**EXHIBIT 10.1**

 

**APOGEE TECHNOLOGY, INC.**

 

**2007 EMPLOYEE, DIRECTOR ANDCONSULTANT STOCK PLAN**

 

1.*DEFINITIONS.*

 

Unlessotherwise specified or unless the context otherwise requires, the followingterms, as used in this Apogee Technology, Inc. 2007 Employee, Director andConsultant Stock Plan, have the following meanings:

 

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

 

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

 

*Agreement*   means an agreement between the Companyand a Participant delivered pursuant to the Plan, in such form as theAdministrator shall approve.

 

*Board of Directors*   means the Board of Directors of theCompany.

 

*Change of Control*   means the occurrence of any of thefollowing events:

 

(i)   Ownership.   Any “Person” (as such term is used in Sections13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)becomes the “Beneficial Owner” (as defined in Rule 13d-3 under said Act),directly or indirectly, of securities of the Company representing 50% or moreof the total voting power represented by the Company’s then outstanding votingsecurities (excluding for this purpose any such voting securities held by theCompany or its Affiliates or by any employee benefit plan of the Company)pursuant to a transaction or a series of related transactions which the Boardof Directors does not approve; or

 

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

 

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

 

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*Code*   means the United States Internal Revenue Code of 1986, asamended.

 

*Committee*   means the committee of the Board ofDirectors to which the Board of Directors has delegated power to act under orpursuant to the provisions of the Plan.

 

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

 

*Company*   means Apogee Technology, Inc., aDelaware corporation.

 

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

 

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

 

*Fair Market Value*   of a Share of Common Stock means:

 

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

 

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

 

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

 

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

 

*Non-Qualified Option*   means an option which is not intended toqualify as an ISO.

 

*Option*   means an ISO or Non-Qualified Option granted under thePlan.

 

*Participant*   means an Employee, director or consultantof the Company or an Affiliate to whom one or more Stock Rights are grantedunder the Plan. As used herein, “Participant” shall include “Participant’sSurvivors” where the context requires.

 

*Plan*   means this Apogee Technology, Inc. 200**7** Employee, Director and Consultant StockPlan.

 

*Shares*   means shares of the Common Stock as to which Stock Rightshave been or may be granted under the Plan or any shares of capital stock intowhich the Shares are changed or for which they are exchanged within theprovisions of Paragraph 3 of the Plan. The Shares issued under the Planmay be authorized and unissued shares or shares held by the Company in itstreasury, or both.

 

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

 

*Stock Grant*   means a grant by the Company of Sharesunder the Plan.

 

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

 

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

 

2.PURPOSES OF THE PLAN.

 

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

 

3.*SHARES SUBJECT TO THEPLAN.*

 

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

 

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

 

(c)  If an Option ceases to be “outstanding”, in whole or in part (other than byexercise), or if the Company shall reacquire (at not more than its originalissuance price) any Shares issued pursuant to a Stock Grant or Stock-BasedAward, or if any Stock Right expires or is forfeited, cancelled, or otherwiseterminated or results in any Shares not being issued, the unissued Shares whichwere subject to such Stock Right shall again be available for issuance fromtime to time pursuant to this Plan. Notwithstanding the foregoing, if a StockRight is exercised, in whole or in part, by tender of Shares or if the Company’stax withholding obligation is satisfied by withholding Shares, the number ofShares deemed to have been issued under the Plan for purposes of the limitationset forth in Paragraph 3(a) above shall be the number of Shares that weresubject to the Stock Right or portion thereof, and not the net number of Sharesactually issued.

