Document:

Exhibit 10.2

 

CONTROL4 CORPORATION

 

2003 EQUITY INCENTIVE PLAN

 

SECTION 1.                                   PURPOSE

 

The purpose of the Control4 Corporation 2003 Equity Incentive Plan is to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of Control4 Corporation and its Related Companies by providing them the opportunity to acquire a proprietary interest in the Company and to link their interests and efforts to the long-term interests of the Company’s stockholders.

 

SECTION 2.                                   DEFINITIONS

 

As used in the Plan,

 

“Acquired Entity” means any entity acquired by the Company or a Related Company or with which the Company or a Related Company merges or combines.

 

“Acquisition Price” means the fair market value of the securities, cash or other property, or any combination thereof, receivable upon consummation of a Company Transaction in respect of a share of Common Stock.

 

“Award” means any awards of Options, Stock Appreciation Rights, Stock Awards, Restricted Stock or Stock Units, as may be designated by the Plan Administrator from time to time.

 

“Board” means the Board of Directors of the Company.

 

“Cause,” unless otherwise defined in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means dishonesty, fraud, serious misconduct, unauthorized use or disclosure of confidential information or trade secrets, or conduct prohibited by criminal law (except minor violations), in each case as determined by the Company’s chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Board, each of whose determination shall be conclusive and binding.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

“Common Stock” means the common stock, par value $0.0001 per share, of the Company.

 

“Company” means Control4 Corporation, a Delaware corporation.

 

“Company Transaction” unless otherwise defined in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means consummation of

 

 

(a)                                 a merger or consolidation of the Company with or into any other company or other entity,

 

(b)                                 a sale in one transaction or a series of transactions undertaken with a common purpose of at least 50% of the Company’s outstanding voting securities, or

 

(c)                                  a sale, lease, exchange or other transfer in one transaction or a series of related transactions undertaken with a common purpose of all or substantially all of the Company’s assets;

 

provided, however, that a Company Transaction shall not include a Related Party Transaction.  Where a series of transactions undertaken with a common purpose is deemed to be a Company Transaction, the date of such Company Transaction shall be the date on which the last of such transactions is consummated.

 

“Disability” unless otherwise defined by the Plan Administrator or in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means a mental or physical impairment of the Participant that is expected to result in death or that has lasted or is expected to last for a continuous period of 12 months or more and that causes the Participant to be unable to perform his or her material duties for the Company or a Related Company and to be engaged in any substantial gainful activity, in each case as determined by the Company’s chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Board, each of whose determination shall be conclusive and binding.

 

“Effective Date” has the meaning set forth in Section 18.

 

“Eligible Person” means any person eligible to receive an Award as set forth in Section 5.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

 

“Fair Market Value” means the per share fair market value of the Common Stock as established in good faith by the Plan Administrator or, if the Common Stock is publicly traded, the average of the high and low trading prices for the Common Stock on any given date during regular trading or, if not trading on that date, such price on the last preceding date on which the Common Stock was traded, unless determined otherwise by the Plan Administrator using such methods or procedures as it may establish.

 

“Grant Date” means the later of (a) the date on which the Plan Administrator completes the corporate action authorizing the grant of an Award or such later date specified by the Plan Administrator or (b) the date on which all conditions precedent to the Award have been satisfied, provided that conditions to the exercisability or vesting of Awards shall not defer the Grant Date.

 

“Incentive Stock Option” means an Option granted with the intention that it qualify as an “incentive stock option” as that term is defined in Section 422 of the Code or any successor provision.

 

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“Nonqualified Stock Option” means an Option other than an Incentive Stock Option.

 

“Option” means a right to purchase Common Stock granted under Section 7.

 

“Option Expiration Date” has the meaning set forth in Section 7.6.

 

“Option Term” means the maximum term of an Option as set forth in Section 7.3.

 

“Participant” means any Eligible Person to whom an Award is granted.

 

“Plan” means the Control4 Corporation 2003 Equity Incentive Plan.

 

“Plan Administrator” has the meaning set forth in Section 3.1.

 

“Related Company” means any entity that, directly or indirectly, is in control of, is controlled by or is under common control with the Company.

 

“Related Party Transaction” means (a) a merger or consolidation of the Company in which the holders of the outstanding voting securities of the Company immediately prior to the merger or consolidation hold at least a majority of the outstanding voting securities of the Successor Company immediately after the merger or consolidation; (b) a sale, lease, exchange or other transfer of all or substantially all of the Company’s assets to a majority-owned subsidiary company; (c) a transaction undertaken for the principal purpose of restructuring the capital of the Company, including, but not limited to, reincorporating the Company in a different jurisdiction, converting the Company to a limited liability company or creating a holding company; or (d) a corporate dissolution or liquidation.

 

“Restricted Stock” means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which may be subject to restrictions prescribed by the Plan Administrator.

 

“Retirement,” unless otherwise defined in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means “Retirement” as defined for purposes of the Plan by the Plan Administrator or the Company’s chief human resources officer or other person performing that function or, if not so defined, means Termination of Service on or after the date the Participant reaches age 55 and has completed ten years of employment or service with the Company or a Related Company.

 

“Securities Act” means the Securities Act of 1933, as amended from time to time.

 

“Stock Appreciation Right” has the meaning set forth in Section 9.1.

 

“Stock Award” means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which are not subject to restrictions prescribed by the Plan Administrator.

 

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“Stock Unit” means an Award denominated in units of Common Stock granted under Section 10.

 

“Substitute Awards” means Awards granted or shares of Common Stock issued by the Company in assumption of, or in substitution or exchange for, awards previously granted by an Acquired Entity.

 

“Successor Company” means the surviving company, the successor company, the acquiring company or its parent, as applicable, in connection with a Company Transaction.

 

“Termination of Service” means a termination of employment or service relationship with the Company or a Related Company for any reason, whether voluntary or involuntary, including by reason of death, Disability or Retirement.  Any question as to whether and when there has been a Termination of Service for the purposes of an Award and the cause of such Termination of Service shall be determined by the Company’s chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Board, each of whose determination shall be conclusive and binding.  Transfer of a Participant’s employment or service relationship between the Company and any Related Company shall not be considered a Termination of Service for purposes of an Award.  Unless the Board determines otherwise, a Termination of Service shall be deemed to occur if the Participant’s employment or service relationship is with an entity that has ceased to be a Related Company.

 

“Vesting Commencement Date” means the Grant Date or such other date set forth in the instrument evidencing the Award as the date from which the Option begins to vest for purposes of Section 7.4.

 

SECTION 3.                                   ADMINISTRATION

 

3.1                               Administration of the Plan

 

The Plan shall be administered by the Board.  If and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, the Board shall consider in selecting the members of any committee acting as Plan Administrator, with respect to any persons subject or likely to become subject to Section 16 of the Exchange Act, the provisions regarding (a) “outside directors” as contemplated by Section 162(m) of the Code and (b) “non-employee directors” as contemplated by Rule 16b-3(b)(3) under the Exchange Act, or any successor provision thereto.  Members of any committee shall serve for such term as the Board may determine, subject to removal by the Board at any time.  All references in the Plan to the “Plan Administrator” shall be, as applicable, to the Board or any committee to whom the Board has delegated authority to administer the Plan.

 

3.2                               Administration and Interpretation by Plan Administrator

 

Except for the terms and conditions explicitly set forth in the Plan, the Plan Administrator shall have full power and exclusive authority, subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board to the extent the Plan Administrator is a committee of the Board, to (a) select the Eligible Persons to whom Awards may from time to time be granted under the Plan; (b) determine the type or

 

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types of Award to be granted to each Participant under the Plan; (c) determine the number of shares of Common Stock to be covered by each Award granted under the Plan; (d) determine the terms and conditions of any Award granted under the Plan; (e) approve the forms of agreements for use under the Plan; (f) determine whether, to what extent and under what circumstances Awards may be settled in cash, shares of Common Stock or other property or canceled or suspended; (g) determine whether, to what extent and under what circumstances cash, shares of Common Stock, other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant; (h) interpret and administer the Plan and any instrument evidencing an Award; (i) establish such rules and regulations as it shall deem appropriate for the proper administration of the Plan; (j) delegate ministerial duties to such of the Company’s officers as it so determines; and (k) make any other determination and take any other action that the Plan Administrator deems necessary or desirable for administration of the Plan.  Decisions of the Plan Administrator shall be final, conclusive and binding on all persons, including the Company, any Participant, any stockholder and any Eligible Person.  A majority of the members of the Plan Administrator may determine its actions and fix the time and place of its meetings.

 

SECTION 4.                                   SHARES SUBJECT TO THE PLAN

 

4.1                               Authorized Number of Shares

 

Subject to adjustment from time to time as provided in Section 13.1, a maximum of 12,523,595 shares of Common Stock shall be available for issuance under the Plan.  Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company as treasury shares.

 

4.2                               Share Usage

 

(a)                                 Shares of Common Stock covered by an Award shall not be counted as used unless and until they are actually issued and delivered to a Participant.  If any Award lapses, expires, terminates or is canceled prior to the issuance of shares thereunder or if shares of Common Stock are issued under the Plan to a Participant and thereafter are forfeited to or otherwise reacquired by the Company, the shares subject to such Awards and the forfeited or reacquired shares shall again be available for issuance under the Plan.  Any shares of Common Stock (i) tendered by a Participant or retained by the Company as full or partial payment to the Company for the purchase price of an Award or to satisfy tax withholding obligations in connection with an Award or (ii) covered by an Award that is settled in cash shall be available for Awards under the Plan.

 

(b)                                 The Plan Administrator shall have the authority to grant Awards as an alternative to or as the form of payment for grants or rights earned or due under other compensation plans or arrangements of the Company.

 

(c)                                  Notwithstanding anything in the Plan to the contrary, the Plan Administrator may grant Substitute Awards under the Plan.  In the event that a written agreement pursuant to which a Company Transaction or a Related Party Transaction is completed is approved by the Board and said agreement sets forth the terms and conditions of the Substitute

 

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Awards, said terms and conditions shall be deemed to be the action of the Plan Administrator without any further action by the Plan Administrator, except as may be required for compliance with Rule 16b-3 under the Exchange Act, and the persons holding such Substitute Awards shall be deemed to be Participants.

 

(d)                                 Notwithstanding the foregoing and, subject to adjustment provided in Section 13.1, the maximum number of shares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregate share number stated in Section 4.1.

 

SECTION 5.                                   ELIGIBILITY

 

An Award may be granted to any employee, officer or director of the Company or a Related Company whom the Plan Administrator from time to time selects.  An Award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered to the Company or any Related Company that (a) are not in connection with the offer and sale of the Company’s securities in a capital-raising transaction and (b) do not directly or indirectly promote or maintain a market for the Company’s securities.

