1997 Director Option Plan



 
EXHIBIT 4.1

 
ARTISAN COMPONENTS, INC. 
 
1997 DIRECTOR OPTION PLAN 
 
(As amended March 6, 2003) 
 
1.    Purposes of the
Plan.    The purposes of this 1997 Director Option Plan are to attract and retain the best available personnel for service as Outside Directors (as defined herein) of the Company, to provide additional incentive to the
Outside Directors of the Company to serve as Directors, and to encourage their continued service on the Board. 
 
All options granted hereunder shall be nonstatutory stock options. 
 
2.    Definitions.    As used herein, the following
definitions shall apply: 
 
(a)    “Board” means the Board of Directors of the Company. 
 
(b)    “Code” means the Internal Revenue Code of 1986, as amended. 
 
(c)    “Common Stock”
means the common stock of the Company. 
 
(d)    “Company” means Artisan Components, Inc., a Delaware corporation. 
 
(e)    “Director” means a member of the Board. 
 
(f)    “Employee” means
any person, including officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. The payment of a Director’s fee by the Company shall not be sufficient in and of itself to constitute “employment” by
the Company. 
 
(g)    “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
 
(h)    “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

 
(i)    If the Common Stock
is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; 
 
(ii)    If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and
low asked prices for the Common Stock on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable; or 







 
(iii)    In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board. 
 
(i)    “Inside Director” means a Director who is an Employee.

 
(j)    “Option” means a stock option granted pursuant to the Plan. 
 
(k)    “Optioned Stock” means the Common Stock subject to an Option. 
 
(l)    “Optionee” means
a Director who holds an Option. 
 
(m)    “Outside Director” means a Director who is not an Employee. 
 
(n)    “Parent” means a “parent corporation,” whether now or hereafter existing, as defined
in Section 424(e) of the Code. 
 
(o)    “Plan” means this 1997 Director Option Plan. 
 
(p)    “Share” means a share of the Common Stock, as adjusted in accordance with Section 10 of the
Plan. 
 
(q)    “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of 1986. 
 
3.    Stock Subject to the
Plan.    Subject to the provisions of Section 10 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 350,000 Shares (after giving effect to the one-for-two reverse stock split
approved by the shareholders of the Company on November 24, 1997) of Common Stock (the “Pool”). The Shares may be authorized, but unissued, or reacquired Common Stock. 
 
If an Option expires or becomes unexercisable without having been exercised in full, the unpurchased Shares
which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). Shares that have actually been issued under the Plan shall not be returned to the Plan and shall not become available for
future distribution under the Plan. 
 
4.    Administration and Grants of Options under the Plan. 
 
(a)    Procedure for Grants.    All grants of Options to Outside Directors under this Plan
shall be automatic and nondiscretionary and shall be made strictly in accordance with the following provisions: 
 
(i)    No person shall have any discretion to select which Outside Directors shall be granted Options or to determine
the number of Shares to be covered by Options granted to Outside Directors. 
 

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(ii)    Each Outside Director as of the effective date of this Plan, as determined in accordance with Section 6 hereof, shall be automatically granted an Option to purchase 25,000 (post-split) Shares (the
“First Option”) at the initial public offering price of the Company’s Common Stock. Each person who becomes an Outside Director after the effective date of the initial public offering shall be automatically granted an Option to
purchase 25,000 Shares (post-split) (such Option shall each be known as a “First Option”) on the date on which such person first becomes an Outside Director, whether through election by the shareholders of the Company or appointment by the
Board to fill a vacancy; provided, however, that an Inside Director who ceases to be an Inside Director but who remains a Director shall not receive a First Option. 
 
(iii)    (A)    Each Outside Director shall be automatically granted
an Option to purchase 15,000 Shares (post-split) (a “Subsequent Director Option”) on the date of the next meeting of the Board of Directors following the annual meeting of shareholders of each year (beginning with the meeting for fiscal
year 1998) provided he or she is then an Outside Director and if as of such date, he or she shall have served on the Board for at least the preceding six (6) months. 
 
  (B)    Certain Outside Directors shall be automatically granted an
additional Option on the date of the next meeting of the Board of Directors following the annual meeting of shareholders of each year (beginning with the meeting in fiscal year 2003) (each such meeting of the Board of Directors, the “Annual
Board Meeting”) in accordance with the following: (1) the Chairman of the Board appointed at the Annual Board Meeting will be automatically granted an option to purchase an additional 30,000 shares of Common Stock, (2) the Chairman of the Audit
Committee appointed at the Annual Board Meeting will be automatically granted an option to purchase an additional 20,000 shares of Common Stock, (3) the Chairman of the Compensation Committee appointed at the Annual Board Meeting will be
automatically granted an option to purchase an additional 10,000 shares of Common Stock, and (4) the Chairman of the Nominating and Governance Committee appointed at the Annual Board Meeting will be automatically granted an option to purchase an
additional 10,000 shares of Common Stock (each such grant, a “Subsequent Chairman Option” and, each such Subsequent Chairman Option and each Subsequent Director Option, a “Subsequent Option”); provided in each case that such
Chairman is an Outside Director. 
 