 

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4.*ADMINISTRATION OF THEPLAN.*

 

TheAdministrator of the Plan will be the Board of Directors, except to the extentthe Board of Directors delegates its authority to the Committee, in which casethe Committee shall be the Administrator. Subject to the provisions of thePlan, the Administrator is authorized to:

 

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

 

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

 

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

 

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

 

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

 

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

 

g.Adopt any sub-plans applicable toresidents of any specified jurisdiction as it deems necessary or appropriate inorder to comply with or take advantage of any tax or other laws applicable tothe Company or to Plan Participants or to otherwise facilitate theadministration of the Plan, which sub-plans may include additional restrictionsor conditions applicable to Stock Rights or Shares issuable pursuant to a StockRight;

 

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

 

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

 

5.*ELIGIBILITY FORPARTICIPATION.*

 

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

 

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

 

6.*TERMS AND CONDITIONS OFOPTIONS.*

 

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

 

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

 

i.*Option Price*:   Each Option Agreement shallstate the option price (per share) of the Shares covered by each Option, whichoption price shall be determined by the Administrator but shall not be lessthan the Fair Market Value per share of Common Stock.

 

ii.*Number of Shares*:   Each Option Agreement shallstate the number of Shares to which it pertains.

 

iii.*Option Periods*:   Each Option Agreement shallstate the date or dates on which it first is exercisable and the date afterwhich it may no longer be exercised, and may provide that the Option rightsaccrue or become exercisable in installments over a period of months or years,or upon the occurrence of certain conditions or the attainment of stated goalsor events.

 

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

 

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

 

B.The Participant or the Participant’sSurvivors may be required to execute letters of investment intent and must alsoacknowledge that the Shares will bear legends noting any applicablerestrictions.

 

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b.*ISOs*:   Each Option intended to bean ISO shall be issued only to an Employee and be subject to the followingterms and conditions, with such additional restrictions or changes as theAdministrator determines are appropriate but not in conflict withSection 422 of the Code and relevant regulations and rulings of the InternalRevenue Service:

 

i.*Minimum standards*:   The ISO shall meet theminimum standards required of Non-Qualified Options, as described in Paragraph6(a) above, except clause (i) thereunder.

 

ii.*Option Price*:   Immediately before the ISOis granted, if the Participant owns, directly or by reason of the applicableattribution rules in Section 424(d) of the Code:

 

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

 

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

 

iii.*Term of Option*:   For Participants who own:

 

A.10% *orless* of the total combined voting power of all classes of stock of theCompany or an Affiliate, each ISO shall terminate not more than ten years fromthe date of the grant or at such earlier time as the Option Agreement mayprovide; or

 

B.More than 10% of the total combinedvoting power of all classes of stock of the Company or an Affiliate, each ISOshall terminate not more than five years from the date of the grant or at suchearlier time as the Option Agreement may provide.

 

iv.*Limitation on YearlyExercise*:  The Option Agreements shall restrict the amount of ISOs which may becomeexercisable in any calendar year (under this or any other ISO plan of theCompany or an Affiliate) so that the aggregate Fair Market Value (determined atthe time each ISO is granted) of the stock with respect to which ISOs areexercisable for the first time by the Participant in any calendar year does notexceed $100,000.

 

7.*TERMS AND CONDITIONS OFSTOCK GRANTS.*

 

Eachoffer of a Stock Grant to a Participant shall state the date prior to which theStock Grant must be accepted by the Participant, and the principal terms ofeach Stock Grant shall be set forth in an Agreement, duly executed by theCompany and, to the extent required by law or requested by the Company, by theParticipant. The Agreement shall be in a form approved by the Administrator andshall contain terms and conditions which the Administrator determines to beappropriate and in the best interest of the Company, subject to the followingminimum standards:

 

(a)Each Agreement shall state the purchaseprice (per share), if any, of the Shares covered by each Stock Grant, whichpurchase price shall be determined by the Administrator but shall not be lessthan the minimum consideration required by the Delaware General Corporation Lawon the date of the grant of the Stock Grant;

 

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

 

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

 

8.*TERMS AND CONDITIONS OFOTHER STOCK-BASED AWARDS.*

 

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

 

9.*EXERCISE OF OPTIONS ANDISSUE OF SHARES.*

 