 

SECTION 6.                                   AWARDS

 

6.1                               Form, Grant and Settlement of Awards

 

The Plan Administrator shall have the authority, in its sole discretion, to determine the type or types of Awards to be granted under the Plan.  Such Awards may be granted either alone, in addition to or in tandem with any other type of Award.  Any Award settlement may be subject to such conditions, restrictions and contingencies as the Plan Administrator shall determine.

 

6.2                               Evidence of Awards

 

Awards granted under the Plan shall be evidenced by a written (including electronic) instrument that shall contain such terms, conditions, limitations and restrictions as the Plan Administrator shall deem advisable and that are not inconsistent with the Plan.

 

6.3                               Vesting of Awards

 

The effect on the vesting of an Award of a Company-approved leave of absence or a Participant’s working less than full-time shall be determined by the Company’s chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Board, each of whose determination shall be conclusive and binding.

 

6.4                               Deferrals

 

The Plan Administrator may permit or require a Participant to defer receipt of the payment of any Award.  If any such deferral election is permitted or required, the Plan Administrator, in its sole discretion, shall establish rules and procedures for such payment deferrals, which may include the grant of additional Awards or provisions for the payment or crediting of interest or dividend equivalents, including converting such credits to deferred stock unit equivalents.

 

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SECTION 7.                                   OPTIONS

 

7.1                               Grant of Options

 

The Plan Administrator may grant Options designated as Incentive Stock Options or Nonqualified Stock Options.

 

7.2                               Option Exercise Price

 

The exercise price for shares purchased under an Option shall be as established by the Plan Administrator, but shall not be less than the minimum exercise price required by Section 8.3 with respect to Incentive Stock Options, except in the case of Substitute Awards.

 

7.3                               Term of Options

 

Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of an Option (the “Option Term”) shall be as established for that Option by the Plan Administrator or, if not so established, shall be ten years from the Grant Date.  For Incentive Stock Options, the Option Term shall be as specified in Section 8.4.

 

7.4                               Exercise of Options

 

The Plan Administrator shall establish and set forth in each instrument that evidences an Option the time at which, or the installments in which, the Option shall vest and become exercisable, any of which provisions may be waived or modified by the Plan Administrator at any time.  If not so established in the instrument evidencing the Option, the Option shall vest and become exercisable according to the following schedule, which may be waived or modified by the Plan Administrator at any time:

 

	
Period   of Participant’s Continuous
   Employment or Service With the
   Company or Its Related Companies
   From the Vesting Commencement Date
    	
 
    	
Portion of Total Option That
   Is Vested and Exercisable
    
	
 
    	
 
    	
 
    
	
After   1 year
    	
 
    	
1/4
    
	
 
    	
 
    	
 
    
	
Each   additional one-month period of continuous service completed thereafter
    	
 
    	
An   additional 1/48
    
	
 
    	
 
    	
 
    
	
After   4 years
    	
 
    	
100%
    

 

To the extent an Option has vested and become exercisable, the Option may be exercised in whole or from time to time in part by delivery to the Company of a properly executed stock option exercise agreement or notice, in a form and in accordance with procedures established by the Plan Administrator, setting forth the number of shares with respect to which the Option is being exercised, the restrictions imposed on the shares purchased under such exercise agreement

 

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or notice, if any, and such representations and agreements as may be required by the Plan Administrator, accompanied by payment in full as described in Section 7.5.  An Option may be exercised only for whole shares and may not be exercised for less than a reasonable number of shares at any one time, as determined by the Plan Administrator.

 

7.5                               Payment of Exercise Price

 

The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased.  Such consideration must be paid before the Company will issue the shares being purchased and must be in a form or a combination of forms acceptable to the Plan Administrator for that purchase, which forms may include:

 

(a)                                 cash;

 

(b)                                 check or wire transfer;

 

(c)                                  tendering (either actually or, if the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation) shares of Common Stock already owned by the Participant, which on the day prior to the exercise date have a Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;

 

(d)                                 if the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, and to the extent permitted by law, delivery of a properly executed exercise agreement or notice, together with irrevocable instructions to a brokerage firm designated or approved by the Company to deliver promptly to the Company the aggregate amount of sale or loan proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise, all in accordance with the regulations of the Federal Reserve Board; or

 

(e)                                  such other consideration as the Plan Administrator may permit.

 

In addition, to assist a Participant (including directors and executive officers) in acquiring shares of Common Stock pursuant to an Award granted under the Plan, the Plan Administrator, in its sole discretion, may authorize, either at the Grant Date or at any time before the acquisition of Common Stock pursuant to the Award, (i) the payment by a Participant of the purchase price of the Common Stock by a promissory note or (ii) the guarantee by the Company of a loan obtained by the Participant from a third party.  Such notes or loans must be full recourse to the extent necessary to avoid charges to the Company’s earnings for financial reporting purposes.  Subject to the foregoing, the Plan Administrator shall in its sole discretion specify the terms of any loans or loan guarantees, including the interest rate and terms of and security for repayment.

 

7.6                               Effect of Termination of Service

 

The Plan Administrator shall establish and set forth in each instrument that evidences an Option whether the Option shall continue to be exercisable, and the terms and conditions of such exercise, after a Termination of Service, any of which provisions may be waived or modified by the Plan Administrator at any time.  If not so established in the instrument evidencing the Option,

 

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the Option shall be exercisable according to the following terms and conditions, which may be waived or modified by the Plan Administrator at any time:

 

(a)                                 Any portion of an Option that is not vested and exercisable on the date of a Participant’s Termination of Service shall expire on such date.

 

(b)                                 Any portion of an Option that is vested and exercisable on the date of a Participant’s Termination of Service shall expire on the earliest to occur of

 

(i)                                     if the Participant’s Termination of Service occurs for reasons other than Cause, Retirement, Disability or death, the date that is three months after such Termination of Service;

 

(ii)                                  if the Participant’s Termination of Service occurs by reason of Retirement, Disability or death, the one-year anniversary of such Termination of Service; and

 

(iii)                               the last day of the Option Term (the “Option Expiration Date”).

 

Notwithstanding the foregoing, if a Participant dies after the Participant’s Termination of Service but while an Option is otherwise exercisable, the portion of the Option that is vested and exercisable on the date of such Termination of Service shall expire upon the earlier to occur of (y) the Option Expiration Date and (z) the one-year anniversary of the date of death, unless the Plan Administrator determines otherwise.

 

Also notwithstanding the foregoing, in case a Participant’s Termination of Service occurs for Cause, all Options granted to the Participant shall automatically expire upon first notification to the Participant of such termination, unless the Plan Administrator determines otherwise.  If a Participant’s employment or service relationship with the Company is suspended pending an investigation of whether the Participant shall be terminated for Cause, all the Participant’s rights under any Option shall likewise be suspended during the period of investigation.  If any facts that would constitute termination for Cause are discovered after a Participant’s Termination of Service, any Option then held by the Participant may be immediately terminated by the Plan Administrator, in its sole discretion.

 

(c)                                  A Participant’s change in status from an employee to a consultant, advisor or independent contractor or a change in status from a consultant, advisor or independent contractor to an employee shall not be considered a Termination of Service for purposes of this Section 7.6.

 

SECTION 8.                                   INCENTIVE STOCK OPTION LIMITATIONS

 

Notwithstanding any other provisions of the Plan, the terms and conditions of any Incentive Stock Options shall in addition comply in all respects with Section 422 of the Code or any successor provision and any applicable regulations thereunder, including the following:

 

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8.1                               Dollar Limitation

 

To the extent the aggregate Fair Market Value (determined as of the Grant Date) of Common Stock with respect to which a Participant’s Incentive Stock Options become exercisable for the first time during any calendar year (under the Plan and all other stock option plans of the Company and its parent and subsidiary corporations) exceeds $100,000, such portion in excess of $100,000 shall be treated as a Nonqualified Stock Option.  In the event the Participant holds two or more such Options that become exercisable for the first time in the same calendar year, such limitation shall be applied on the basis of the order in which such Options are granted.

 

8.2                               Eligible Employees

 

Individuals who are not employees of the Company or one of its parent or subsidiary corporations may not be granted Incentive Stock Options.

 

8.3                               Exercise Price

 

The exercise price of an Incentive Stock Option shall be at least 100% of the Fair Market Value of the Common Stock on the Grant Date and, in the case of an Incentive Stock Option granted to a Participant who owns more than 10% of the total combined voting power of all classes of the stock of the Company or of its parent or subsidiary corporations (a “10% Stockholder”), shall not be less than 110% of the Fair Market Value of the Common Stock on the Grant Date.  The determination of more than 10% ownership shall be made in accordance with Section 422 of the Code.

 

8.4                               Option Term

 

Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the Option Term of an Incentive Stock Option shall not exceed ten years, and in the case of an Incentive Stock Option granted to a 10% Stockholder, shall not exceed five years.

 

8.5                               Exercisability

 

An Option designated as an Incentive Stock Option shall cease to qualify for favorable tax treatment as an Incentive Stock Option to the extent it is exercised (if permitted by the terms of the Option) (a) more than three months after the date of a Participant’s Termination of Service if termination was for reasons other than death or Disability, (b) more than one year after the date of a Participant’s Termination of Service if termination was by reason of Disability, or (c) after the Participant has been on leave of absence for more than 90 days, unless the Participant’s reemployment rights are guaranteed by statute or contract.

 

8.6                               Taxation of Incentive Stock Options

 

In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code, the Participant must hold the shares acquired upon the exercise of an Incentive Stock Option for two years after the Grant Date and one year after the date of exercise.

 

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A Participant may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option.  The Participant shall give the Company prompt notice of any disposition of shares acquired on the exercise of an Incentive Stock Option prior to the expiration of such holding periods.

 

8.7                               Promissory Notes

 

The amount of any promissory note delivered pursuant to Section 7.5 in connection with an Incentive Stock Option shall bear interest at a rate specified by the Plan Administrator, but in no case less than the rate required to avoid imputation of interest (taking into account any exceptions to the imputed interest rules) for federal income tax purposes.

 

8.8                               Code Definitions

 

For the purposes of this Section 8, “disability,” “parent corporation” and “subsidiary corporation” shall have the meanings attributed to those terms for purposes of Section 422 of the Code.

 

SECTION 9.                                   STOCK APPRECIATION RIGHTS

 

9.1                               Grant of Stock Appreciation Rights

 

The Plan Administrator may grant stock appreciation rights (“Stock Appreciation Rights” or “SARs”) to Participants at any time.  An SAR may be granted in tandem with an Option or alone (“freestanding”).  The grant price of a tandem SAR shall be equal to the exercise price of the related Option, and the grant price of a freestanding SAR shall be as established by the Plan Administrator.  An SAR may be exercised upon such terms and conditions and for the term as the Plan Administrator determines in its sole discretion; provided, however, that, subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the SAR, the term of a freestanding SAR shall be as established for that SAR by the Plan Administrator or, if not so established, shall be ten years, and in the case of a tandem SAR, (a) the term shall not exceed the term of the related Option and (b) the tandem SAR may be exercised for all or part of the shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option, except that the tandem SAR may be exercised only with respect to the shares for which its related Option is then exercisable.

