Document:

exv10w04

 

Exhibit 10.04

NSI SOFTWARE, INC.

NON-QUALIFIED STOCK OPTION AGREEMENT

Name:

Date of Grant:

Option No.:

 

     We are pleased to notify you that in accordance with the terms of the Non-Executive Director
Stock Option Plan (the “Plan”) of NSI Software, Inc. (the “Company”) a stock option to purchase
                                
shares of the Common Stock $.001 par value per share of the Company at a price of
                    
per share has this ___ day of                      been granted to you under the Plan. This option
may be exercised only upon the terms and conditions set forth below. The following is a summary of
the Plan and is subject to all of the terms and conditions of the Plan.

     1. Purpose of Option

          The purpose of the Plan under which this stock option has been granted is to enable the
Company to attract and retain the services of qualified independent person to serve on the
Company’s Board of Directors by affording such person the opportunity to acquire a proprietary
interest in the Company.

     2. Acceptance of Option Agreement

          Your acceptance of this stock option agreement will indicate your acceptance of and your
willingness to be bound by its terms; it imposes no obligation upon you to purchase any of the
shares subject to the option. Your obligation to purchase shares can arise only upon your exercise
of the option in the manner set forth in paragraph 4 hereof.

     3. When Option May Be Exercised

          Except as otherwise provided herein, this option shall be exercisable at any time prior to the
Expiration Date, as hereafter defined. This option may not be exercised for less than ten shares
at any one time (or the remaining shares then purchasable if less than ten) and expires
                     (the “Expiration Date”) whether or not it has been duly exercised, unless sooner
terminated as provided in paragraphs 5, 6 and 7 hereof.

     4. How Option May Be Exercised

          This option is exercisable by a written notice signed by you and delivered to the Company at
its executive offices, signifying your election to exercise the option. The notice

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must state the number of shares of Common Stock as to which your option is being exercised,
must contain a statement by you (in a form acceptable to the Company) that such shares are being
acquired by you for investment and not with a view to their distribution or resale (unless a
Registration Statement covering the shares purchasable has been declared effective by the
Securities and Exchange Commission) and must be accompanied by cash or certified check to the order
of the Company for the full purchase price of the shares being purchased. Payment shall be in
cash, or by certified or bank cashier’s check payable to the order of the Company, free from all
collection charges; provided, however, that payment may be made in shares of Stock owned by the
Optionee for at least six months prior to the date of exercise, having a market value on the date
of exercise equal to the aggregate purchase price, or in a combination of cash and Stock. For
these purposes, the market value per share of Stock shall be: (i) if the Common Stock is traded on
a national securities exchange or on the NASDAQ National Market System (“NMS”), the per share
closing price of the Common Stock on the principal securities exchange on which they are listed or
on NMS, as the case may be, on the date of exercise (or if there is no closing price for such date
of exercise, then the last preceding business day on which there was a closing price); or (ii) if
the Common Stock is traded in the over-the-counter market and quotations are published on the
NASDAQ quotation system (but not on NMS), the closing bid price of the Common Stock on the date of
exercise as reported by NASDAQ (or if there are no closing bid prices for such date of exercise,
then the last preceding business day on which there was a closing bid price); or (iii) if the
Common Stock is traded in the over-the-counter market but bid quotations are not published on
NASDAQ, the closing bid price per share for the Common Stock as furnished by a broker-dealer which
regularly furnishes price quotations for the Common Stock.

          If notice of the exercise of this option is given by the person or persons other than you, the
Company may require, as a condition to the exercise of this option, the submission to the Company
of appropriate proof of the right of such person or person to exercise this option.

          Certificate for shares of the Common Stock so purchased will be issued as soon as practicable.
The Company, however, shall not be required to issue or deliver a certificate for any shares until
it has complied with all requirements of the Securities Act of 1933, the Securities Exchange Act of
1934, any stock exchange on which the Company’s common Stock may then be listed and all applicable
state laws in connection with the issuance or sale of such shares or the listing of such shares on
said exchange. Until the issuance of the certificate for such shares, you or such other person as
may be entitled to exercise this option, shall have none of the rights of a stockholder with
respect to shares subject to this option.

