Document:

EXHIBIT 10.28

INTERACTIVE INTELLIGENCE, INC. 

EMPLOYEE STOCK PURCHASE PLAN

(As
Amended)

 

Section 1. Designation and Purpose of Plan. The name of this Plan is the Interactive
Intelligence, Inc. Employee Stock Purchase Plan. The purpose of the Plan is to
provide incentives, through the ownership of Company common stock, for
employees to enhance Company performance through their services. The Plan is
intended to comply, and should be interpreted where possible to comply, with
the terms of Code section 423.

 

Section 2. Definitions. As used in the Plan, the following
terms, when capitalized, have the following meanings:

 

(a) “Agent” means Norwest Bank Minnesota, N.A., or any
successor agent selected by the Company.

 

(b) “Beneficiary” means, with respect to a Participant,
the individual or estate designated, pursuant to Section 11, to receive the
Participant’s Payroll Deduction Account balance and Investment Account assets
in the event of the Participant’s death.

 

(c) “Board” means the Board of Directors of the Company.

 

(d) “Code” means the Internal Revenue Code of 1986, as
amended from time to time, and its interpretive rules and regulations.

 

(e) “Committee” means the Employee Stock Purchase Plan
Committee established pursuant to Section 12 to administer the Plan.

 

(f) “Common Stock” means the Company’s common stock,
$0.01 par value.

 

(g) “Company” means Interactive Intelligence, Inc. and
any successor by merger, consolidation or otherwise.

 

(h) “Compensation” means, with respect to an Eligible
Employee for a calendar year, the Eligible Employee’s wages, salary,
commissions, bonuses, and other remuneration for services, including salary
reduction contributions pursuant to elections under a plan subject to Code
sections 125 or 401(k).

 

(i) “Designated Subsidiary” means any Subsidiary of
the Company that is designated from time to time by the Committee to permit the
employees of that Subsidiary to participate in the Plan.

 

(j) “Effective Date” means April 1, 2000, subject to
approval of the Plan by the Company’s shareholders within 12 months of the Plan’s
adoption.

 

(k) “Eligible Employee” means any employee of the
Company or any Designated Subsidiary that meets the eligibility requirements of
Section 4.

 

(l) “Enrollment Form” means the form filed with the
Committee authorizing payroll deductions pursuant to Section 5.

 

(m) “Entry Date” means the first day of each calendar
quarter that coincides with or follows the Effective Date.

 

(n) “Fair Market Value” means, with respect to any
Investment Date, the lower closing price, as reported on The Nasdaq Stock
Market, on the first or last business day of the immediately preceding calendar
quarter.

 

 

(o) “Investment Account” means the account established
for each Participant to hold Common Stock purchased under the Plan pursuant to
Section 6.

 

(p) “Investment Date” means the first business day of
each calendar quarter after the Effective Date, on which shares of Common Stock
are or could be traded on The Nasdaq Stock Market.

 

(q) “Participant” means an Eligible Employee who elects
to participate in the Plan by filing an Enrollment Form pursuant to Section 5
and who has not ceased to participate in the Plan pursuant to Section 10.

 

(r) “Payroll Deduction Account” means the account
established for a Participant to hold payroll deductions pursuant to Section 5.

 

(s) “Plan” means this instrument and the employee
stock purchase plan established by this instrument.

 

(t) “Purchase Price” means the price for each whole
and fractional share of Common Stock, including those purchased by dividend
reinvestment, which shall be 85% of the Fair Market Value of such whole or
fractional share as of the Investment Date.

 

(u) “Subsidiary” means any corporation which is a “subsidiary
corporation” of the Company as such term is defined in Section 424 of the Code.

 

Section 3. Shares Reserved for the Plan. The Company shall reserve for issuance
and purchase by employees under the Plan an aggregate of 750,000 shares of
Common Stock, subject to adjustment as provided in Section 14. Shares subject
to the Plan shall be authorized but unissued shares, treasury shares or shares
purchased on the open market or in private transactions. Shares needed to
satisfy the Plan may be acquired from the Company or by purchases at the
Company’s expense on the open market or in private transactions.

 

Section 4. Eligible Employees. All employees of the Company or any
Designated Subsidiary are eligible to participate in the Plan, except the
following:

 

(a) any employee who had not been employed for more
than 30 days prior to the Entry Date;

 

(b) any employee whose customary employment is 20
hours or less per week; and

 

(c) any employee whose customary employment is for not
more than 5 months in a calendar year.

 

Section 5. Election to Participate. Each Eligible Employee may become a
Participant on the Entry Date that coincides with or follows the date he first
becomes an Eligible Employee, by complying with this Section.

 

(a) The Eligible Employee shall file with the
Committee an Enrollment Form authorizing specified regular payroll deductions
from his Compensation.

 

(b) Regular payroll deductions shall be subject to a
minimum deduction of 1% and a maximum deduction of 20% of Compensation for the
payroll period and to a maximum deduction per payroll period of $1,000.

 

(c) The Company shall hold all payroll deduction
amounts as part of its general assets, but shall credit each Participant’s
payroll deduction amounts, without interest, to a Payroll Deduction Account in
his name.

 

(d) To begin participation as of an Entry Date, an Eligible
Employee must file his Enrollment Form with the Committee not less than 14 days
before that Entry Date, unless a shorter period of time

 

 

is prescribed by the Committee. An Enrollment Form not
filed within the prescribed filing period shall be effective the second Entry
Date following the filing of the Enrollment Form.

