Document:

EXHIBIT 10.3

 

WESTAFF, INC. 2006 STOCK INCENTIVE PLAN

 

NOTICE OF STOCK OPTION AWARD

 

	
  Grantee’s Name and Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

You (the “Grantee”) have been granted an option to
purchase shares of Common Stock, subject to the terms and conditions of this
Notice of Stock Option Award (the “Notice”), the Westaff, Inc. 2006 Stock
Incentive Plan, as amended from time to time (the “Plan”) and the Stock Option
Award Agreement (the “Option Agreement”) attached hereto, as follows. Unless
otherwise defined herein, the terms defined in the Plan shall have the same
defined meanings in this Notice.

 

	
  Award Number

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date of Award

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Vesting
  Commencement Date

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price
  per Share

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Number of
  Shares Subject

  	
   

  	
   

  
	
  to the Option
  (the “Shares”)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Exercise
  Price

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Type of Option:

  	
   

  	
   

  	
   

  	
  Incentive Stock
  Option

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Non-Qualified
  Stock Option

  
	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Post-Termination
  Exercise Period:

  	
   

  	
  Three (3) Months

  
								

 

Vesting Schedule:

 

Subject to the Grantee’s Continuous Service and other
limitations set forth in this Notice, the Plan and the Option Agreement, the
Option may be exercised, in whole or in part, in accordance with the
following schedule:

 

25% of the Shares subject to the Option shall vest one
(1) year after the Vesting Commencement Date and 1/36th of the
balance of the Shares subject to the Option shall vest on each monthly
anniversary of the Vesting Commencement Date thereafter.

 

During any authorized leave of absence, the vesting of
the Option as provided in this schedule shall be suspended after the leave
of absence exceeds a period of three (3) months. Vesting of the Option
shall resume upon the Grantee’s termination of the leave of absence and return
to service to the Company or a Related Entity. The Vesting Schedule of the
Option shall be extended by the length of the suspension.

 

1

 

In the event of termination of the Grantee’s
Continuous Service for Cause, the Grantee’s right to exercise the Option shall
terminate concurrently with the termination of the Grantee’s Continuous
Service, except as otherwise determined by the Administrator.

 

IN WITNESS WHEREOF, the Company and the Grantee have
executed this Notice and agree that the Option is to be governed by the terms
and conditions of this Notice, the Plan, and the Option Agreement.

 

	
   

  	
  Westaff, Inc.,

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES
SUBJECT TO THE OPTION SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE
GRANTEE’S CONTINUOUS SERVICE (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED
THE OPTION OR ACQUIRING SHARES HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND
AGREES THAT NOTHING IN THIS NOTICE, THE OPTION AGREEMENT, OR THE PLAN SHALL
CONFER UPON THE GRANTEE ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION
OF THE GRANTEE’S CONTINUOUS SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE
GRANTEE’S RIGHT OR THE RIGHT OF THE COMPANY OR RELATED ENTITY TO WHICH THE
GRANTEE PROVIDES SERVICES TO TERMINATE THE GRANTEE’S CONTINUOUS SERVICE, WITH
OR WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE. THE GRANTEE ACKNOWLEDGES THAT
UNLESS THE GRANTEE HAS A WRITTEN EMPLOYMENT AGREEMENT WITH THE COMPANY TO THE
CONTRARY, THE GRANTEE’S STATUS IS AT WILL.

 

The Grantee acknowledges receipt of a copy of the Plan
and the Option Agreement, and represents that he or she is familiar with the
terms and provisions thereof, and hereby accepts the Option subject to all of
the terms and provisions hereof and thereof. The Grantee has reviewed this
Notice, the Plan, and the Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Notice, and
fully understands all provisions of this Notice, the Plan and the Option
Agreement. The Grantee hereby agrees that all questions of interpretation and
administration relating to this Notice, the Plan and the Option Agreement shall
be resolved by the Administrator in accordance with Section 13 of the
Option Agreement. The Grantee further agrees to the venue selection in
accordance with Section 14 of the Option Agreement. The Grantee further
agrees to notify the Company upon any change in the residence address indicated
in this Notice.