(iv)    Notwithstanding the provisions of subsections (ii) and (iii) hereof, any exercise of an Option granted before the Company has obtained shareholder approval of the Plan in accordance with Section 16 hereof
shall be conditioned upon obtaining such shareholder approval of the Plan in accordance with Section 16 hereof. 
 
(v)    The terms of a First Option granted hereunder shall be as follows: 
 
  (A)    the term of the First
Option shall be ten (10) years. 
 
  (B)    the First Option shall be exercisable only while the Outside Director remains a Director of the Company, except as set forth in Sections 8 and 10 hereof. 
 
  (C)    the exercise price
per Share shall be 100% of the Fair Market Value per Share on the date of grant of the First Option. In the event that the date of grant of the First Option is not a trading day, the exercise price per Share shall be the Fair Market Value on the
next trading day immediately following the date of grant of the First Option. 
 

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  (D)    subject to Section 10 hereof, the First Option shall become exercisable as to 25% of the shares subject to the Option on the first anniversary of its date of grant and 1/48th of the Shares each
month thereafter so that the First Option shall be fully exercisable four (4) years after its date of grant, provided that the Optionee continues to serve as a Director on such dates. 
 
(vi)    The terms of a Subsequent Option granted hereunder shall be as follows:

 
  (A)    the
term of the Subsequent Option shall be ten (10) years. 
 
  (B)    the Subsequent Option shall be exercisable only while the Outside Director remains a Director of the Company, except as set forth in Sections 8 and 10 hereof. 
 
  (C)    the exercise price
per Share shall be 100% of the Fair Market Value per Share on the date of grant of the Subsequent Option. In the event that the date of grant of the Subsequent Option is not a trading day, the exercise price per Share shall be the Fair Market Value
on the next trading day immediately following the date of grant of the Subsequent Option. 
 
  (D)    subject to Section 10 hereof, the Subsequent Option shall become exercisable as to 1/48th of the Shares subject to the Subsequent Option on each monthly
anniversary of its date of grant, provided that the Optionee continues to serve as a Director on such dates. 
 
(vii)    In the event that any Option granted under the Plan would cause the number of Shares subject to outstanding
Options plus the number of Shares previously purchased under Options to exceed the Pool, then the remaining Shares available for Option grant shall be granted under Options to the Outside Directors on a pro rata basis. No further grants shall be
made until such time, if any, as additional Shares become available for grant under the Plan through action of the Board or the shareholders to increase the number of Shares which may be issued under the Plan or through cancellation or expiration of
Options previously granted hereunder. 
 
5.    Eligibility.    Options may be granted only to Outside Directors. All Options shall be automatically granted in accordance with the terms set forth in Section 4 hereof.

 
The Plan shall not confer upon any Optionee any
right with respect to continuation of service as a Director or nomination to serve as a Director, nor shall it interfere in any way with any rights which the Director or the Company may have to terminate the Director’s relationship with the
Company at any time. 
 
6.    Term of Plan.    The Plan shall become effective upon the effective date of the Company’s initial public offering of its Common Stock that is registered with the Securities
and Exchange Commission. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 11 of the Plan. 
 

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7.    Form of Consideration.    The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall consist of (i) cash, (ii)
check, (iii) other shares which (x) in the case of Shares acquired upon exercise of an Option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to which said Option shall be exercised, (iv) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan, or (v) any combination of the
foregoing methods of payment. 
 
8.    Exercise of Option. 
 
(a)    Procedure for Exercise; Rights as a Shareholder.    Any Option granted hereunder shall be exercisable at such times as are set forth in Section 4 hereof; provided,
however, that no Options shall be exercisable until shareholder approval of the Plan in accordance with Section 16 hereof has been obtained. 
 
An Option may not be exercised for a fraction of a Share. 
 
An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company
in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may consist of any consideration
and method of payment allowable under Section 7 of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. A share certificate for the number of Shares so acquired shall be issued
to the Optionee as soon as practicable after exercise of the Option. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 10 of the
Plan. 
 
Exercise of an Option in any manner shall
result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. 
 
(b)    Termination of Continuous
Status as a Director.    Subject to Section 10 hereof, in the event an Optionee’s status as a Director terminates (other than upon the Optionee’s death or total and permanent disability (as defined in Section
22(e)(3) of the Code)), the Optionee may exercise his or her Option, but only within three (3) months following the date of such termination, and only to the extent that the Optionee was entitled to exercise it on the date of such termination (but
in no event later than the expiration of its ten (10) year term). To the extent that the Optionee was not entitled to exercise an Option on the date of such termination, and to the extent that the Optionee does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall terminate. 
 