AnOption (or any part or installment thereof) shall be exercised by givingwritten notice to the Company or its designee, together with provision forpayment of the full purchase price in accordance with this Paragraph for theShares as to which the Option is being exercised, and upon compliance with anyother condition(s) set forth in the Option Agreement. Such notice shall besigned by the person exercising the Option, shall state the number of Shareswith respect to which the Option is being exercised and shall contain any representationrequired by the Plan or the Option Agreement. Payment of the purchase price forthe Shares as to which such Option is being exercised shall be made (a) inUnited States dollars in cash or by check, or (b) at the discretion of theAdministrator, through delivery of shares of Common Stock having a Fair MarketValue equal as of the date of the exercise to the cash exercise price of theOption and held for at least six months, or (c) at the discretion of theAdministrator, by having the Company retain from the shares otherwise issuableupon exercise of the Option, a number of shares having a Fair Market Valueequal as of the date of exercise to the exercise price of the Option, or(d) at the discretion of the Administrator, in accordance with a cashlessexercise program established with a securities brokerage firm, and approved bythe Administrator, or (e) at the discretion of the Administrator, by anycombination of (a), (b), (c) and (d) above or (f) at thediscretion of the Administrator, payment of such other lawful consideration asthe Administrator may determine. Notwithstanding the foregoing, theAdministrator shall accept only such payment on exercise of an ISO as ispermitted by Section 422 of the Code.

 

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

 

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

 

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

 

10.*ACCEPTANCE OF STOCKGRANTS AND STOCK-BASED AWARDS AND ISSUE OF SHARES.*

 

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

 

TheCompany shall then, if required by the applicable Agreement, reasonablypromptly deliver the Shares as to which such Stock Grant or Stock-Based Awardwas accepted to the Participant (or to the Participant’s Survivors, as the casemay be), subject to any escrow provision set forth in the applicable Agreement.In determining what constitutes “reasonably promptly,” it is expresslyunderstood that the issuance and delivery of the Shares may be delayed by theCompany in order to comply with any law or regulation (including, withoutlimitation, state securities or “blue sky” laws) which requires the Company totake any action with respect to the Shares prior to their issuance.

 

TheAdministrator may, in its discretion, amend any term or condition of anoutstanding Stock Grant, Stock-Based Award or applicable Agreement provided(i) such term or condition as amended is permitted by the Plan,(ii) any such amendment shall be made only with the consent of theParticipant to whom the Stock Grant or Stock-Based Award was made, if theamendment is adverse to the Participant and (iii) any such amendment shallbe made only after the Administrator determines whether such amendment wouldcause any adverse tax consequences to the Participant, including, but notlimited to, pursuant to Section 409A of the Code.

 

11.*RIGHTS AS ASHAREHOLDER.*

 

NoParticipant to whom a Stock Right has been granted shall have rights as ashareholder with respect to any Shares covered by such Stock Right, exceptafter due exercise of the Option or acceptance of the Stock Grant or as setforth in any Agreement, and tender of the full purchase price, if any, for theShares being purchased pursuant to such exercise or acceptance and registrationof the Shares in the Company’s share register in the name of the Participant.

 

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12.*ASSIGNABILITY ANDTRANSFERABILITY OF STOCK RIGHTS.*

 

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

 

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

 

Exceptas otherwise provided in a Participant’s Option Agreement, in the event of atermination of service (whether as an employee, director or consultant) withthe Company or an Affiliate before the Participant has exercised an Option, thefollowing rules apply:

 

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

 

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

 

c.The provisions of this Paragraph, and notthe provisions of Paragraph 15 or 16, shall apply to a Participant whosubsequently becomes Disabled or dies after the termination of employment,director status or consultancy; provided, however, in the case of a Participant’sDisability or death within three months after the termination of employment,director status or consultancy, the Participant or the Participant’s Survivorsmay exercise the Option within one year after the date of the Participant’stermination of service, but in no event after the date of expiration of theterm of the Option.

