Document:

Exhibit 4.1

 

 

OCTILLION
COMMUNICATIONS INC.

2001 STOCK OPTION PLAN

 

As Adopted Effective
February 9, 2001

 

1.                                       Purpose.

 

(a)           The
purpose of the Octillion Communications Inc. Stock Option Plan (the “Plan”) is
to provide a means whereby selected eligible employees and officers and
directors of and consultants to Octillion Communications Inc., a California
corporation (the “Company”), and its Affiliates, if any, as defined below, may
be given a favorable opportunity to acquire common stock of the Company (the “Common
Stock”), thereby encouraging such persons to accept or continue a qualifying
relationship with the Company; increasing the interest of such persons in the
Company’s welfare through participation in the growth and the value of the
Common Stock; and furnishing such persons with an incentive to improve
operations and increase profits of the Company. The term “Affiliate” or
“Affiliates” as used in the Plan shall mean any parent corporation or
subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

                                (b)           To accomplish the foregoing
objectives, the Plan provides a means whereby employees, directors, and
consultants may receive options to purchase Common Stock.

 

                2.             Stock Option.        Stock options granted pursuant to the
Plan may, at the discretion of the Board of Directors of the Company, be
granted either as an Incentive Stock Option (“ISO”) or as a Non-statutory Stock
Option (“NSO”). An ISO shall mean an option described in Section 422 of the
Code.  An NSO shall mean any option not
meeting the requirements of Section 422 of the Code.  An option designated as an NSO will not be treated as an ISO.

 

                3.             Administration.    The Board of Directors (the “Board”), whose
authority shall be plenary, shall administer the Plan, unless and until such
time as the Board delegates administration of the Plan pursuant to subsection
(3)(b), below.

 

(a)           The Board, whose determinations shall
be conclusive, shall have the power, subject to and within the limits of the
express provisions of the Plan:

 

(i) To grant options pursuant to the Plan;

 

(ii) To determine from time to time which of the
eligible persons described in Section 5, below, shall be granted options under
the Plan, the number of shares for which each option shall be granted, the term
of each granted option and the time or times during the term of each option
within which all or a portion of each option may be exercised (which at the
Board’s discretion may be accelerated, if allowed under applicable law.)

 

(iii) To construe and interpret the Plan and options
granted under it and to establish, amend, and revoke rules and regulations for
its administration.  The Board, in the

 

 

exercise of this power,
shall generally determine all questions for policy and expediency that may
arise and may correct any defect, omission or inconsistency in the Plan or in
any option agreement with respect to the Plan in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.

 

(iv) To grant options in exchange for cancellation of
options granted earlier at different exercise prices; provided, however,
nothing contained herein shall empower the Board to grant an ISO under
conditions or pursuant to terms that are inconsistent with the requirements of
subsection 4(b), below, or section 422 of the Code.

 

(v) To prescribe the terms and provisions of each
option granted (which need not be identical) and the form of written instrument
that shall constitute the option agreement;

 

(vi) To amend the Plan as provided in Section 11,
below;

 

(vii) Generally, to
exercise such powers and perform such acts as are deemed necessary or expedient
to promote the best interests of the Company;

 

(viii) To take appropriate action to cause any option
granted hereunder to cease to be an ISO; provided, however, no such action may
be taken by the Board without the written consent of the affected optionee.

 

                                (b)           The Board may, by resolution,
delegate administration of the Plan (including, without limitation, the Board’s
powers under subsection 3(a) above) to a committee acting under the authority
of the Board. In the event that the Company has registered any equity security
under section 12 of the Securities Act of 1934, as amended (the “Act”), such
committee shall consist of not less than two (2) members of the Board each of
whom shall be a “disinterested person” and an “outside director”.  A member of the Board is a “disinterested
person” if at the time she exercises discretion in administering the Plan she
is not eligible and has not at any time within one year prior thereto been
eligible for selection as a person to whom stock may be allocated or to whom
stock options or stock appreciation rights may be granted pursuant to the Plan
or any other plan of the Company (or Affiliate) entitling the participants
therein to acquire stock, stock options or stock appreciation rights of the
Company (or Affiliate), or if she otherwise satisfies the requirements of a
“disinterested person” within the meaning of Rule 16b-3 of the Act.  A member of the Board is an “outside
director” if she is not a current employee of the Company (or Affiliate”), is
not a former employee of the Company (or Affiliate) who is receiving
compensation for prior services, was not an officer of the Company (or
Affiliate) at any time, and currently is not receiving compensation for
personal services to the Company (or Affiliate) in any capacity other than as a
member of the Board, or if she otherwise satisfies the requirements of an
“outside director” as such term is defined for purpose of Section 162(m) of the
Code.  The Board shall have complete
discretion to determine the composition, structure, form, term and operation of
any committee established to administer the Plan.  The Board at any time may revest in the Board the administration
of the Plan.

