Document:

Exhibit 10.5.2

 

APPLIED OPTOELECTRONICS, INC.

 

Incentive Stock Option Agreement

 

Applied Optoelectronics, Inc., a Texas corporation (the “Company”), hereby grants as of the                       , to                       (the “Employee”), an option (the “Stock Option”) to purchase a maximum of         shares (the “Option Shares”) of its Common Stock, with no par value (“Common Stock”), at the price of     per share (the “Option Price”), on the terms and conditions contained in this Incentive Stock Option Agreement (the “Agreement”):

 

1.                                      2000 Incentive Share Plan.  This Stock Option is granted pursuant to and is governed by the Company’s 2000 Incentive Share Plan (the “Plan”) and, unless otherwise defined herein, capitalized terms used herein shall have the same meaning ascribed to such terms in the Plan.  Determinations made in connection with this Stock Option pursuant to the Plan shall be governed by the Plan as it exists on this date.

 

2.                                      Grant as Incentive Stock Option: Other Options.  This Stock Option is intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).  This Stock Option is in addition to any other options heretofore or hereafter granted to the Employee by the Company, but a duplicate original of this instrument shall not constitute the grant of another option.

 

3.                                      Vesting of Option if Employment Continues.  For the purpose of determining the vesting of the Stock Option granted hereunder, the vesting date will start on              , (the “Vesting Date”) and this Stock Option will vest over     years.  Subject to the earlier expiration of this Stock Option as herein provided and further subject to the continued employment of Employee by the Company, this Stock Option may be exercised, by written notice to the Company, at any time and from time to time after the date of execution hereof, but this Stock Option shall not be exercisable for more than the aggregate number of shares of Common Stock offered by this Stock Option as set forth opposite the following applicable Exercise Dates:

 

	
 
    	
 
    	
Number of
    
	
Exercise Date
    	
 
    	
Shares Purchasable
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

Notwithstanding the foregoing, (i) upon the occurrence of any Change in Control (as defined in the Plan), all Stock Options granted hereunder shall become immediately exercisable, and (ii) in accordance with and subject to the provisions of the Plan, the Board may, in its discretion, amend the vesting schedule and accelerate the date that any installment of this Stock Option becomes exercisable.

 

 

Subject to the earlier termination of this Stock Option as provided herein, this Stock Option shall be for a period of         years and shall not, under any circumstances, be exercisable after                  (the “Option Expiration Date”).

 

4.                                      Termination of Employment.  If the Employee ceases to be employed by the Company for any reason other than by reason of death or Disability or Retirement, no further vesting shall occur, and this Stock Option shall terminate (and may no longer be exercised) on the earlier of ninety (90) days after the date of such termination or the Option Expiration Date; provided, however, that if the Employee’s employment is terminated as a result of a Change in Control, any remaining Stock Options hereunder shall become exercisable.

 

5.                                      Death, Disability.

 

(a)                                 Death: If the Employee dies while in the employ of the Company or during  any period under Section 4 or Section 5(b) during which the Employee has the right to exercise this Stock Option, this Stock Option may be exercised, to the extent otherwise exercisable on the date of his or her death, by the Employee’s estate, personal representative or beneficiary to whom this Stock Option has been assigned pursuant to Section 10, at any time on or before the earlier of (i) the date which is twelve (12) months after the date of the Employee’s death or (ii) the Option Expiration Date.  Except as otherwise provided with respect to a Change in Control, the Employee’s estate, personal representative, or beneficiary to whom this Stock Option has been assigned shall not be entitled to purchase any shares in excess of the number of shares which the Employee was vested and entitled to purchase under Section 3 at the time of the Employee’s death.

 

(b)                                 Disability or Retirement:  If the Employee ceases to be employed by the Company by reason of his or her Disability or Retirement (as defined in the Plan), this Stock Option may be exercised, to the extent otherwise exercisable on the date of the termination of his or her employment, at any time on or before the earlier of (i) the date which is twelve (12) months after the date of such termination or (ii) the Option Expiration Date.  Except as otherwise provided with respect to a Change in Control, the Employee shall not be entitled to purchase any shares in excess of the number of shares which the Employee is vested and entitled to purchase under Section 3 as of the date the Employee’s employment so terminates.