 

9.2                               Payment of SAR Amount

 

Upon the exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: (a) the difference between the Fair Market Value of the Common Stock for the date of exercise over the grant price by (b) the number of shares with respect to which the SAR is exercised.  At the discretion of the Plan Administrator as set forth in the instrument evidencing the Award, the payment upon exercise of an SAR may be in cash, in shares of equivalent value, in some combination thereof or in any other manner approved by the Plan Administrator in its sole discretion.

 

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SECTION 10.                            STOCK AWARDS, RESTRICTED STOCK AND STOCK UNITS

 

10.1                        Grant of Stock Awards, Restricted Stock and Stock Units

 

The Plan Administrator may grant Stock Awards, Restricted Stock or Stock Units on such terms and conditions and subject to such repurchase or forfeiture restrictions, if any (which may be based on continuous service with the Company or a Related Company or the achievement of any performance criteria), as the Plan Administrator shall determine in its sole discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the Award.

 

10.2                        Issuance of Shares; Settlement of Awards

 

Upon the satisfaction of any terms, conditions and restrictions prescribed with respect to Restricted Stock or Stock Units, or upon a Participant’s release from any terms, conditions and restrictions of Restricted Stock or Stock Units, as determined by the Plan Administrator, and subject to the provisions of Section 11, (a) the shares of Restricted Stock covered by each Award of Restricted Stock shall become freely transferable by the Participant, and (b) Stock Units shall be paid in shares of Common Stock or, if set forth in the instrument evidencing the Award, in cash, shares of Common Stock or a combination of cash and shares of Common Stock as the Plan Administrator shall determine in its sole discretion.  Any fractional shares subject to such Awards shall be paid to the Participant in cash.

 

10.3                        Dividends and Distributions

 

Participants holding shares of Restricted Stock or Stock Units may, if the Plan Administrator so determines, be credited with dividends paid with respect to the underlying shares or dividend equivalents while they are so held in a manner determined by the Plan Administrator in its sole discretion.  The Plan Administrator may apply any restrictions to the dividends or dividend equivalents that the Plan Administrator deems appropriate.  The Plan Administrator, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, shares of Common Stock, Restricted Stock or Stock Units.

 

10.4                        Waiver of Restrictions

 

Notwithstanding any other provisions of the Plan, the Plan Administrator, in its sole discretion, may waive the repurchase or forfeiture period and any other terms, conditions or restrictions on any Restricted Stock or Stock Unit under such circumstances and subject to such terms and conditions as the Plan Administrator shall deem appropriate.

 

SECTION 11.                            WITHHOLDING

 

The Company may require the Participant to pay to the Company the amount of (a) any taxes that the Company is required by applicable federal, state, local or foreign law to withhold with respect to the grant, vesting or exercise of an Award (“tax withholding obligations”) and (b) any amounts due from the Participant to the Company or to any Related Company (“other obligations”).  The Company shall not be required to issue any shares of Common Stock or

 

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otherwise settle an Award under the Plan until such tax withholding obligations and other obligations are satisfied.

 

The Plan Administrator may permit or require a Participant to satisfy all or part of the Participant’s tax withholding obligations and other obligations by (a) paying cash to the Company, (b) having the Company withhold an amount from any cash amounts otherwise due or to become due from the Company to the Participant, (c) having the Company withhold a number of shares of Common Stock that would otherwise be issued to the Participant (or become vested in the case of Restricted Stock) having a Fair Market Value equal to the tax withholding obligations and other obligations, or (d) surrendering a number of shares of Common Stock the Participant already owns having a value equal to the tax withholding obligations and other obligations.  The value of the shares so withheld may not exceed the employer’s minimum required tax withholding rate, and the value of the shares so surrendered may not exceed such rate to the extent the Participant has owned the surrendered shares for less than six months if such limitation is necessary to avoid a charge to the Company for financial reporting purposes.

 

SECTION 12.                            ASSIGNABILITY

 

No Award or interest in an Award may be sold, assigned, pledged (as collateral for a loan or as security for the performance of an obligation or for any other purpose) or transferred by the Participant or made subject to attachment or similar proceedings otherwise than by will or by the applicable laws of descent and distribution, except to the extent a Participant designates one or more beneficiaries on a Company-approved form who may exercise the Award or receive payment under the Award after the Participant’s death.  During a Participant’s lifetime, an Award may be exercised only by the Participant.  Notwithstanding the foregoing and to the extent permitted by Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit a Participant to assign or transfer an Award; provided, however, that any Award so assigned or transferred shall be subject to all the terms and conditions of the Plan and the instrument evidencing the Award.

 

SECTION 13.                            ADJUSTMENTS

 

13.1                        Adjustment of Shares

 

In the event, at any time or from time to time, a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to stockholders other than a normal cash dividend, or other change in the Company’s corporate or capital structure results in (a) the outstanding shares of Common Stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or kind of securities of the Company or any other company or (b) new, different or additional securities of the Company or any other company being received by the holders of shares of Common Stock, then the Plan Administrator shall make proportional adjustments in (i) the maximum number and kind of securities available for issuance under the Plan; (ii) the maximum number and kind of securities issuable as Incentive Stock Options as set forth in Section 4.2(d); and (iii) the number and kind of securities that are subject to any outstanding Award and the per share price of such securities, without any change in the aggregate price to be paid therefor.

 

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The determination by the Plan Administrator as to the terms of any of the foregoing adjustments shall be conclusive and binding.

 

Notwithstanding the foregoing, the issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services rendered, or for other valid consideration, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, outstanding Awards.  Also notwithstanding the foregoing, a dissolution or liquidation of the Company or a Company Transaction shall not be governed by this Section 13.1 but shall be governed by the remaining provisions of this Section 13.

 

13.2                        Dissolution or Liquidation

 

To the extent not previously exercised or settled, and unless otherwise determined by the Plan Administrator in its sole discretion, Options, Stock Appreciation Rights and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company.  To the extent a forfeiture provision or repurchase right applicable to an Award has not been waived by the Plan Administrator, the Award shall be forfeited immediately prior to the consummation of the dissolution or liquidation.

 

13.3                        Company Transaction

 

13.3.1              Options, Stock Appreciation Rights and Stock Units

 

(a)                                 In the event of a Company Transaction, except as otherwise provided in the instrument evidencing the Award or in a written employment, services or other agreement between a Participant and the Company or a Related Company,

 

(i)                                     all Options and Stock Appreciation Rights outstanding and held by a Participant whose employment or service relationship has not terminated (other than Terminations of Service immediately prior to or in connection with the Company Transaction) as of the date of the Company Transaction shall, immediately prior to the Company Transaction, become fully vested and exercisable with respect to 100% of the unvested portion of the Award; and

 

(ii)                                  all Stock Units outstanding as of the date of the Company Transaction shall, immediately prior to the Company Transaction, become fully vested and shall be settled with respect to 100% of the unvested portion of the Award; provided, however, that

 

(iii)                               notwithstanding the foregoing, such accelerated vesting and exercisability or settlement of such Options, Stock Appreciation Rights and Stock Units shall not occur

 

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(A)                               if and to the extent any Successor Company assumes or continues such Options, Stock Appreciation Rights or Stock Units, or substitutes equivalent options, rights or units or

 

(B)                               if the Plan Administrator determines, in its sole discretion, that to the extent any Successor Company does not assume or continue such Options, Stock Appreciation Rights or Stock Units, or substitute equivalent options, rights or units, any portion of such Awards that is not assumed, continued or substituted for by the Successor Company shall terminate immediately prior to the Company Transaction in exchange for a cash payment at least equal to the amount, if any, by which the Acquisition Price multiplied by the number of shares of Common Stock subject to such Award, either to the extent the Award is vested and exercisable in accordance with its original terms or as such vesting and exercisability may be accelerated by the Plan Administrator, in its sole discretion, in connection with the Company Transaction, exceeds the aggregate exercise or grant price, if any, for such Award.

 

(iv)                              provided that the conditions set forth in Section 13.3.1(a)(iii)(A) are satisfied, if at any time during the six (6) month period following a Company Transaction, a Participant’s employment or service relationship with the Company is terminated by the Company or its Related Companies without Cause, or for Good Reason (as defined below), then fifty percent (50%) of the then unvested portion such Participant’s Options, Stock Appreciation Rights or Stock Units shall immediately become vested and exercisable.  For the purposes of this Section 13.3.1, “Good Reason” shall mean that the Participant’s employment or service relationship with the Company or its Related Companies was “constructively terminated” if within 90 days after the occurrence of one of the following Company actions (unless such action(s) applies generally to all of the Company’s management of the Company or unless Participant consents in writing to such action(s)), Participant resigns in writing from his employment with the Company: (x) a significant reduction in the Participant’s duties, position or responsibilities compared to the Participant’s duties, position or responsibilities immediately prior to such reduction; provided however that a reduction in position that occurs solely by virtue of the Company being acquired and made part of a larger entity shall not constitute “Good Reason” so long as Participant maintains a comparable level of duties and responsibilities with the acquiring entity as Participant held immediately prior to the acquisition; (y) a material reduction in Participant’s base salary as in effect immediately before such reduction; and (z) the relocation by the Company of Participant’s then current work site that has the effect of increasing the Participant’s then-current commute by more than 75 miles (not including any regular business travel consistent with the business travel requirements of the Participant’s position with the Company).

 

(b)                                 Immediately following a Company Transaction, all outstanding Options, Stock Appreciation Rights and Stock Units shall terminate and cease to be outstanding, except to the extent assumed, continued or substituted for by the Successor Company.

 

15

 

13.3.2              Restricted Stock

 

In the event of a Company Transaction, except as otherwise provided in the instrument evidencing the Award or in a written employment, services or other agreement between a Participant and the Company or a Related Company, the restrictions applicable to all Restricted Stock outstanding as of the date of the Company Transaction shall, immediately prior to the Company Transaction, lapse, and such Restricted Stock shall become free of all restrictions and become fully vested and transferable to the full extent of the original Award.  Notwithstanding the foregoing, if and to the extent any Successor Company generally assumes or continues all or any portion of Options, Stock Appreciation Rights or Stock Units outstanding as of the date of the Company Transaction, or substitutes equivalent options, rights or units, the restrictions applicable to such Restricted Stock shall not lapse, any Company repurchase rights shall automatically be assigned to the Successor Company, and all such restrictions shall continue with respect to any shares of the Successor Company or other consideration that may be issued in exchange or in substitution for such Restricted Stock.