     5. Termination of Directorship

          If your service as a member of the Board of Directors of the Company is terminated for any
reason other than by death, disability or retirement, this option shall lapse and expire the
earlier of seven months from the date such termination or the Expiration Date.

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     6. Disability

          If your service as a member of the Board of Directors of the Company is terminated by reason
of your permanent disability you may exercise this option within one year from the date of such
termination, provided, that such exercise occurs prior to the Expiration Date.

     7. Death

          If you die while serving as a member of the Board of Directors of the Company, any option
which was exercisable by you at the date of your death may be exercised by your legatee or legatees
under your Will, or by your personal representatives or distributees, within one year from the date
of your death, but in no event after the Expiration Date.

     8. Non-Transferability of Option

          This option shall not be transferable except by Will or the laws of descent and distribution,
and may be exercised during your lifetime only by you.

     9. Adjustments Upon Changes in Capitalization

          If at any time after the date of grant of this option, the Company shall, by stock dividend,
split-up, combination, reclassification or exchange, or through merger or consolidation, or
otherwise, change its shares of Common Stock into a different number or kind or class of shares or
other securities or property, then the number of shares covered by this option and the price of
each such share shall be proportionately adjusted for any such change by the Board of Directors
whose determination shall be conclusive. Any fraction of a share resulting from any adjustment
shall be eliminated and the price per share of the remaining shares subject to this option adjusted
accordingly.

     10. Subject to Terms of the Plan

          This stock option agreement shall be subject in all respects to the terms and conditions of
the Plan and in the event of any question or controversy relating to the terms of the Plan, the
decision of the Board of Directors shall be conclusive.

Remainder of page intentionally left blank.

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     11. Tax Status

          This option is not intended to qualify for “incentive stock option” treatment under the
provisions of Section 422A of the Internal Revenue Code of 1954, as amended. You are urged to
consult with your individual tax advisor prior to exercising this option.

	 	 	 	 	 
	 	Sincerely yours,

NSI SOFTWARE, INC.

 	 
	 	By:  	 	 

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OPTION EXERCISE FORM

	 	 	 
	TO:

	 	NSI Software, Inc.
	 

	 	2 Hudson Place, Suite 700
	 

	 	Hoboken, NJ 07030

     The undersigned holder hereby irrevocably elects to exercise the right to purchase shares of
Common Stock covered by this Option Agreement according to the conditions hereof and herewith makes
full payment of the Exercise Price of such shares.

     Kindly deliver to the undersigned a certificate representing the Shares.

INSTRUCTIONS FOR DELIVERY

	 	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	 	 	 	 
	 	(please typewrite or print in block letters)	 	 
	 
	 	 	 	 	 	 
	Address:	 	 	 	 
	 

	 	 	 	 
	Dated:	 	 	 	 
	 

	 	 	 	 	 
	Signature	 	 	 	 
	 

	 	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 
	STATE OF

	 	 	 	 	)	 	 	 
	 	 	 	 	 	 	 	 	 
	COUNTY OF	 	 	)	 	 	ss.
	 

	 	 	 	 	 	 	 	 	 	 

     On
this___ day of ___, ___ before me personally came                      to me known and known to me to be the individual
described in and who executed the foregoing instrument and (s)he acknowledged to me that (s)he
executed the same.

	 	 	 	 	 
	 	 
	 
	 	Notary Public	 
	 	 	 
	 	 	 
	 

5exv10w05

 

Exhibit 10.05

2003 EMPLOYEES STOCK OPTION PLAN

OF

NETWORK SPECIALISTS, INCORPORATED

l. PURPOSE OF THE PLAN

     This Employees Stock Option Plan (the “Plan”) is intended as a performance incentive for
officers, employees, consultants and other key persons of NETWORK SPECIALISTS, INCORPORATED (the
“Company”) or its Subsidiaries (as hereinafter defined) to enable the persons to whom options are
granted (the “Optionees”) to acquire or increase a proprietary interest in the success of the
Company. The Company intends that this purpose will be effected by the granting of “incentive
stock options” (“Incentive Options”) as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”), and nonqualified stock options (“Nonqualified Options”). The term
“Subsidiaries” includes any corporations in which stock possessing fifty percent or more of the
total combined voting power of all classes of stock is owned directly or indirectly by the Company.

