Document:

Exhibit
10.41

 

 

EMPLOYMENT AGREEMENT

 

 

                This
Employment Agreement (the “Agreement”) is made and entered into as of May 4,
2003 by and between Zoran Corporation, a Delaware corporation (the “Company”),
and Young K. Sohn (“Employee”).  This
Agreement shall become effective immediately following the effective time (the
“Effective Time”) of the merger (the “Merger”) of Oak Technology, Inc., a
Delaware corporation (“Oak”), with and into Zoran Acquisition Corporation, a
Delaware corporation and wholly-owned subsidiary of the Company (“Sub”),
pursuant to an Agreement and Plan of Reorganization of even date herewith by
and among the Company, Sub and Oak (the “Merger Agreement”).

                WHEREAS,
Employee is currently employed as the President and Chief Executive Officer of
Oak and, in that capacity, has gained substantial knowledge and expertise
regarding Oak’s operations, organization, products and customers;

                WHEREAS,
the Company desires to employ Employee on the terms and subject to the
conditions of this Agreement for a transition period of three (3) months
commencing immediately following the Effective Time (the “Transition Period”),
during which time Employee will perform services to facilitate the transition
and integration of the business and operations of Oak and its subsidiaries into
the business and operations of the Company (Oak, the Company and their
respective subsidiaries being hereinafter referred to collectively as the
“Company Group”), and Employee desires to accept such employment; and

                WHEREAS,
concurrent with this Agreement, the Company and Employee have entered into a
Restrictive Covenants Agreement (the “Restrictive Covenants Agreement”) in
order to protect the goodwill related to the business of the Company Group;

                NOW
THEREFORE, in consideration of the mutual promises set forth herein, the
Company and Employee hereby agree as follows:

1.             Position
and Duties.  Employee shall be
employed by the Company and shall report to Levy Gerzberg, the Company’s
President and Chief Executive Officer. 
Employee shall perform such duties related to the transition and
integration of the business and operations of Oak and its subsidiaries into the
business and operations of the Company as directed by Mr. Gerzberg.  During the first week following the
commencement of Employee’s employment with the Company, Employee shall be
employed on a full-time basis. 
Thereafter, Employee’s employment shall be on such full- or part-time
basis as Employee and Mr. Gerzberg shall agree.

2.             Term
of Employment.  Employee’s
employment shall begin immediately following the Effective Time and shall
terminate at the close of business on the last day of the Transition Period,
unless earlier terminated or unless a further term of employment is negotiated
and agreed to at or before the end of the Transition Period.  Notwithstanding
the foregoing, Employee’s employment relationship with the Company is at-will,
and the employment relationship may be terminated by Employee or the Company at
any time, with or without cause.  Upon
the termination of Employee’s employment with the Company for any reason,
neither Employee nor 

 

the Company shall have any further obligation or
liability under this Agreement to the other, except as set forth in
Paragraph 11 below.

3.             Compensation.  Employee shall be compensated by the Company
for his services as follows:

(a)           Salary.  Employee shall be paid a salary at the rate
of $20,000 per month, less applicable tax and other withholding, in accordance
with the Company’s normal payroll procedures.

(b)           Benefits.  Employee shall have the right, on the same
basis as other employees of the Company, to participate in and to receive
benefits under any of the Company’s employee benefit plans, as such plans may
be modified from time to time.  For
purposes of calculating Employee’s eligibility for such benefits, his period of
employment by Oak shall be counted as employment by the Company, except as
prohibited by the terms of any plan.

(c)           Stock
Options.  Options to acquire the
common stock of Oak granted to Employee by Oak and assumed by the Company
pursuant to the Merger Agreement and thereby becoming options to acquire the
common stock of the Company (the “Assumed Options”) and/or options granted by
Company to Employee pursuant to Sections 6.13(c) or (d) of the Merger Agreement
(the “Replacement Options”) shall not continue to vest during the term
of Employee’s employment with the Company pursuant to this Agreement.  The Assumed Options shall continue to be
subject to the same terms and conditions as were applicable to the Assumed Options
immediately prior to the Effective Time pursuant to the agreements evidencing
the Assumed Options and the Oak stock option plans pursuant to which the
Assumed Options were granted (collectively, the “Assumed Option Documents”),
except to the extent such terms and conditions are modified pursuant to the
Merger Agreement and except to the extent provided by the terms of the Oak
Participation Agreement and Oak Severance Plan described in Paragraph 5
below.  Except as otherwise provided
herein or in Sections 6.13(c) or (d) of the Merger Agreement, the Replacement
Options shall be governed by the terms and conditions of the Company stock
option plan under which such options are granted and the standard form of stock
option agreement used thereunder (the “Replacement Option Documents”).