 

6.                                      Partial Exercise.  This Stock Option may be exercised in part at any time and from time to time within the above limits, except that this Stock Option may not be exercised for a fraction of a share unless such exercise is with respect to the final installment of stock subject to this Stock Option and cash in lieu of a fractional share must be paid to permit the Employee to exercise completely such final installment.  Any fractional share with respect to which an installment of this Stock Option cannot be exercised because of the limitation contained in the preceding sentence shall remain subject to this Stock Option and shall be available for later purchase by the Employee in accordance with the terms hereof.

 

 

7.                                      Payment of Price.  The option price may only be paid in cash or by check.  The option price of the Option Shares as to which this Stock Option is exercised shall be paid in full at the time of exercise.

 

8.                                      Restrictions on Resale.  Option Shares may not be transferred without the Company’s written consent except by will, by the laws of descent and distribution and in accordance with the provisions of Section 17, if applicable.  Option Shares will be subject to significant restrictions on transfer and will be deemed to be “restricted securities” for purposes of the Securities Act.  Accordingly, the Option Shares must be sold in compliance with the registration requirements of the Applicable Legal Requirements or an exemption therefrom.  Consistent with the terms of the Plan, the Company may, as a condition precedent to the exercise of this Stock Option, require an opinion of counsel, satisfactory to the Company, to the effect that the issuance of the Option Shares will not be in violation of the Applicable Legal Requirements.  Further, the Company may place legends on any certificates evidencing the Option Shares and issue stop transfer orders with respect thereto as the Company may deem necessary or advisable to assure compliance with the Applicable Legal Requirements.

 

9.                                      Method of Exercising Option. Subject to the terms and conditions of this Agreement, this Stock Option may be exercised by written notice to the Company at its principal executive office.  Such notice shall state the election to exercise this Stock Option and the number of Option Shares for which it is being exercised and shall be signed by the person or persons so exercising this Stock Option.  Such notice shall be accompanied by payment of the full purchase price of such shares, in cash or check, and the Company shall deliver a certificate or certificates representing such shares as soon as practicable after the notice shall be received.  Such certificate or certificates shall be registered in the name of the person or persons so exercising this Stock Option (or if this Stock Option shall be exercised by the Employee and if the Employee shall so request in the notice exercising this Stock Option, shall be registered in the name of the Employee and another person jointly, with right of survivorship).  In the event this option shall be exercised, pursuant to Section 5 hereof, by any person or persons other than the Employee, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise this Stock Option.

 

10.                               Stock Option Not Transferable. This Stock Option is not transferable or assignable except by will or by the laws of descent and distribution.  During the Employee’s lifetime only the Employee can exercise this Stock Option.

 

11.                               No Obligation To Exercise Stock Option. The grant and acceptance of this Stock Option imposes no obligation on the Employee to exercise it.

 

12.                               No Right to Continued Employment.  Neither the Plan, this Agreement, nor the grant of this Stock Option shall confer upon or be construed as giving the Employee any right to remain in the employ of the Company.

 

13.                               No Rights as Stockholder until Exercise. The Employee shall have no rights as a shareholder with respect to the Option Shares until such time as:  (i) the Employee has exercised this

 

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Stock Option by delivering a notice of exercise and has paid in full the purchase price for the shares so exercised in accordance with Section 9, and (ii) a certificate evidencing the Option Shares has been issued to the Employee. Except as is expressly provided in the Plan with respect to certain changes in the capitalization of the Company, no adjustment shall be made for dividends or similar rights for which the record date is prior to such date of exercise.

 

14.                               Capital Changes and Business Successions.  The Plan contains provisions covering the treatment of Stock Options in a number of contingencies such as stock splits and mergers.  Provisions in the Plan for adjustment with respect to stock subject to Stock Options and the related provisions with respect to successors to the business of the Company are hereby made applicable hereunder and are incorporated herein by reference.