2. ELIGIBILITY

     (a) Incentive Options may be granted only to officers or other full-time employees of the
Company or its Subsidiaries, including members of the Board of Directors who are also full-time
employees of the Company or its Subsidiaries. Nonqualified Options may be granted to officers or
other employees of the Company or its Subsidiaries, to members of the Board of Directors of the
Company or its Subsidiaries (other than Directors serving on the Option Committee), and to
consultants and other key persons who provide services to the Company or its Subsidiaries, and
members of any scientific or other advisory boards of the Company or otherwise (regardless of
whether they are also employees).

     (b) No person shall be eligible to receive any Incentive Option under the Plan if, at the date
of grant, such person beneficially owns stock representing in excess of ten percent of the voting
power of all outstanding capital stock of the Company, unless notwithstanding anything in this Plan
to the contrary (i) the purchase price for stock subject to such option is at least 110% of the
fair market value of such stock at the time of the grant and (ii) the option by its terms is not
exercisable more than 5 years from the date of grant thereof.

     (c) Notwithstanding any other provision of the Plan, the aggregate fair market value
(determined as of the time the option is granted) of the stock with respect to which incentive
stock options are exercisable for the first time by any individual during any calendar year (under
all plans of the Company and its parent and subsidiary corporations) shall not exceed $100,000.

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     (d) The granting of an option shall take place when the Plan Administrator by resolution,
written consent or other appropriate action determines to grant such an option to a particular
Participant at a particular price. Each option shall be evidenced by a written instrument
delivered by or on behalf of the Company containing provisions not inconsistent with the Plan.

3. STOCK SUBJECT TO THE PLAN

     (a) The stock granted under the Plan, or subject to the options granted under the Plan, shall
be shares of the Company’s authorized but unissued common stock, par value $.001 per share (the
“Common Stock”). The total number of shares that may be issued under the Plan shall be 11,000,000
shares of Common Stock. Such number shall be subject to adjustment as provided in Section 7
hereof.

     (b) Whenever any outstanding option under the Plan expires, is canceled or is otherwise
terminated (other than by exercise), the shares of Common Stock allocable to the unexercised
portion of such option may again be the subject of options under the Plan.

4. ADMINISTRATION

     (a) Options granted under the Plan may be either Incentive Options or Nonqualified Options,
and shall be designated as such at the time of grant. To the extent that any option intended to be
an Incentive Option shall fail to qualify as an “incentive stock option” under the Code, such
option shall be deemed to be a Nonqualified Option.

     (b) The Plan shall be administered by the Board of Directors or by a committee (the “Option
Committee”) of not less than two directors of the Company appointed by the Board of Directors of
the Company (the “Board of Directors”) for such term as the Board of Directors may determine. The
Board of Directors may, from time to time, remove members from, or add members to, the Option
Committee. The administrator of the Plan shall hereinafter be referred to as the “Plan
Administrator”. In the event that the Plan Administrator is an Option Committee of the Board of
Directors, none of the members of such Option Committee shall be an officer or other full-time
employee of the Company. It is the intention of the Company that each member of the Option
Committee shall be a “disinterested person” as that term is defined and interpreted pursuant to
Rule 16b-3(c)(2) or any successor rule thereto promulgated under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Action by the Option Committee shall require the
affirmative vote of a majority of all its members. In the event that the Plan Administrator is the
Board of Directors, and a member of the Board of Directors may be eligible, subject to the
restrictions in Section 4, to participate in or receive or hold options under the Plan, no member
of the Board of Directors or the Option Committee shall vote with respect to the granting of
options hereunder to himself or herself, as the case may be, and, if state corporate law does not
permit a committee to grant options to directors, then any option granted under the Plan to a
director for his or her services as such shall be approved by the full Board of Directors.

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     With respect to grants made under the Plan to officers and directors of the Company who are
subject to Section 16 of the Exchange Act, the Plan Administrator shall be constituted at all times
so as to meet the requirements of Rule 16b-3 so long as any of the Company’s equity securities are
registered pursuant to Section 12(b) or 12(g) of the Exchange Act.