4.             Expenses.  The Company shall reimburse Employee for
those customary, ordinary and necessary business expenses incurred by him in
the performance of his duties and activities on behalf of the Company Group.  Such expenses shall be reimbursed upon
presentation by Employee of appropriate documentation to substantiate such
expenses pursuant to the policies and procedures of the Company governing
reimbursement of business expenses. 
Employee shall present such documentation for any unreimbursed expenses
no later than thirty (30) days after termination of his employment.

5.             Acknowledgment
of Effect of Oak Retention and Severance Plan.  Employee and Oak entered into an Amended and Restated Agreement
of Plan Participation, dated May 4, 2003, a copy of which is attached
hereto as Exhibit A (the “Oak Participation Agreement”), pursuant
to which Employee became a participant in Oak’s Retention and Severance Plan
for the Chief Executive Officer, as adopted April 9, 2002 and as amended on
May 4, 2003, a copy of which is attached hereto as Exhibit B
(the “Oak Severance Plan”).  Employee
acknowledges and hereby 

 

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reaffirms that by executing the Oak Participation
Agreement, he has waived and terminated to the extent provided by the Oak
Participation Agreement any and all rights he may have or may have had under
any agreement other than the Oak Participation Agreement and the Oak Severance
Plan; provided, however, that such waiver shall not include such rights as
Employee may have pursuant to this Agreement. 
The Company and Employee hereby acknowledge and agree that, as a
consequence of the Merger and effective at the Effective Time, a “Termination Upon
Change of Control,” as such term is defined by the Oak Severance Plan, shall
have occurred with respect to Employee for all purposes under the Oak Severance
Plan (but no termination of employment shall be deemed to have occurred for
purposes of receipt of Replacement Options), and that Employee shall thereby
have become entitled to any and all benefits to be paid or provided upon or
following such event pursuant to the Oak Severance Plan, subject to its terms
and conditions, including, without limitation, the execution of a release of
claims substantially in the form attached as Appendix A to the Oak
Participation Agreement.  The Company
and Employee also agree that the Replacement Options shall be vested and
exercisable and shall remain exercisable to the same extent, in accordance with
the Oak Severance Plan, as if such Replacement Options were Assumed
Options.  The Company and Employee
further agree that the date of the “qualifying event” for purposes of the
ability of Employee to elect, pursuant to the Oak Severance Plan, continued
health insurance coverage under the Consolidated Budget Reconciliation Act of
1985 shall be the date on which Employee’s employment with the Company
terminates or such earlier date as permitted or required by applicable law, and
the Company shall reimburse Employee for the premium cost of such coverage for
a period of eighteen (18) months from the date of such qualifying event to the
extent provided by the Oak Severance Plan.

6.             Authority.  Employee covenants, warrants and represents
to the Company that he has as of the date of this Agreement, and will continue
to have as of the Effective Time, the full, complete and entire right and
authority to enter into the employment contemplated by the Agreement, that he
has and will have no agreement, duty, commitment or responsibility of any kind
or nature whatsoever with any other person, corporation, partnership, firm,
company, joint venture or other entity which would conflict in any manner
whatsoever with any of his duties, obligations or responsibilities to the
Company pursuant to this Agreement, and that he is fully ready, willing and
able to perform each and all of such duties, obligations and responsibilities.

7.             Termination
of Employment.

(a)           Additional
Consulting Services.  In
consideration of the benefits provided to Employee under this Agreement,
Employee agrees that for a period of one year following his termination of
employment with the Company, Employee will, with reasonable notice from the
Company, provide additional transitional assistance of up to ten (10) hours per
month without additional compensation. 
Employee further agrees to provide following his termination of
employment with the Company, for a consulting fee of $250 per hour, such
additional assistance and cooperation as the Company shall, with reasonable
notice, reasonably request in connection with any and all litigation matters
arising out of or in any way relating to the conduct prior to the Effective
Time of the business and operations of Oak, provided that such litigation
assistance shall not exceed ten (10) hours per month unless required by legal
process or otherwise agreed to between Employee and the Company.

 

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(b)           Return
of Company Property.  Upon
termination of his employment for any reason, Employee shall immediately
deliver to the Company all documents, property, and other records of the
Company or any other member of the Company Group, and all copies thereof,
within Employee’s possession, custody or control.