 

 

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                4.                                       Shares Subject to Plan and to Option.

 

(a)           Subject to the provisions of Section
10, below (relating to adjustments upon changes in stock), the stock which may
be sold pursuant to options granted under the Plan shall not exceed in the
aggregate of six million (6,000,000) shares of the Company’s authorized Common
Stock and they may be unissued shares, reacquired shares, or shares bought on
the market for the purpose of issuance under the Plan.  If any options granted under the Plan shall
for any reason terminate or expire without having been exercised in full, the
stock not purchased under such options shall be available again for the purpose
of the Plan.

 

                (b)           If the aggregate fair market value of stock with respect
to which ISOs are exercisable for the first time by any individual during any
calendar year exceeds the amount provided in Section 422(d) of the Code, such
options representing stock in excess of Section 422(d) annual limitation shall
be deemed to be a grant of an NSO to the extent of such excess.

 

5.                                       Eligibility.

 

(a)           All employees of the Company and its
Affiliates are eligible to receive ISOs and only employees of the Company or
its Affiliate may be granted ISOs. 
Independent contractors, and Directors of the Company who are not also
employees of the Company shall not be eligible for ISOs, but are eligible for
NSOs.  Employees shall also be eligible
for NSOs.

 

(b)         No option issued under the Plan, may be
granted to a person who, at the time such option would be granted, owns stock
possessing more than ten percent (10%) of the total combined voting power of
all outstanding capital stock of the Company or its Affiliate unless the option
price is at least one hundred (100%) in the case of an NSO, one hundred ten
percent (110%) in the case of an ISO, of the fair market value of the stock
subject to the option and such option by its terms is not exercisable after
five (5) years from the date such option is granted.  Any employee may hold more than one (1) option at any time.  For purpose of this subsection 5(b), in
determining stock ownership, an optionee shall be considered as owning the
voting capital stock owned, directly or indirectly, by or for his brothers and
sisters, spouse, ancestors and lineal descendants.  Voting capital stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be considered as being owned
proportionately by or for its shareholders, partners or beneficiaries, as
applicable. Common Stock with respect to which any such optionee holds an
option shall not be counted. 
Additionally, for purpose of this subsection 5(b), outstanding capital
stock shall include all capital stock actually issued and outstanding
immediately after the grant of the option to the optionee. Outstanding capital
stock shall not include capital stock authorized for issuance under outstanding
options held by the optionee or by any other person.

 

6.             Terms of Options.                Options granted pursuant to the
Plan need not be identical, but each option shall be granted within ten (10)
years from the date the Plan is adopted by the Board or approved by the
shareholders, whichever is earlier, shall specify the number of shares to which
it pertains and shall be subject to the following terms and conditions:

 

(a)           The purchase price of each option
shall be determined by the administrator of the Plan at the time the option is
granted, but shall in no event, except as otherwise set forth in

 

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Section 5, above, be less
than eighty-five percent (85%) in the case of an NSO, or one hundred percent
(100%) in the case of an ISO, of the fair market value of the stock subject to
the option on the date the option is granted. 
For all purposes of the Plan, the fair market value of the Common Stock
shall be, if the stock is publicly traded, its closing bid price on NASDQ or
the over-the-counter market, or if is traded on another stock exchange, the
last price at which it traded on such exchange.  If the stock is not publicly traded, the fair market value shall
be such as is determined in good faith by the Board of Directors by taking into
consideration the following factors: the Company’s net worth, prospective
earning power and dividend-paying capacity, and other relevant factors.

 

“Other relevant
factors” include the goodwill of the business; the economic outlook in the
particular industry; the Company’s position in the industry and its management;
the degree of control of the business represented by the bloc of the stock to
be valued; and the values of securities of corporations engaged in the same or
similar line of business which are listed on a stock exchange.  In addition to the relevant factors
described above, consideration shall also be given to nonoperating assets
including proceeds of life insurance policies payable to or for the benefit of
the Company, the extent such nonoperating assets have not been taken into
account in the determination of net worth, prospective earning power, and
dividend-earning capacity.

 

(b)           Except as otherwise set forth in
Section 5, above, the term of any option shall not be greater than ten (10)
years from the date it was granted.

 

(c)           An option by its terms, shall not be
transferable otherwise than by will or the laws of descent and distribution and
may be exercisable, during the lifetime of the option holder, only by the
individual to whom the option is granted. 
Notwithstanding the above, if an employee is determined to be
incompetent by a court of proper jurisdiction, his or her legal representative
may exercise the option on his or her behalf.