 

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(1)The form of non-qualified optionagreement contains a provision allowing for options to be transferred butremain eligible for exercise pursuant to Form S-8.  Optionees should beencouraged to discuss the gifting of options with their tax advisors as undercurrent law only the transfer of a vested option is deemed to be a completedgift and the income tax liability associated with the exercise of the optioncontinues to be the responsibility of the original optionee.

 

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

 

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

 

f.Except as required by law or as set forthin a Participant’s Option Agreement, Options granted under the Plan shall notbe affected by any change of a Participant’s status within or among the Companyand any Affiliates, so long as the Participant continues to be an employee,director or consultant of the Company or any Affiliate.

 

14.*EFFECT ON OPTIONS OFTERMINATION OF SERVICE “FOR CAUSE”.*

 

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

 

a.All outstanding and unexercised Optionsas of the time the Participant is notified his or her service is terminated “forcause” will immediately be forfeited.

 

b.For purposes of this Plan, “cause” shallinclude (and is not limited to) dishonesty with respect to the Company or anyAffiliate, insubordination, substantial malfeasance or non-feasance of duty,unauthorized disclosure of confidential information, breach by the Participantof any provision of any employment, consulting, advisory, nondisclosure, non-competitionor similar agreement between the Participant and the Company, and conductsubstantially prejudicial to the business of the Company or any Affiliate. Thedetermination of the Administrator as to the existence of “cause” will beconclusive on the Participant and the Company.

 

c.“Cause” is not limited to events whichhave occurred prior to a Participant’s termination of service, nor is itnecessary that the Administrator’s finding of “cause” occur prior totermination. If the Administrator determines, subsequent to a Participant’stermination of service but prior to the exercise of an Option, that eitherprior or subsequent to the Participant’s termination the Participant engaged inconduct which would constitute “cause”, then the right to exercise any Optionis forfeited.

 

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

 

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15.*EFFECT ON OPTIONS OFTERMINATION OF SERVICE FOR DISABILITY.*

 

Exceptas otherwise provided in a Participant’s Option Agreement:

 

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

 

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

 

(ii)   In theevent rights to exercise the Option accrue periodically, to the extent of a prorata portion through the date of Disability of any additional vesting rightsthat would have accrued on the next vesting date had the Participant not becomeDisabled. The proration shall be based upon the number of days accrued in thecurrent vesting period prior to the date of Disability.

 

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

 

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

 

16.*EFFECT ON OPTIONS OFDEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.*

 

Exceptas otherwise provided in a Participant’s Option Agreement:

 

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

 

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

 

(ii)   In theevent rights to exercise the Option accrue periodically, to the extent of a prorata portion through the date of death of any additional vesting rights thatwould have accrued on the next vesting date had the Participant not died. Theproration shall be based upon the number of days accrued in the current vestingperiod prior to the Participant’s date of death.

 

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

 

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17.*EFFECT OF TERMINATIONOF SERVICE ON UNACCEPTED STOCK GRANTS.*

 

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

 

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

 

Inaddition, for purposes of this Paragraph 17 and Paragraph 18 below, any changeof employment or other service within or among the Company and any Affiliatesshall not be treated as a termination of employment, director status orconsultancy so long as the Participant continues to be an employee, director orconsultant of the Company or any Affiliate.