 

13.3.3              Assumption, Continuation or Substitution

 

For the purposes of this Section 13.3, an Award shall be considered assumed, continued or substituted for if, following the Company Transaction, the Substitute Award confers the right to purchase or receive, for each share of Common Stock subject to the Award immediately prior to the Company Transaction, the consideration (whether stock, cash, or other securities or property) received in the Company Transaction by holders of Common Stock for each share subject to the Award immediately prior to the Company Transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares) without any change in the aggregate exercise or grant price, if any, of such Award; provided, however, that if such consideration received in the Company Transaction is not solely common stock of the Successor Company, the Plan Administrator may, with the consent of the Successor Company, provide for the consideration to be received upon the exercise or settlement of the Award, for each share of Common Stock subject to the Award, to be solely common stock of the Successor Company substantially equal in fair market value to the per share consideration received by holders of Common Stock in the Company Transaction.  The determination of such substantial equality of value of consideration shall be made by the Plan Administrator, whose determination shall be conclusive and binding.

 

13.4                        Further Adjustment of Awards

 

Subject to Sections 13.2 and 13.3, the Plan Administrator shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation, dissolution or change in control of the Company, as defined by the Plan Administrator, to take such further action as it determines to be necessary or advisable with respect to Awards.  Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, lifting restrictions and other modifications, and the Plan Administrator may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants.  The Plan Administrator may take such action before or after granting Awards to which the action relates and before or after any public

 

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announcement with respect to such sale, merger, consolidation, reorganization, liquidation, dissolution or change in control that is the reason for such action.

 

13.5                        Limitations

 

The grant of Awards shall in no way affect the Company’s right to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

 

13.6                        Fractional Shares

 

In the event of any adjustment in the number of shares covered by any Award, each such Award shall cover only the number of full shares resulting from such adjustment.

 

SECTION 14.                            FIRST REFUSAL AND REPURCHASE RIGHTS

 

14.1                        First Refusal Rights

 

Until the date on which the initial registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act first becomes effective, the Company shall have the right of first refusal with respect to any proposed sale or other disposition by a Participant of any shares of Common Stock issued pursuant to an Award.  Such right of first refusal shall be exercisable in accordance with the terms and conditions established by the Plan Administrator and set forth in the stock purchase agreement evidencing the purchase of the shares.

 

14.2                        Repurchase Rights for Vested Shares

 

Until the date on which the initial registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act first becomes effective, upon a Participant’s Termination of Service, all vested shares of Common Stock issued pursuant to an Award (whether issued before or after such Termination of Service) shall be subject to repurchase by the Company, at the Company’s sole discretion, at the Fair Market Value of such shares on the date of such repurchase.  The terms and conditions upon which such repurchase right shall be exercisable (including the period and procedure for exercise) shall be established by the Plan Administrator and set forth in the stock purchase agreement evidencing the purchase of the shares.

 

14.3                        General

 

The Company may not exercise its first refusal or repurchase rights under Section 14.1 or 14.2, respectively, earlier than six months and one day following the date the shares were purchased by a Participant (or any shorter period determined by the Company to be sufficient to avoid a charge to the Company’s earnings for financial reporting purposes or required by applicable law).

 

The Company’s first refusal and repurchase rights under this Section 14 are assignable by the Company at any time.

 

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SECTION 15.                            MARKET STANDOFF

 

In the event of an underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, no person may sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose of or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to any shares issued pursuant to an Award granted under the Plan without the prior written consent of the Company or its underwriters.  Such limitations shall be in effect for such period of time as may be requested by the Company or such underwriters; provided, however, that in no event shall such period exceed 180 days.  The limitations of this Section 15 shall in all events terminate two years after the effective date of the Company’s initial public offering.

 

In the event of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the Company’s outstanding Common Stock effected as a class without the Company’s receipt of consideration, any new, substituted or additional securities distributed with respect to the purchased shares shall be immediately subject to the provisions of this Section 15, to the same extent the purchased shares are at such time covered by such provisions.

 

In order to enforce the limitations of this Section 15, the Company may impose stop-transfer instructions with respect to the purchased shares until the end of the applicable standoff period.

 

SECTION 16.                            AMENDMENT AND TERMINATION

 

16.1                        Amendment, Suspension or Termination

 

The Board may amend, suspend or terminate the Plan or any portion of the Plan at any time and in such respects as it shall deem advisable; provided, however, that, to the extent required by applicable law, regulation or stock exchange rule, stockholder approval shall be required for any amendment to the Plan.  Subject to Section 16.3, the Board may amend the terms of any outstanding Award, prospectively or retroactively.

 

16.2                        Term of the Plan

 

The Plan shall have no fixed expiration date.  After the Plan is terminated, no future Awards may be granted, but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan’s terms and conditions.  Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten years after the earlier of (a) the adoption of the Plan by the Board and (b) the adoption by the Board of any amendment to the Plan that constitutes the adoption of a new plan for purposes of Section 422 of the Code.

 

16.3                        Consent of Participant

 

The amendment, suspension or termination of the Plan or a portion thereof or the amendment of an outstanding Award shall not, without the Participant’s consent, materially adversely affect any rights under any Award theretofore granted to the Participant under the

 

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Plan.  Any change or adjustment to an outstanding Incentive Stock Option shall not, without the consent of the Participant, be made in a manner so as to constitute a “modification” that would cause such Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option.  Notwithstanding the foregoing, any adjustments made pursuant to Sections 13.2 and 13.3 shall not be subject to these restrictions.

 

SECTION 17.                            GENERAL

 

17.1                        No Individual Rights

 

No individual or Participant shall have any claim to be granted any Award under the Plan, and the Company has no obligation for uniformity of treatment of Participants under the Plan.

 

Furthermore, nothing in the Plan or any Award granted under the Plan shall be deemed to constitute an employment contract or confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate a Participant’s employment or other relationship at any time, with or without cause.

 

17.2                        Issuance of Shares

 

Notwithstanding any other provision of the Plan, the Company shall have no obligation to issue or deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless, in the opinion of the Company’s counsel, such issuance, delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act or the laws of any state or foreign jurisdiction) and the applicable requirements of any securities exchange or similar entity.

 

The Company shall be under no obligation to any Participant to register for offering or resale or to qualify for exemption under the Securities Act, or to register or qualify under the laws of any state or foreign jurisdiction, any shares of Common Stock, security or interest in a security paid or issued under, or created by, the Plan, or to continue in effect any such registrations or qualifications if made.

 

As a condition to the exercise of an Option or any other receipt of Common Stock pursuant to an Award under the Plan, the Company may require (a) the Participant to represent and warrant at the time of any such exercise or receipt that such shares are being purchased or received only for the Participant’s own account and without any present intention to sell or distribute such shares and (b) such other action or agreement by the Participant as may from time to time be necessary to comply with the federal, state and foreign securities laws.  At the option of the Company, a stop-transfer order against any such shares may be placed on the official stock books and records of the Company, and a legend indicating that such shares may not be pledged, sold or otherwise transferred, unless an opinion of counsel is provided (concurred in by counsel for the Company) stating that such transfer is not in violation of any applicable law or regulation, may be stamped on stock certificates to ensure exemption from registration.  The Plan Administrator may also require the Participant to execute and deliver to the Company a purchase

 

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agreement or such other agreement as may be in use by the Company at such time that describes certain terms and conditions applicable to the shares.

 

To the extent the Plan or any instrument evidencing an Award provides for issuance of stock certificates to reflect the issuance of shares of Common Stock, the issuance may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

 

17.3                        Indemnification

 

Each person who is or shall have been a member of the Board, or a committee appointed by the Board to whom authority was delegated in accordance with Section 3.1 shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by such person in settlement thereof, with the Company’s approval, or paid by such person in satisfaction of any judgment in any such claim, action, suit or proceeding against such person; provided, however, that such person shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person’s own behalf, unless such loss, cost, liability or expense is a result of such person’s own willful misconduct or except as expressly provided by statute.

 

The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person may be entitled under the Company’s certificate of incorporation or bylaws, as a matter of law, or otherwise, or of any power that the Company may have to indemnify such person or hold such person harmless.

 

17.4                        No Rights as a Stockholder

 

Unless otherwise provided by the Plan Administrator or in the instrument evidencing the Award or in a written employment, services or other agreement, no Option, Stock Appreciation Right or Stock Unit shall entitle the Participant to any cash dividend, voting or other right of a stockholder unless and until the date of issuance under the Plan of the shares that are the subject of such Award.

 

17.5                        Compliance With Laws and Regulations

 

In interpreting and applying the provisions of the Plan, any Option granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an “incentive stock option” within the meaning of Section 422 of the Code.

 

17.6                        Participants in Other Countries

 

The Plan Administrator shall have the authority to adopt such modifications, procedures and subplans as may be necessary or desirable to comply with provisions of the laws of other countries in which the Company or any Related Company may operate to ensure the viability of

 

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the benefits from Awards granted to Participants employed in such countries, to comply with applicable foreign laws and to meet the objectives of the Plan.

 

17.7                        No Trust or Fund

 

The Plan is intended to constitute an “unfunded” plan.  Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor of the Company.

 

17.8                        Successors

 

All obligations of the Company under the Plan with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all the business and/or assets of the Company.

 

17.9                        Severability

 

If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Plan Administrator, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Plan Administrator’s determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.

 

17.10                 Choice of Law

 

The Plan, all Awards granted thereunder and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Delaware without giving effect to principles of conflicts of law.

 

17.11                 Appendix Provisions

 

Participants who are residents of the State of California shall be subject to the additional terms and conditions set forth in Appendix A to the Plan until such time as the Common Stock becomes a “listed” security under the Securities Act.

 

SECTION 18.                            EFFECTIVE DATE

 

The effective date (the “Effective Date”) is the date on which the Plan is adopted by the Board.  If the stockholders of the Company do not approve the Plan within 12 months after the Board’s adoption of the Plan, any Incentive Stock Options granted under the Plan will be treated as Nonqualified Stock Options.

 

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APPENDIX A

 

TO THE CONTROL4 CORPORATION
 2003 EQUITY INCENTIVE PLAN

 

(For California Residents Only)

 

This Appendix to the Control4 Corporation 2003 Equity Incentive Plan (the “Plan”) shall have application only to Participants who are residents of the State of California.  Capitalized terms contained herein shall have the same meanings given to them in the Plan, unless otherwise provided in this Appendix.  Notwithstanding any provision contained in the Plan to the contrary and to the extent required by applicable law, the following terms and conditions shall apply to all Awards granted to residents of the State of California, until such time as the Common Stock becomes a “listed security” under the Securities Act:

 

1.                                      Nonqualified Stock Options shall have an exercise price that is not less than 85% of the Fair Market Value of the Common Stock at the Grant Date, except that the exercise price shall be at least 110% of the Fair Market Value in the case of any person who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its parent or subsidiary companies.