 

(d)           Each option shall become exercisable
on annual basis as to not less than twenty percent (20%) of the total number of
shares subject thereto.

 

(e)           Options under the Plan may be
exercised by a participant regardless of whether she is employed by the Company
or an Affiliate at the time of exercise.

 

(f)            Upon the termination of a
participant’s employment (defined as the date the participant is not longer
employed by either the Company or any of its Affiliates), his or her rights to
exercise an option then held by him or her shall be only as follows:

 

                (i)            If a participant’s employment is terminated for any
reason other than death of the participant, she may, within not less than three
(3) months following such termination, or with such longer period as the Board
may fix, exercise the option to the extent such option was exercisable by the
participant on the date of termination of his employment, or to the extent
otherwise specified by the Board, which may so specify at a time that is
subsequent to the date of the termination of his employment, provided, the date
of exercise is in no event after the expiration of the term of the option.  However, if the participant’s employment is
terminated due to the Disability (within the meaning of Section 22(e) of the
Code) of the

 

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participant, then this
paragraph 6(f)(i) shall apply to such participant by substituting twelve (12)
for three (3) months.

 

                (ii)           If a participant’s employment is terminated by death, his
estate shall have the right for a period of not less than twelve (12) months
following the date of death, or for such longer period as the Board may fix, to
exercise the option to the extent the participant was entitled to exercise such
option on the date of death, or to the extent otherwise specified by the Board,
which may so specify, at a time that is subsequent to the date of the death,
provided the actual date of exercise is in no event after the expiration of the
term of the option.  A participant’s
estate shall mean his legal representative or any person who acquires the right
to exercise an option by reason of the participant’s death.

 

(g)           Option may also contain such other
provisions, which shall not be inconsistent with any of the foregoing term, as
the Board shall deem appropriate.  No
option, however, nor anything contained in the Plan, shall confer upon any
employee any right to continue in the employ of the Company (or Affiliate) nor
limit in any way the right of the Company (or Affiliate) to terminate his or
her employment at any time.

 

(h)           Subject to any required action by the
Company’s shareholders, if upon the consummation of any merger or
consolidation, the shareholders of the Company as constituted immediately prior
to such merger or consolidation hold more than 50% of the total outstanding
voting stock of the surviving or acquired entity immediately after such merger
or consolidation, each outstanding option shall pertain and apply to the
securities to which a holder of the number of shares subject to the option
would have been entitled, provided, the excess of the aggregate fair market
value of the shares subject to the option immediately after such merger or
consolidation over the aggregate option price of such shares is not more than
the excess of the aggregate fair market value of all shares subject to the
option immediately before such merger and consolidation over the aggregate
option price of such shares.  Upon the
consummation of a dissolution or liquidation of the Company or a merger or
consolidation in which the Company’s shareholders as constituted immediately
prior to the merger of consolidation hold less than 50% of the total
outstanding voting stock of the survived or acquired entity immediately after
such merger or consolidation, each outstanding option shall terminate, unless
the surviving or acquired corporation in the case of the merger or
consolidation assumes outstanding options or replaces them with substitute
options and (i) the excess of the aggregate fair market value of the shares
subject to the option immediately after the substitution or assumption over the
aggregate option price of such shares is not more than the excess of the
aggregate fair market value of all shares subject to the option immediately
before such substitution or assumption over the aggregate option price of such
shares; and (ii) the new option or the assumption of the old option does not
give the employee additional benefits which she did not have under the old
option.

 

7.                                       Payments and Loans Upon Exercise.

 

(a) The purchase
price of stock sold pursuant to an option shall be paid either in full in cash
or by certified check at the time the option is exercised or to the extent
permitted under the applicable provisions of California General Corporation
Law, pursuant to any deferred payment arrangement that the Board in its
discretion may approve; provided, however, that any

 

5

 

interest to be paid by an
optionee in connection with any such deferred payment arrangement shall be
charged at the applicable federal rate as defined in Section 1274(d)of the
Code.

 

(b)           The Company may make loans or
guarantee loans made by an appropriate financial institution to individual
optionees, including officers, on such terms as may be approved by the Board
for the purpose of financing the exercise of options granted under the Plan and
the payment of any taxes that may be due by such exercise.

 

(c)           In addition, if and to the extent
authorized by the Board, optionees may make all or any portion of any payment
due to the Company upon exercise of an option by delivery of any property
(including securities of the Company) other than cash, so long as such property
constitutes valid consideration for the stock under applicable law.

 

(d)           Where the Company has or will have a
legal obligation to withhold taxes relating to the exercise of any stock
option, such option may not be exercised, in whole or in part, unless such tax
obligation is first satisfied in a manner satisfactory to the Company.