     (c) Subject to the terms and conditions of the Plan, the Plan Administrator shall have the
power:

     (i) To determine from time to time the options to be granted to eligible persons under
the Plan and to prescribe the terms and provisions (which need not be identical) of options
granted under the Plan to such persons;

     (ii) To construe and interpret the Plan and grants thereunder and in its discretion
have the authority: (A) to determine, upon review of relevant information, the fair market
value of the Common Stock; (B) to determine the exercise price per share of stock options to
be granted; (C) to determine the eligible participants to whom, and time or times at which,
options shall be granted and the number of shares to be issuable upon exercise of each stock
option; (D) to construe and interpret the Plan; (E) to prescribe, amend and rescind rules
and regulations relating to the Plan; (F) to determine the terms and provisions of each
grant (which need not be identical); and (G) to make all other determinations necessary to
or advisable for the administration of the Plan. Notwithstanding the foregoing, in the
event any employee of the Company or any of its Subsidiaries granted an option under the
Plan is, at the time of such grant, a member of the Board of Directors of the Company, the
grant of such grant shall, in the event the Board of Directors at the time such option is
granted is not deemed to satisfy the requirement of Rule 16b-3(b)(2)(i) or (ii) promulgated
under the Act, be subject to the approval of an auxiliary committee consisting of not less
than two persons who qualify as “disinterested persons” within the meaning of Rule
16b-3(d)(3) promulgated under the Act. All decisions and determinations by the Option
Committee in the exercise of this power shall be final and binding upon the Company and the
Optionees; and

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

5. DURATION OF THE PLAN

     The Plan shall become effective upon the approval of the requisite vote of the stockholders of
the Company, and upon the approvals, if required, of any other public authorities. The Plan shall
remain in effect for a term of ten (l0) years from the date of adoption by the Board unless sooner
terminated under Section 15 hereof. Notwithstanding any of the foregoing to the contrary, the
Board of Directors (but not the Committee) shall have the authority to amend the Plan pursuant to
Section 15 hereof; provided, however, that Awards already made shall remain in full force and
effect as if the Plan had not been amended or terminated.

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6. OPTIONS

     Subject to the terms and conditions of the Plan, each option agreement shall contain such
provisions as the Plan Administrator shall from time to time deem appropriate. Option agreements
need not be identical, but each option agreement by appropriate language shall include the
substance of all of the following provisions:

     (a) Expiration; Termination of Employment. Notwithstanding any other provision of the
Plan or of any option agreement, each option shall expire on the date specified in the option
agreement, which date in the case of any Incentive Option shall not be later than the tenth
anniversary of the date on which the option was granted. Except as otherwise determined by the
Plan Administrator, either at the time an Option is granted or subsequent thereto, the following
provisions shall govern the effect of an option holder’s termination of employment. In the event
that an option holder ceases to be an officer, employee, consultant, advisory board member, or
director of the Company or of any of its Subsidiaries for any reason other than permanent
disability (as determined by the Board of Directors) and death, any option, including any exercised
portion thereof, which was otherwise exercisable on the date of termination, shall expire unless
exercised within a period of three months from the date on which the option holder ceased to be so
employed, but in no event after the expiration of the exercise period; provided, however, that, if
the Board of Directors shall determine that an option holder shall have been discharged for cause,
options granted and not yet exercised shall terminate immediately and be null and void as of the
date of discharge. In the event of the death of an option holder during this three month period,
the option shall be exercisable by his or her personal representatives, heirs or legatees to the
same extent that the option holder could have exercised the option if he or she had not died, for
the three months from the date of death, but in no event after the expiration of the exercise
period. In the event of the permanent disability of an option holder while an officer, employee,
consultant, advisory board member or director of the Company or of any Subsidiary, any option
granted to such person shall be exercisable for twelve (12) months after the date of permanent
disability; but in no event after the expiration of the exercise period; provided that such option
shall have previously vested (in whole or in part) prior to the date of such permanent disability
and the exercise of such option is in no event made after the expiration of the option exercise
period otherwise provided for. In the event of the death of an option holder while an officer,
employee, consultant, advisory board member or director of the Company or any of its Subsidiaries,
or during the twelve (12) month period after the date of permanent disability of the option holder,
that portion of the option which had become exercisable on the date of death shall be exercisable
by his or her personal representatives, heirs or legatees at any time prior to the expiration of
one (1) year from the date of the death of the option holder, but in no event after the expiration
of the exercise period. Except as the Option Committee shall provide otherwise, in the event an
option holder ceases to be an officer, employee, consultant, advisory board member or director of
the Company or of any Subsidiary for any reason, including death, prior to the lapse of the waiting
period, his or her option shall terminate and be null and void.