 

2.                                      The purchase price for any shares of Common Stock that may be purchased under the Plan (“Stock Purchase Rights”) shall be at least 85% of the Fair Market Value of the Common Stock at the time the Participant is granted the Stock Purchase Right or at the time the purchase is consummated.  Notwithstanding the foregoing, the purchase price shall be at least 100% of the Fair Market Value of the Common Stock at the time the Participant is granted the Stock Purchase Right or at the time the purchase is consummated in the case of any person who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its parent or subsidiary companies.

 

3.                                      Options shall have a term of not more than ten years from the Grant Date.

 

4.                                      Awards shall be nontransferable other than by will or the laws of descent and distribution.  Notwithstanding the foregoing, and to the extent permitted by Section 422 of the Code, the Plan Administrator, in its discretion, may permit distribution of an Option to an inter vivos or testamentary trust in which the Option is to be passed to beneficiaries upon the death of the trustor (settlor), or by gift to “immediate family” as that term is defined in Rule 16a-1(e) under the Exchange Act.

 

5.                                      Options shall become exercisable at the rate of at least 20% per year over five years from the date the Option is granted, subject to reasonable conditions such as continued employment.  However, in the case of an Option granted to officers, directors or consultants of the Company or a Related Company, the Option may become fully exercisable, subject to reasonable conditions such as continued employment, at any time or during any period established by the Company or a Related Company.

 

Appendix A-1

 

6.                                      Unless employment or services are terminated for Cause, the right to exercise an Option in the event of Termination of Service, to the extent that the Participant is otherwise entitled to exercise an Option on the date of Termination of Service, shall be

 

a.                                      at least six months from the date of a Participant’s Termination of Service if termination was caused by death or Disability; and

 

b.                                      at least 30 days from the date of a Participant’s Termination of Service if termination of employment was caused by other than death or Disability;

 

c.                                       but in no event later than the Option Expiration Date.

 

7.                                      No Award may be granted to a resident of California more than ten years after the earlier of the date of adoption of the Plan and the date the Plan is approved by the stockholders.

 

8.                                      Any Award exercised before stockholder approval is obtained shall be rescinded if stockholder approval is not obtained within 12 months before or after the Plan is adopted.  Such shares shall not be counted in determining whether such approval is obtained.

 

9.                                      The Company shall provide annual financial statements of the Company to each California resident holding an outstanding Award under the Plan.  Such financial statements need not be audited and need not be issued to key employees whose duties at the Company assure them access to equivalent information.

 

10.                               Any right of repurchase on behalf of the Company in the event of a Participant’s Termination of Service shall be (a) at a purchase price that is not less than the Fair Market Value of the securities upon Termination of Service, and the right to repurchase shall be exercised for cash or cancellation of purchase money indebtedness for the shares within 90 days of Termination of Service (or in the case of securities issued upon exercise of Options after the date of Termination of Service, within 90 days after the date of the exercise), and the right shall terminate when the Company’s securities become publicly traded; or (b) at the original purchase price, provided that the right to repurchase at the original purchase price lapses at the rate of at least 20% of the shares per year over five years from the date the Option or Stock Purchase Right is granted (without respect to the date the Option or Stock Purchase Right was exercised or became exercisable) and the right to repurchase shall be exercised for cash or cancellation of purchase money indebtedness for the shares within 90 days of Termination of Service (or in the case of securities issued upon exercise of Options after the date of Termination of Service, within 90 days after the date of the exercise).  In addition to the restrictions set forth in clauses (a) and (b), the securities held by an officer, director or consultant of the Company or a Related Company may be subject to additional or greater restrictions.

 

Appendix A-2

 

CONTROL4 CORPORATION
 2003 EQUITY INCENTIVE PLAN

 

STOCK OPTION GRANT NOTICE

 

Control4 Corporation (the “Company”) hereby grants to Participant an Option (the “Option”) to purchase shares of the Company’s Common Stock.  The Option is subject to all the terms and conditions set forth in this Stock Option Grant Notice (this “Grant Notice”) and in the Stock Option Agreement and the Company’s 2003 Equity Incentive Plan (the “Plan” which are attached to and incorporated into this Grant Notice in their entirety.

 

	
Participant:
    	
 
    	
 
    
	
Grant   Date:
    	
 
    	
 
    
	
Vesting   Commencement Date:
    	
 
    	
 
    
	
Number   of Shares Subject to Option:
    	
 
    	
 
    
	
Exercise   Price (per Share):
    	
 
    	
 
    
	
Option   Expiration Date:
    	
 
    	
 
    
	
 
    	
 
    	
(subject   to earlier termination in accordance with the terms of the Plan and the Stock   Option Agreement)
    
	
Type   of Option:
    	
 
    	
[Incentive   / Non-Qualified] Stock Option
    
	
Vesting   and Exercisability Schedule:
    	
 
    	
1/4th of the shares subject to the Option will   vest and become exercisable on the one (1) year anniversary of the Vesting   Commencement Date.
    
	
 
    	
 
    	
1/48th of the shares subject to the Option will   vest and become exercisable each month thereafter over the remaining three   (3) years following the one (1) year anniversary of the Vesting Commencement   Date.
    

 

Additional Terms/Acknowledgement: The undersigned Participant acknowledges receipt of, and understands and agrees to, this Grant Notice, the Stock Option Agreement and the Plan.  Participant further acknowledges that as of the Grant Date, this Grant Notice, the Stock Option Agreement and the Plan set forth the entire understanding between Participant and the Company regarding the Option and supersede all prior oral and written agreements on the subject.

 

	
CONTROL4   CORPORATION
    	
 
    	
PARTICIPANT
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Signature
    
	
 
    	
 
    	
Date:
    	
 
    
	
Attachments:
    	
 
    	
Address:
    
	
1.   Stock Option Agreement
    	
 
    	
 
    
	
2.   2003 Equity Incentive Plan
    	
 
    	
Taxpayer   ID:
    

 

 

CONTROL4 CORPORATION
 2003 EQUITY INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

 

Pursuant to your Stock Option Grant Notice (the “Grant Notice”) and this Stock Option Agreement, Control4 Corporation has granted you an Option under its 2003 Equity Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice (the “Shares”) at the exercise price indicated in your Grant Notice.  Capitalized terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan.

 

The details of the Option are as follows:

 

1.                                      Vesting and Exercisability.  Subject to the provisions contained herein, the Option will vest and become exercisable as provided in your Grant Notice, provided that vesting will cease upon the termination of your employment or service relationship with the Company or a Related Company and the unvested portion of the Option will terminate.

 

2.                                      Securities Law Compliance.  Notwithstanding any other provision of this Agreement, you may not exercise the Option unless the Shares issuable upon exercise are registered under the Securities Act or, if such Shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act.  The exercise of the Option must also comply with other applicable laws and regulations governing the Option, and you may not exercise the Option if the Company determines that such exercise would not be in material compliance with such laws and regulations.

 

3.                                      Incentive Stock Option Qualification.  If so designated in your Grant Notice, all or a portion of the Option is intended to qualify as an Incentive Stock Option under federal income tax law, but the Company does not represent or guarantee that the Option qualifies as such.

 

If the Option has been designated as an Incentive Stock Option and the aggregate Fair Market Value (determined as of the grant date) of the shares of Common Stock subject to the portions of the Option and all other Incentive Stock Options you hold that first become exercisable during any calendar year exceeds $100,000, any excess portion will be treated as a Nonqualified Stock Option, unless the Internal Revenue Service changes the rules and regulations governing the $100,000 limit for Incentive Stock Options.  A portion of the Option may be treated as a Nonqualified Stock Option if certain events cause exercisability of the Option to accelerate.

 

4.                                      Notice of Disqualifying Disposition.  To the extent the Option has been designated as an Incentive Stock Option, to obtain certain tax benefits afforded to Incentive Stock Options, you must hold the Shares issued upon the exercise of the Option for two years after the Grant Date and one year after the date of exercise.  You may be subject to the alternative minimum tax at the time of exercise.  You should obtain tax advice when exercising the Option and prior to the disposition of the Shares.  You will be responsible for any taxes or

 

 

duties arising from the exercise of this Option, and agree to indemnify and hold the Company harmless from any such taxes or duties.  By accepting the Option, you agree to promptly notify the Company if you dispose of any of the Shares within one year from the date you exercise all or part of the Option or within two years from the Grant Date.

 

5.                                      Method of Exercise.  You may exercise the Option by giving written notice to the Company in the form of the Notice of Exercise of Stock Option attached hereto as Exhibit A, or such other form as may be reasonably required by the Company from time to time (the “Exercise Notice”).  The Exercise Notice must be accompanied by full payment of the exercise price for the number of Shares you are purchasing.  You may make this payment in any combination of the following:  (a) by cash; (b) by check acceptable to the Company; (c) if permitted by the Plan Administrator, by using shares of Common Stock you have owned for at least six months; (d) if the Common Stock is registered under the Exchange Act, by instructing a broker to deliver to the Company the total payment required; or (e) by any other method permitted by the Plan Administrator.

 

6.                                      Repurchase and First Refusal Rights.  So long as the Common Stock is not registered under the Exchange Act, the Company may, in its sole discretion at the time of exercise, require you to sign a stock purchase agreement, in the form to be provided, pursuant to which you will grant to the Company certain repurchase and/or first refusal rights to purchase the Shares acquired by you upon exercise of the Option.  Upon request to the Company, you may review a current form of this agreement prior to exercise of the Option.

 

7.                                      Market Standoff.  By exercising the Option you agree that the Shares will be subject to the market standoff restrictions on transfer set forth in the Plan.

 

8.                                      Treatment Upon Termination of Employment or Service Relationship.  The unvested portion of the Option will terminate automatically and without further notice immediately upon termination of your employment or service relationship with the Company or a Related Company for any reason (“Termination of Service”).  You may exercise the vested portion of the Option as follows:

 

(a)                                 General Rule.  You must exercise the vested portion of the Option on or before the earlier of (i) three months after your Termination of Service and (ii) the Option Expiration Date;

 

(b)                                 Retirement or Disability.  If your employment or service relationship terminates due to Retirement or Disability, you must exercise the vested portion of the Option on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date.

 

(c)                                  Death.  If your employment or service relationship terminates due to your death, the vested portion of the Option must be exercised on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date.  If you die after your Termination of Service but while the Option is still exercisable, the vested portion of the Option may be exercised until the earlier of (x) one year after the date of death and (y) the Option Expiration Date; and

 

2

 

(d)                                 Cause.  The vested portion of the Option will automatically expire at the time the Company first notifies you of your Termination of Service for Cause, unless the Plan Administrator determines otherwise.  If your employment or service relationship is suspended pending an investigation of whether you will be terminated for Cause, all your rights under the Option likewise will be suspended during the period of investigation.  If any facts that would constitute termination for Cause are discovered after your Termination of Service, any Option you then hold may be immediately terminated by the Plan Administrator.