 

15.                               Early Disposition. Subject to the provisions of Section 17, the Employee agrees to notify the Company in writing immediately after the Employee transfers any Option Shares, if such transfer occurs on or before the later of (a) the date which is two years after the date of this Agreement or (b) the date which is one year after the date the Employee acquired such Option Shares.  The Employee also agrees to provide the Company with any information concerning any such transfer required by the Company for tax purposes.

 

16.                               Withholding Taxes.  If the Company in its discretion determines that it is obligated to withhold any tax in connection with the exercise of this Stock Option, or in connection with the transfer of, or the lapse of restrictions on, any Common Stock or other property acquired pursuant to this Stock Option, the Employee hereby agrees that the Company may withhold from the Employee’s wages or other remuneration the appropriate amount of tax.  At the discretion of the Company, the amount required to be withheld may be withheld in cash from such wages or other remuneration or in kind from the Common Stock or other property otherwise deliverable to the Employee on exercise of this Stock Option.  The Employee further agrees that the Company may require the Employee to make a cash payment to the Company if the Company determines that (i) the wages or other remuneration available for withholding are insufficient to satisfy the withholding obligation of the Company, or (ii) additional amounts should be withheld by the Company to satisfy the withholding obligation of the Company.

 

17.                               Right of First Refusal.

 

(a)                                 Primary Right of First Refusal by Company:  If the Employee desires to transfer all or any part of the Option Shares to any person other than the Company or other Shareholders (an “Offeror”), the Employee shall: (i) obtain in writing an irrevocable and unconditional bona fide offer (the “Offer”) for the purchase thereof from the Offeror; and (ii) give written notice (the “Option Notice”) to the Company and other Shareholders setting forth the Employee’s desire to transfer such shares, which Option Notice shall be accompanied by a photocopy of the Offer and shall set forth at least the name and address of the Offeror and the price and terms of the Offer.  Upon receipt of the Option Notice, the Company shall have an option to purchase any or all of such Option Shares (the “Offered Shares”) specified in the Option Notice, such option to be exercisable by giving, within         days after receipt of the Option Notice, written notice of such exercise to the Employee.  If the Company elects to purchase any or all of such Offered 

 

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Shares, it shall be obligated to purchase, and the Employee shall be obligated to sell to the Company, such Offered Shares and said sale and purchase shall be closed within         days thereafter.

 

(b)                     Secondary Right of First Refusal by Other Shareholders:  If the Company provides written notice of its intent not to exercise its right of first refusal or otherwise fails to exercise its right of first refusal to purchase all of the Offered Shares before the expiration of the         -day period set forth in Section 17(a), the other Shareholders of the Company shall have an option for a period of         days following the date of the receipt of the Company’s written notice to acquire all or any part of such Offered Shares not otherwise purchased by the Company.  If one or more other shareholders gives written notice to the Company and the Offeror that such shareholder exercises his option to purchase such Offered Shares, then such Offered Shares shall be allocated among the other Shareholders as they may agree or, if the other shareholders fail to reach such an agreement, the Offered Shares shall be allocated among the exercising shareholders in the ratio each exercising shareholder’s number of shares of Common Stock bears to the total number of shares of Common Stock owned by all other Shareholders exercising their option pursuant to this Section 17(b).  To the extent any other shareholders elect to exercise their right of first refusal under this Section 17(b), such shareholder shall provide written notice of such exercise to the Employee and the Company within such         -day period.  If any other shareholders elect to purchase any or all of such Offered Shares, such shareholder shall be obligated to purchase, and the Employee shall be obligated to sell to such shareholders, such Offered Shares and said sale and purchase shall be closed within         days thereafter.

 

(c)                                  Purchase Price: The total purchase price to be paid by the Company or other Shareholders for the Offered Shares shall be the lower of (i) the purchase price set forth in the Option Notice, or (ii) the purchase price determined pursuant to Section 18 (d).