 

	
  Dated:

  	
   

  	
   

  	
  Signed:

  	
   

  	
   

  
	
   

  	
   

  	
  Grantee

  	
   

  
							

 

2

 

	
  Award Number:

  	
   

  	
   

  

 

WESTAFF, INC. 2006
STOCK INCENTIVE PLAN

 

STOCK OPTION AWARD AGREEMENT

 

1.                                       Grant
of Option. Westaff, Inc., a Delaware corporation (the “Company”),
hereby grants to the Grantee (the “Grantee”) named in the Notice of Stock
Option Award (the “Notice”), an option (the “Option”) to purchase the Total
Number of Shares of Common Stock subject to the Option (the “Shares”) set forth
in the Notice, at the Exercise Price per Share set forth in the Notice (the “Exercise
Price”) subject to the terms and provisions of the Notice, this Stock Option
Award Agreement (the “Option Agreement”) and the Company’s 2006 Stock Incentive
Plan, as amended from time to time (the “Plan”), which are incorporated herein
by reference. Unless otherwise defined herein, the terms defined in the Plan
shall have the same defined meanings in this Option Agreement.

 

If designated in the Notice as an Incentive Stock
Option, the Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. However, notwithstanding such
designation, the Option will qualify as an Incentive Stock Option under the
Code only to the extent the $100,000 dollar limitation of Section 422(d) of
the Code is not exceeded. The $100,000 limitation of Section 422(d) of
the Code is calculated based on the aggregate Fair Market Value of the Shares
subject to options designated as Incentive Stock Options which become
exercisable for the first time by the Grantee during any calendar year (under
all plans of the Company or any Parent or Subsidiary of the Company). For
purposes of this calculation, Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the shares subject to such options shall be determined as of the grant date of
the relevant option.

 

2.                                       Exercise
of Option.

 

(a)                                  Right
to Exercise. The Option shall be exercisable during its term in accordance
with the Vesting Schedule set out in the Notice and with the applicable
provisions of the Plan and this Option Agreement. The Option shall be subject
to the provisions of Section 11 of the Plan relating to the exercisability
or termination of the Option in the event of a Corporate Transaction or Change
in Control. The Grantee shall be subject to reasonable limitations on the
number of requested exercises during any monthly or weekly period as determined
by the Administrator. In no event shall the Company issue fractional Shares.

 

(b)                                 Method
of Exercise. The Option shall be exercisable by delivery of an exercise
notice or by such other procedure as specified from time to time by the
Administrator which shall state the election to exercise the Option, the whole
number of Shares in respect of which the Option is being exercised, and such
other provisions as may be required by the Administrator. The exercise
notice shall be delivered in person, by certified mail, or by such other method
(including electronic transmission) as determined from time to time by the
Administrator to the Company accompanied by payment of the Exercise Price. The
Option shall be deemed to be exercised upon receipt by the Company of such
notice accompanied by the 

 

1

 

Exercise Price, which, to the extent selected, shall be deemed to be
satisfied by use of the broker-dealer sale and remittance procedure to pay the
Exercise Price provided in Section 3(d), below.

 

(c)                                  Taxes.
No Shares will be delivered to the Grantee or other person pursuant to the
exercise of the Option until the Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of applicable income tax
and employment tax withholding obligations, including, without limitation, such
other tax obligations of the Grantee incident to the receipt of Shares. Upon
exercise of the Option, the Company or the Grantee’s employer may offset
or withhold (from any amount owed by the Company or the Grantee’s employer to
the Grantee) or collect from the Grantee or other person an amount sufficient
to satisfy such tax withholding obligations.