     (b) Exercise. At the time an option is granted, the Board of Directors will determine

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the terms and conditions to be satisfied before shares may be purchased, including the dates on
which shares subject to the option may first be purchased. (The period from the date of grant of
an option until the date on which such option may first be exercised, if not immediately
exercisable, is referred to herein as the “waiting period. “) At the time an option is granted, the
Board of Directors shall fix the period within which it may be exercised which shall not be less
than one (l) year nor more than ten (l0) years from the date of grant. (Any of such periods is
referred to herein as the “exercise period”). Each option shall be exercisable in such
installments (which need not be equal) and at such times as may be designated by the Option
Committee. The minimum number of shares with respect to which an option may be exercised at any
one time shall be one hundred (100) shares, or such lesser number as is subject to exercise under
the option at the time. To the extent not exercised, installments shall accumulate and be
exercisable, in whole or in part, at any time after becoming exercisable, but not later than the
date the option expires.

     (c) Method of Exercise and Payment of Purchase Price

     (i) Any option granted under the Plan may be exercised by the Optionee in whole or, subject to
Section 6(b) hereof, in part by delivering to the Company on any business day a written notice
specifying the number of shares of Common Stock the Optionee then desires to purchase (the
“Notice”).

     (ii) Payment for the shares of Common Stock purchased pursuant to the exercise of an option
shall be made either: (A) in cash, or by certified or bank check or other payment acceptable to
the Company, equal to the option exercise price for the number of shares specified in the Notice
(the “Total Option Price”); (B) if authorized by the applicable option agreement and if permitted
by law, by delivery of shares of Common Stock that the optionee may freely transfer, and has held
for a period of at least six months, having a fair market value, determined by reference to the
provisions of Section 6(d) hereof, equal to or less than the Total Option Price, plus cash in an
amount equal to the excess, if any, of the Total Option Price over the fair market value of such
shares of Common Stock; or (C) by the Optionee delivering the Notice to the Company together with
irrevocable instructions to a broker to promptly deliver the Total Option Price to the Company in
cash or by other method of payment acceptable to the Company; provided, however, that the Optionee
and the broker shall comply with such procedures and enter into such agreements of indemnity or
other agreements as the Company shall prescribe as a condition of payment under this clause (C).
Notwithstanding the foregoing, shares of Common Stock used in payment of the exercise price of an
incentive option must have been held by the Optionee for a minimum of six months prior to exercise.

     (iii) The delivery of certificates representing shares of Common Stock to be purchased
pursuant to the exercise of any option will be contingent upon the Company’s receipt of the Total
Option Price and of any written representations from the Optionee required by the Option Committee,
and the fulfillment of any other requirements contained in the option agreement or applicable
provisions of law.

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     (d) Purchase Price. The purchase price per share of Common Stock subject to each
option shall be determined by the Plan Administrator; provided, however, that the purchase price
per share of Common Stock subject to each Incentive Option shall be not less than the fair market
value of the Common Stock on the date such Incentive Option is granted. In the case of a
Non-Qualified Option, the purchase price per share of Common Stock subject to such Non-Qualified
Option shall be such price as determined by the Plan Administrator. For the purposes of the Plan,
the fair market value of the Common stock shall be determined in good faith by the Plan
Administrator; provided (i) if the Common Stock is traded on a national securities exchange or on
the NASDAQ National Market System (“NMS”), the per share closing price of the Common Stock on the
principal securities exchange on which they are listed or on NMS, as the case may be, on the date
of grant (or if there is no closing price for such date of grant, then the last preceding business
day on which there was a closing price); or (ii) if the Common Stock is traded in the
over-the-counter market and quotations are published on the NASDAQ quotation system (but not on
NMS), the per share closing bid price of the Common Stock on the date of grant as reported by
NASDAQ (or if there is no closing bid price for such date of grant, then the last preceding
business day on which there was a closing bid price); or (iii) if the Common Stock is traded in the
over-the-counter market but bid quotations are not published on NASDAQ, the closing bid price per
share for the Common Stock as furnished by a broker-dealer which regularly furnishes price
quotations for the Common Stock or (iv) if no such quotes are available, the fair market value as
determined by the Board of Directors.