 

(d)                                 Sale of Offered Shares to Offeror: The Employee may, for          days after the expiration of the option periods as set forth in Sections 17(a) and (b) above, sell to the Offeror, pursuant to the terms of the Offer, any or all of such Offered Shares not purchased or agreed to be purchased by the Company or the other Shareholders; provided, however, that the Employee shall not sell such Offered Shares to such Offeror unless such Offeror shall execute an agreement with the Company pursuant to which such Offeror agrees to be subject to the restrictions set forth in this Section 17.  In no event shall the Employee sell or transfer any Offered Shares to the Offeree without (i) making all required filings with, and obtaining any required approval from, any applicable governmental or other regulatory authority which the Company shall, in its sole discretion, determine to be necessary or advisable, and (ii) otherwise complying with the Applicable Legal Requirements regarding any transfer or sale of the Offered Shares.  If any or all of such Offered Shares are not sold pursuant to an Offer within the time permitted above, the unsold Offered Shares shall remain subject to the terms of this Section 17.

 

(e)                                  Adjustments for Changes in Capital Structure:  If there shall be any change in the Common Stock of the Company through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, combination or exchange of shares, or the like, the restrictions contained in Section 8 and this Section 17 shall apply with equal force to additional and/or substitute securities, if any, received by the Employee in exchange for, or by virtue of his or

 

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her ownership of, Option Shares, except as otherwise determined by the Board of Directors of the Company.

 

(f)                                   Failure to Deliver Option Shares: If the Employee fails or refuses to deliver on a timely basis duly endorsed certificates representing Offered Shares to be sold to the Company or the other Shareholders pursuant to this Section 17, the Company shall have the right to establish a special account in the name, and for the benefit of, the Employee and deposit the purchase price for such Offered Shares in such special account, giving notice of such deposit to the Employee, whereupon such Offered Shares shall be deemed to have been purchased by the Company and/or the other Shareholders.  All such monies shall be held for the benefit of the Employee.  The Company may place a legend on any certificates for Option Shares delivered to the Employee reflecting the restrictions on transfer provided in Section 8 hereof and this Section 17.

 

18.                               Repurchase of Option Shares.

 

(a)                                 If (i) the Employee’s employment with the Company is terminated by either the Employee or the Company and the Employee is found in violation of the signed Employee Agreement or works, performs work for hire, consults, is self employed or otherwise employed, either directly or indirectly or (ii) causes or solicits others to work, performs work for hire, consults, or be self employed or otherwise employed, either directly or indirectly, in a business competing with or acting against the Company’s interest, the Company and other shareholders shall have the absolute right to purchase all of the Option Shares owned by such Employee (the “Repurchase Shares”) in accordance with the option time periods and notice procedures provided for with respect to the purchase of the Offered Shares as set forth in Section 17(a) and (b) above.  Only under the conditions set forth in this section shall the provisions set forth in 17(a) and 17(b) be extended to cover a time period of nine (9) months after the termination of Employee’s employment during which time the Company will have the first right to elect to purchase all or any portion of the Repurchase Shares.

 

(b)                                 The purchase price (the “Purchase Price”) per share of the Repurchased Shares under this Section 18 shall be the Fair Value of such shares as described in Section 18(d) below.

 

(c)                                  If the Company and/or the other shareholders exercise their option to purchase the Repurchased Shares, the closing of the sale of the Repurchased Shares shall be made at the offices of the Company on or before the 30th day following the expiration of the Company’s and other shareholder’s options as provided in Section 18(a).  Such sale shall be effected by the Employee’s (or heirs’ or legal representatives’) delivery to the Company and/or other purchasing shareholders of a certificate or certificates evidencing the Repurchased Shares, duly endorsed for transfer to the Company and/or other purchasing shareholders, against payment to the Employee (or his or her heirs or legal representatives) by the Company and/or other purchasing shareholders of the Purchase Price for each Repurchased Share.

 

(d)                                 For purposes of this Agreement,  “Fair Value” shall mean: (i) if the Company’s Common Stock is not then publicly traded on a national securities exchange or in the Nasdaq over-the-counter inter-dealer quotation system, the value per share as determined in good faith by the Board of Directors, either pursuant to the most recent grant of an incentive stock option

 

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under the Company’s Plan, or as is established in good faith by the Board of Directors, or (ii) if the Company’s Common Stock is then publicly traded, “Fair Value” shall mean the average of the bid and asked price in the over-the-counter market as reported by Nasdaq or, if the Common Stock is then traded on a national securities exchange, or traded in the Nasdaq National Market, the average of the high and low sale prices quoted on such exchange or market system for the 20 consecutive trading days preceding the date of termination of the Employee’s employment with the Company. Nothing in this section is intended to survive Section 17(e) except as provided for in Section 18(a) of this agreement.