(c)           Compensation
Upon Involuntary Termination Without Cause.  If Employee’s employment is terminated by the Company for any
reason other than Cause (as defined below) prior to the end of the Transition
Period, Employee shall be entitled nevertheless to receive his salary as
provided in Paragraph 3(a) through the end of the Transition Period.  For the purposes of this Paragraph, “Cause”
shall mean the occurrence of  any of the
following: (a) Employee’s willful failure to follow the lawful directions of
Mr. Gerzberg, (b) Employee’s engagement in gross misconduct which is materially
detrimental to the Company or any other member of the Company Group,
(c) Employee’s willful and repeated failure or refusal to comply in any
material respect with the Company agreement and policy described in Paragraph 7
or any other reasonable policies of the Company where material non-compliance
would be materially detrimental to the Company, or (d) Employee’s commission of
an unlawful or criminal act (serious in nature) which may reasonably be
expected to reflect adversely on the Company.

8.             Confidential
and Proprietary; Insider Trading Policy. 
Employee agrees to abide by the terms and conditions of the Company’s
standard form of employee confidentiality and assignment of inventions
agreement as executed by Employee and attached hereto as Exhibit C
and the Company’s Insider Trading Policy as executed by Employee and attached
hereto as Exhibit D.

9.             Dispute
Resolution.  In the event of any
dispute or claim relating to or arising out of this Agreement (including, but
not limited to, any claims of breach of contract, wrongful termination or age,
sex, race or other discrimination), Employee and the Company agree that all
such disputes shall be fully and finally resolved by binding arbitration
conducted by the American Arbitration Association in Santa Clara County,
California in accordance with its National Employment Dispute Resolution rules,
as those rules are currently in effect (and not as they may be modified in the
future).  Employee acknowledges that by
accepting this arbitration provision he is waiving any right to a jury trial in
the event of such dispute.  Provided,
however, that this arbitration provision shall not apply to any disputes or
claims relating to or arising out of the misuse or misappropriation of trade
secrets or proprietary information.

10.           Attorneys’
Fees.  The prevailing party shall be
entitled to recover from the losing party its attorneys’ fees and costs
incurred in any action brought to enforce any right arising out of this
Agreement.

11.           Survival
of Certain Provisions of this Agreement. Except as may otherwise be
provided herein, each and all of the terms, provisions and covenants of each of
Paragraphs 5, 6, 7, 8, 9, 10, 11 and 12 of this Agreement shall, for any
and all purposes whatsoever, survive any termination of the Employee’s
employment, regardless of whether such termination is by Employee, by the
Company, by expiration of the term of employment or otherwise.

 

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12.           General.

(a)           Successors and Assigns.  The provisions of this Agreement shall inure
to the benefit of and be binding upon the Company, Employee and each and all of
their respective heirs, legal representatives, successors and assigns.  The duties, responsibilities and obligations
of Employee under this Agreement shall be personal and not assignable or
delegable by Employee in any manner whatsoever to any person, corporation,
partnership, firm, company, joint venture or other entity.  Employee may not assign, transfer, convey,
mortgage, pledge or in any other manner encumber the compensation or other
benefits to be received by him or any rights which he may have pursuant to the
terms and provisions of this Agreement.

(b)           Amendments;
Waiver.  No provision of this
Agreement shall be modified, waived or discharged unless the modification,
waiver or discharge is agreed to in writing and signed by Employee and by an
authorized officer of the Company.  No
waiver by either party of any breach of, or of compliance with, any condition
or provision of this Agreement by the other party shall be considered a waiver
of any other condition or provision or of the same condition or provision at
another time.

(c)           Entire
Agreement.  This Agreement, the
attachments hereto and the other agreements referred to herein, including the
Company’s benefit plans, the Assumed Option Documents, the Replacement Option
Documents and the Restrictive Covenants Agreement, are the sole, complete and
entire contract, agreement and understanding between the Company and Employee
concerning the terms and conditions of Employee’s employment with the Company,
the duration and termination of such employment and the compensation and
benefits to be paid and provided by the Company to Employee pursuant to such
employment.  Except as otherwise
provided herein, this Agreement supersedes any and all prior contracts,
agreements, plans, agreements in principle, correspondence, letters of intent,
understandings, and negotiations, whether oral or written, concerning the
Employee’s employment with the Company.

(d)           Withholding
Taxes.  All payments made under this
Agreement shall be subject to reduction to reflect taxes required to be
withheld by law.

(e)           Originals.  This Agreement may be executed by the
Company and Employee in counterparts, each of which shall be deemed an original
and which together shall constitute one instrument.