 

(e) A Participant may increase or decrease his payroll
deduction, effective as of the next Entry Date, by filing a new Enrollment
Form.

 

(f) At any time during the first 2 1⁄2 months of a
calendar quarter, a Participant may elect to terminate his payroll deductions
and receive a refund of the balance in his Payroll Deduction Account
accumulated during that calendar quarter. In that event, he shall not again
become a Participant until the second Entry Date following his election to
terminate.

 

Section 6. Participant Purchases and Investment
Accounts. On
each Investment Date, each Participant shall be deemed, without further action,
to have purchased shares of Common Stock with the entire balance in his Payroll
Deduction Account, and the Agent shall credit the purchased shares to the
Participant’s Investment Account.

 

(a) The Participant shall be credited with the number
of whole and fractional shares (rounded to three decimal places) that his
Payroll Deduction Account balance can purchase at the Purchase Price on that
Investment Date.

 

(b) All dividends paid with respect to the whole and
fractional shares of the Common Stock and shares so purchased shall be
reinvested in Common Stock and added to the shares held for a Participant in
his Investment Account.

 

(c) Expenses incurred in the purchase of shares and
the expenses of the Agent shall be paid by the Company.

 

Section 7. Limitation on Purchases. Participant purchases are subject to the
following limitations:

 

(a) During any one calendar year, a Participant may
not purchase, under the Plan or under any other plan qualified under Code
section 423, shares of Common Stock having a Fair Market Value (determined by
reference to the Fair Market Value on each date of purchase) in excess of
$25,000.

 

(b) During any one calendar year, all Participants who
are corporate officers of the Company may not purchase, in the aggregate, more
than 50% of the Common Stock purchased under the Plan during that calendar
year.

 

(c) A Participant’s Payroll Deduction Account may not
be used to purchase Common Stock on any Investment Date to the extent that,
after such purchase, the Participant would own (or be considered as owning
within the meaning of Code section 424(d)) stock possessing 5% or more of the
total combined voting power of the Company. For this purpose, stock that the
Participant may purchase under any outstanding option shall be treated as owned
by such Participant. As of the first Investment Date on which this paragraph
limits a Participant’s ability to purchase Common Stock, the Participant’s
payroll deductions shall terminate, and he shall receive a refund of the
balance in his Payroll Deduction Account.

 

Section 8. Stock Purchases by Agent. As of each Investment Date, the Agent
shall acquire, using the accumulated balances of all Participants’ Payroll
Deduction Accounts, shares of Common Stock to be credited to those Participants’
Investment Accounts.

 

(a) The Agent shall acquire shares issued or held as
treasury shares by the Company or, if directed by the Committee, by purchases
on the open market or in private transactions.

 

(b) If shares are purchased in one or more
transactions on the open market or in private transactions at the direction of
the Committee, the Company will pay the Agent the difference between the
Purchase Price and the price at which such shares are purchased for
Participants.

 

 

Section 9. Investment Account Withdrawals. Upon 5 business days advance written
notice to the Agent, a Participant may elect as of any Investment Date to
withdraw the assets in his Investment Account.

 

(a) The Participant may elect to obtain a certificate
for the whole shares of Common Stock credited to his Investment Account. As a
condition of participation in the Plan, each Participant agrees to notify the
Company if he sells or otherwise disposes of any of his shares of Common Stock
within two years of the Entry Date immediately preceding the Investment Date on
which such shares were purchased.

 

(b) The Participant may elect that all shares in his
Investment Account be sold and that the proceeds, less expenses of sale, be
remitted to him.

 

(c) In either event, the Agent will sell any
fractional shares held in the Investment Account and remit the proceeds of such
sale, less selling expenses, to the Participant.

 

(d) If a Participant withdraws the assets in his
Investment Account, he shall cease to be a Participant and shall not again
become a Participant until the second Entry Date following the withdrawal.

 

Section 10. Cessation of Participation. If a Participant dies, terminates
employment, or withdraws assets from his Investment Account, he shall cease to
participate in the Plan, the Company shall refund the balance in his Payroll
Deduction Account, and the Agent shall distribute the assets in his Investment
Account.

 

(a) In the event of the Participant’s death, his
Payroll Deduction Account balance and his Investment Account assets shall be
distributed to his Beneficiary.

 

(b) If the Participant terminates employment, his
Payroll Deduction Account balance and his Investment Account assets shall be
distributed to him.

 

(c) Upon distribution, the Participant or, in the
event of his death, his Beneficiary may elect to obtain a certificate for the
whole shares of Common Stock credited to the Participant’s Investment Account
or may elect that any whole shares in his Investment Account be sold. In that
event, the Agent will sell such whole shares and any fractional shares held in
the Investment Account and remit the proceeds of such sale, less selling
expenses.

 

Section 11. Beneficial Interests in Plan. Each Payroll Deduction Account and each
Investment Account shall be in the name of the Participant. A Participant may
designate a Beneficiary to receive his interests in both accounts in the event
of his death by complying with procedures prescribed by the Committee. If a
Participant dies without having designated a Beneficiary, or if the Beneficiary
does not survive the Participant, the Participant’s estate shall be his
Beneficiary.

 

Section 12. Administration of the Plan. The Plan shall be administered by the
Employee Stock Purchase Plan Committee.

 

(a) The Committee shall consist of not less than three
members appointed by the Board. The Board from time to time may fill vacancies
in the Committee.