 

                8.             Use of Proceeds from Stock.      Proceeds from the sale of stock pursuant
to options granted under the Plan shall be used for general corporate purposes.

 

                9.             Stock
Transfer Restrictions; Repurchase Provisions.   Stock issued pursuant to the exercise of options granted under the
Plan shall be subject to those stock transfer restrictions and repurchase provisions
which shall be set forth in a Stock Option Agreement (the “Agreement”),
substantially in the form attached hereto as Exhibit A.  Each individual shall be required to execute
such agreement prior to receiving his or her shares.

 

                10.           Adjustments
of and Changes in the Stock.     Subject
to the provisions set forth in subsection 6(h), above, in the event the shares
of Common Stock of the Company, as presently constituted, shall be changed into
or exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation (whether by reason of
merger, consolidation, recapitalization, reclassification, split-up,
combination of shares, or otherwise), or if the number of shares of Common
Stock of the Company shall be increased through the payment of a stock
dividend, then there shall be substituted for or added to each share of Common
Stock of the Company theretofore appropriated or thereafter subject or which
may become subject to an option under the Plan, the number and kind of shares
of stock or other securities into which each such outstanding share of Common
Stock of the Company shall be so changed, or for which each such share shall be
exchanged or to which each such share shall be entitled, as the case may be.

 

Outstanding
options shall also be amended as to price and other terms if necessary to
reflect the foregoing events.  In the
event there shall be any other change in the number or kind of the outstanding
shares of Common Stock of the Company, or of any stock or other securities into
which such Common Stock shall have been changed, or for which it shall have
been exchanged, then if the Board of Directors shall, in its sole discretion,
determine that such change equitably requires an adjustment in any option theretofore
granted or which may be granted under the Plan, such adjustment shall be made
in accordance with such determination. No right

 

6

 

to purchase factional
shares shall result from any adjustment in options pursuant to this Section
10.  In case of any such adjustment, the
shares subject to the option shall be rounded down to the nearest whole
share.  Notice of any adjustment shall
be given by the Company to each holder of an option which shall be so adjusted
and such adjustment (whether or not notice is given) shall be effective and
binding for all purposes of the Plan.

 

                11.           Amendment
of the Plan.     The Board at any time
and from time to time, may amend the Plan, subject to the limitation, however,
that except as provided in Section 10 (relating to adjustments upon changes in
stock), no amendment shall be effective, unless approved, within twelve (12)
months before or after the date of such amendment’s adoption, by the vote or
written consent of a majority of the outstanding shares of the Company entitled
to vote, where such amendment will:

 

(b)                                 increase the number of shares reserved
for options under the Plan;

 

(c)                                  materially modify the requirements of
Section 5 as to eligibility for participation in the Plan; or

 

(d)                                 materially increase the benefits accorded
to participant under the Plan.

 

                It is expressly contemplated that the Board may amend
the Plan in any respect necessary to provide the Company’s employees with the
maximum benefits provided or to be provided under Section 422 of the Code and
regulations thereunder relating to employee incentive stock option and/or to
bring the Plan or options granted under it into compliance therewith.

 

                Rights and obligations under any option granted
before any amendment of the Plan shall not be altered or impaired by amendment
of the Plan, except with the consent, which may be obtained in any manner
deemed by the Board to be appropriate, of the person to whom the option was
granted.

 

                12.           Termination or Suspension of the Plan.   The Board at any time may suspend or
terminate the Plan.  The Plan, unless
sooner terminated, shall terminate at the end of ten (10) years from the date
the Plan is adopted by the Board or approved by the stockholders of the
Company, whichever is earlier.  An
option may not be granted under the Plan while the Plan is suspended or after
it is terminated.

 

                Rights and obligations under any option granted while
the Plan is in effect shall not be altered or impaired by suspension or
termination of the Plan, except with the consent of the person to whom the
option was granted, which may be obtained in any manner that the Board deems
appropriate.

 

                13.           Time
of Granting Options.  The date of an
option hereunder shall, for all purposes, be the date on which the Board (or
committee under authority of the Board) makes the determination granting such
option.

 

7

 

                14.           Listing, Qualification or Approval of Stock; Approval
of Options.    All options granted
under the Plan are subject to the requirement that if at any time the Board
shall determine in its discretion that listing or qualification of the shares
of the stock subject thereto on any securities exchange or under any applicable
law, or the consent or approval by any governmental regulatory body or the
shareholders of the Company, is necessary or desirable as a condition of or in
connection with the issuance of shares under the option, the option may not be
exercised in whole or in part, unless such listing, qualification, consent or
approval shall have been effected or obtained free of any condition not
acceptable to the Board.