(f)            Headings.  Each and all of the headings contained in
this Agreement are for reference purposes only and shall not in any manner
whatsoever affect the construction or interpretation of this Agreement or be
deemed a part of this Agreement for any purpose whatsoever.

(g)           Savings
Provision.  To the extent that any
provision of this Agreement or any paragraph, term, provision, sentence,
phrase, clause or word of this Agreement shall be found to be illegal or
unenforceable for any reason, such Paragraph, term, provision, sentence,
phrase, clause or word shall be modified or deleted in such a manner as to make
this Agreement, as so modified, legal and enforceable under applicable
laws.  The remainder of this Agreement
shall continue in full force and effect.

 

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(h)           Governing
Law.  This Agreement shall be
governed in all respects by the internal laws, but not the choice of law rules,
of the State of California.

(i)            Construction.  The language of this Agreement and of each
and every paragraph, term and provision of this Agreement shall, in all cases,
for any and all purposes, and in any and all circumstances whatsoever be construed
as a whole, according to its fair meaning, not strictly for or against
Employee, the Company and with no regard whatsoever to the identity or status
of any person or persons who drafted all or any portion of this Agreement.

(j)            Notices.  Any notices to be given pursuant to this
Agreement by either party to the other party may be effected by personal
delivery or by registered or certified mail, postage prepaid with return
receipt requested.  Mailed notices shall
be addressed to the parties at the addresses stated below, but each party may
change its or his address by written notice to the other in accordance with
this Paragraph.  Notices delivered
personally shall be deemed received on the date of delivery.  Notices delivered by mail shall be deemed
received on the third business day after the mailing thereof.

                Mailed
notices to Employee shall be addressed as follows:

Young K. Sohn

1321 Harker Avenue

Palo Alto, California 94301

 

                Mailed
notices to the Company shall be addressed as follows:

Zoran Corporation

3112 Scott Boulevard

Santa Clara, California 95054

Attention: President

 

                IN WITNESS WHEREOF the Company and Employee have each
duly executed this Agreement as of the date first set forth above.

 

	
   

  	
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Levy Gerzberg

  
	
   

  	
  Its:

  	
  President and CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Young K. Sohn

  
	
   

  	
  Young K. Sohn

  

 

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EXHIBIT A

 

 

 

 

 

 

OAK PARTICIPATION
AGREEMENT

(Including form of
Release of Claims attached as Appendix A)

 

 

 

 

EXHIBIT B

 

 

 

 

 

 

OAK SEVERANCE PLAN

 

 

 

 

 

EXHIBIT C

 

 

 

 

 

 

PROPRIETARY
INFORMATION AND INVENTIONS AGREEMENT

 

 

 

 

 

EXHIBIT D

 

 

 

 

 

 

INSIDER TRADING
POLICYExhibit 10.1

AMENDED AND RESTATED

1995 STOCK OPTION PLAN

OF

DEPOMED, INC.

(through May 29, 2003)

 

1.             PURPOSES OF THE PLAN

The purposes of the 1995
Stock Option Plan (the “Plan”) of DepoMed, Inc., a California corporation (the
“Company”), are to:  (a) encourage
selected employees, directors and consultants to improve operations and
increase profits of the Company; (b) encourage selected employees, directors
and consultants to accept or continue employment or association with the
Company or its Affiliates; and (c) increase the interest of selected employees,
directors and consultants in the Company’s welfare through participation in the
growth in value of the common stock of the Company (the “Common Stock”).

Options granted under
this Plan (“Options”) may be “incentive stock options” (“ISOs”) intended to
satisfy the requirements of Section 422 of the Internal Revenue Code of 1986,
as amended (the “Code”), or “nonstatutory options” (“NSOs”).

2.             ELIGIBLE PERSONS

Every person who at the
date of grant of an Option is a full–time employee of the Company or of
any Affiliate (as defined below) of the Company is eligible to receive NSOs or
ISOs under this Plan. Every person who at the date of grant is a consultant to,
or non-employee director of, the Company or any Affiliate (as defined below) of
the Company is eligible to receive NSOs under this Plan. The term “Affiliate”
as used in the Plan means a parent or subsidiary corporation as defined in the
applicable provisions (currently Sections 424(e) and (f), respectively) of the
Code. The term “employee” includes an officer or director who is an employee,
of the Company. The term “consultant” includes persons employed by, or
otherwise affiliated with, a consultant.