 

(b) Subject to the express provisions of the Plan, the
Committee shall have the authority to take any and all actions (including
directing the Agent as to the acquisition of shares) necessary to implement the
Plan and to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, and to make all other determinations necessary or
advisable in administering the Plan. All of such determinations shall be final
and binding upon all persons.

 

 

(c) A quorum of the Committee shall consist of a
majority of its members and the Committee may act by vote of a majority of its
members at a meeting at which a quorum is present, or without a meeting by a
written consent to their action taken signed by all members of the Committee.

 

(d) The Committee may request advice or assistance or
employ such other persons as are necessary for proper administration of the
Plan.

 

Section 13. Rights Not Transferable. Rights under the Plan are not
transferable by a Participant.

 

Section 14. Change in Capital Structure. Despite anything in the Plan to the
contrary, the Committee may take the following actions without the consent of
any Participant or Beneficiary, and the Committee’s determination shall be
conclusive and binding on all persons for all purposes.

 

(a) In the event of a stock dividend, stock split or
combination of shares, recapitalization or merger in which the Company is the
surviving corporation or other change in the Company’s capital stock
(including, but not limited to, the creation or issuance to shareholders
generally of rights, options or warrants for the purchase of common stock or
preferred stock of the Company), the number and kind of shares of stock or
securities of the Company to be subject to the Plan, the maximum number of
shares or securities which may be delivered under the Plan, the selling price
and other relevant provisions shall be appropriately adjusted by the Committee,
whose determination shall be binding on all persons.

 

(b) If the Company is a party to a consolidation or a
merger in which the Company is not the surviving corporation, a transaction
that results in the acquisition of substantially all of the Company’s
outstanding stock by a single person or entity, or a sale or transfer of
substantially all of the Company’s assets, the Committee may take such actions
with respect to the Plan as the Committee deems appropriate.

 

Section 15. Amendment of the Plan. The Board may at any time, or from time
to time, amend the Plan in any respect. The shareholders of the Company,
however, must approve any amendment that would increase the number of shares of
Common Stock that may be issued under the Plan (other than an increase merely
reflecting a change in capitalization of the Company) or a change in the
designation of any corporations (other than a Subsidiary) whose employees
become Eligible Employees under the Plan.

 

Section 16. Termination of the Plan. The Plan and all rights of employees and
beneficiaries under the Plan shall terminate:

 

(a) on the Investment Date that Participants become
entitled to purchase a number of shares greater than the number of reserved
shares remaining available for purchase; or

 

(b) at any date at the discretion of the Board.

 

In the event that the Plan terminates under circumstances described in
(a) above, reserved shares remaining as of the termination date shall be issued
to Participants on a prorata basis. Upon termination of the Plan, each
Participant shall receive the balance in his Payroll Deduction Account and all
shares in his Investment Account.

 

Section 17. Indemnification of Committee. Members of the Committee shall be
entitled to indemnification and reimbursement to the same extent applicable to
directors of the Company pursuant to its Articles of Incorporation and Bylaws.

 

Section 18. Government Regulations. The Plan, the grant and exercise of the
rights to purchase shares under the Plan, and the Company’s obligation to sell
and deliver shares upon the exercise of rights to purchase shares, shall be
subject to all applicable federal, state and foreign laws, rules and
regulations, and to such approvals by any regulatory or government agency as
may, in the opinion of counsel for the Company, be required.

 

 

Interactive Intelligence, Inc. has caused this Interactive
Intelligence, Inc. Employee Stock Purchase Plan to be adopted as of April 1,
2000.

 

Amendment approved by the Board of Directors of
Interactive Intelligence, Inc. as of April 1, 2005

 

Amendment approved by the Shareholders of
Interactive Intelligence, Inc. as of May 19, 2005Exhibit 4.1

 

WAVE SYSTEMS CORP.

2004 EMPLOYEE STOCK PURCHASE PLAN

(As amended by Approval of the
Board of Directors on May 24, 2005)

 

 

The following constitute
the provisions of the 2004 Employee Stock Purchase Plan of Wave Systems Corp.

 

1.                                      Purpose

 

The purpose of the Plan
is to provide employees of the Company and its Designated Subsidiaries with an
opportunity to purchase Common Stock of the Company.  It is the intention of the Company to have
the Plan qualify as an “Employee Stock Purchase Plan” under Section 423 of
the Code.  The provisions of the Plan
shall, accordingly, be construed so as to extend and limit participation in a
manner consistent with the requirements of that section of the Code.

 

2.                                      Definitions

 

2.1.                              Acquisition means a merger or consolidation of the
Company with and into another person or the sale, transfer, or other
disposition of all or substantially all of the Company’s assets to one or more
persons (other than any wholly-owned subsidiary of the Company) in a single
transaction or series of related transactions.

 

2.2.                              Administrator has the meaning set-forth in Section 13.2.

 

2.3.                              Board means the Board of Directors of the Company.

 

2.4.                              Code means the Internal Revenue Code of 1986, as
amended.

 

2.5.                              Common Stock means the Common Stock, par value $.01 per share,
of the Company.

 

2.6.                              Company means Wave Systems Corp., a Delaware corporation.

 

2.7.                              Compensation means all regular straight time compensation
including commissions but shall not include payments for overtime, shift
premium, incentive compensation, incentive payments, bonuses and other
irregular or infrequent compensation or benefits.