 

                15.           Binding Effect of the Conditions.      The conditions and stipulations
hereinabove contained or in any option granted pursuant to the Plan shall be
and constitute a covenant running with all of the shares of the Company owned
by the participant at any time, directly or indirectly whether the same have
been issued or not, and those shares of the Company owned by the participant
shall not be sold, assigned or transferred by any person save and except in
accordance with the terms and conditions herein provided, and the participant
shall agree to use his best efforts to cause the officers of the Company to
refuse to record on the books of the Company any assignment or transfer made or
attempted to be made, except as provided in the Plan and to cause said officers
to refuse to cancel old certificates or to issue or deliver new certificates
therefor where the purchaser or assignee has acquired certificates for the
stock represented thereby, except strictly in accordance with the provisions of
this Plan.

 

                16.           Effective Date of Plan.   The Plan shall become effective as determined by the Board but no
options granted under it shall be exercisable until the Plan has been approved
by the vote or written consent of the holders of a majority of the outstanding
shares of the Company entitled to vote. 
If such shareholders approval is not obtained within twelve (12) months
before or after the date of the Board’s adoption of the Plan, then all options
previously granted under the Plan shall terminate, and no further options shall
be granted and no shares shall be issued. Subject to such limitation, the Board
may grant options under the Plan at any time after the effective date and
before the date fixed herein for termination of the Plan.

 

                17.           Gender.     The
use of any gender specific pronoun or similar term is intended to be without
legal significance as to gender.

 

                18.           Financial
Reports.     The Company shall provide
financial and other information regarding the Company, on an annual or more
frequent basis, to each individual holding an outstanding option under the plan
as required pursuant to Section 260.14046 of Title 10, California Code of
Regulations.

 

8Exhibit 4.2

 

CERDELINX
TECHNOLOGIES, INC.

SPECIAL 2002 STOCK OPTION PLAN

 

As Adopted Effective July
9, 2002

 

1.                                       Purpose.

 

(a)           The
purpose of the Cerdelinx Technologies, Inc. Special 2002 Stock Option Plan (the
“Plan”) is to provide a means whereby selected eligible employees of Cerdelinx
Technologies, Inc., a California corporation (the “Company”), and its
Affiliates, if any, as defined below, may be given a favorable opportunity to
acquire common stock of the Company (the “Common Stock”), thereby encouraging
such persons to accept or continue a qualifying relationship with the Company;
increasing the interest of such persons in the Company’s welfare through
participation in the growth and the value of the Common Stock; and furnishing
such persons with an incentive to improve operations and increase profits of
the Company. The term “Affiliate” or “Affiliates” as used in the Plan shall
mean any parent corporation or subsidiary corporation of the Company, as those
terms are defined in Sections 424(e) and (f) of the Internal Revenue Code of
1986, as amended (the “Code”).

 

                                (b)           To accomplish the foregoing
objectives, the Plan provides a means whereby employees may receive options to
purchase Common Stock.

 

                                (c)           All stock options granted under the
Plan shall be made in compliance with the applicable requirements of Section
25102(f) of the California Corporations Code so that the qualification of those
securities shall not be required in the State of California.

 

                2.             Stock Option.        Stock options granted pursuant to the
Plan may only be Non-Statutory Stock Options (“NSOs”). An NSO shall mean any
option not intended to meet the requirements of Section 422 of the Code.

 

                3.             Administration.    The Board of Directors (the “Board”), whose
authority shall be plenary, shall administer the Plan, unless and until such
time as the Board delegates administration of the Plan pursuant to subsection
(3)(b), below.

 

(a)           The Board, whose determinations shall
be conclusive, shall have the power, subject to and within the limits of the
express provisions of the Plan:

 

(i)            To
grant options pursuant to the Plan;

 

(ii)           To
determine from time to time which of the eligible persons described in Section
5, below, shall be granted options under the Plan, the number of shares for
which each option shall be granted, the term of each granted option and the
time or times during the term of each option within which all or a portion of
each option may be exercised (which at the Board’s discretion may be
accelerated, if allowed under applicable law.)

 

 

 

(iii)          To
construe and interpret the Plan and options granted under it and to establish,
amend, and revoke rules and regulations for its administration.  The Board, in the exercise of this power,
shall generally determine all questions for policy and expediency that may
arise and may correct any defect, omission or inconsistency in the Plan or in
any option agreement with respect to the Plan in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.

 

(iv)          To
grant options in exchange for cancellation of options granted earlier at
different exercise prices;

 

(v)           To
prescribe the terms and provisions of each option granted (which need not be
identical) and the form of written instrument that shall constitute the option
agreement;

 

(vi)          To
amend the Plan as provided in Section 11, below;

 

(vii)         Generally, to exercise such powers and
perform such acts as are deemed necessary or expedient to promote the best
interests of the Company.