     (e) Incentive Treatment. The option agreement shall specify the total number of shares
to which it pertains and whether such options are ISOs or are not ISOs. With respect to ISOs
granted under the Plan, the aggregate fair market value (determined at the time an ISO is granted)
of the shares of Common Stock with respect to which ISOs are exercisable for the first time by such
employee during any calendar year shall not exceed $l00,000 under all plans of the employer
corporation or its Parent or Subsidiaries.

     (f) Purchase for Investment. The Plan Administrator shall have the right to require
that each Participant or other person who shall exercise an option under the Plan, and each person
into whose name shares of Common Stock shall be issued pursuant to the exercise of an option,
represent and agree that any and all shares of Common Stock purchased pursuant to such option are
being purchased for investment only and not with a view to the distribution or resale thereof and
that such shares will not be sold except in accordance with such restrictions or limitations as may
be set forth in the option. This Section 6(f) shall be inoperative during any period of time when
the Company has obtained all necessary or advisable approvals from governmental agencies and has
completed all necessary or advisable registrations or other qualifications of shares of Common
Stock as to which options may from time to time be granted.

     (g) Other Provisions. Each option granted under the Plan may contain such other
terms, provisions, and conditions not inconsistent with the Plan as may be determined by the Board
of Directors.

7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION

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     (a) If the shares of the Company’s Common Stock as a whole are increased, decreased, changed
into or exchanged for a different number or kind of shares or securities of the Company, whether
through merger, consolidation, reorganization, recapitalization, reclassification, stock dividend,
stock split, combination of shares, exchange of shares, change in corporate structure or the like,
an appropriate and proportionate adjustment shall be made in the number and kind of shares subject
to the Plan, and in the number, kind and per share exercise price of shares subject to unexercised
options or portions thereof granted prior to any such change. In the event of any such adjustment
in an outstanding option, the Optionee thereafter shall have the right to purchase the number of
shares under such option at the per share price, as so adjusted, which the Optionee could purchase
at the total purchase price applicable to the option immediately prior to such adjustment.

     (b) Adjustments under this Section 7 shall be determined by the Plan Administrator and such
determinations shall be conclusive. The Plan Administrator shall have the discretion and power in
any such event to determine and to make effective provision for acceleration of the time or times
at which any option or portion thereof shall become exercisable. No fractional shares of Common
Stock shall be issued under the Plan on account of any adjustment specified above.

8. ACCELERATION

     (a) Notwithstanding any contrary waiting period in any stock option agreement issued pursuant
to the Plan, but subject to any determination by the Board of Directors to provide otherwise at the
time such Award is granted or subsequent thereto, each outstanding option granted under the Plan
shall, except as otherwise provided in the stock option agreement, become exercisable in full for
the aggregate number of shares covered thereby shall vest unconditionally on the first day
following the occurrence of any of the following: (a) the approval by the stockholders of the
Company of an Approved Transaction; (b) a Control Purchase; or (c) a Board Change.

     (b) For purposes of this Section 8:

          (i) An “Approved Transaction” shall mean (A) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to which shares of
Common Stock would be converted into cash, securities or other property, other than a merger of the
Company in which the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately after the merger,
or (B) any sale, lease, exchange, or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or (C) the adoption of
any plan or proposal for the liquidation or dissolution of the Company.