 

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

 

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

 

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

 

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

 

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

 

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

 

c.“Cause” is not limited to events whichhave occurred prior to a Participant’s termination of service, nor is itnecessary that the Administrator’s finding of “cause” occur prior totermination. If the Administrator determines, subsequent to a Participant’stermination of service, that either

 

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

 

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

 

20.*EFFECT ON STOCK GRANTSOF TERMINATION OF SERVICE FOR DISABILITY.*

 

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

 

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

 

21.*EFFECT ON STOCK GRANTSOF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.*

 

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

 

22.*PURCHASE FORINVESTMENT.*

 

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

 

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

 

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by the provisions of the following legend which shallbe endorsed upon the certificate(s) evidencing their Shares issuedpursuant to such exercise or such grant:

 

“The shares represented by this certificate have beentaken for investment and they may not be sold or otherwise transferred by anyperson, including a pledgee, unless (1) either (a) a RegistrationStatement with respect to such shares shall be effective under the SecuritiesAct of 1933, as amended, or (b) the Company shall have received an opinionof counsel satisfactory to it that an exemption from registration under suchAct is then available, and (2) there shall have been compliance with allapplicable state securities laws.”

 

b.At the discretion of the Administrator,the Company shall have received an opinion of its counsel that the Shares maybe issued upon such particular exercise or acceptance in compliance with the1933 Act without registration thereunder.

 

23.*DISSOLUTION ORLIQUIDATION OF THE COMPANY.*

 

Uponthe dissolution or liquidation of the Company, all Options granted under thisPlan which as of such date shall not have been exercised and all Stock Grantsand Stock-Based Awards which have not been accepted will terminate and becomenull and void; provided, however, that if the rights of a Participant or aParticipant’s Survivors have not otherwise terminated and expired, theParticipant or the Participant’s Survivors will have the right immediatelyprior to such dissolution or liquidation to exercise or accept any Stock Rightto the extent that the Stock Right is exercisable or subject to acceptance asof the date immediately prior to such dissolution or liquidation. Upon thedissolution or liquidation of the Company, any outstanding Stock-Based Awardsshall immediately terminate unless otherwise determined by the Administrator orspecifically provided in the applicable Agreement.

 

24.*ADJUSTMENTS.*

 

Uponthe occurrence of any of the following events, a Participant’s rights withrespect to any Stock Right granted to him or her hereunder shall be adjusted ashereinafter provided, unless otherwise specifically provided in a Participant’sAgreement:

 

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

 

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

 

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

 

Notwithstanding theforegoing, in the event the Corporate Transaction also constitutes a Change ofControl, all Options outstanding on the date of the Corporate Transaction willbecome fully exercisable, and will be available for exercise for a number ofdays after the date of such notice and as specified by the Administrator, atthe end of which period the Options shall terminate.

 

With respect tooutstanding Stock Grants, the Administrator or the Successor Board, shalleither (i) make appropriate provisions for the continuation of such StockGrants on the same terms and conditions by substituting on an equitable basisfor the Shares then subject to such Stock Grants either the considerationpayable with respect to the outstanding Shares of Common Stock in connectionwith the Corporate Transaction or securities of any successor or acquiringentity; or (ii) terminate such Stock Grants in exchange for a cash paymentequal to the excess of the Fair Market Value of the Shares subject to such StockGrants over the purchase price thereof, if any. In addition, in the event of aCorporate Transaction, the Administrator may waive any or all Companyforfeiture or repurchase rights with respect to outstanding Stock Grants.

 

c.*   Recapitalization or Reorganization.*  In the event of a recapitalization or reorganization of the Company other thana Corporate Transaction pursuant to which securities of the Company or ofanother corporation are issued with respect to the outstanding shares of CommonStock, a Participant upon exercising an Option or accepting a Stock Grant afterthe recapitalization or reorganization shall be entitled to receive for thepurchase price paid upon such exercise or acceptance of the number ofreplacement securities which would have been received if such Option had beenexercised or Stock Grant accepted prior to such recapitalization orreorganization.

 

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

 

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

 

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

 

25.*ISSUANCES OFSECURITIES.*

 

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

 

26.*FRACTIONAL SHARES.*

 

Nofractional shares shall be issued under the Plan and the person exercising aStock Right shall receive from the Company cash in lieu of such fractionalshares equal to the Fair Market Value thereof.

 

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

 

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

 

28.*WITHHOLDING*.