 

                                (b)           The Board may, by resolution, delegate
administration of the Plan (including, without limitation, the Board’s powers
under subsection 3(a) above) to a committee acting under the authority of the
Board. In the event that the Company has registered any equity security under
section 12 of the Securities Act of 1934, as amended (the “Act”), such
committee shall consist of not less than two (2) members of the Board each of
whom shall be a “disinterested person” and an “outside director”.  A member of the Board is a “disinterested
person” if at the time she exercises discretion in administering the Plan she
is not eligible and has not at any time within one year prior thereto been
eligible for selection as a person to whom stock may be allocated or to whom
stock options or stock appreciation rights may be granted pursuant to the Plan
or any other plan of the Company (or Affiliate) entitling the participants
therein to acquire stock, stock options or stock appreciation rights of the
Company (or Affiliate), or if she otherwise satisfies the requirements of a
“disinterested person” within the meaning of Rule 16b-3 of the Act.  A member of the Board is an “outside
director” if she is not a current employee of the Company (or Affiliate”), is
not a former employee of the Company (or Affiliate) who is receiving
compensation for prior services, was not an officer of the Company (or
Affiliate) at any time, and currently is not receiving compensation for
personal services to the Company (or Affiliate) in any capacity other than as a
member of the Board, or if she otherwise satisfies the requirements of an
“outside director” as such term is defined for purpose of Section 162(m) of the
Code.  The Board shall have complete
discretion to determine the composition, structure, form, term and operation of
any committee established to administer the Plan.  The Board at any time may revest in the Board the administration
of the Plan.

 

4.                                       Shares Subject to Plan and to Option.

 

(a)           Subject to the provisions of Section
10, below (relating to adjustments upon changes in stock), the stock which may
be sold pursuant to options granted under the Plan shall not exceed in the
aggregate of six hundred eighty-five thousand two hundred twenty-two

 

2

 

(685,222) shares of the
Company’s authorized Common Stock and they may be unissued shares, reacquired
shares, or shares bought on the market for the purpose of issuance under the
Plan.  If any options granted under the
Plan shall for any reason terminate or expire without having been exercised in
full, the stock not purchased under such options shall be available again for
the purpose of the Plan.

 

5.                                       Eligibility.

 

(a)           Only employees of the Company and its
Affiliates are eligible to receive option grants under the Plan.

 

(b)           Any employee may hold more than one
(1) option at any time.

 

6.             Terms of Options.                Options granted pursuant to the
Plan need not be identical, but each option shall be granted within ten (10)
years from the date the Plan is adopted by the Board or approved by the shareholders,
whichever is earlier, shall specify the number of shares to which it pertains
and shall be subject to the following terms and conditions:

 

(a)           The purchase price of each option
shall be determined by the administrator of the Plan at the time the option is
granted, and may be less than, equal to, or more than the fair market value of
the stock subject to the option on the date the option is granted.  For all purposes of the Plan, the fair
market value of the Common Stock shall be, if the stock is publicly traded, its
closing bid price on NASDAQ or the over-the-counter market, or if is traded on
another stock exchange, the last price at which it traded on such
exchange.  If the stock is not publicly
traded, the fair market value shall be such as is determined in good faith by
the Board of Directors by taking into consideration the following factors: the
Company’s net worth, prospective earning power and dividend-paying capacity,
and other relevant factors.

 

“Other relevant
factors” include the goodwill of the business; the economic outlook in the
particular industry; the Company’s position in the industry and its management;
the degree of control of the business represented by the bloc of the stock to
be valued; and the values of securities of corporations engaged in the same or
similar line of business which are listed on a stock exchange.  In addition to the relevant factors
described above, consideration shall also be given to nonoperating assets
including proceeds of life insurance policies payable to or for the benefit of
the Company, the extent such nonoperating assets have not been taken into
account in the determination of net worth, prospective earning power, and
dividend-earning capacity.

 

(b)           The term of any option shall not be
greater than ten (10) years from the date it was granted.

 

(c)           An option by its terms, shall not be
transferable otherwise than by will or the laws of descent and distribution and
may be exercisable, during the lifetime of the option holder, only by the
individual to whom the option is granted. 
Notwithstanding the above, if an employee is determined to be
incompetent by a court of proper jurisdiction, his or her legal representative
may exercise the option on his or her behalf.

 

3

 

(d)           Not used.

 

(e)           Options under the Plan may be
exercised by a participant regardless of whether she is employed by the Company
or an Affiliate at the time of exercise.