          (ii) A “Control Purchase” shall mean circumstances in which any person (as such

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term is defined in Sections l3(d)(3) and l4(d)(2) of the Exchange Act, corporation or other entity
(other than the Company or any employee benefit plan sponsored by the Company or any Subsidiary)
(A) shall purchase any Common Stock of the Company (or securities convertible into the Company’s
Common Stock) for cash, securities or any other consideration pursuant to a tender offer or
exchange offer, without the prior consent of the Board of Directors, or (B) shall become the
“beneficial owner” (as such term is defined in Rule l3d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of the then outstanding securities of the Company ordinarily (and apart from
rights accruing under special circumstances) having the right to vote in the election of directors
(calculated as provided in paragraph (d) of such Rule l3d-3 in the case of rights to acquire the
Company’s securities).

     (iii) A “Board Change” shall mean circumstances in which, during any period of two consecutive
years or less, individuals who at the beginning of such period constitute the entire Board shall
cease for any reason to constitute a majority thereof unless the election, or the nomination for
election by the Company’s stockholders, of each new director was approved by a vote of at least a
majority of the directors then still in office.

9. CONTINUATION OF RELATIONSHIP; LEAVE OF ABSENCE

     (a) Nothing in the Plan or any Award made hereunder shall interfere with or limit in any way,
the right of the Company or of any Subsidiary to terminate any Eligible Participant’s employment at
any time, nor confer upon any Eligible Participant any right to continue any such relationship with
the Company or Subsidiary.

     (b) For purposes of the Plan, a transfer of a recipient of options hereunder from the Company
to a Subsidiary or vice versa, or from one Subsidiary to another, or a leave of absence duly
authorized by the Company shall not be deemed a termination of employment or a break in the
incentive, waiting or exercise period, as the case may be. In the case of any employee on an
approved leave of absence, the Board of Directors may make such provisions with respect to
continuance of stock rights, options or restricted shares previously granted while on leave from
the employ of the Company or a Subsidiary as it may deem equitable.

l0. GENERAL RESTRICTION

     Each Award made under the Plan shall be subject to the requirement that, if at any time the
Board of Directors shall determine, in its sole and subjective discretion, that the registration,
qualification or listing of the shares subject to such Award upon a securities exchange or under
any state or federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting or exercise of such
Award, the Company shall not be required to issue such shares unless such registration,
qualification, listing, consent or approval shall have been effected or obtained free of any

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conditions not acceptable to the Board of Directors. Nothing in the Plan or any agreement or grant
hereunder shall obligate the Company to effect any such registration, qualification or listing.

11. RIGHTS OF OPTIONEES

     No Optionee shall be deemed for any purpose to be the owner of any shares of Common Stock
subject to any option unless and until (i) the option shall have been exercised pursuant to the
terms thereof, (ii) all requirements under applicable law and regulations shall have been complied
with to the satisfaction of the Company, (iii) the Company shall have issued and delivered the
shares to the Optionee, and (iv) the Optionee’s name shall have been entered as a stockholder of
record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and
other ownership rights with respect to such shares of Common Stock. No adjustment shall be made
for the dividends or other rights for which the record date is prior to the date such stock
certificate is issued.

12. NONTRANSFERABILITY OF OPTIONS

     During a Participant’s lifetime, an option may be exercisable only by the Participant and
options granted under the Plan and the rights and privileges conferred thereby shall not be subject
to execution, attachment or similar process and may not be transferred, assigned, pledged or
hypothecated in any manner (whether by operation of law or otherwise) other than by will or by the
applicable laws of descent and distribution. Notwithstanding the foregoing, to the extent
permitted by applicable law and Rule 16b-3, if applicable, the Plan Administrator may permit a
recipient of a Nonqualified Option to (i) designate in writing during the Participant’s lifetime a
Beneficiary to receive and exercise the Participant’s Nonqualified Options in the event of such
Participant’s death or (ii) transfer a Nonqualified Option. Any other attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of any option under the Plan or of any right or privilege
conferred thereby, contrary to the provisions of the Plan, or the sale or levy of any attachment or
similar process upon the rights and privileges conferred hereby, shall be null and void.

13. WITHHOLDING TAXES

     (a) Payment by Participant. Each Optionee shall, no later than the date as of which
the value of any option granted hereunder or of any Common Stock issued upon the exercise of such
option first becomes includable in the gross income of the participant for federal income tax
purposes (the “Tax Date”), pay to the Company, or make arrangements satisfactory to the Company
regarding payment of any federal, state, or local taxes of any kind required by law to be withheld
with respect to such income.