 

3.                                       Method
of Payment. Payment of the Exercise Price shall be made by any of the
following, or a combination thereof, at the election of the Grantee; provided,
however, that such exercise method does not then violate any Applicable Law
and, provided further, that the portion of the Exercise Price equal to the par
value of the Shares must be paid in cash or other legal consideration permitted
by the Delaware General Corporation Law:

 

(a)                                  cash;

 

(b)                                 check;

 

(c)                                  surrender
of Shares or delivery of a properly executed form of attestation of
ownership of Shares as the Administrator may require which have a Fair
Market Value on the date of surrender or attestation equal to the aggregate
Exercise Price of the Shares as to which the Option is being exercised,
provided, however, that Shares acquired under the Plan or any other equity
compensation plan or agreement of the Company must have been held by the
Grantee for a period of more than six (6) months (and not used for another
Award exercise by attestation during such period); or

 

(d)                                 payment
through a broker-dealer sale and remittance procedure pursuant to which the
Grantee (i) shall provide written instructions to a Company-designated
brokerage firm to effect the immediate sale of some or all of the purchased
Shares and remit to the Company sufficient funds to cover the aggregate
exercise price payable for the purchased Shares and (ii) shall provide
written directives to the Company to deliver the certificates for the purchased
Shares directly to such brokerage firm in order to complete the sale
transaction.

 

4.                                       Restrictions
on Exercise. The Option may not be exercised if the issuance of the
Shares subject to the Option upon such exercise would
constitute a violation of any Applicable Laws. In addition, the Option may not
be exercised until such time as the Plan has been approved by the stockholders
of the Company. If the exercise of the Option within the applicable time
periods set forth in Section 5, 6 and 7 of this Option Agreement is
prevented by the provisions of this Section 4, the Option shall remain
exercisable until one (1) month after the date the Grantee is notified by
the Company that the Option is exercisable, but in any event no later than the
Expiration Date set forth in the Notice.

 

5.                                       Termination
or Change of Continuous Service. In the event the Grantee’s Continuous
Service terminates, other than for Cause, the Grantee may, but only during the
Post-

 

2

 

Termination Exercise
Period, exercise the portion of the Option that was vested at the date of such
termination (the “Termination Date”). The Post-Termination Exercise Period
shall commence on the Termination Date. In the event of termination of the
Grantee’s Continuous Service for Cause, the Grantee’s right to exercise the
Option shall, except as otherwise determined by the Administrator, terminate
concurrently with the termination of the Grantee’s Continuous Service (also the
“Termination Date”). In no event, however, shall the Option be exercised later
than the Expiration Date set forth in the Notice. In the event of the Grantee’s
change in status from Employee to Director or from Director to Employee, the
Option shall remain in effect and the Option shall continue to vest in
accordance with the Vesting Schedule set forth in the Notice; provided,
however, that with respect to any Incentive Stock Option that shall remain in
effect after a change in status from Employee to Director, such Incentive Stock
Option shall cease to be treated as an Incentive Stock Option and shall be
treated as a Non-Qualified Stock Option on the day three (3) months
and one (1) day following such change in status. Except as provided
in Sections 6 and 7 below, to the extent that the Option was unvested on
the Termination Date, or if the Grantee does not exercise the vested portion of
the Option within the Post-Termination Exercise Period, the
Option shall terminate.

 

6.                                       Disability
of Grantee. In the event the Grantee’s Continuous Service terminates as a
result of his or her Disability, the Grantee may, but only within twelve (12)
months commencing on the Termination Date (but in no event later than the
Expiration Date), exercise the portion of the Option that was vested on the
Termination Date; provided, however, that if such Disability is not a “disability”
as such term is defined in Section 22(e)(3) of the Code and the
Option is an Incentive Stock Option, such Incentive Stock Option shall cease to
be treated as an Incentive Stock Option and shall be treated as a Non-Qualified
Stock Option on the day three (3) months and one (1) day
following the Termination Date. To the extent that the Option was unvested on
the Termination Date, or if the Grantee does not exercise the vested portion of
the Option within the time specified herein, the Option shall terminate. Section 22(e)(3) of
the Code provides that an individual is permanently and totally disabled if he
or she is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months.