 

(f)            Upon the termination of a
participant’s employment (defined as the date the participant is not longer
employed by either the Company or any of its Affiliates), his or her rights to
exercise an option then held by him or her shall be only as follows:

 

                (i)            If a participant’s employment is terminated for any
reason other than death of the participant, she may, within not less than three
(3) months following such termination, or with such longer period as the Board
may fix, exercise the option to the extent such option was exercisable by the
participant on the date of termination of his employment, or to the extent
otherwise specified by the Board, which may so specify at a time that is
subsequent to the date of the termination of his employment, provided, the date
of exercise is in no event after the expiration of the term of the option.  However, if the participant’s employment is
terminated due to the Disability (within the meaning of Section 22(e) of the
Code) of the participant, then this paragraph 6(f)(i) shall apply to such
participant by substituting twelve (12) for three (3) months.

 

                (ii)           If a participant’s employment is terminated by death, his
estate shall have the right for a period of not less than twelve (12) months
following the date of death, or for such longer period as the Board may fix, to
exercise the option to the extent the participant was entitled to exercise such
option on the date of death, or to the extent otherwise specified by the Board,
which may so specify, at a time that is subsequent to the date of the death,
provided the actual date of exercise is in no event after the expiration of the
term of the option.  A participant’s
estate shall mean his legal representative or any person who acquires the right
to exercise an option by reason of the participant’s death.

 

(g)           Option may also contain such other provisions,
which shall not be inconsistent with any of the foregoing term, as the Board
shall deem appropriate.  No option,
however, nor anything contained in the Plan, shall confer upon any employee any
right to continue in the employ of the Company (or Affiliate) nor limit in any
way the right of the Company (or Affiliate) to terminate his or her employment
at any time.

 

(h)           Subject to any required action by the
Company’s shareholders, if upon the consummation of any merger or
consolidation, the shareholders of the Company as constituted immediately prior
to such merger or consolidation hold more than 50% of the total outstanding
voting stock of the surviving or acquired entity immediately after such merger
or consolidation, each outstanding option shall pertain and apply to the
securities to which a holder of the number of shares subject to the option
would have been entitled, provided, the excess of the aggregate fair market
value of the shares subject to the option immediately after such merger or consolidation
over the aggregate option price of such shares is not more than the excess of
the aggregate fair market value of all shares subject to the option immediately
before such merger and consolidation over the aggregate option price of such
shares.  Upon the consummation of a
dissolution or liquidation of the Company or a merger or consolidation in which
the Company’s shareholders as constituted immediately prior to the merger of
consolidation hold less than 50%

 

4

 

of the total outstanding
voting stock of the survived or acquired entity immediately after such merger
or consolidation, each outstanding option shall terminate, unless the surviving
or acquired corporation in the case of the merger or consolidation assumes
outstanding options or replaces them with substitute options and (i) the excess
of the aggregate fair market value of the shares subject to the option
immediately after the substitution or assumption over the aggregate option
price of such shares is not more than the excess of the aggregate fair market
value of all shares subject to the option immediately before such substitution
or assumption over the aggregate option price of such shares; and (ii) the new
option or the assumption of the old option does not give the employee
additional benefits which she did not have under the old option.

 

7.                                       Payments Upon Exercise.

 

(a)           The purchase price of stock sold
pursuant to an option shall be paid in such consideration permitted by the
applicable option agreement evidencing such option.

 

(b)           The Company may make loans or
guarantee loans made by an appropriate financial institution to individual
optionees, including officers, on such terms as may be approved by the Board
for the purpose of financing the exercise of options granted under the Plan and
the payment of any taxes that may be due by such exercise.

 

(c)           Where the Company has or will have a
legal obligation to withhold taxes relating to the exercise of any stock
option, such option may not be exercised, in whole or in part, unless such tax
obligation is first satisfied in a manner satisfactory to the Company.

 

                8.             Use of Proceeds from Stock.      Proceeds from the sale of stock pursuant
to options granted under the Plan shall be used for general corporate purposes.

 

                9.             Stock
Transfer Restrictions; Repurchase Provisions.   Stock issued pursuant to the exercise of options granted under the
Plan shall be subject to those stock transfer restrictions and repurchase
provisions which shall be set forth in a Stock Option Agreement (the
“Agreement”), substantially in the form attached hereto as Exhibit A.  Each individual shall be required to execute
such agreement prior to receiving his or her shares.

 

                10.           Adjustments
of and Changes in the Stock.     Subject
to the provisions set forth in subsection 6(h), above, in the event the shares
of Common Stock of the Company, as presently constituted, shall be changed into
or exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation (whether by reason of
merger, consolidation, recapitalization, reclassification, split-up,
combination of shares, or otherwise), or if the number of shares of Common
Stock of the Company shall be increased through the payment of a stock
dividend, then there shall be substituted for or added to each share of Common
Stock of the Company theretofore appropriated or thereafter subject or which
may become subject to an option under the Plan, the number and kind of shares
of stock or other securities into which each such outstanding share of Common
Stock of the Company shall be so changed, or for which each such share shall be
exchanged or to which each such share shall be entitled, as the case may be.