 

The Option must be exercised within three months after Termination of Service for reasons other than death or Disability and one year after Termination of Service due to Disability to qualify for the beneficial tax treatment afforded Incentive Stock Options.

 

It is your responsibility to be aware of the date the Option terminates.

 

9.                                      Change of Control.  Upon the consummation of any Company Transaction (as such term is defined in the Plan), any unvested portion of the Option shall be treated in the manner defined in the Plan.

 

10.                               Limited Transferability.  During your lifetime only you can exercise the Option.  The Option is not transferable except by will or by the applicable laws of descent and distribution, except that Nonqualified Stock Options may be transferred to the extent permitted by the Plan Administrator.  The Plan provides for exercise of the Option by a beneficiary designated on a Company-approved form or the personal representative of your estate.

 

11.                               Withholding Taxes.  As a condition to the exercise of any portion of an Option, you must make such arrangements as the Company may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such exercise.

 

12.                               Option Not an Employment or Service Contract.  Nothing in the Plan or any Award granted under the Plan will be deemed to constitute an employment contract or confer or be deemed to confer any tight for you to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate your employment or other relationship at any time, with or without Cause.

 

13.                               No Right to Damages.  You will have no right to bring a claim or to receive damages if you are required to exercise the vested portion of the Option within three months (one year in the case of Retirement, Disability or death) of the Termination of Service or if any portion of the Option is cancelled or expires unexercised.  The loss of existing or potential profit in Awards will not constitute an element of damages in the event of your Termination of Service for any reason even if the termination is in violation of an obligation of the Company or a Related Company to you.

 

14.                               Binding Effect.  This Agreement will inure to the benefit of the successors and assigns of the Company and be binding upon you and your heirs, executors, administrators, successors and assigns.

 

3

 

EXHIBIT A

 

NOTICE OF EXERCISE OF STOCK OPTION

 

To:  Control4 Corporation

 

I, a resident of                                               , hereby exercise my [Incentive / Non-Qualified] Stock Option granted by Control4 Corporation (the “Company”) on                  , subject to all the terms and provisions thereof and of the 2003 Equity Incentive Plan referred to therein, and notify the Company of my desire to purchase                                      shares of Common Stock of the Company (the “Securities”) at the exercise price of $      per share.  I hereby represent and warrant that I have been furnished with a copy of the Plan.

 

I hereby represent and warrant that (1) I have been furnished with all information which I deem necessary to evaluate the merits and risks of the purchase of the Securities; (2) I have had the opportunity to ask questions and receive answers concerning the information received about the Securities and the Company; and (3) I have been given the opportunity to obtain any additional information I deem necessary to verify the accuracy of any information obtained concerning the Securities and the Company.

 

I am aware that the Securities have not been registered under the Federal Securities Act of 1933 (the “1933 Act”) or any state securities laws, pursuant to exemption(s) from registration.  I understand that the reliance by the Company on such exemption(s) is predicated in part upon the truth and accuracy of the statements by me in this Notice of Exercise.

 

I hereby represent and warrant that I am purchasing the Securities for my own personal account for investment and not with a view to the sale or distribution of all or any part of the Securities.

 

I understand that because the Securities have not been registered under the 1933 Act, I must continue to bear the economic risk of the investment for an indefinite time and the Securities cannot be sold unless the Securities are subsequently registered or an exemption from registration is available.

 

I agree that I will in no event sell or distribute all or any part of the Securities unless (1) there is an effective registration statement under the 1933 Act and applicable state securities laws covering any such transaction involving the Securities or (2) the Company receives an opinion of my legal counsel (concurred in by legal counsel for the Company) stating that such transaction is exempt from registration or the Company otherwise satisfies itself that such transaction is exempt from registration.

 

I consent to the placing of a legend on my certificate (s) for the Securities stating that the Securities have not been registered and setting forth the restriction on transfer contemplated hereby and to the placing of a stop transfer order on the books of the Company and with any transfer agents against the Securities until the Securities may be legally resold or distributed.

 

I understand that at the present time I may not rely on Rule 144 of the Securities and Exchange Commission (the “SEC”) for the resale or distribution of the Securities.  I understand

 

 

that the Company has no obligation to me to register the Securities with the SEC and has not represented to me that it will register the Securities.

 

I am advised, prior to my purchase of the Securities, that neither the offering of the Securities nor any offering materials have been reviewed by any administrator under the Securities Act of 1933, the Utah State Securities Act or any other applicable securities act, law or regulation (the “Acts”), and that the Securities have not been registered under any of the Acts and therefore cannot be resold unless they are registered under the Acts or unless an exemption from such registration is available.

 

	
Dated:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
(signature)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(print   name)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address:
    
	
 
    	
 
    	
 
    
	
Taxpayer   I.D. Number
    	
 
    	
 
    

 

2Exhibit 10.4

 

August 20, 2011

 

Martin Plaehn

Dear Martin:

 

On behalf of Control4 Corporation (the “Company”), I am pleased to present you this offer of employment.  The terms of this offer, should you accept this opportunity, are as follows:

 

1.                                      Employment.  Effective as of October 17, 2011, or such earlier date as we may mutually agree (the “Start Date”), you will be appointed to serve in a full-time capacity as the Company’s President and Chief Executive Officer.  In such capacity, you will report directly to the Board of Directors of the Company (the “Board”).  Your employment with the Company will be for an unspecified duration and will constitute “at-will” employment, meaning either you or the Company may terminate your employment relationship at any time, and for any or no reason, with or without Cause subject to the terms and conditions of this Agreement.  The “at-will” nature of your employment may only he changed in a document signed by you and a duly authorized member of the Board.  Your position will be classified as “exempt” and you will not be eligible for overtime pay.

 

2.                                      Compensation.

 

(a)                                 Base Salary.  You will be paid a base salary at the annual rate of $360,000 (the “Base Salary”), less applicable deductions and withholdings, paid in accordance with the Company’s standard payroll procedures.  The Board will review your Base Salary annually, and, in its sole discretion, consider any increases it deems warranted at that time.

 

(b)                                 Equity Incentives.  The Company will request that the Board approve the grant to you of an option (the “Option”) to purchase shares of Company Common Stock equal to 2.7% of the Company’s fully diluted shares, calculated as of the Start Date.  The Option shall vest as follows:  25% of the shares purchasable upon exercise of the Option shall vest on the one-year anniversary of the Start Date, with the rest of the shares purchasable upon exercise of the Option to vest in equal monthly installments over the ensuing 36 months thereafter.  In addition to the Option, the Company will request that the Board approve a second grant to you of an option (the “Milestone Option”) to purchase additional shares of Company Common Stock equal to 0.6% of the Company’s fully diluted shares, calculated as of the Start Date.  The Milestone Option shall vest on the same time-based vesting schedule as the Option if, and only if, certain annual objectives (the “Milestones”), as mutually agreed by you and the Board, are achieved.  For the avoidance of doubt, upon the failure to achieve any given Milestone, the options related to such Milestone shall be immediately terminated and returned to the Company’s equity incentive plan and shall not be eligible for any vesting acceleration as set forth below in Section 5(d).

 

(c)                                  Bonus.  Beginning in 2012, you will be eligible to receive an annual performance bonus of up to 30% of your Base Salary, based upon criterion to be established by the Board in its sole discretion.

 

 

(d)                                 Business Expenses.  The Company will reimburse you for reasonable business expenses incurred by you from time to time in accordance with applicable Company travel and expense policies, including, if necessary, travel to the Company’s headquarters prior to the Start Date.

 

(e)                                  Relocation Expenses.  In connection your employment, you will move to the Salt Lake City, Utah area, and the Company will pay for in advance (or, for smaller expenses, reimburse you for upon presentation of reasonable documentation) reasonable and customary moving expenses associated with locating and purchasing or leasing housing (not including payment for such housing), transportation for your household goods and immediate family, and directly related expenses associated with this move (including taxes on any relocation payment or reimbursement that are taxable to you).

 

3.                                      Taxes and 409A Compliance.

 

(a)                                 The intent of the parties is that payments and benefits under this Agreement comply with Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.  In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on you by Code Section 409A or damages for failing to comply with Code Section 409A.

 

(b)                                 A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”  Notwithstanding anything to the contrary in this Agreement, if you are deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall not be made or provided until the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of your “separation from service,” and (ii) the date of your death, to the extent required under Code Section 409A.  Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Section 3(b) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to you in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

 

(c)                                  To the extent that reimbursements or other in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Code Section 409A, (i) all expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by you, (ii) any right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (iii) no such reimbursement, expenses eligible for reimbursement, or in-kind

 

 

benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.

 

(d)                                 For purposes of Code Section 409A, your right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.  Whenever a payment under this Agreement specifics a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company.

 

(e)                                  Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.

 

(f)                                   All payments and benefits provided herein shall be subject to withholding of taxes and other amounts as are required by law to be withheld.

 

(g)                                  Notwithstanding any provision of this Agreement to the contrary, the Company may unilaterally amend this Agreement to the extent it deems necessary to avoid the imposition of excise taxes, penalties or similar charges on the Company as a result of this Agreement being considered to be “discriminatory,” including, without limitation, any penalties under Section 4980D of the Code.

 

4.                                      Termination of Employment.  Upon the termination of your employment for any reason, you shall be entitled to the compensation, benefits and reimbursements then due and owing for the period ending as of the end of the effective date of the termination (the “Termination Date”) and the Company shall make the following payments to you (or your beneficiaries or estate if applicable) on your Termination Date: (i) all accrued but unpaid salary and any unpaid vacation that has accrued pursuant to the Company’s vacation accrual policy through the Termination Date, (ii) any earned but unpaid bonuses, (iii) any unreimbursed business expenses, and in addition (iv) you will continue to be able to exercise any vested and exercisable stock options then held by you pursuant to their terms and conditions (collectively, (i) through (iv) are the “Accrued Benefits”).  In addition, you may also be eligible for other post-employment payments and benefits as provided in this Agreement or pursuant to other agreements or plans with the Company that you enter into from time to time.

 

(a)                                 By Death.  Your employment shall terminate automatically upon your death.  The Company shall pay to your beneficiaries or estate, as appropriate, any compensation then due and owing, including the Accrued Benefits, and any other benefits provided hereunder, including without limitation the ability to exercise any vested and exercisable options held by you.  Thereafter, all obligations of the Company under this Agreement shall cease.