 

7.                                       Death
of Grantee. In the event of the termination of the Grantee’s Continuous
Service as a result of his or her death, or in the event of the Grantee’s death
during the Post-Termination Exercise Period or during the twelve (12)
month period following the Grantee’s termination of Continuous Service as a
result of his or her Disability, the person who acquired the right to exercise
the Option pursuant to Section 8 may exercise the portion of the
Option that was vested at the date of termination within twelve (12)
months commencing on the date of death (but in no event later than the
Expiration Date). To the extent that the Option was unvested on the date of
death, or if the vested portion of the Option is not exercised within the time
specified herein, the Option shall terminate.

 

8.                                       Transferability
of Option. The Option, if an Incentive Stock Option, may not be
transferred in any manner other than by will or by the laws of descent and
distribution and may be exercised during the lifetime of the Grantee only
by the Grantee. The Option, if a Non-Qualified Stock Option, may not be
transferred in any manner other than by will or by the laws of descent and
distribution, provided, however, that a Non-Qualified Stock Option may be 

 

3

 

transferred during the
lifetime of the Grantee to the extent and in the manner authorized by the
Administrator. Notwithstanding the foregoing, the Grantee may designate
one or more beneficiaries of the Grantee’s Incentive Stock Option or
Non-Qualified Stock Option in the event of the Grantee’s death on a beneficiary
designation form provided by the Administrator. Following the death of the
Grantee, the Option, to the extent provided in Section 7, may be
exercised (a) by the person or persons designated under the deceased
Grantee’s beneficiary designation or (b) in the absence of an effectively
designated beneficiary, by the Grantee’s legal representative or by any person
empowered to do so under the deceased Grantee’s will or under the then
applicable laws of descent and distribution. The terms of the Option shall be
binding upon the executors, administrators, heirs, successors and transferees
of the Grantee.

 

9.                                       Term
of Option. The Option must be exercised no later than the Expiration Date
set forth in the Notice or such earlier date as otherwise provided herein. After
the Expiration Date or such earlier date, the Option shall be of no further
force or effect and may not be exercised.

 

10.                                 Tax
Consequences. The Grantee may incur tax liability as a result of the
Grantee’s purchase or disposition of the Shares. THE GRANTEE SHOULD CONSULT A
TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.

 

11.                                 Entire
Agreement: Governing Law. The Notice, the Plan and this Option Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and the Grantee with respect to the subject matter
hereof, and may not be modified adversely to the Grantee’s interest except
by means of a writing signed by the Company and the Grantee. Nothing in the
Notice, the Plan and this Option Agreement (except as expressly provided
therein) is intended to confer any rights or remedies on any persons other than
the parties. The Notice, the Plan and this Option Agreement are to be construed
in accordance with and governed by the internal laws of the State
of California without giving effect to any choice of law rule that would
cause the application of the laws of any jurisdiction other than the internal
laws of the State of California to the rights and duties of the parties. Should
any provision of the Notice, the Plan or this Option Agreement be determined to
be illegal or unenforceable, such provision shall be enforced to the fullest
extent allowed by law and the other provisions shall nevertheless remain
effective and shall remain enforceable.

 

12.                                 Construction.
The captions used in the Notice and this Option Agreement are inserted for
convenience and shall not be deemed a part of the Option for construction
or interpretation. Except when otherwise indicated by the context, the singular
shall include the plural and the plural shall include the singular. Use of the
term “or” is not intended to be exclusive, unless the context clearly requires
otherwise.