 

5

 

Outstanding
options shall also be amended as to price and other terms if necessary to
reflect the foregoing events.  In the
event there shall be any other change in the number or kind of the outstanding
shares of Common Stock of the Company, or of any stock or other securities into
which such Common Stock shall have been changed, or for which it shall have
been exchanged, then if the Board of Directors shall, in its sole discretion,
determine that such change equitably requires an adjustment in any option
theretofore granted or which may be granted under the Plan, such adjustment
shall be made in accordance with such determination.  No right to purchase factional shares shall result from any
adjustment in options pursuant to this Section 10.  In case of any such adjustment, the shares subject to the option
shall be rounded down to the nearest whole share.  Notice of any adjustment shall be given by the Company to each
holder of an option which shall be so adjusted and such adjustment (whether or
not notice is given) shall be effective and binding for all purposes of the
Plan.

 

                11.           Amendment
of the Plan.     The Board at any time
and from time to time, may amend the Plan, subject to the limitation, however,
that except as provided in Section 10 (relating to adjustments upon changes in
stock), no amendment shall be effective, unless approved, within twelve (12)
months before or after the date of such amendment’s adoption, by the vote or
written consent of a majority of the outstanding shares of the Company entitled
to vote, where such amendment will:

 

(b)                                 increase the number of shares reserved
for options under the Plan;

 

(c)                                  materially modify the requirements of
Section 5 as to eligibility for participation in the Plan; or

 

(d)                                 materially increase the benefits accorded
to participant under the Plan.

 

                Rights and obligations under any option granted
before any amendment of the Plan shall not be altered or impaired by amendment
of the Plan, except with the consent, which may be obtained in any manner
deemed by the Board to be appropriate, of the person to whom the option was
granted.

 

                12.           Termination
or Suspension of the Plan.  The
Board at any time may suspend or terminate the Plan.  The Plan, unless sooner terminated, shall terminate at the end of
ten (10) years from the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier.  An option may not be granted under the Plan
while the Plan is suspended or after it is terminated.

 

                Rights and obligations under any option granted while
the Plan is in effect shall not be altered or impaired by suspension or
termination of the Plan, except with the consent of the person to whom the
option was granted, which may be obtained in any manner that the Board deems
appropriate.

 

                13.           Time
of Granting Options.  The date of an
option hereunder shall, for all purposes, be the date on which the Board (or
committee under authority of the Board) makes the determination granting such
option.

 

6

 

                14.           Listing, Qualification or Approval of Stock; Approval
of Options.    All options granted
under the Plan are subject to the requirement that if at any time the Board
shall determine in its discretion that listing or qualification of the shares
of the stock subject thereto on any securities exchange or under any applicable
law, or the consent or approval by any governmental regulatory body or the
shareholders of the Company, is necessary or desirable as a condition of or in
connection with the issuance of shares under the option, the option may not be
exercised in whole or in part, unless such listing, qualification, consent or
approval shall have been effected or obtained free of any condition not
acceptable to the Board.

 

                15.           Binding
Effect of the Conditions.      The
conditions and stipulations hereinabove contained or in any option granted
pursuant to the Plan shall be and constitute a covenant running with all of the
shares of the Company owned by the participant at any time, directly or indirectly
whether the same have been issued or not, and those shares of the Company owned
by the participant shall not be sold, assigned or transferred by any person
save and except in accordance with the terms and conditions herein provided,
and the participant shall agree to use his best efforts to cause the officers
of the Company to refuse to record on the books of the Company any assignment
or transfer made or attempted to be made, except as provided in the Plan and to
cause said officers to refuse to cancel old certificates or to issue or deliver
new certificates therefor where the purchaser or assignee has acquired
certificates for the stock represented thereby, except strictly in accordance
with the provisions of this Plan.

 

                16.           Effective Date of Plan.   The Plan shall become effective as determined by the Board but no
options granted under it shall be exercisable until the Plan has been approved
by the vote or written consent of the holders of a majority of the outstanding
shares of the Company entitled to vote. 
If such shareholders approval is not obtained within twelve (12) months
before or after the date of the Board’s adoption of the Plan, then all options
previously granted under the Plan shall terminate, and no further options shall
be granted and no shares shall be issued. Subject to such limitation, the Board
may grant options under the Plan at any time after the effective date and
before the date fixed herein for termination of the Plan.

 

                17.           Gender.  The use of any gender specific pronoun or
similar term is intended to be without legal significance as to gender.

 

7

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