 

2.8.                              Continuous
Status as an Employee means
the absence of any interruption or termination of service as an Employee.  Continuous Status as an Employee shall not be
considered interrupted in the case of (i) sick leave; (ii) military
leave; (iii) any other leave of absence approved by the Administrator, provided, that such leave is for a period
of not more than 90 days, unless reemployment upon the expiration of such leave
is guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (iv) in the case of transfers
between locations of the Company or between the Company and its Designated Subsidiaries.

 

2.9.                              Contributions means all amounts credited to the account of a
participant pursuant to the Plan.

 

2.10.                        Designated
Subsidiaries means the
Subsidiaries which have been or will be designated by the Board from time to
time in its sole discretion as eligible to participate in the Plan.

 

2.11.                        Employee means any person, including an Officer, who is
customarily employed for at least 20 hours per week and more than five months
in a calendar year by the Company or one of its Designated Subsidiaries.

 

2.12.                        Exchange Act means the Securities Exchange Act of 1934, as
amended.

 

2.13.                        Offering
Commencement Date means the
first business day of each Offering Period of the Plan.

 

 

2.14.                        Offering Period
means any of the periods,
generally of six months duration, as set forth in Section 4.

 

2.15.                        Officer means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

 

2.16.                        Offering
Termination Date means the
last business day of each Offering Period of the Plan.

 

2.17.                        Parent means a parent corporation of the Company,
whether now or hereafter existing, as defined by Section 424(a) of
the Code.

 

2.18.                        Plan means this Employee Stock Purchase Plan.

 

2.19.                        Purchase Price means with respect to an Offering Period an
amount equal to 85% of the Fair Market Value (as defined in Section 7.2
below) of a Share on the Offering Commencement Date or on the Offering
Termination Date, whichever is lower; provided,
however, that (i) if there is an increase in the number of
Shares available for issuance under the Plan as a result of a
stockholder-approved amendment to the Plan, (ii) all or a portion of such
additional Shares are to be issued with respect to the Offering Period underway
at the time of such increase (“Additional Shares”), and (iii) the Fair Market
Value of a Share of Common Stock on the date of such increase (the “Approval Date Fair Market Value”)
is higher than the Fair Market Value on the Offering Commencement Date for such
Offering Period, then in such instance the Purchase Price with respect to
Additional Shares shall be 85% of the Approval Date Fair Market Value or the
Fair Market Value of a Share of Common Stock on the Offering Termination Date,
whichever is lower.

 

2.20.                        Securities Act
means the Securities Act of
1933, as amended.

 

2.21.                        Share means a share of Common Stock, as adjusted in
accordance with Section 18 of the Plan.

 

2.22.                        Subsidiary means a subsidiary corporation of the Company,
whether now or hereafter existing, as defined in Section 424(f) of
the Code.

 

Other terms are defined
in the following sections:

 

	
  Term

  	
   

  	
  Section

  	
   

  
	
  Administrator

  	
   

  	
  13.2

  	
   

  
	
  Fair Market Value

  	
   

  	
  7.2

  	
   

  
	
  New Offering Termination Date

  	
   

  	
  18.2

  	
   

  
	
  Reserves

  	
   

  	
  18.1

  	
   

  

 

3.                                      Eligibility

 

3.1.                              Eligible Persons.  Any
person who is an Employee as of the Offering Commencement Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, subject to the requirements of Section 5.1 and the limitations
imposed by Section 423(b) of the Code.

 

3.2.                              Certain Restrictions.  Any
provisions of the Plan to the contrary notwithstanding, no Employee shall be
granted an option under the Plan (i) if, immediately after the grant, such
Employee (taking into account stock which would be attributed to such Employee
pursuant to Section 424(d) of the Code) would own capital stock of
the Company and/or hold outstanding options to purchase stock possessing five
percent or more of the total combined voting power or value of all classes of
stock of the Company or of any Parent or Subsidiary of the Company, or (ii) if
such option would permit his or her rights to purchase stock under all employee
stock purchase plans (described in Section 423 of the Code) of the Company
and its Parent or Subsidiaries to accrue at a rate which exceeds Twenty-Five
Thousand Dollars ($25,000) of the Fair Market Value (as defined in Section 7.2
below) of such stock (determined at the time such option is granted) for each
calendar year in which such option is outstanding at any time.

 

 

4.                                      Offering Periods

 

Each Offering Period will
begin on December 1 or June 1 and end on the next following November 30
or May 31, respectively.  At any
time and from time to time, the Board may change the duration and/or the
frequency of Offering Periods with respect to future Offering Periods or
suspend operation of the Plan with respect to Offering Periods not yet
commenced.

 

5.                                      Participation

 

5.1.                              Subscription Agreement.  An
eligible Employee may become a participant in the Plan by completing a
subscription agreement on the form provided by the Company and filing it with
the Company’s payroll office at least two business days prior to the applicable
Offering Commencement Date, unless a later time for filing the subscription
agreement is set by the Board for all eligible Employees with respect to a
given Offering Period.  The subscription
agreement shall set forth the percentage of the participant’s Compensation
(subject to Section 6.1 below) to be paid as Contributions pursuant to the
Plan.

 

5.2.                              Timing of Payroll Deductions.  Payroll
deductions shall commence on the first payroll following the Offering
Commencement Date and shall end on the last payroll paid on or prior to the
Offering Termination Date of the Offering Period to which the subscription
agreement is applicable, unless sooner terminated by the participant as
provided in Section 10.