 

13.                                 Administration
and Interpretation. Any question or dispute regarding the administration or
interpretation of the Notice, the Plan or this Option Agreement shall be
submitted by the Grantee or by the Company to the Administrator. The resolution
of such question or dispute by the Administrator shall be final and binding on
all persons.

 

4

 

14.                                 Venue.
The Company, the Grantee, and the Grantee’s assignees pursuant to Section 8
(the “parties”) agree that any suit, action, or proceeding arising out of or
relating to the Notice, the Plan or this Option Agreement shall be brought in
the United States District Court for the Northern District of California (or
should such court lack jurisdiction to hear such action, suit or proceeding, in
a California state court in the County of Santa Clara) and that the parties
shall submit to the jurisdiction of such court. The parties irrevocably waive,
to the fullest extent permitted by law, any objection the party may have
to the laying of venue for any such suit, action or proceeding brought in such
court. If any one or more provisions of this Section 14 shall for any
reason be held invalid or unenforceable, it is the specific intent of the
parties that such provisions shall be modified to the minimum extent necessary
to make it or its application valid and enforceable.

 

15.                                 Notices.
Any notice required or permitted hereunder shall be given in writing and shall
be deemed effectively given upon personal delivery, upon deposit for delivery
by an internationally recognized express mail courier service or upon deposit
in the United States mail by certified mail (if the parties are within the
United States), with postage and fees prepaid, addressed to the other party at
its address as shown in these instruments, or to such other address as such
party may designate in writing from time to time to the other party.

 

END OF AGREEMENT

 

5EXHIBIT 10.4

 

WESTAFF, INC. 2006
STOCK INCENTIVE PLAN

 

2006 NON-EMPLOYEE DIRECTOR
OPTION PROGRAM

 

NOTICE OF NON-QUALIFIED
STOCK OPTION AWARD

 

	
  Grantee’s Name
  and Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

You (the “Grantee”) have been granted an option to
purchase shares of Common Stock, subject to the terms and conditions of this
Notice of Stock Option Award (the “Notice”), the Westaff, Inc. 2006 Stock
Incentive Plan (the “Plan”), and the Westaff, Inc. 2006 Non-Employee
Director Option Program (the “Program”), as amended from time to time, and the
Non-Qualified Stock Option Award Agreement (the “Option Agreement”) attached
hereto, as follows. Unless otherwise defined herein, the terms defined in the
Plan and the Program shall have the same defined meanings in this Notice.

 

	
  Award Number

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date of Award

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price
  per Share

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Number of
  Shares subject

  	
   

  	
   

  
	
  to the Option

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Exercise
  Price

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Type of Option:

  	
   

  	
  Non-Qualified
  Stock Option

  
	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Post-Termination
  Exercise Period:

  	
   

  	
  Twelve (12)
  Months

  
					

 

Vesting Schedule:

 

Subject to the Grantee’s Continuous Service and other
limitations set forth in this Notice, the Plan, the Program and the Option
Agreement, the Option may be exercised, in whole or in part, in accordance
with the following schedule:

 

100% of the Shares subject to the Option shall vest
twelve months after the Date of Award.

 

In the event the Grantee’s Continuous Service is
terminated as the result of the Grantee’s death of Disability, 100% of the
Shares subject to the Option shall vest immediately prior to the termination of
the Grantee’s Continuous Service.

 

1

 

IN WITNESS WHEREOF, the Company and the Grantee have
executed this Notice and agree that the Option is to be governed by the terms
and conditions of this Notice, the Plan, the Program and the Option Agreement.

 

	
   

  	
  Westaff, Inc.,

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES
SUBJECT TO THE OPTION SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE
GRANTEE’S CONTINUOUS SERVICE (NOT THROUGH THE ACT OF BEING GRANTED THE OPTION
OR ACQUIRING SHARES HEREUNDER).