3.             STOCK SUBJECT TO THIS PLAN

(a)           Number and Source of Shares.
Subject to the provisions of Section 6.1.1 of the Plan, the total number of
shares of stock which may be issued under options granted pursuant to this Plan
shall not exceed 4,700,000 shares of Common Stock. The shares covered by the
portion of any grant under the Plan which expires unexercised shall become
available again for grants under the Plan.

 

 

(b)           Individual Limitation. The
Company may not issue options with a fair market value exercise price as of the
date of grant covering in the aggregate more than 500,000 shares of Common
Stock to any one participant in any one-year period.

4.             ADMINISTRATION

(a)           This Plan shall be administered by
the Board of Directors of the Company (the “Board”) or, either in its entirety
or only insofar as required pursuant to Section 4(b) hereof, by a committee
(the “Committee”) of at least two Board members to which administration of the
Plan, or of part of the Plan, is delegated (in either case, the
“Administrator”).

(b)           Subject to the other provisions of
this Plan, the Administrator shall have the authority, in its discretion: (i)
to grant Options; (ii) to determine the fair market value of the Common Stock
subject to Options; (iii) to determine the exercise price of Options granted;
(iv) to determine the persons to whom, and the time or times at which, Options
shall be granted, and the number of shares subject to each Option; (v) to
interpret this Plan; (vi) to prescribe, amend, and rescind rules and
regulations relating to this Plan; (vii) to determine the terms and provisions
of each Option granted (which need not be identical), including but not limited
to, the time or times at which Options shall be exercisable; (viii) with the
consent of the optionee, to modify or amend any Option; (ix) to defer (with the
consent of the optionee) the exercise date of any Option; (x) to accelerate the
exercise date of any Option; (xi) to authorize any person to execute on behalf
of the Company any instrument evidencing the grant of an Option; and (xii) to
make all other determinations deemed necessary or advisable for the
administration of this Plan. The Administrator may delegate nondiscretionary
administrative duties to such employees of the Company as it deems proper.

(c)           All questions of interpretation,
implementation, and application of this Plan shall be determined by the
Administrator. Such determinations shall be final and binding on all persons.

(d)           With respect to persons subject to
Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), if any, transactions under this Plan are intended to comply with the
applicable conditions of Rule 16b-3, or any successor rule thereto. To the
extent any provision of this Plan or action by the Administrator fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Administrator. Notwithstanding the above, it shall be
the responsibility of such persons, not of the Company or the Administrator, to
comply with the requirements of Section 16 of the Exchange Act; and neither the
Company nor the Administrator shall be liable if this Plan or any transaction
under this Plan fails to comply with the applicable conditions of Rule 16b-3 or
any successor rule thereto, or if any such person incurs any liability under
Section 16 of the Exchange Act.

5.             GRANTING OF OPTIONS; OPTION AGREEMENT

 

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(a)           No Options shall be granted under
this Plan after ten years from the date of adoption of this Plan by the Board.

(b)           Each Option shall be evidenced by a
written stock option agreement, in form satisfactory to the Company, executed
by the Company and the person to whom such Option is granted; provided,
however, that the failure by the Company, the optionee, or both to execute such
an agreement shall not invalidate the granting of an Option, although the
exercise of each option shall be subject to Section 6.1.3.

(c)           The stock option agreement shall
specify whether each Option it evidences is a NSO or an ISO.

(d)           Subject to Section 6.2.3 with respect
to ISOs, the Administrator may approve the grant of Options under this Plan to
persons who are expected to become employees, directors or consultants of the
Company, but are not employees, directors or consultants at the date of
approval.

6.             TERMS AND CONDITIONS OF OPTIONS

Each
Option granted under this Plan shall be subject to the terms and conditions set
forth in Section 6.1.  NSOs shall not be
subject to the terms and conditions set forth in Section 6.2.

6.1.          Terms and Conditions to Which All
Options are Subject.

All Options granted under
this Plan shall be subject to the following terms and conditions:

6.1.1.       Changes in Capital Structure.  Subject to Section 6.1.2, if the stock of
the Company is changed by reason of a stock split, reverse stock split, stock
dividend, or recapitalization, combination or reclassification, appropriate
adjustments shall be made by the Board in (a) the number and class of shares of
stock subject to this Plan and each Option outstanding under this Plan, and (b)
the exercise price of each outstanding Option; provided, however, that the
Company shall not be required to issue fractional shares as a result of any
such adjustments. Each such adjustment shall be subject to approval by the
Board in its sole discretion.