 

(b)                                 By Disability.  For purposes of this Agreement, “disability” means a mental or physical Impairment that is expected to result in death or that has lasted or is expected to last for a continuous period of three (3) months or more and that causes you to be unable to perform your duties under this Agreement and to be engaged in any substantial gainful activity.  If you experience such a disability, then, to the extent permitted by law, the Company may terminate

 

 

your employment upon sixty (60) days’ advance written notice.  Termination by disability shall be determined by a physician selected by the Board, if such physician is unable to schedule an appointment with you within ten business days of physician’s written request, the Board is authorized to determine whether your disability has occurred at its sole discretion.  The Company shall pay you all compensation to which you are entitled up through the last business day of the notice period, including all Accrued Benefits, and any other benefits provided hereunder, including without limitation the exercisability of any vested and exercisable option held by you; thereafter, all obligations of Company under this Agreement shall cease.  Nothing in this subsection shall affect your rights under any applicable Company disability plan.  Termination by disability shall not constitute termination without Cause or for resignation for Good Reason.

 

(c)                                  By Company Not For Cause or By You for Good Reason.  At any time, Company may terminate your employment without Cause by providing you written notice of such termination or you may terminate your employment.  In either event, the Company will pay to you the Accrued Benefits and all post-termination payments and benefits when due as provided in this Agreement.  As a condition to your receipt of such benefits, you will be required to comply with your continuing obligations (including without limitation the return of any Company properly and the non-competition and non-solicitation obligations set forth herein), resign from all positions you hold with the Company, and execute the Company’s standard form of release agreement attached as an exhibit to this Agreement (Exhibit A) in which you agree to fully release the Company and its representatives from any and all claims you may have, and such release must become effective no later than sixty (60) days following your termination.  Thereafter, all obligations of the Company under this Agreement will cease except as set forth herein.

 

(d)                                 By Company For Cause.  At any time, unless such actions are cured as described below, and without prior notice for actions that are not curable, the Company may terminate your employment for Cause.  In such event, the Company will pay to you the Accrued Benefits.  Thereafter, all obligations of the Company under this Agreement will cease except as set forth herein.

 

(e)                                  By You Without Good Reason.  At any time you may terminate your employment voluntarily and without Good Reason.  In such event, the Company will pay to you the Accrued Benefits.  Thereafter, all obligations of the Company under this Agreement will cease except as set forth herein.

 

5.                                      Severance Benefits.  Subject to the conditions set forth in Section 4(c) above, in the event your employment with the Company is terminated by the Company without Cause or by you for Good Reason, then you will be entitled to receive:

 

(a)                                 the continued payment of your Base Salary for six months (6) months, provided, however, (i) after the Company’s initial public offering, or (ii) if your termination without Cause or due to Good Reason occurs within ninety (90) days prior to or within 12 months after a Change of Control, the continued payment of your Base Salary shall be for twelve (12) months (the “Cash Severance”).  Notwithstanding the foregoing, if the Cash Severance constitutes deferred compensation for purposes of Code Section 409A as determined by the Company, such

 

 

payments shall commence upon the 60th date following your date of termination (and the first payment shall include payment of all amounts that otherwise would have been due prior thereto under the terms of this Agreement had such payments commenced immediately upon your termination, and any payments thereafter shall continue as provided herein);

 

(b)                                 Company paid group medical, dental and vision coverage for you and your dependents (at the same coverage levels that you had on the date of your termination) commencing as of the first day of the month immediately following your termination and continuing for the duration of twelve (12) months;

 

(c)                                  the Accrued Benefits;

 

(d)                                 if such termination without Cause or due to Good Reason occurs (i) during the first year of your employment and within ninety (90) days prior to or within twelve (12) months after a Change of Control, accelerated vesting of (A) 50% of the then unvested shares purchasable upon exercise of the Option and (B) 25% of the Milestone Option; and (ii) after the first year of your employment and within ninety (90) days prior to or within 12 months after a Change of Control, accelerated vesting of (A) 100% of the then unvested shares purchasable upon exercise of the Option, and (B) the greater of either, (x) 50% of the then unvested portion of the Milestone Option, or (y) 25% of the total Milestone Option.; and

 

(e)                                  a twelve (12) month period to purchase any or all vested shares through the exercise of your Option and Milestone Option.

 

For purposes of clarity, you will not be entitled to receive the foregoing benefits of subsection 5(a) through (c) should your employment terminate for Cause (as provided in Section 4(d) above) or should you terminate your employment other than for Good Reason (as provided in Section 4(e) above).

 

6.                                      Benefits.  You will be entitled to continue to participate in the Company’s basic employment benefits available to all Company employees, as currently in effect or as the Company may revise such benefits in the future, in its sole discretion.  As you know, participation in Company benefit programs may require payroll deductions and/or direct contributions by you.

 

7.                                      Vacation.  You will be entitled to accrue up to three (3) weeks of vacation leave consisting of fifteen (15) business days earned on an annual, pro-rata basis throughout each calendar year of employment, all in accordance with the Company’s standard vacation policy in effect from time to time and approved by the Board of Directors.  Employee’s vacation accrual will be pro-rated for the remainder of this calendar year.  Once the maximum vacation accrual is reached, no further vacation will accrue.  When some vacation is used, vacation will begin to accrue again and there will be no retroactive grant of vacation for the period of time the accrued vacation was at the maximum accrual balance.  Any accrued and unused vacation will be paid to you in cash upon your termination of employment.

 

8.                                      Confidentiality Agreement.  As a condition of employment, you agree to enter into the Company’s standard Confidential Information and Intellectual Property Assignment Agreement (the “PIIA”), a copy of which is attached hereto as Exhibit B.

 

 

9.                                      Noncompetition and Nondisparagement.

 

(a)                                 During the term of your employment with the Company and for eighteen (18) months after termination, for any reason, of your employment with the Company, you shall not directly or indirectly, own, manage, operate, join or control, be employed by or participate in the ownership, management, operation or control of, or be a consultant to or connected in any other manner with, any business, firm or corporation which is similar to or competes with a principal business of the Company or its subsidiaries; provided, however, that your ownership of securities of any company not in excess of one percent of any class of such securities shall not be a violation of this provision.  You acknowledge that the foregoing is in addition to your obligations under the PIIA.

 

(b)                                 From the date hereof and forever hereafter, you expressly agree not to disparage the Company, its past and present investors, officers, directors or employees or its affiliates and to keep all confidential and proprietary information about the past or present business affairs of the Company and its affiliates confidential unless a prior written release from the Company is obtained or unless disclosure is required by law.

 

10.                               Defined Terms: For purposes of this Agreement, the following terms will mean:

 

(a)                                 “Cause” shall be defined as (1) your repeated failure, in the reasonable judgment of the Board to perform one or more of your essential and material duties and responsibilities to the Company after formal written notice thereof from the Board to you describing your failure to perform such essential and material duties or responsibilities and, if such failure is remediable, your failure to remedy same within 10 business days of receiving written notice; (2) your refusal or failure to comply with the legal directives of the Board after formal written notice thereof to you describing your failure to comply and, if such failure is remediable, your failure to remedy same within 10 business days of receiving written notice; (3) your material violation of any material Company policy; (4) your commission or conviction of, or entry of a plea of nolo contendere to, any felony or any act of fraud, embezzlement, dishonesty, moral turpitude, misappropriation or any other misconduct that has caused or is reasonably expected to result in material injury to the Company or its affiliates; (5) your unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom the Company owes an obligation of nondisclosure as a result of a relationship with the Company; (6) your material breach of any obligations under any written agreement or covenant with the Company; or (7) your violation of a federal or state law or regulation applicable to the Company which violation was or is reasonably likely to be injurious to the Company; provided, however, that a finding of any of the above shall be predicated on a good faith determination by the Board.

 

(b)                                 “Change of Control” means a transaction or series of related transactions that constitutes a “Deemed Liquidation” in accordance with the Company’s then-current Certificate of incorporation, as amended from time to time (proved that such amendment shall not be formulated with the intention of denying the benefits of this paragraph to you).

 

(c)                                  “Code” means the Internal Revenue Code of 1986, as amended.

 

 

(d)                                 “Disability” means you have a mental or physical impairment that is expected to result in death or that has lasted or is expected to last for a continuous period of three months or more and that causes you to be unable to perform your duties under this Agreement and to be engaged in any substantial gainful activity.

 

(e)                                  “Good Reason” for your resignation shall mean that your continuous status as an employee was “constructively terminated” by the Company if within 90 days after the occurrence of one of the following Company actions (unless you consent in writing to such action(s)), and after providing the Company with a reasonable opportunity to cure such action(s), you resign in writing from your employment with the Company: (1) a material reduction in your base salary as in effect immediately before such reduction; or (2) the relocation by the Company of your then-current work site that has the effect of increasing your then-current commute by more than 50 miles (not including any regular business travel consistent with the business travel requirements of the your position with the Company).

 

11.                               Governing Law.  This Agreement will be construed in accordance with, and governed by, the laws of the State of Utah without regard to its conflicts of law principles.  Please note that this Agreement (together with the PIIA, and the documentation memorializing the Option and the Milestone Option) represent the entire agreement and understanding between you and the Company regarding your employment with the Company and supersede any and all prior representations, promises or agreements, whether written or oral.  To the extent that the practices, policies or procedures of Company or any other document referenced in this Agreement, now or in the future, apply to you, are inconsistent with the terms of this Agreement, the provisions of this Agreement will control.

 

***********************

 

If you are in agreement with the above, please execute a copy of this Agreement where indicated below, and return an executed copy to the Company via fax or email PDF.

 

***********************

 

	
 
    	
 
    	
Sincerely,
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
CONTROL4 CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
ACCEPTED   AND AGREED:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/   Martin Plaehn
    	
 
    	
 
    
	
Martin   Plaehn
    	
 
    	
 
    
	
Aug   20, 2011
    	
 
    	
 
    

 

 

EXHIBIT A

 

Standard Release upon Employment Termination

 

 

SEPARATION AGREEMENT AND RELEASE

 

This Separation Agreement and Release (“Agreement”) is made and entered into as of the          day of                       20    , by and between (“Employee”) and Control4 Corporation (“Employer”), who shall be referred to collectively as the “Parties” and each individually as a “Party.”

 

DEFINITIONS

 

1.                                      “Employee” shall include Employee and Employee’s heirs, assigns, and legal representatives.

 

2.                                      The phrase “employer Released Parties” shall mean Control4 Corporation and any and all of its business units, committees and groups, as well as its present, former or future parents, affiliates, subsidiaries, directors, officers, attorneys, successors, predecessors, and assigns.