 

5.3.                              Tax
Withholding.  Each participant who
purchases shares of Common Stock under the Plan shall thereby be deemed to have
agreed that the Company or the Subsidiary that employs the participant shall be
entitled to withhold, from any other amounts that may be payable to the
participant at or around the time of the purchase, such federal, state, local
and foreign income, employment and other taxes which may be required to be
withheld under applicable laws.  In lieu
of such withholding, the Company or such Subsidiary may require the participant
to remit such taxes to the Company or such Subsidiary as a condition of the
purchase.

 

6.                                      Method of Payment of Contributions

 

6.1.                              Election.  A participant shall elect to
have payroll deductions made on each payday during the Offering Period in an
amount not less than one percent and not more than 15 percent (or such other
percentage as the Board may establish from time to time before an Offering
Commencement Date) of such participant’s Compensation on each payday during the
Offering Period.  All payroll deductions
made by a participant shall be credited to his or her account under the
Plan.  A participant may not make any
additional payments into such account.

 

6.2.                              Discontinuation; Changes.  A
participant may discontinue his or her participation in the Plan as provided in
Section 10.  In addition, if the
Board has so announced to Employees at least five days prior to the scheduled
beginning of the next Offering Period to be affected by the Board’s
determination, a participant may, on no more than two occasions only during
each Offering Period, change the rate of his or her Contributions with respect
to the Offering Period by completing and filing with the Company a new
subscription agreement authorizing a change in the payroll deduction rate.  If otherwise permitted, no such change shall
enable a participant to resume Contributions other than as of an Offering Commencement
Date, following a withdrawal of Contributions during an Offering Period
pursuant to Section 10.  Any such
change in rate shall be effective as of the first payroll period following the
date of filing of the new subscription agreement, if the agreement is filed at
least 10 business days prior to such period and, if not, as of the second
following payroll period.

 

6.3.                              Reductions.  Notwithstanding the foregoing,
to the extent necessary to comply with Section 423(b)(8) of the Code
and Section 3.2 herein, a participant’s payroll deductions may be
decreased during any Offering Period scheduled to end during the current
calendar year to 0%.  Payroll deductions
reduced to 0% in compliance with this Section 6.3 shall re-commence
automatically at the rate provided in such participant’s subscription agreement
at the beginning of the first Offering Period which is scheduled to end in the
following calendar year, unless terminated by the participant as provided in Section 10.

 

 

7.                                      Grant of Option

 

7.1.                              Number of Shares.  On the
Offering Commencement Date of each Offering Period, each eligible Employee
participating in such Offering Period shall be granted an option to purchase on
the Offering Termination Date of that Offering Period a number of Shares
determined by dividing such Employee’s Contributions accumulated prior to such
Offering Termination Date and retained in the participant’s account as of the
Offering Termination Date by the applicable Purchase Price.  However, the Board may determine from time to
time, prior to the applicable Offering Period, the maximum number of Shares an
Employee may purchase during each such Offering Period, provided that any such
purchase shall be subject to the limitations set forth in Sections 3.2 and 12.

 

7.2.                              Fair Market Value.  The fair
market value of the Company’s Common Stock on a given date (the “Fair Market Value”)
shall be (i) the closing sales price on the NASDAQ National Market, or any
national securities exchange or other established market on which the Stock is
then listed (or, in the event that the Common Stock is not traded on such date,
on the immediately preceding trading date) or (ii) determined by the Board
in its discretion based on the closing sales price of the Common Stock for such
date (or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported by NASDAQ or other such
exchange, or (iii) if the closing sales price is not reported, the mean of
the bid and asked prices per share of the Common Stock as reported by NASDAQ or
other such exchange.

 

8.                                      Exercise of Option

 

Unless a participant
withdraws from the Plan as provided in Section 10, his or her option for
the purchase of Shares will be exercised automatically on the Offering
Termination Date of an Offering Period, and the maximum number of full Shares
subject to the option will be purchased at the applicable Purchase Price with
the accumulated Contributions in his or her account.  The Shares purchased upon exercise of an
option hereunder shall be deemed to be transferred to the participant on the
Offering Termination Date.  During his or
her lifetime, a participant’s option to purchase Shares hereunder is
exercisable only by him or her.

 

9.                                      Delivery

 

After each Offering
Termination Date of each Offering Period, the Company shall deliver to the
Administrator the Shares purchased by the participant.  The participant may thereafter elect to
receive a certificate representing such Shares.

 

10.                               Voluntary Withdrawal; Termination of Employment

 

10.1.                        Withdrawal of Contributions.  A
participant may withdraw all but not less than all of the Contributions
credited to his or her account under the Plan at any time prior to each
Offering Termination Date by giving written notice to the Company.  All of the participant’s Contributions
credited to his or her account will be paid to him or her promptly after
receipt of his or her notice of withdrawal and his or her option for the
current Offering Period will be automatically terminated, and no further
Contributions for the purchase of Shares will be made during the Offering
Period.

 

10.2.                        Termination of Employment.  Upon
termination of the participant’s Continuous Status as an Employee prior to the
Offering Termination Date of an Offering Period for any reason, including
retirement or death, the Contributions credited to his or her account will be
returned to him or her or, in the case of his or her death, to the person or
persons entitled thereto under Section 14, and his or her option will be
automatically terminated.

 

10.3.                        Automatic Withdrawal from Plan.  In the
event an Employee fails to remain in Continuous Status as an Employee of the
Company for at least 20 hours per week during the Offering Period in which the
Employee is a participant, he or she will be deemed to have elected to withdraw
from the Plan and the Contributions credited to his or her account will be
returned to him or her and his or her option terminated.