6.1.2.       Change in Control.  (a) 
In the event of the proposed dissolution or liquidation of the Company,
the Administrator shall notify each optionee at least 30 days prior to such
proposed action.  To the extent not
previously exercised, all Options will terminate immediately prior to the
consummation of such proposed action.

(b)           In the event of a “change in control”
of the Company, options granted pursuant to the Plan shall automatically be
accelerated in full so as to become completely vested and fully exercisable.  In such event, the Administrator shall
notify each 

 

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optionee at least 30 days prior to such proposed
action that the options shall be fully exercisable for a period of 30 days from
the date of such notice, and options shall terminate upon the expiration of
such 30-day period.  In the event of a
“change in control” of the Company, any right of repurchase pursuant to Section
6.1.8 shall expire.

For purposes of the
foregoing, a change in control means the occurrence of either of the following:

(i)            any “person” (as used in Section
13(d) of the Securities Exchange Act of 1934 and the rules promulgated
thereunder) becomes the “beneficial owner” (as defined in Rule 13d-3) of
securities representing a majority of the voting power of the then outstanding
securities of the Company; or

(ii)           a sale of assets involving all or
substantially all of the assets of the Company, or a merger or consolidation of
the Company in which the holders of securities of the Company immediately prior
to such event hold in the aggregate less than a majority of the securities of
the Company immediately after such event.

6.1.3.       Time of Option Exercise. Subject
to Section 5 and Section 6.2.4, Options granted under this Plan shall be
exercisable (a) immediately as of the effective date of the stock option
agreement granting the Option, or (b) in accordance with a schedule related to
the date of the grant of the Option, the date of first employment, or such
other date as may be set by the Administrator (in any case, the “Vesting Base
Date”) and specified in the written stock option agreement relating to such
Option. In any case, no Option shall be exercisable until a written stock
option agreement in form satisfactory to the Company is executed by the Company
and the optionee.

6.1.4.       Option Grant Date. Except in the
case of advance approvals described in Section 5(d), the date of grant of an
Option under this Plan shall be the date as of which the Administrator approves
the grant.

6.1.5.       Nonassignability of Option Rights.  Except as otherwise determined by the
Administrator, no Option granted under this Plan shall be assignable or
otherwise transferable by the optionee except by will or by the laws of descent
and distribution. During the life of the optionee, except as otherwise
determined by the Administrator and expressly set forth in the Option
Agreement, an Option shall be exercisable only by the optionee.

6.1.6.       Payment. Except as provided below,
payment in full, in cash, shall be made for all stock purchased at the time
written notice of exercise of an Option is given to the Company, and proceeds
of any payment shall constitute general funds of the Company. At the time an
Option is granted or exercised, the Administrator, in the exercise of its
absolute discretion after considering any tax or accounting consequences, may
authorize any one or more of the following additional methods of payment:

 

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(a)           Acceptance of the optionee’s full recourse
promissory note for all or part of the Option price, payable on such terms and
bearing such interest rate as determined by the Administrator (but in no event
less than the minimum interest rate specified under the Code at which no
additional interest would be imputed and in no event more than the maximum
interest rate allowed under applicable usury laws), which promissory note may
be either secured or unsecured in such manner as the Administrator shall
approve (including, without limitation, by a security interest in the shares of
the Company); and

(b)           Delivery by the optionee of Common
Stock already owned by the optionee for all or part of the Option price,
provided the value (determined as set forth in Section 6.1.11) of such Common
Stock is equal on the date of exercise to the Option price, or such portion
thereof as the optionee is authorized to pay by delivery of such stock;
provided, however, that if an optionee has exercised any portion of any Option
granted by the Company by delivery of Common Stock, the optionee may not,
within six months following such exercise, exercise any Option granted under
this Plan by delivery of Common Stock without the consent of the Administrator.

(c)           Exercise of an Option may be made
pursuant to a “cashless exercise/sale” procedure pursuant to which funds to pay
for exercise of the Option are delivered to the Company by a broker upon
receipt of stock certificates from the Company, or pursuant to which optionees
obtain margin loans from brokers to fund the exercise of the Option.