 

19.                               Lock-up Agreement.  The Employee agrees that in connection with an underwritten public offering of Common Stock, or in the event of a Change in Control as provided in Section 3 and Section 17(e), upon the request of the Company or the principal underwriter managing such public offering, this Option and the Option Shares may not be sold, offered for sale or otherwise disposed of without the prior written consent of the Company or such underwriter, as the case may be, for at least 180 days after the effectiveness of the registration statement filed in connection with such offering, or such longer period of time as the Board of Directors may determine if all of the Company’s directors and officers agree to be similarly bound.  The lock-up agreement established pursuant to this paragraph 19 shall have perpetual duration.

 

20.                               Provision of Documentation to Employee.  By signing this Agreement the Employee acknowledges receipt of a copy of this Agreement and a copy of the Plan.

 

21.                               Miscellaneous.

 

(a)                                 Notices:  All notices hereunder shall be in writing and shall be deemed given when sent by certified or registered mail, postage prepaid, return receipt requested, to the address set forth below.  The addresses for such notices may be changed from time to time by written notice given in the manner provided for herein.

 

Company:

 

 

 

Employee:

 

 

 

 

(b)                                 Entire Agreement; Modification: This Agreement, together with the Plan which is incorporated herein, constitute the entire agreement between the parties relative to the subject matter hereof, and supersede all proposals, written or oral, and all other communications between the parties relating to the subject matter of this Agreement.  This Agreement may be modified, amended or rescinded only by a written agreement executed by both parties.

 

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(c)                                  Severability: The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way affect the validity, legality or enforceability of any other provision.

 

(d)                                 Successors and Assigns:  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, subject to the limitations set forth in Section 10 hereof.

 

(e)                                  Governing Law: This Agreement shall be governed by and interpreted in accordance with the laws of the State of Texas without giving effect to the principles of the conflicts of laws thereof.

 

IN WITNESS WHEREOF, the Company and the Employee have caused this instrument to be executed as of the date first above written.

 

 

	
 
    	
APPLIED   OPTOELECTRONICS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
EMPLOYEE
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    

 

8Exhibit 10.7

 

APPLIED OPTOELECTRONICS, INC.

2004 INCENTIVE SHARE PLAN

 

STOCK OPTION AGREEMENT

(INCENTIVE AND NONQUALIFIED STOCK OPTIONS)

 

Pursuant to this Stock Option Agreement (the “Agreement”), having an effective date of the Grant Date (defined below), Applied Optoelectronics, Inc. (the “Company”) has granted you (the “Participant”) a Stock Option (“Option”) under its 2004 Incentive Share Plan, as amended (the “Plan”), to purchase the number of shares of the Company’s Common Stock at the exercise price indicated below. Undefined terms in this Agreement are defined in the Plan.

 

The details of your Option are as follows:

 

PARTICIPANT:

 

ADDRESS:

 

FIRST DATE OF EMPLOYMENT:

 

TOTAL OPTION SHARES:

 

PURCHASE PRICE PER SHARE:

 

GRANT DATE:

 

FIRST VESTING DATE:

 

FIRST VESTING DATE NUMBER OF SHARES:

 

SUBSEQUENT VESTING DATE NUMBER OF SHARES:

 

EXPIRATION DATE:

 

TYPE OF STOCK OPTION:

	
(CHECK   ONE)
    	
o
    	
INCENTIVE   STOCK OPTION
    
	
 
    	
o
    	
NONQUALIFIED   STOCK OPTION
    

 

1.                                      GRANT OF OPTION. The Company hereby grants to you an option (the “Option”) to purchase the total number of shares of Common Stock set forth above at the Purchase Price Per Share set forth above (the “Purchase Price”), subject to all of the terms and conditions of this Agreement and the Plan. If designated as an Incentive Stock Option above, the Option is intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).  However, the Company shall have no liability in the event it is determined that such Option fails to qualify as such.  If this Option is designated as an Incentive Stock Option and all or any portion of this Option fails to qualify as such, the portion that fails to qualify as an Incentive Stock Option shall be treated as a Nonqualified Stock Option.