 

10.4.                        Effect of Withdrawal from Plan.  A
participant’s withdrawal during an Offering Period will not have any effect
upon his or her eligibility to participate in a succeeding Offering Period or
in any similar plan which may hereafter be adopted by the Company.

 

 

11.                               Interest

 

No interest shall accrue on the Contributions
of a participant in the Plan.

 

12.                               Stock

 

12.1.                        Maximum Number of Shares.  Subject
to adjustment as provided in Section 18, the maximum number of Shares
which shall be made available for sale under the Plan shall be 3,000,000
Shares, plus an annual increase to be added on the first day of the
Company’s fiscal year beginning in 2006 and on each anniversary of that date
thereafter equal to the least of (i) 3,000,000 Shares and (ii)  such
other amount as the Board may specify prior to the date such annual increase is
to take effect.  If the Board determines
that, on a given Offering Termination Date, the number of shares with respect
to which options are to be exercised may exceed (i) the number of shares
of Common Stock that were available for sale under the Plan on the Offering
Commencement Date, or (ii) the number of shares available for sale under
the Plan on such Offering Termination Date, the Board may in its sole
discretion provide that the Company shall make a pro rata allocation of the
Shares available for purchase on such Offering Commencement Date or Offering
Termination Date, as applicable, in as uniform a manner as shall be practicable
and as it shall determine in its sole discretion to be equitable among all
participants exercising options to purchase Common Stock on such Offering
Termination Date.  The Company may make
pro rata allocation of the Shares available on the Offering Commencement Date
of the applicable Offering Period pursuant to the preceding sentence,
notwithstanding any authorization of additional Shares for issuance under the
Plan by the Company’s stockholders subsequent to such Offering Commencement
Date.

 

12.2.                        No Interest or Voting Right.  The
participant shall have no interest or voting right in Shares covered by his or
her option until such option has been exercised.

 

12.3.                        Registration of Shares.  Shares
purchased by a participant under the Plan will be registered in the name of the
participant if shares are delivered to the Administrator.

 

13.                               Administration

 

13.1.                        Board Authority.  The Board, or a committee named
by the Board, shall supervise and administer the Plan and shall have full power
to adopt, amend and rescind any rules deemed desirable and appropriate for
the administration of the Plan and not inconsistent with the Plan, to construe
and interpret the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. 
The Board’s determinations made in good faith on matters referred to in
this Plan shall be final, binding and conclusive on all persons having or
claiming any interest under this Plan.

 

13.2.                        Designation of Administrator.  The
Board may from time to time designate an employee or retain a third party to
address routine administrative matters. 
Any employee or third party so designated may be referred to herein as
the “Administrator.”

 

14.                               Designation of Beneficiary

 

14.1.                        Designation.  A participant may file a written
designation of a beneficiary who is to receive any Shares and cash, if any,
from the participant’s account under the Plan in the event of such participant’s
death subsequent to the end of an Offering Period but prior to delivery to him
or her of such Shares and cash.  Any such
beneficiary shall also be entitled to receive any cash from the participant’s
account under the Plan in the event of such participant’s death prior to the
Offering Termination Date of an Offering Period.

 

14.2.                        Changes to Designation; Lack of Designation.  Such
designation of beneficiary may be changed by the participant at any time by
written notice.  In the event of the
death of a participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such participant’s death, the
Company shall deliver such Shares and/or cash to the executor or administrator
of the estate of the participant, or if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such Shares and/or cash to the spouse or to any one or
more dependents or relatives of the participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.

 

 

15.                               Transferability of Options and Shares

 

15.1.                        Restrictions on Transfer.  Neither
Contributions credited to a participant’s account nor any rights with regard to
the exercise of an option or to receive Shares under the Plan may be assigned,
transferred, pledged or otherwise disposed of in any way (other than by will,
the laws of descent and distribution, or as provided in Section 14) by the
participant.  Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 10.  In
addition, if the Board has so announced to Employees at least five days prior
to the scheduled beginning of the next Offering Period to be affected by the
Board’s determination, any Shares acquired on the Offering Termination Date of
such Offering Period may be subject to restrictions specified by the Board on
the transfer of such Shares.

 

15.2.                        Notice of Transfer.  Any
participant selling or transferring any or all of his or her Shares purchased
pursuant to the Plan that are no longer held in the participant’s account with
the Administrator must provide written notice of such sale or transfer to the Company within two business days
after the date of sale or transfer.  Such
notice to the Company shall include the gross sales price, if any, the Offering
Period during which the Shares being sold were purchased by the participant,
the number of Shares being sold or transferred and the date of sale or
transfer.

 

16.                               Use of Funds

 

All Contributions
received or held by the Company under the Plan may be used by the Company for
any corporate purpose, and the Company shall not be obligated to segregate such
Contributions from its other assets.

 

17.                               Reports

 

Individual accounts will
be maintained for each participant in the Plan. 
Statements of account will be given to participating Employees at least
annually, which statements will set forth the amounts of Contributions, the per
Share Purchase Price, the number of Shares purchased and the remaining cash
balance, if any.

 

18.                               Adjustments Upon Changes in Capitalization;
Acquisitions

 

18.1.                        Adjustment.  Subject to any required action
by the stockholders of the Company, the number of shares covered by each option
under the Plan which has not yet been exercised and the number of Shares which
have been authorized for issuance under the Plan but have not yet been placed
under option (collectively, the “Reserves”), as well as the maximum number of shares of
Common Stock which may be purchased by a participant in an Offering Period, the
number of shares of Common Stock set forth in Section 12.1 above, and the
price per Share of Common Stock covered by each option under the Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of the Company’s issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock (including any such change in the number of Shares of Common
Stock effected in connection with a change in domicile of the Company), or any
other increase or decrease in the number of Shares effected without receipt of
consideration by the Company; provided
however, that conversion of any convertible securities of the
Company shall not be deemed to have been “effected without receipt of
consideration.” Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive.