6.1.7.       Termination of Employment. If for
any reason other than death or disability, an optionee ceases to be employed by
the Company or any of its Affiliates (such event being called a “Termination”),
Options held at the date of Termination (to the extent then exercisable) may be
exercised in whole or in part at any time within thirty days of the date of
such Termination, or such other period as is specified in the Option Agreement
(but in no event after the Expiration Date); provided, that if such exercise of
the Option would result in liability for the optionee under Section 16(b) of
the Exchange Act, then such one-month period automatically shall be extended
until the tenth day following the last date upon which optionee has any
liability under Section 16(b) (but in no event after the Expiration Date). If
an optionee dies or becomes disabled (within the meaning of Section 22(e)(3) of
the Code) while employed by the Company or an Affiliate or within the period
that the Option remains exercisable after Termination, Options then held (to
the extent then exercisable) may be exercised, in whole or in part, by the
optionee, by the optionee’s personal representative or by the person to whom
the Option is transferred by devise or the laws of descent and distribution, at
any time within twelve months after the death or twelve months after the
disability of the optionee, or such other period as is specified in the Option
Agreement (but in no event after the Expiration Date). For purposes of this
Section 6.1.7, “employment” includes service as a director or as a consultant.
For purposes of this Section 6.1.7, an optionee’s employment shall not be
deemed to terminate by reason of sick leave, military leave or other leave of
absence approved by the Administrator, if the period of any such leave does not
exceed 90 days or, if longer, if the optionee’s right to reemployment by the
Company or any Affiliate is guaranteed either contractually or by statute.

 

5

 

6.1.8.       Repurchase of Stock. At the option
of the Administrator, the stock to be delivered pursuant to the exercise of any
Option granted to an employee, director or consultant under this Plan may be
subject to a right of repurchase in favor of the Company with respect to any
employee, or director or consultant whose employment, or director or consulting
relationship with the Company is terminated.

Determination of the number of shares subject to any
such right of repurchase shall be made as of the date the employee’s employment
as an employee, consultant or director of the Company terminates, not as of the
date that any Option granted to such employee, director or consultant is
thereafter exercised.

6.1.9.       Withholding and Employment Taxes.
At the time of exercise of an Option or at such other time as the amount of
such obligations becomes determinable (the “Tax Date”), the optionee shall
remit to the Company in cash all applicable federal and state withholding and
employment taxes. If authorized by the Administrator in its sole discretion
after considering any tax or accounting consequences, an optionee may elect to
(i) deliver a promissory note on such terms as the Administrator deems
appropriate, (ii) tender to the Company previously owned shares of Stock or other
securities of the Company, or (iii) have shares of Common Stock which are
acquired upon exercise of the Option withheld by the Company to pay some or all
of the amount of tax that is required by law to be withheld by the Company as a
result of the exercise of such Option.

Any securities tendered or withheld in accordance with
this Section 6.1.9 shall be valued by the Company as of the Tax Date.

6.1.10.  Other Provisions. Each Option granted
under this Plan may contain such other terms, provisions, and conditions not
inconsistent with this Plan as may be determined by the Administrator, and each
ISO granted under this Plan shall include such provisions and conditions as are
necessary to qualify the Option as an “incentive stock option” within the
meaning of Section 422 of the Code.

6.1.11.  Determination of Value. For purposes
of the Plan, the value of Common Stock or other securities of the Company shall
be determined as follows:

(a)           If the stock of the Company is listed
on any established stock exchange or a national market system, including
without limitation the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation System, 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 system or exchange (or the largest such
exchange) for the date the value is to be determined (or if there are no sales
for such date, then for the last preceding business day on which there were
sales), as reported n the Wall Street Journal or similar publication.

(b)           If the stock of the Company is
regularly quoted by a 

 

6

 

recognized securities dealer but selling prices
are not reported, its fair market value shall be the mean between the high bid
and low asked prices for the stock on the date the value is to be determined
(or if there are no quoted prices for the date of grant, then for the last
preceding business day on which there were quoted prices).

(c)           In the absence of an established
market for the stock, the fair market value thereof shall be determined in good
faith by the Administrator, with reference to the Company’s net worth,
prospective earning power, dividend-paying capacity, and other relevant factors,
including the goodwill of the Company, the economic outlook in the Company’s
industry, the Company’s position in the industry and its management, and the
values of stock of other corporations in the same or a similar line of
business.

6.1.12.  Option Term. Subject to Section
6.2.5, no Option shall be exercisable more than ten years after the date of
grant, or such lesser period of time as is set forth in the stock option
agreement (the end of the maximum exercise period stated in the stock option
agreement is referred to in this Plan as the “Expiration Date”).