 

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2.                                      EXERCISE PERIOD/VESTING SCHEDULE.

 

(a)                                 “Company Person” means the Company or a Subsidiary.  “Continuous Service” means that the applicable Participant’s service with a Company Person, whether as an employee, director or consultant, is not interrupted or terminated. Such Participant’s Continuous Service will not be deemed to have terminated merely because of a change in the capacity in which such Participant renders service to a Company Person as an employee, consultant or director or a change in the Company Person for which such Participant renders such service, provided that there is no interruption or termination of such Participant’s Continuous Service. For example, a change in status from an employee of the Company to a consultant of a Subsidiary or a director will not constitute an interruption of Continuous Service.  The Committee or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service will be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.

 

(b)                                 Provided that you continue to provide Continuous Service to any Company Person throughout the specified period, the Option shall vest and become exercisable as to portions of the shares as follows:                       on the First Vesting Date, with the remainder vesting in equal portions of                       each at the end of                        periods (each such period, a “Vesting Period”) of the                       period following the First Vesting Date (each such date, a “Vesting Date”).  Each Vesting Date shall be on the same day of the month as that of the First Vesting Date, or on the last day of the month in cases where the day of the month of the First Vesting Date is beyond the end of the month of the respective Vesting Date.  [If application of any vesting percentage causes a fractional share, such share shall be rounded down to a whole share.]  Subject to the limitations contained herein, your Option will vest as set forth herein, provided that vesting will cease upon the termination of your Continuous Service, and further provided that this vesting schedule is subject to Sections 4 and 7 hereof.

 

3.                                      NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common Stock subject to your Option and the Purchase Price may be adjusted from time to time in accordance with the Plan.

 

4.                                      [CHANGE IN CONTROL.

 

(a)                                 If Participant is an employee (“Employee”), the Option hereby granted shall become immediately and fully exercisable, irrespective of the limitations set forth in Section 2 above, provided that the Employee has been in Continuous Employment since the Grant Date of said Option and as long as this Option has not already expired or been forfeited, upon the occurrence of both: (a) a Change in Control; and (b) termination of the Employee’s Employment on or after the date of a Change in Control either (i) by the Company for any reason other than for Cause, or (ii) by the Employee for Good Reason.

 

(b)                                 “Cause” shall mean cause as defined in any employment agreement between the Employee and the Company or any Subsidiary in effect at the time of the Employee’s termination of Employment or, in the absence of any such employment agreement, any of the following: (i) conviction of

 

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the Employee by a court of competent jurisdiction of any felony or a crime involving moral turpitude; (ii) the Employee’s knowing failure or refusal to follow reasonable instructions of the Board or the Employee’s supervisor or reasonable policies, standards and regulations of the Company or any Subsidiary; (iii) the Employee’s continued failure or refusal to faithfully and diligently perform the usual, customary duties of his Employment with the Company or any Subsidiary; or (iv) the Employee’s conduct is detrimental to the reputation, character, business or standing of the Company or any Subsidiary.

 

(c)                                  “Good Reason” shall mean if, without the written consent of the Employee, (i) the Employee is assigned duties (or has his or her duties diminished in a fashion) materially inconsistent with his or her position, duties, responsibilities and status with the Company and its Subsidiaries as of the time of a Change in Control; (ii) the Company or any of its Subsidiaries materially reduces the aggregate compensation or incentive package of the Employee as in effect at the time of a Change in Control; (iii) the Company or any of its Subsidiaries reduces the benefit package for health and welfare benefit plans, pension and 401(k) plans of the Employee, as in effect at the time of the Change in Control, except for changes in the benefit package applicable to all employees of the Company or its Subsidiaries; or (iv) the Company takes any other action which materially and adversely changes the conditions or perquisites of the Employee’s Employment as in effect as of the time of the Change in Control (provided that no material or adverse change shall be deemed to have occurred solely on account of a change in the individual(s) in the office or on the board of directors to whom the Employee reports).  The Employee shall give notice of any termination of the Employee’s Employment for Good Reason due to any of the events described above by delivery of written notice thereof to the Company within 120 days after the first occurrence of the event giving rise to such Good Reason.