 

The Grantee acknowledges receipt of a copy of the
Plan, the Program and the Option Agreement, and represents that he or she is
familiar with the terms and provisions thereof, and hereby accepts the Option
subject to all of the terms and provisions hereof and thereof. The Grantee has
reviewed this Notice, the Plan, the Program and the Option Agreement in their
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Notice, and fully understands all provisions of this Notice, the
Plan, the Program and the Option Agreement. The Grantee hereby agrees that all
questions of interpretation and administration relating to this Notice, the
Plan, the Program and the Option Agreement shall be resolved by the
Administrator in accordance with Section 13 of the Option Agreement. The
Grantee further agrees to the venue selection in accordance with Section 14
of the Option Agreement. The Grantee further agrees to notify the Company upon
any change in the residence address indicated in this Notice.

 

	
  Dated:

  	
   

  	
   

  	
  Signed:

  	
   

  	
   

  
	
   

  	
   

  	
  Grantee

  	
   

  
							

 

2

 

	
  Award Number:

  	
   

  	
   

  

 

WESTAFF, INC. 2006
STOCK INCENTIVE PLAN

 

2006 NON-EMPLOYEE DIRECTOR
OPTION PROGRAM

 

NON-QUALIFIED STOCK OPTION
AWARD AGREEMENT

 

1.                                       Grant
of Option. Westaff, Inc., a Delaware corporation (the “Company”),
hereby grants to the Grantee (the “Grantee”) named in the Notice of
Non-Qualified Stock Option Award (the “Notice”), an option (the “Option”) to
purchase the Total Number of Shares of Common Stock subject to the Option (the “Shares”)
set forth in the Notice, at the Exercise Price per Share set forth in the
Notice (the “Exercise Price”) subject to the terms and provisions of the
Notice, this Non-Qualified Stock Option Award Agreement (the “Option Agreement”),
the Company’s 2006 Stock Incentive Plan (the “Plan”), and the Company’s 2006
Non-Employee Director Option Program (the “Program”), as amended from time to
time, which are incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan and the Program shall have the same
defined meanings in this Option Agreement.

 

The Option is intended to qualify as a Non-Qualified
Stock Option and not as an Incentive Stock Option as defined in Section 422
of the Code.

 

2.                                       Exercise
of Option.

 

(a)                                  Right
to Exercise. The Option shall be exercisable during its term in accordance
with the Vesting Schedule set out in the Notice and with the applicable
provisions of the Plan, the Program and this Option Agreement. The Option shall
be subject to the provisions of Section 3.04 of the Program relating to
the exercisability or termination of the Option in the event of a Corporate
Transaction or a Change in Control. The Grantee shall be subject to reasonable
limitations on the number of requested exercises during any monthly or weekly
period as determined by the Administrator. In no event shall the Company issue
fractional Shares.

 

(b)                                 Method
of Exercise. The Option shall be exercisable only by delivery of an
exercise notice or by such other procedure as specified from time to time by
the Administrator which shall state the election to exercise the Option, the
whole number of Shares in respect of which the Option is being exercised, and
such other provisions as may be required by the Administrator. The
exercise notice shall be delivered in person, by certified mail, or by such
other method (including electronic transmission) as determined from time to
time by the Administrator to the Company accompanied by payment of the Exercise
Price. The Option shall be deemed to be exercised upon receipt by the Company
of such notice accompanied by the Exercise Price, which, to the extent
selected, shall be deemed to be satisfied by use of the broker-dealer sale and
remittance procedure to pay the Exercise Price provided in Section 4(d),
below.

 

(c)                                  Taxes.
No Shares will be delivered to the Grantee or other person pursuant to the
exercise of the Option until the Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of applicable income tax
and employment tax 

 

1

 

withholding obligations, including, without limitation, obligations
incident to the receipt of Shares. Upon exercise of the Option, the Company or
the Grantee’s employer may offset or withhold (from any amount owed by the
Company or the Grantee’s employer to the Grantee) or collect from the Grantee
or other person an amount sufficient to satisfy such tax withholding
obligations.