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(c)    Disability of Optionee.    In the event Optionee’s status as a Director terminates as a result of total and permanent disability (as defined in Section 22(e)(3) of the Code),
the Optionee may exercise his or her Option, but only within twelve (12) months following the date of such termination, and only to the extent that the Optionee was entitled to exercise it on the date of such termination (but in no event later than
the expiration of its ten (10) year term). To the extent that the Optionee was not entitled to exercise an Option on the date of termination, or if he or she does not exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate. 
 
(d)    Death of Optionee.    In the event of an Optionee’s death, the Optionee’s estate or a person who acquired the right to exercise the Option by bequest or inheritance may
exercise the Option, but only within twelve (12) months following the date of death, and only to the extent that the Optionee was entitled to exercise it on the date of death (but in no event later than the expiration of its ten (10) year term). To
the extent that the Optionee was not entitled to exercise an Option on the date of death, and to the extent that the Optionee’s estate or a person who acquired the right to exercise such Option does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall terminate. 
 
9.    Non-Transferability of Options.    The Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than
by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. 
 
10.    Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale. 
 
(a)    Changes in
Capitalization.    Subject to any required action by the shareholders of the Company, the number of Shares covered by each outstanding Option, the number of Shares which have been authorized for issuance under the Plan but as
to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per Share covered by each such outstanding Option, and the number of Shares issuable pursuant to the
automatic grant provisions of Section 4 hereof shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been
“effected without receipt of consideration.” 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 an Option. 
 
(b)    Dissolution or Liquidation.    In the event of the proposed dissolution or
liquidation of the Company, to the extent that an Option has not been previously exercised, it shall terminate immediately prior to the consummation of such proposed action. 
 

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(c)    Merger or Asset Sale.    In the event of a merger of the Company with or into another corporation or the sale of substantially all of the assets of the Company, outstanding
Options may be assumed or equivalent options may be substituted by the successor corporation or a Parent or Subsidiary thereof (the “Successor Corporation”). If an Option is assumed or substituted for, the Option or equivalent option shall
continue to be exercisable as provided in Section 4 hereof for so long as the Optionee serves as a Director or a director of the Successor Corporation. Following such assumption or substitution, if the Optionee’s status as a Director or
director of the Successor Corporation, as applicable, is terminated other than upon a voluntary resignation by the Optionee, the Option or option shall become fully exercisable, including as to Shares for which it would not otherwise be exercisable.
Thereafter, the Option or option shall remain exercisable in accordance with Sections 8(b) through (d) above. 
 
If the Successor Corporation does not assume an outstanding Option or substitute for it an equivalent option, the Option shall become
fully vested and exercisable, including as to Shares for which it would not otherwise be exercisable. In such event the Board shall notify the Optionee that the Option shall be fully exercisable for a period of thirty (30) days from the date of such
notice, and upon the expiration of such period the Option shall terminate. 
 
For the purposes of this Section 10(c), an Option shall be considered assumed if, following the merger or sale of assets, the Option confers the right to purchase or receive, for each Share of Optioned
Stock subject to the Option immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares). If such consideration received in the merger or sale of assets is not
solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets. 
 
11.    Amendment and Termination of the
Plan. 
 
(a)    Amendment and Termination.    The Board may at any time amend, alter, suspend, or discontinue the Plan, but no amendment, alteration, suspension, or discontinuation shall be made
which would impair the rights of any Optionee under any grant theretofore made, without his or her consent. In addition, to the extent necessary and desirable to comply with any applicable law, regulation or stock exchange rule, the Company shall
obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required. 
 
(b)    Effect of Amendment or Termination.    Any such amendment or termination of the Plan
shall not affect Options already granted and such Options shall remain in full force and effect as if this Plan had not been amended or terminated. 
 
12.    Time of Granting Options.    The date of grant of an Option shall, for all purposes,
be the date determined in accordance with Section 4 hereof. 
 

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13.    Conditions Upon Issuance of Shares.    Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, state securities laws, and the
requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. 
 
As a condition to the exercise of an Option, the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares, if, in the opinion of counsel for the Company, such a representation
is required by any of the aforementioned relevant provisions of law. 
 
Inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 
 
14.    Reservation of Shares.    The Company, during the term
of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 
 
15.    Option Agreement.    Options shall be evidenced by written option agreements in such
form as the Board shall approve. 
 
16.    Shareholder Approval.    Continuance of the Plan shall be subject to approval by the shareholders of the Company at or prior to the first annual meeting of shareholders held
subsequent to the granting of an Option hereunder. Such shareholder approval shall be obtained in the degree and manner required under applicable state and federal law and any stock exchange rules. 
 

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