 

18.2.                        Acquisitions.  In the event of a dissolution or
liquidation of the Company, the Offering Period then in progress will terminate
immediately prior to the consummation of such action, unless otherwise provided
by the Board.  In the event of an
Acquisition, each option outstanding under the Plan shall be assumed or an
equivalent option shall be substituted by the successor corporation or a parent
or Subsidiary of such successor corporation. 
In the event that the successor corporation refuses to assume or
substitute for outstanding options, the Offering Period then in progress shall
be shortened and a new Offering Termination Date shall be set (the “New Offering Termination Date”),
as of which date the Offering Period then in progress will terminate.  The New Offering Termination Date shall be on
or before the date of consummation of the transaction and the Board shall
notify each participant in writing, at least ten (10) days prior to the
New Offering Termination Date, that the Offering Termination Date for his or
her option has been changed to the New Offering Termination Date and that his
or her option will be exercised automatically on the New Offering Termination
Date, unless prior to such date he or she has withdrawn from the Offering
Period as provided in Section 10. 
For purposes of this Section 18, an option granted under the Plan
shall be deemed to be assumed, without limitation, if, at the time of issuance
of the stock or other

 

 

consideration
upon an Acquisition, each holder of an option under the Plan would be entitled
to receive upon exercise of the option the same number and kind of shares of
stock or the same amount of property, cash or securities as such holder would
have been entitled to receive upon the occurrence of the transaction if the
holder had been, immediately prior to the transaction, the holder of the number
of Shares of Common Stock covered by the option at such time (after giving effect
to any adjustments in the number of Shares covered by the option as provided
for in this Section 18); provided,
however, that if the consideration received in the transaction is
not solely common stock of the successor corporation or its parent (as defined
in Section 424(e) of the Code), the Board may, with the consent of
the successor corporation, provide for the consideration to be received upon
exercise of the option to be solely common stock of the successor corporation
or its parent equal in Fair Market Value to the per Share consideration
received by holders of Common Stock in the transaction.

 

18.3.                        Other Adjustments.  The
Board may, if it so determines in the exercise of its sole discretion, also
make provision for adjusting the Reserves, as well as the price per Share of
Common Stock covered by each outstanding option, in the event that the Company
effects one or more reorganizations, recapitalizations, rights offerings or
other increases or reductions of Shares of its outstanding Common Stock, and in
the event of the Company’s being consolidated with or merged into any other
corporation.

 

19.                               Amendment or Termination

 

19.1.                        Amendment or Termination by the Board.  The
Board may at any time and for any reason terminate or amend the Plan.  Except as provided in Section 18, no
such termination of the Plan may affect options previously granted, provided
that the Plan or an Offering Period may be terminated by the Board on an
Offering Termination Date or by the Board’s setting a new Offering Termination
Date with respect to an Offering Period then in progress if the Board
determines that termination of the Plan and/or the Offering Period is in the
best interests of the Company and its stockholders or if continuation of the
Plan and/or the Offering Period would cause the Company to incur adverse
accounting charges as a result of the Plan. 
Except as provided in Section 18 and in this Section 19, no
amendment to the Plan shall make any change in any option previously granted
which adversely affects the rights of any participant.

 

19.2.                        Other Powers of the Board.  Without
stockholder consent and without regard to whether any participant rights may be
considered to have been adversely affected, the Board (or its committee) shall
be entitled to change the Offering Periods, limit the frequency and/or number
of changes in the amount withheld during an Offering Period, establish the
exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, permit payroll withholding in excess of the amount designated by a
participant in order to adjust for delays or mistakes in the Company’s
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from the participant’s
Compensation, and establish such other limitations or procedures as the Board
(or its committee) determines in its sole discretion advisable which are
consistent with the Plan.

 

20.                               Notices and Other Communications

 

Any notice, demand,
request or other communication hereunder to any party shall be deemed to be
sufficient if contained in a written instrument delivered in person or duly
sent by first class registered, certified or overnight mail, postage prepaid,
or telecopied with a confirmation copy by regular, certified or overnight mail,
addressed or telecopied, as the case may be, (i) if to the recipient of an
Award, at his or her residence address last filed with the Company and (ii) if
to the Company, at its principal place of business, addressed to the attention
of its Treasurer, or to such other address or telecopier number or electronic
mail address, as the case may be, as the addressee may have designated by
notice to the addressor.  All such
notices, requests, demands and other communications shall be deemed to have
been received: (i) in the case of personal delivery, on the date of such
delivery; (ii) in the case of mailing, when received by the addressee; (iii) in
the case of facsimile transmission, when confirmed by facsimile machine report;
and (iv) in the case of electronic mail, when directed to an electronic
mail address at which the receiving party has consented to receive notice, provided, that such consent is deemed revoked if the sender
is unable to deliver by electronic transmission two consecutive notices and
such inability becomes known to the Secretary of the corporation or to the
transfer agent, or other person responsible for giving notice.

 

 

21.                               Conditions to Issuance of Shares

 

21.1.                        Compliance with Securities Laws.  Shares
shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such Shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act, the Exchange Act, the rules and
regulations promulgated thereunder, applicable state securities laws and the
requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.