6.2.          TERMS AND CONDITIONS TO WHICH ONLY
ISOS ARE SUBJECT. Options granted under this Plan which are designated as
ISOs shall be subject to the following terms and conditions:

6.2.1.       Exercise Price. The exercise price
of an ISO shall be determined in accordance with the applicable provisions of
the Code and shall in no event be less than the fair market value (determined
in accordance with Section 6.1.11) of the stock covered by the Option at the time
the Option is granted; provided, however, that the exercise price of any ISO
granted to any person who owns, directly or by attribution under the Code
currently Section 424(d), stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or of any
Affiliate (a “Ten Percent Stockholder”) shall in no event be less than 110% of
the fair market value (determined in accordance with Section 6.1.11) of the
stock covered by the Option at the time the Option is granted.

6.2.2.       Disqualifying Dispositions. If
stock acquired by exercise of an ISO granted pursuant to this Plan is disposed
of in a “disqualifying disposition” within the meaning of Section 422 of the
Code, the holder of the stock immediately before the disposition shall promptly
notify the Company in writing of the date and terms of the disposition and
shall provide such other information regarding the Option as the Company may
reasonably require.

6.2.3.       Grant Date. If an ISO is granted
in anticipation of employment as provided in Section 5(d), the Option shall be
deemed granted, without further approval, on the date the grantee assumes the
employment relationship forming the basis for such grant, and, in addition,
satisfies all requirements of this Plan for Options granted on that date.

6.2.4.       Vesting. Notwithstanding any other
provision of this Plan, ISOs granted 

 

7

 

under all
incentive stock option plans of the Company and its subsidiaries may not “vest”
for more than $100,000 in fair market value of stock (measured on the grant
dates(s)) in any calendar year. For purposes of the preceding sentence, an
option “vests” when it first becomes exercisable. If, by their terms, such ISOs
taken together would vest to a greater extent in a calendar year, and unless
otherwise provided by the Administrator, ISOs with lower exercise prices shall
vest before ISOs with higher exercise prices, regardless of the grant date.

6.2.5.       Term. Notwithstanding Section
6.1.12, no ISO granted to any Ten Percent Stockholder shall be exercisable more
than five years after the date of grant.

7.             MANNER OF EXERCISE

(a)           An optionee wishing to exercise an
Option shall give written notice to the Company at its principal executive
office, to the attention of the officer of the Company designated by the
Administrator, accompanied by payment of the exercise price as provided in
Section 6.1.6. The date the Company receives written notice of an exercise
hereunder accompanied by payment of the exercise price will be considered as
the date such Option was exercised.

(b)           Promptly after receipt of written
notice of exercise of an Option, the Company shall, without stock issue or
transfer taxes to the optionee or other person entitled to exercise the Option,
deliver to the optionee or such other person a certificate or certificates for
the requisite number of shares of stock. An optionee or permitted transferee of
an optionee shall not have any privileges as a stockholder with respect to any
shares of stock covered by the Option until the date of issuance (as evidenced
by the appropriate entry on the books of the Company or a duly authorized
transfer agent) of such shares.

8.             EMPLOYMENT OR CONSULTING RELATIONSHIP

Nothing in this Plan or
any Option granted thereunder shall interfere with or limit in any way the
right of the Company or of any of its Affiliates to terminate any optionee’s
employment or consulting at any time, nor confer upon any optionee any right to
continue in the employ of, or consult with, the Company or any of its
Affiliates.

9.             CONDITIONS UPON ISSUANCE OF SHARES

Shares of Common Stock
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 “Securities Act”).

10.           NONEXCLUSIVITY OF THE PLAN

The adoption of the Plan
shall not be construed as creating any limitations on the power 

 

8

 

of the Company to adopt
such other incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options other than under the Plan.

11.           MARKET STANDOFF

Each optionee, if so
requested by the Company or any representative of the underwriters in
connection with any registration of the offering of any securities of the
company under the Securities Act shall not sell or otherwise transfer any
shares of Common Stock acquired upon exercise of Options during the 180-day
period following the effective date of a registration statement of the company
filed under the Securities Act; provided, however, that such restriction shall
apply only to the first two registration statements of the Company to become
effective under the Securities Act which includes securities to be sold on
behalf of the Company to the public in an underwritten public offering under
the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restriction until the end of
such 180-day period.

12.           AMENDMENTS TO PLAN

The Board may at any time
amend, alter, suspend or discontinue this Plan. Without the consent of an
optionee, no amendment, alteration, suspension or discontinuance may adversely
affect outstanding Options except to conform this Plan and ISOs granted under
this Plan to the requirements of federal or other tax laws relating to
incentive stock options. No amendment, alteration, suspension or discontinuance
shall require stockholder approval unless (a) stockholder approval is required
to preserve incentive stock option treatment for federal income tax purposes,
or (b) the Board otherwise concludes that stockholder approval is advisable.

 

 

 

9

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