 

3.                                       Restrictions
on Exercise. The Option may not be exercised if the issuance of the
Shares subject to the Option upon such exercise would constitute a violation of
any Applicable Laws. If the exercise of the Option within the applicable time
periods set forth in Section 5, 6, and 7 of this Option Agreement is
prevented by the provisions of this Section 3, the Option shall remain
exercisable until one (1) month after the date the Grantee is notified by
the Company that the Option is exercisable, but in any event no later than the
Expiration Date set forth in the Notice.

 

4.                                       Method
of Payment. Payment of the Exercise Price shall be by any of the following,
or a combination thereof, at the election of the Grantee; provided, however,
that such exercise method does not then violate any Applicable Law and,
provided further, that the portion of the Exercise Price equal to the par value
of the Shares must be paid in cash or other legal consideration permitted by
the Delaware General Corporation Law:

 

(a)                                  cash;

 

(b)                                 check;

 

(c)                                  surrender
of Shares or delivery of a properly executed form of attestation of
ownership of Shares as the Administrator may require which have a Fair
Market Value on the date of surrender or attestation equal to the aggregate
Exercise Price of the Shares as to which the Option is being exercised,
provided, however, that Shares acquired under the Plan or any other equity
compensation plan or agreement of the Company must have been held by the
Grantee for a period of more than six (6) months (and not used for another
Award exercise by attestation during such period); or

 

(d)                                 payment
through a broker-dealer sale and remittance procedure pursuant to which the
Grantee (i) shall provide written instructions to a Company-designated
brokerage firm to effect the immediate sale of some or all of the purchased
Shares and remit to the Company sufficient funds to cover the aggregate
exercise price payable for the purchased Shares and (ii) shall provide
written directives to the Company to deliver the certificates for the purchased
Shares directly to such brokerage firm in order to complete the sale
transaction.

 

5.                                       Termination
or Change of Continuous Service. In the event the Grantee’s Continuous
Service terminates, the Grantee may, but only during the Post-Termination
Exercise Period, exercise the portion of the Option that was vested at the date
of such termination (the “Termination Date”). The Post-Termination Exercise
Period shall commence on the Termination Date. In no event, however, shall the
Option be exercised later than the Expiration Date set forth in the Notice. In
the event of the Grantee’s change in status from Employee to Director or from
Director to Employee, the Option shall remain in effect and the Option shall
continue to vest in accordance with the Vesting Schedule set forth in the
Notice. Except as 

 

2

 

provided in Sections 6 and 7 below, to the extent that the Option was
unvested on the Termination Date, or if the Grantee does not exercise the
vested portion of the Option within the Post-Termination Exercise Period, the Option shall terminate.

 

6.                                       Disability
of Grantee. In the event the Grantee’s Continuous Service terminates as a
result of his or her Disability, the Grantee may exercise the Option
within twelve (12) months commencing on the Termination Date (but in no event
later than the Expiration Date). If the Grantee does not exercise the Option
within the time specified herein, the Option shall terminate.

 

7.                                       Death
of Grantee. In the event of the termination of the Grantee’s Continuous
Service as a result of his or her death, or in the event of the Grantee’s death
during the Post-Termination Exercise Period or during the twelve (12)
month period following the Grantee’s termination of Continuous Service as a
result of his or her Disability, the person who acquired the right to exercise
the Option pursuant to Section 8 may exercise the portion of the
Option that was vested at the Termination Date within twelve (12) months
commencing on the date of death (but in no event later than the Expiration
Date). To the extent that the Option was unvested on the Termination Date, or
if the vested portion of the Option is not exercised within the time specified
herein, the Option shall terminate.