 

(d)                                 “Employment” shall mean employment with a Company Person.  “Continuous Employment” means Continuous Service as an employee of a Company Person.]

 

5.                                      METHOD OF PAYMENT. This Option may be exercised, in whole or in part, by giving written notice of exercise to the Company specifying the number of shares of Common Stock to be purchased. [Such notice shall be accompanied by the payment in full of the Option Purchase Price. Such payment shall be made: (a) in cash; (b) to the extent authorized by the Committee, by surrender of shares of Common Stock previously owned by the holder of the Option; (c) following an Initial Public Offering, through simultaneous sale through a broker of shares acquired on exercise, as permitted under Regulation T of the Federal Reserve Board; (d) through additional methods prescribed by the Committee; or (e) by a combination of any such methods as permitted by the Committee. Your subsequent transfer or disposition of any shares acquired upon exercise of an Option will be subject to any Federal and state laws then applicable.]

 

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6.                                      WHOLE SHARES. You may exercise your Option only for whole shares of Common Stock.

 

7.                                      SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary contained herein, you may not exercise your Option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the Committee has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your Option must also comply with other applicable laws and regulations governing your Option, and you may not exercise your Option if the Committee determines that such exercise would not be in material compliance with such laws and regulations.

 

8.                                      TERM. The term of your Option commences on the Grant Date and expires upon the EARLIEST of the following:

 

(a)                                 three months after the termination of your Continuous Service for any reason other than your Disability or death, provided that if during any part of such three month period your Option is not exercisable solely because of the condition set forth in the preceding paragraph relating to “Securities Law Compliance,” your Option will not expire until the earlier of the Expiration Date or until it has been exercisable for an aggregate period of three months after the termination of your Continuous Service;

 

(b)                                 twelve months after the termination of your Continuous Service due to your Disability;

 

(c)                                  twelve months after your death if you die either during your Continuous Service or within three months after your Continuous Service terminates;

 

(d)                                 the Expiration Date set forth in the schedule on the first page of this Agreement; or

 

(e)                                  upon a forfeiture of the Option pursuant to the Plan or this Agreement.

 

If your Option is an Incentive Stock Option, note that, to obtain the federal income tax advantages associated with an Incentive Stock Option, the Code requires (1) that at all times beginning on the Grant Date and ending on the day three months before the date of your Option’s exercise, you must be an employee of a Company Person, except in the event of your death or Disability; and (2) you may generally not dispose of shares of the Common Stock issued upon exercise of your Option within two years after the Grant Date of this Option or within one year after such shares of Common Stock are transferred upon exercise of your Option.  The Company has provided for extended exercisability of your Option under certain circumstances for your benefit but there is no guarantee that your Option will necessarily be treated as an Incentive Stock Option if you exercise your Option more than three months after the date your employment terminates, except in the case of death or Disability, even if you continue to provide services to a Company Person as a consultant or director after your employment.

 

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9.                                      EXERCISE.

 

(a)                                 As a condition to the exercise of the Option or any portion thereof, you or any other person entitled to exercise the Option shall enter into a written joinder to the Shareholder’s Agreement dated on or about                       , as it may be hereafter amended.  You may exercise the vested portion of your Option during its term by delivering a notice of exercise (in a form designated by the Company) together with the Purchase Price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then reasonably require, including a written joinder to the Shareholder’s Agreement as specified above.

 

(b)                                 By exercising your Option you agree that, as a condition to any exercise of your Option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising because of (1) the exercise of your Option, (2) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such exercise.

 

(c)                                  If your Option is an Incentive Stock Option, by exercising your Option you agree that you will notify the Company in writing within 15 days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your Option that occurs within two years after the Grant Date of this Option or within one year after such shares of Common Stock are transferred upon exercise of your Option.