     (b) Payment in Shares. An Optionee may request permission to have such tax
withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold
from shares of Common Stock to be issued pursuant to an option exercise a number of shares with an
aggregate fair market value that would satisfy the withholding amount due, or (ii)

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transferring to the Company shares of Common Stock owned by the participant with an aggregate fair
market value that would satisfy the withholding amount due. The following additional restrictions
shall apply:

     (A) the election to satisfy tax withholding obligations in the manner permitted by this
Section 11(b) shall be made either (1) during the period beginning on the third business day
following the date of release of quarterly or annual summary statements of sales and
earnings of the Company and ending on the twelfth business day following such date, or (2)
at least six months prior to the Tax Date;

     (B) such election shall be irrevocable;

     (C) such election shall be subject to the approval of the Board of Directors, which
approval may be withheld in its absolute discretion; and

     (D) such election shall not be made within six months of the date of grant of the
option.

l4. NONEXCLUSIVITY OF THE PLAN

     Neither the adoption of the Plan by the Board of Directors nor any provision of the Plan shall
be construed as creating any limitations on the power of the Board (but not the Committee) to adopt
such additional compensation agreements as it may deem desirable, including, without limitation,
the granting of stock options otherwise than under the Plan, and such arrangements may be either
generally applicable or applicable only in specific cases.

15. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN

     The Board of Directors may discontinue the Plan or amend the Plan at any time, and from time
to time, subject to any required regulatory approval and the limitation that, except as provided in
Sections 6, 7 and 8 hereof, no amendment shall be effective unless approved by the stockholders of
the Company in accordance with applicable law and regulations at an annual or special meeting held
within twelve months before or after the date of adoption of such amendment, where such amendment
will:

     (a) increase the number of shares of Common Stock as to which options may be granted under the
Plan;

     (b) change in substance Section 4 hereof relating to eligibility to participate in the Plan;

     (c) change the minimum option exercise price;

     (d) increase the maximum term of options provided herein; or

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     (e) otherwise materially increase the benefits accruing to participants under the Plan.

     Except as provided in Sections 5, 7 and 8 hereof, rights and obligations under any option
granted before any amendment of the Plan shall not be altered or impaired by such amendment, except
with the consent of the Optionee.

Without limiting the foregoing, the Board of Directors may, any time or from time to time,
authorize the Company, without the consent of the respective recipients, to issue new options in
exchange for the surrender and cancellation of any or all outstanding options.

16. LIMITATIONS ON EXERCISE.

     Notwithstanding anything to the contrary contained in the Plan, any agreement evidencing any
Award hereunder may contain such provisions as the Board deems appropriate to ensure that the
penalty provisions of Section 4999 of the Code, or any successor thereto, will not apply to any
stock received by the holder from the Company.

17. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW

     (a) The obligation of the Company to sell and deliver shares of Common Stock with respect to
options granted under the Plan shall be subject to all applicable laws, rules and regulations,
including all applicable laws, rules and regulations, including all applicable federal and state
securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Option Committee.

     (b) The Plan shall be governed by New Jersey law, except to the extent that such law is
preempted by federal law.

     (c) Transactions under the Plan are intended to comply with Rule 16b-3 or any successor rule
thereto promulgated under the Act. Any provision of the Plan or of any option agreement
inconsistent with such compliance shall be inoperative and shall not affect the validity of the
Plan or the availability of any exemption from Section 16(b) of the Act.

18. EFFECTIVE DATE OF PLAN; STOCKHOLDER APPROVAL

     The Plan shall become effective upon the date that it is approved by the Company’s Board of
Directors, provided that the Plan is subject to the approval of the Plan by the Company’s
stockholders on or before the first anniversary of the date that the Plan is approved by the
Company’s Board of Directors. Options may be granted prior to such stockholder approvals, provided
that no option granted under the Plan may be exercised until such stockholder approvals are
obtained, and if such approvals are not obtained within such 12 month period, the Plan and all
outstanding options shall terminate and be null and void.

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