 

In theevent that any federal, state, or local income taxes, employment taxes, FederalInsurance Contributions Act (“F.I.C.A.”) withholdings or other amounts arerequired by applicable law or governmental regulation to be withheld from theParticipant’s salary, wages or other remuneration in connection with theexercise or acceptance of a Stock Right or in connection with a DisqualifyingDisposition (as defined in Paragraph 29) or upon the lapsing of any forfeitureprovision or right of repurchase or for any other reason required by law, theCompany may withhold from the Participant’s compensation, if any, or mayrequire that the Participant advance in cash to the Company, or to anyAffiliate of the Company which employs or employed the Participant, thestatutory minimum amount of such withholdings unless a different withholdingarrangement, including the use of shares of the Company’s Common Stock or apromissory note, is authorized by the Administrator (and permitted by law). Forpurposes hereof, the fair market value of the shares withheld for purposes ofpayroll withholding shall be determined in the manner provided in Paragraph 1above, as of the most recent practicable date prior to the date of exercise. Ifthe fair market value of the shares withheld is less than the amount of payrollwithholdings required, the Participant may be required to advance thedifference in cash to the Company or the Affiliate employer. The Administratorin its discretion may condition the exercise of an

 

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Option for less than thethen Fair Market Value on the Participant’s payment of such additionalwithholding.

 

29.*NOTICE TO COMPANY OFDISQUALIFYING DISPOSITION.*

 

EachEmployee who receives an ISO must agree to notify the Company in writingimmediately after the Employee makes a Disqualifying Disposition of any sharesacquired pursuant to the exercise of an ISO. A Disqualifying Disposition isdefined in Section 424(c) of the Code and includes any disposition(including any sale or gift) of such shares before the later of (a) twoyears after the date the Employee was granted the ISO, or (b) one yearafter the date the Employee acquired Shares by exercising the ISO, except asotherwise provided in Section 424(c) of the Code. If the Employee hasdied before such stock is sold, these holding period requirements do not applyand no Disqualifying Disposition can occur thereafter.

 

30.*TERMINATION OF THEPLAN.*

 

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

 

31.*AMENDMENT OF THE PLANAND AGREEMENTS.*

 

ThePlan may be amended by the shareholders of the Company. The Plan may also beamended by the Administrator, including, without limitation, to the extentnecessary to qualify any or all outstanding Stock Rights granted under the Planor Stock Rights to be granted under the Plan for favorable federal income taxtreatment (including deferral of taxation upon exercise) as may be affordedincentive stock options under Section 422 of the Code, and to the extentnecessary to qualify the shares issuable upon exercise or acceptance of anyoutstanding Stock Rights granted, or Stock Rights to be granted, under the Planfor listing on any national securities exchange or quotation in any nationalautomated quotation system of securities dealers. Any amendment approved by theAdministrator which the Administrator determines is of a scope that requiresshareholder approval shall be subject to obtaining such shareholder approval.Any modification or amendment of the Plan shall not, without the consent of aParticipant, adversely affect his or her rights under a Stock Right previouslygranted to him or her. With the consent of the Participant affected, theAdministrator may amend outstanding Agreements in a manner which may be adverseto the Participant but which is not inconsistent with the Plan. In thediscretion of the Administrator, outstanding Agreements may be amended by theAdministrator in a manner which is not adverse to the Participant.

 

32.*EMPLOYMENT OR OTHERRELATIONSHIP.*

 

Nothingin this Plan or any Agreement shall be deemed to prevent the Company or anAffiliate from terminating the employment, consultancy or director status of aParticipant, nor to prevent a Participant from terminating his or her ownemployment, consultancy or director status or to give any Participant a rightto be retained in employment or other service by the Company or any Affiliatefor any period of time.

 

33.GOVERNING LAW.

 

ThisPlan shall be construed and enforced in accordance with the law of the State ofDelaware.

 

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