 

3.                                      The “Released Claims” shall mean any type or manner of suits, claims, demands, allegations, charges, damages, or causes of action whatsoever in law or in equity under federal, state, municipal or local statute law, ordinance, regulation, constitution, or common law, whether known or unknown, which Employee has ever had or now has against the Employer Released Parties.  This includes but is not limited to any action for costs, interest or attorney’s fees, which arise in whole or in part (i) from Employee’s employment relationship with Employer, (ii) from the ending of that relationship, and (iii) from any other conduct by or dealings of any kind between Employee and the Employer Released Parties, which occurred prior to the execution of this Agreement.  This also includes but is not limited to any and all claims, rights, demands, allegations and causes of action for alleged wrongful discharge, breach of alleged employment contract, breach of the covenant of good faith and fair dealing, termination in violation of public policy, intentional or negligent infliction of emotional distress, fraud, misrepresentation, defamation, interference with prospective economic advantage, failure to pay wages due or other monies owed, failure to pay pension benefits, conversion, breach of duty, interference with existing economic relations, punitive damages, retaliation, discrimination on the basis of age in violation of the Age Discrimination and Employment Act of 1967, as amended (“ADEA”), harassment or discrimination on the basis of sex, race, color, citizenship, religion, age, national origin, or disability, or other protected classification under the federal, state, municipal or local laws of employment, including those arising under the common law, and any alleged violation of the Employee Retirement Income Security Act of 1974 (“ERISA”), the Family and Medical Leave Act, the Fair Labor Standards Act (“FLSA”), the Occupational Safety and Health Act (“OSHA”), Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Washington State Law Against Discrimination, the Utah Antidiscrimination Act, the California Fair Employment and Housing Act and any other state law to similar effect, the California Family Rights Act, as well as any other federal, state or local laws or regulations concerning discrimination or harassment, wages or compensation or wrongful termination.  The “Released Claims” shall not mean (i) any rights of indemnity against Employer that Employee may have as a former employee of Employer, or (ii) any claims that may not be released by law.

 

 

RECITALS

 

A.                                    The Parties desire to settle and compromise the Released Claims and to enter into this Agreement.

 

B.                                    This Agreement releases any claims Employee may have against the Employer Released Parties under the Age Discrimination in Employment Act.  Employer is providing Employee with 21 days to review this Agreement and seek advice and counsel.  If Employee chooses to sign this Agreement, Employee will have seven days to revoke this Agreement, if Employee chooses, and this Agreement will not become effective and enforceable until the seven day revocation period has passed without Employee revoking this Agreement.  Employer advises Employee to consult an attorney of his own choosing before signing this Agreement.

 

COVENANTS

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in consideration of the mutual covenants set forth in this Agreement the Parties agree as follows:

 

1.                                      Employee’s employment with Employer is terminated effective                      (the “Termination Date”).  All employment compensation due to Employee has been paid to Employee by Employer.

 

2.                                      Employer, shall grant Employee the severance benefits set forth in Section 5 of that certain employment agreement between Employer and Employee, dated as of August      , 2011, as may be amended from time to time.  Employer will pay such severance benefits to Employee within fifteen business days after this Agreement becomes effective as provided in Paragraph 15 hereof, and only if this Agreement becomes effective as provided therein.  The foregoing amount is consideration for Employee’s release of all of the Released Claims, including attorney’s fees, costs, interest and all other expenses which may have been incurred.  Employee assumes full and sole responsibility for any tax consequences related to this Agreement.  Employee acknowledges that this consideration listed in this paragraph constitutes consideration for this Agreement and is separate from and in addition to anything Employee is entitled to receive from Employer.  Employee acknowledges that Employee has been fully compensated by the terms of this Agreement for releasing the Released Claims.

 

3.                                      Employee shall not pursue, or authorize anyone on Employee’s behalf to pursue, the Released Claims in any way in any court.  Employee represents that Employee has not filed and there is not pending with any governmental agency or any state or federal court, any other claims, complaints, charges, or lawsuits of any kind against the Employer Released Parties.  Employee agrees that Employee will not make any filings with any court at any time hereafter for any matter, claim or incident, known or unknown, which occurred or arose out of occurrences on or prior to the date of this Agreement; provided, however, this shall not limit either of the Parties from filing a lawsuit for the sole purpose of enforcing its rights under this Agreement.  Each of the Parties shall bear its own costs and attorneys’ fees in this dispute.

 

4.                                      Employee hereby waives, releases, remises and discharges each and every one of the Employer Released Parties from liability with respect to the Released Claims.  Employee

 

 

acknowledges that Employee understands that Employee is prohibited from receiving any further relief on the Released Claims.  Employee hereby promises and covenants never to institute any suit or action at law or in equity against the Employer Released Parties regarding or relating to the Released Claims.  Specifically and without limitation, Employee understands and agrees that that Employee is waiving and forever discharging the Employer Released Parties from any and all claims, causes of action or complaints that Employee may have or have ever had, which have or may have arisen prior to the execution of this Agreement.

 

5.                                      Employee represents and warrants that Employee is the sole owner of the Released Claims, that the Released Claims have not been assigned, transferred, or disposed of in fact, by operation of law or in any manner whatsoever, and that Employee has the full right and power to grant, execute and deliver the full and complete releases, undertakings, and agreements herein contained.

 

6.                                      It is the intention of Employee and Employer that this Agreement is a general release that will be effective as a bar to each and every claim, demand, or cause of action it releases.  Employee recognizes that Employee may have some claim, demand, or cause of action against Employer or one or more of the Employer Released Parties of which Employee is totally unaware and unsuspecting which Employee is giving up by execution of this Agreement.  It is the intention of Employee in executing this Agreement that it will deprive Employee of each such claim, demand or cause of action and prevent Employee from asserting it against the Employer Released Parties.  In furtherance of this intention.  Employee expressly waives any rights or benefits conferred by the provisions of Section 1542 of the Civil Code of the State of California (or any other law of any other jurisdiction of similar import), which provides as follows:

 

“A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”

 

Employee understands the statutory language of Section 1542 of the California Civil Code but nevertheless elects to and hereby does release the Employer Released Parties from all claims Employee may have against the Employer Released Parties, or any of them, whether known or unknown, as herein provided, and specifically waives any rights which Employee may have under said Civil Code Section (or any other law of any other jurisdiction of similar import).  Employee fully understands that if the facts with respect to this Agreement are found hereafter to be other than or different from the facts now believed by Employee to be true, Employee expressly accepts and assumes the risk of such possible difference in fact and agrees that this Agreement will be and remain effective, notwithstanding any such difference.

 

7.                                      Each of Employee and the Company agrees that the existence and terms of this Agreement shall be and remain confidential.  The Parties acknowledges that this confidentiality provision is an essential element of the consideration provided for entering into this Agreement.  Therefore, each of Employee and the Company agrees not to discuss or describe any information concerning of the terms of this Agreement to anyone, except as required by subpoena or permitted herein, except that Employee may discuss the same with Employee’s immediate

 

 

family, attorneys and tax and financial advisors provided Employee first informs them of their obligation of confidentiality regarding the same and the Company may disclose the existence of this Agreement and the terms hereof to its agents, employees, and advisors and as deemed in good faith to be required by law.  Each of Employee and the Company agrees to reveal only that the matter has been resolved.  This paragraph shall not apply to any action by the Parties to enforce this Agreement.  If any provision of this paragraph is breached, the Parties shall be untitled to such legal or equitable relief as may be available by law.

 

8.                                      This Agreement is entered into by the Parties solely to avoid the expenses associated with litigation and does not constitute and shall not be construed as an admission by the Employer Released Parties of any breach of any alleged agreements or duties, or of any wrongdoing toward any person, including any alleged breach of contract or violation of any federal, state, or local law, regulation, or ordinance.  The Employer Released Parties specifically disclaim any liability to Employee for wrongdoing of any kind.

 

9.                                      The Parties agree that this Agreement may be used in evidence in a subsequent proceeding in which any of the Parties alleges a breach of this Agreement.

 

10.                               The Parties affirm they are not relying on any representations or statements made by each other which are not specifically included in this Agreement.  The Parties acknowledge they have been informed in writing by this Agreement that they have the right to consult with legal counsel regarding this release and confirm that they have consulted with counsel to the extent desired concerning the meaning and consequences of this Agreement.

 

11.                               This Agreement constitutes the entire agreement between the Parties with relation to the subject matter hereof.  Any prior negotiations or correspondence relating to the subject mailer hereof shall be deemed to have been merged into this Agreement and to the extent inconsistent herewith shall be deemed to be of no force or effect.  This Agreement may not be modified, nor any provision waived unless such modification or waiver is made in writing referring to this Agreement and signed by each Party.  This Agreement shall be binding upon and inure to the benefit of each of the Party’s respective successors, heirs, executors, administrators and assigns, as the case may be.

 

12.                               This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be an original, but all of such counterparts shall constitute one and the same instrument.

 

13.                               This Agreement shall be interpreted and enforced in accordance with the laws of the State of, and/or when applicable, of the United States.

 

14.                               The provisions of this Agreement are severable, and if any part of it is found to be unenforceable, the other parts and/or paragraphs shall remain fully valid and enforceable.  Should any provisions of this Agreement be determined by any court or administrative body to be invalid, the validity of the remaining provisions is not affected thereby and the invalidated part shall be deemed not a part of this Agreement.  Any court or administrative body shall construe and interpret this Agreement as enforceable to the full extent available under applicable law.  This Agreement shall survive the termination of any arrangements contained in it.

 

 

15.                               Employee and Employer acknowledge and understand this is a legal contract and that they each sign this Agreement knowingly, freely and voluntarily and have not been threatened, coerced or intimidated into making the same.  Employee and Employer acknowledge that they have had ample and reasonable time to consider this Agreement and the effects and import of it and that they have fully dwelt on it in their minds and have had such counsel and advice, legal or otherwise, as they desire in order to make this Agreement.  EMPLOYER AND EMPLOYER, BY SIGNING TIHS AGREEMENT, ACKNOWLEDGE IT CONTAINS A RELEASE OF KNOWN AND UNKNOWN CLAIMS.  Employee and Employer have read and fully considered this Agreement and understand and desire to enter into it.  The terms of this Agreement were derived through mutual compromise and are fully understood.  Employee acknowledges that Employee has been offered at least 21 days to consider the impact of this Agreement and its release of Employee’s rights to bring suit against the Employer Released Parties and after due consideration has decided to enter into this Agreement at this time.  Employee further understands that Employee may revoke this Agreement for a period of up to seven (7) days following signature and execution of the same.  This Agreement will not become effective and enforceable until such seven-day period has passed without revocation of this Agreement by the Employee.  Any revocation within this period must be signed and submitted in writing to the undersigned representative of Employer and must state, “I hereby revoke my acceptance of the Agreement.”  Employee understands that if Employee revokes this Agreement, Employee is not entitled to receive the consideration provided by this Agreement.

 

16.                               As of the effectiveness of this Agreement (as provided in the preceding paragraph) the Company represents and warrants to Employee that is not aware of claims that it could reasonably levy against Employee prior to the date hereof other than as expressly disclosed to Employee in writing.

 

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth above.

 

	
 
    	
EMPLOYEE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CONTROL4   CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Its:

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