of a Change in Control (as defined herein), then:(i) withrespect to Stock Awards held by persons whose Continuous Service has notterminated prior to such Change in Control, the vesting (and, if applicable,the exercisability) of Stock Awards held by such persons shall be acceleratedimmediately prior to such event, and the Stock Awards terminated if notexercised at or prior to the later of the date of such event or thirty (30)days after delivery to such person of notice of such event or the prospect ofsuch event, and (ii) any Company repurchase option or reacquisition right withrespect to shares acquired by such persons under a Stock Award shall lapseimmediately prior to such event and the shares held by such persons shall befully vested.In its discretion, the Board may require any surviving corporationor acquiring corporation to assume any Stock Awards outstanding under the Planor to substitute similar stock awards (including an award to acquire the same consideration paid to thestockholders in the transaction described in this subsection 11(b)) for thoseoutstanding under the Plan.In the event any surviving or acquiring corporationdoes not assume such Stock Awards or substitute similar stock awards for thoseoutstanding under the Plan, such Stock Awards which are vested without regardto such event shall terminate if not exercised prior to such event and suchStock Awards which become vested by virtue of acceleration due to such eventshall terminate if not exercised within the period set forth above in thissubsection 11(b).

 

(c)                     In the event of a dissolution or liquidation ofthe Company, any Stock Awards outstanding under the Plan shall terminate if notexercised prior to such event.

 

12.                                 AMENDMENT OF THE PLANAND STOCK AWARDS.

(a)                     The Board at any time, and from time to time, mayamend the Plan. However, except as provided in Section 11 relating toadjustments upon changes in stock, no amendment shall be effective unlessapproved by the stockholders of the Company to the extent stockholder approvalis necessary for the Plan to satisfy the requirements of Section 422 of theCode, Rule 16b-3 or any Nasdaq or securities exchange listing requirements.

 

(b)                    The Board may in its sole discretion submit anyother amendment to the Plan for stockholder approval, including, but notlimited to, amendments to the Plan intended to satisfy the requirements ofSection 162(m) of the Code and the regulations promulgated thereunder regardingthe exclusion of performance-based compensation from the limit on corporatedeductibility of compensation paid to certain executive officers.

 

(c)                     It is expressly contemplated that the Board mayamend the Plan in any respect the Board deems necessary or advisable to provideOptionees with the maximum benefits provided or to be provided under theprovisions of the Code and the regulations promulgated thereunder relating toIncentive Stock Options and/or to bring the Plan and/or Incentive Stock Optionsgranted under it into compliance therewith.

 

(d)                    Rights and obligations under any Stock Awardgranted before amendment of the Plan shall not be impaired by any amendmentof the Plan unless (i) the Company requests the consent of the person to whomthe Stock Award was granted and (ii) such person consents in writing.

(e)                     The Board at any time, and from time to time, mayamend the terms of any one or more Stock Awards; provided, however, that therights under any Stock Award shall not be impaired by any such amendment unless(i) the Company requests the consent of the person to whom the Stock Award wasgranted and (ii) such person consents in writing.

 

13.                                 TERMINATION ORSUSPENSION OF THE PLAN.

 

(a)       The Boardmay suspend or terminate the Plan at any time.Unless sooner terminated, thePlan shall terminate on the day before the tenth (10th) anniversary of the datethe Plan is adopted by the Board or approved by the stockholders of theCompany, whichever is earlier.No Stock Awards may be granted under the Planwhile the Plan is suspended or after it is terminated.

 

(b)       Rightsand obligations under any Stock Award granted while the Plan is in effect shallnot be impaired by suspension or termination of the Plan, except with theconsent of the person to whom the Stock Award was granted.

 

14.                                 EFFECTIVE DATE OF PLAN.

 

The Plan shall become effective as of the Listing Date,but no Stock Awards granted under the Plan shall be exercised (or, in the caseof a stock bonus, shall be granted) unless and until the Plan has been approvedby the stockholders of the Company, which approval shall be within twelve (12)months before or after the date the Plan is adopted by the Board.

 

15.                                 CHOICE OF LAW.

 

All questions concerning the construction, validity andinterpretation of this Plan shall be governed by the law of the State ofDelaware, without regard to such state’s conflict of laws rules.