 

10.                               TRANSFERABILITY. Your Option is not transferable, except by will or by the laws of descent and distribution. If your Option is an Incentive Stock Option, it is exercisable during your life only by you. If it is a Nonqualified Stock Option, it is exercisable during your life only by you or your guardian or legal representative.

 

11.                               OPTION NOT A SERVICE CONTRACT. Your Option is not an employment or service contract, and nothing in your Option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ or Continuous Service of a Company Person, or of any Company Person to continue your employment. In addition, nothing in your Option shall obligate any Company Person, its shareholders, boards of directors, officers or employees to continue any relationship that you might have as a director or consultant for any Company Person.

 

12.                               WITHHOLDING OBLIGATIONS.

 

(a)                                 At the time you exercise your Option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or a Subsidiary, if any (but not in excess of the minimum withholding requirements), which arise in connection with your Option.

 

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(b)                                 Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable conditions or restrictions of law, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your Option a number of whole shares of Common Stock having a Fair Market Value, determined by the Committee as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law. If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your Option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your Option. Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your Option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.

 

(c)                                  You may not exercise your Option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your Option when desired even though your Option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock.

 

13.                               FORFEITURE AND REPURCHASE OF OPTION SHARES

 

(a)                                 “Forfeiture Event” means a serious breach of conduct by a Participant (including, without limitation, any conduct prejudicial to or in conflict with any Company Person) or any activity of a Participant who is an Employee in competition with any of the businesses of any Company Person during a time period of nine (9) months after termination of Participant’s Service, or a termination of employment for Cause.  Said activity in competition includes activity during a time period of nine (9) months after termination of Participant’s Service in which the Employee (i) works, performs work for hire, consults, is self employed or otherwise employed, either directly or indirectly, in a business competing with or acting against any Company Person’s interest; or (ii) causes or solicits others to work, performs work for hire, consults, or be self employed or otherwise employed, either directly or indirectly, in a business competing with or acting against any Company Person’s interest.  The determination of whether a Forfeiture Event has occurred will be determined by the Committee in good faith and in its sole discretion.

 

(b)                                 Forfeiture.  If a Forfeiture Event occurs, the Committee may cancel any outstanding Award granted to such Participant, in whole or in part, whether or not vested.  Such cancellation will be effective as of the date specified by the Committee.  This Section 13(b) will have no application following a Change of Control.

 

(c)                                  Repurchase of Option Shares.  If a Forfeiture Event occurs, the Company shall have the absolute right to purchase all or any portion of the Option Shares owned by such Employee (the “Repurchase Shares”), by electing to purchase all or any portion of the Repurchase Shares any time during a time period of nine (9) months after the Forfeiture Event or

 

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termination of Participant’s Service, whichever is later, by giving written notice of such exercise to the Employee.  The purchase price per share of the Repurchase Shares shall be the Fair Market Value of such shares.  If the Company elects to purchase any or all of such Repurchase Shares, it shall be obligated to purchase, and the Employee shall be obligated to sell to the Company, such Repurchase Shares and said sale and purchase shall be closed within 30 days thereafter at the offices of the Company.  Such sale shall be effected by the Employee’s (or heirs’ or legal representatives’) delivery to the Company and/or other purchasing shareholders of a certificate or certificates evidencing the Repurchased Shares, duly endorsed for transfer to the Company and/or other purchasing shareholders, against payment to the Employee (or his or her heirs or legal representatives) by the Company and/or other purchasing shareholders of the Purchase Price for each Repurchased Share.

 

14.                               NOTICES. Any notices provided for in this Agreement or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.

 

15.                               GOVERNING PLAN DOCUMENT. Your Option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Option, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. If there is any conflict between the provisions of this Agreement and those of the Plan, the provisions of the Plan shall control.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Grant Date.

 

 

	
 
    	
APPLIED   OPTOELECTRONICS, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
ACCEPTED   AND AGREED TO:
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    

 

By executing this Agreement, you acknowledge receipt of a copy of the Plan.

 

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