 

21.2.                        Purchaser Representation.  As a
condition to the exercise of an option, the Company may require the person
exercising such option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.

 

22.                               Term of Plan; Effective Date

 

The Plan shall become
effective upon the adoption by the Board and shall continue in effect for a
term of 10 years from that date unless sooner terminated under Section 19.  Options to purchase Shares granted prior to
shareholder approval of the Plan are hereby expressly conditioned upon such
approval, and shall be void ab initio in
the event the shareholders of the Company shall fail to approve the Plan by May 31,
2005.  Any and all payroll deductions
will be returned to the respective Employee promptly.

 

 

SAMPLE

 

WAVE SYSTEMS CORP.

2004 EMPLOYEE STOCK PURCHASE PLAN

SUBSCRIPTION AGREEMENT

 

New
Election     

 

Change
of Election     

 

I,                        ,
hereby elect to participate in the Wave Systems Corp. 2004 Employee Stock
Purchase Plan (the “Plan”) for the Offering Period(s)             
to                 ,
and subscribe to purchase shares of the Company’s Common Stock in accordance
with this Subscription Agreement and the Plan.

 

I
elect to have Contributions in the amount of          %
of my Compensation, as those terms are defined in the Plan, applied to this
purchase.  I understand that this amount
must not be less than 1% and not more than 15% of my Compensation during the
Offering Period.  (Please note that no
fractional percentages are permitted).

 

I
hereby authorize payroll deductions from each paycheck during the Offering
Period at the rate stated in Item 2 of this Subscription Agreement.  I understand that all payroll deductions made
by me shall be credited to my account under the Plan and that I may not make
any additional payments into such account. 
I understand that all payments made by me shall be accumulated, without
interest or earnings, for the purchase of shares of Common Stock at the
applicable purchase price determined in accordance with the Plan.  I further understand that, except as
otherwise set forth in the Plan, shares will be purchased for me automatically
on the Offering Termination Date of each Offering Period unless I otherwise
withdraw from the Plan by giving written notice to the Company for such
purpose.

 

I
understand that I may discontinue at any time prior to the Offering Termination
Date my participation in the Plan as provided in Section 10 of the
Plan.  I acknowledge that, unless I
discontinue my participation in the Plan as provided in Section 10 of the
Plan, my election will continue to be effective for each successive Offering
Period.

 

I
have received a copy of the complete Wave Systems Corp. 2004 Employee Stock
Purchase Plan.  I understand that my
participation in the Plan is in all respects subject to the terms of the Plan.

 

Shares
purchased for me under the Plan should be issued in the name(s) of (name of
employee or employee and spouse only):

 

 

 

In
the event of my death, I hereby designate the following as my beneficiary(ies)
to receive all payments and shares due to me under the Plan:

 

	
  NAME: (Please print)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (First)

  	
  (Middle)

  	
  (Last)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Relationship)

  	
  (Address)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
						

 

I
understand that if I dispose of any shares received by me pursuant to the Plan
within two years after the Offering Commencement Date (the first day of the
Offering Period during which I purchased such shares) or within one year after
the Offering Termination Date, I will be treated for federal income tax
purposes as having received ordinary compensation income at the time of such
disposition in an amount equal to the excess of the fair market value of the
shares on the Offering Termination Date over the price which I paid for the
shares, regardless of whether

 

 

I
disposed of the shares at a price less than their fair market value at the
Offering Termination Date.  The remainder
of the gain or loss, if any, recognized on such disposition will be treated as
capital gain or loss.

 

I hereby agree to notify
the Company in writing within 30 days after the date of any such disposition,
and I will make adequate provision for federal, state or other tax withholding
obligations, if any, which arise upon the disposition of the Common Stock.  The Company may, but will not be obligated
to, withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.

 

If
I dispose of such shares at any time after expiration of the two-year and
one-year holding periods, I understand that I will be treated for federal
income tax purposes as having received compensation income only to the extent
of an amount equal to the lesser of (i) the excess of the fair market
value of the shares at the time of such disposition over the purchase price
which I paid for the shares under the option, or (ii) 15% of the fair
market value of the shares on the Offering Commencement Date.  The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or loss.

 

I understand that this
tax summary is only a summary and is subject to change.  I further understand that I should consult a
tax advisor concerning certain tax implications of the purchase and sale of
stock under the Plan.

 

I
hereby agree to be bound by the terms of the Plan.  The effectiveness of this Subscription
Agreement is dependent upon my eligibility to participate in the Plan.

 

	
   

  	
  SIGNATURE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SOCIAL
  SECURITY #:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DATE:

  	
   

  	
   

  
						

 

 

SAMPLE

 

WAVE SYSTEMS CORP.

2004 EMPLOYEE STOCK PURCHASE PLAN

NOTICE OF WITHDRAWAL

 

 

I,                     
hereby elect to withdraw my participation in the Wave Systems Corp. 2004
Employee Stock Purchase Plan (the “Plan”) for the Offering Period that began on
                           ,
200  .  This withdrawal covers
all Contributions credited to my account and is effective on the date
designated below.

 

I understand that
all Contributions credited to my account will be paid to me within 10 business
days of receipt by the Company of this Notice of Withdrawal and that my option
for the current period will automatically terminate, and that no further
Contributions for the purchase of shares can be made by me during the Offering
Period.

 

The undersigned
further understands and agrees that he or she shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.

 

	
   

  	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature of Employee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Social Security Number

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