 

8.                                       Transferability
of Option. The Option may not be transferred in any manner other than
by will or by the laws of descent and distribution, provided, however, that the
Option may be transferred during the lifetime of the Grantee to the extent
and in the manner authorized by the Administrator. Notwithstanding the
foregoing, the Grantee may designate one or more beneficiaries of the
Grantee’s Option in the event of the Grantee’s death on a beneficiary
designation form provided by the Administrator. Following the death of the
Grantee, the Option, to the extent provided in Section 7, may be
exercised (a) by the person or persons designated under the deceased
Grantee’s beneficiary designation or (b) in the absence of an effectively
designated beneficiary, by the Grantee’s legal representative or by any person
empowered to do so under the deceased Grantee’s will or under the then
applicable laws of descent and distribution. The terms of the Option shall be
binding upon the executors, administrators, heirs, successors and transferees
of the Grantee.

 

9.                                       Term
of Option. The Option must be exercised no later than the Expiration Date
set forth in the Notice or such earlier date as otherwise provided herein. After
the Expiration Date or such earlier date, the Option shall be of no further
force or effect and may not be exercised.

 

10.                                 Tax
Consequences. The Grantee may incur tax liability as a result of the
Grantee’s purchase or disposition of the Shares. THE GRANTEE SHOULD CONSULT A
TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.

 

11.                                 Entire
Agreement: Governing Law. The Notice, the Plan, the Program and this Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and the Grantee with respect to the subject
matter hereof, and may not be modified adversely to the Grantee’s interest
except by means of a writing signed by the Company and the Grantee. 

 

3

 

Nothing in the Notice, the Plan, the Program and this Option Agreement
(except as expressly provided therein) is intended to confer any rights or
remedies on any persons other than the parties. The Notice, the Plan, the
Program and this Option Agreement are to be construed in accordance with and
governed by the internal laws of the State of California without
giving effect to any choice of law rule that would cause the application
of the laws of any jurisdiction other than the internal laws of the State of
California to the rights and duties of the
parties. Should any provision of the Notice, the Plan, the Program or this Option
Agreement be determined to be illegal or unenforceable, such provision shall be
enforced to the fullest extent allowed by law and the other provisions shall
nevertheless remain effective and shall remain enforceable.

 

12.                                 Construction.
The captions used in the Notice and this Option Agreement are inserted for
convenience and shall not be deemed a part of the Option for construction
or interpretation. Except when otherwise indicated by the context, the singular
shall include the plural and the plural shall include the singular. Use of the
term “or” is not intended to be exclusive, unless the context clearly requires
otherwise.

 

13.                                 Administration
and Interpretation. Any question or dispute regarding the administration or
interpretation of the Notice, the Plan, the Program or this Option Agreement
shall be submitted by the Grantee or by the Company to the Administrator. The
resolution of such question or dispute by the Administrator shall be final and
binding on all persons.

 

14.                                 Venue.
The Company, the Grantee, and the Grantee’s assignees pursuant to Section 8
(the “parties”) agree that any suit, action, or proceeding arising out of or
relating to the Notice, the Plan, the Program or this Option Agreement shall be
brought in the United States District Court for the Northern District of
California (or should such court lack jurisdiction to hear such action, suit or
proceeding, in a California state court in the County of Santa Clara) and that
the parties shall submit to the jurisdiction of such court. The parties
irrevocably waive, to the fullest extent permitted by law, any objection the
party may have to the laying of venue for any such suit, action or
proceeding brought in such court. If any one or more provisions of this Section 14
shall for any reason be held invalid or unenforceable, it is the specific
intent of the parties that such provisions shall be modified to the minimum
extent necessary to make it or its application valid and enforceable.

 

15.                                 Notices.
Any notice required or permitted hereunder shall be given in writing and shall
be deemed effectively given upon personal delivery, upon deposit for delivery
by an internationally recognized express mail courier service or upon deposit
in the United States mail by certified mail (if the parties are within the
United States), with postage and fees prepaid, addressed to the other party at
its address as shown in these instruments, or to such other address as such
party may designate in writing from time to time to the other part.

 

END OF AGREEMENT

 

4

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