Document:

Exhibit 10.3

 

Notice
of Grant of Stock Option and

Terms and Conditions of Richard J. Thompson Stock Option

 

Grantee:                Richard J. Thompson                                         Plan:      2004

 

Effective
February 18, 2008 (the “Award Date”), you (the “Grantee”) have been
granted a nonqualified stock option (the “Option”) to buy 500,000  shares of Common Stock of Power-One, Inc. (the “Corporation”)
at a price of $2.38 per share (the “Exercise Price”).  Your Option is intended to be a Qualifying
Option.

 

The
aggregate Exercise Price of the shares subject to the Option is $1,190,000.

 

The Option will become vested as to 100% of the
total number of shares of Common Stock subject to the Option on February 18,
2012.  The Option will vest earlier in
the following circumstances: (i) 50% of the shares of Common Stock subject
to the Option shall become vested on March 1, 2010 if (A) the closing
price per share of the Corporation’s Common Stock on the principal exchange on
which such stock is traded on any 20 out of 30 consecutive trading days in the
period beginning October 1, 2009 and ending March 1, 2010  exceeds 150% of the Exercise Price (as
appropriately adjusted for stock splits and similar transactions) and (B) the
Corporation’s consolidated net income for the 2009 calendar year as determined
under generally accepted accounting principles (“GAAP”) equals or exceeds 5% of
the Corporation’s consolidated net sales revenue for such period determined
under GAAP; and (ii) 25% of the shares of Common Stock subject to the
Option shall become vested on March 1, 2011 if (X) the closing price
per share of the Corporation’s Common Stock on the principal exchange on which
such stock is traded on any 20 out of 30 consecutive trading days beginning October 1,
2010 and ending March 1, 2011 exceeds 160% of the Exercise Price (as
appropriately adjusted for stock splits and similar transactions) and (Y) the
Corporation’s consolidated net income for the 2010 calendar year as determined
under GAAP equals or exceeds 7.5% of the Corporation’s consolidated net sales
revenue for such period determined under GAAP. 
In all cases in which the Corporation’s consolidated net income and
consolidated net sales revenue is a vesting measurement, extraordinary charges
as defined in the Grantee’s Employment Agreement with the Corporation entered into
on the date hereof (as it may be amended from time to time, the “Employment
Agreement”) shall be excluded.  Pursuant
to the provisions of the Employment Agreement, a portion of the shares of
Common Stock subject to the Option will also become vested  in connection with the Grantee’s termination
of employment due to death, disability, by the Corporation without Cause (as
defined in the Employment Agreement), due to a Substantial Breach (as defined
in the Employment Agreement) by the Corporation, or due to a non-renewal of the
Employment Agreement by the Corporation. 
The Grantee is also a party to the Corporation’s Senior Executive Change
in Control Agreement, which provides for accelerated vesting of the shares of
Common Stock subject to the Option under the circumstances provided therein.

 

The Option will expire on the tenth anniversary of
the Award Date (the “Expiration Date”).

 

In all cases, the Option is subject to early
termination under Section 5 of the Terms (as defined below) and Section 7.4
of the Plan (as defined below).  The
Option and applicable performance targets are subject to adjustment pursuant to
Section 7.1 of the Plan.

 

By
your signature and the Corporation’s signature below, you and the Corporation
agree that the Option is granted under and governed by the terms and conditions
of the Corporation’s 2004 Stock Incentive Plan (the “Plan”) and the Terms and
Conditions of Richard J. Thompson Nonqualified Stock Option (the “Terms”),
which are attached and incorporated herein by this reference.  This Notice of Grant of Stock Option,
together with the Terms, will be referred to as your Option Agreement.  The Option has been granted to you in
addition to, and not in lieu of, any other form of compensation otherwise
payable or to be paid to you.  Capitalized terms are defined in the Plan if
not defined herein or in the Terms.  You
acknowledge receipt of a copy of the Terms, the Plan and the Prospectus for the
Plan.

 

	
  /s/  RANDALL
  H. HOLLIDAY

  	
   

  	
   

  
	
  Power-One, Inc.

  	
  Date  02/18/2008

  
	
   

  	
   

  
	
  /s/  RICHARD
  J. THOMPSON

  	
   

  	
   

  
	
  Richard
  J. Thompson

  	
  Date  02/18/2008

  

 

 

POWER-ONE, INC.

2004 STOCK INCENTIVE PLAN

TERMS AND CONDITIONS OF RICHARD J. THOMPSON NONQUALIFIED STOCK OPTION

 

1.                                      General.

 

These
Terms and Conditions of Richard J. Thompson Nonqualified Stock Option (these “Terms”) apply to a particular stock option (the “Option”) if incorporated by reference in the Notice of Grant
of Stock Option (the “Grant Notice”)
corresponding to that particular grant. 
The recipient of the Option identified in the Grant Notice is referred
to as the “Grantee.”  The per share exercise price of the Option as
set forth in the Grant Notice is referred to as the “Exercise
Price.”  The effective date of
grant of the Option as set forth in the Grant Notice is referred to as the “Award Date.”  The
exercise price and the number of shares covered by the Option are subject to
adjustment under Section 7.1 of the Plan.

 

The
Option was granted under and subject to the Power-One, Inc. 2004 Stock
Incentive Plan (the “Plan”).  Capitalized terms are defined in the Plan if
not defined herein.  The Option has been
granted to the Grantee in addition to, and not in lieu of, any other form of
compensation otherwise payable or to be paid to the Grantee.  The Grant Notice and these Terms are
collectively referred to as the “Option Agreement” applicable to the Option.

 

2.                                      Vesting; Limits on
Exercise; Incentive Stock Option Status.

 

The
Option shall vest and become exercisable in percentage installments of the
aggregate number of shares subject to the Option as set forth on the Grant
Notice.  The Option may be exercised only
to the extent the Option is vested and exercisable.

 

·                  Cumulative Exercisability.  To the extent that the Option is vested and
exercisable, the Grantee has the right to exercise the Option (to the extent
not previously exercised), and such right shall continue, until the expiration
or earlier termination of the Option.

 

·                  No Fractional Shares.  Fractional share interests shall be
disregarded, but may be cumulated.

 

·                  Minimum Exercise.  No fewer than 100 shares of Common Stock
(subject to adjustment under Section 7.1 of the Plan) may be purchased at
any one time, unless the number purchased is the total number at the time
exercisable under the Option.

 

·                  Nonqualified Stock Option.  The Option is a nonqualified stock option and
is not, and shall not be, an incentive stock option within the meaning of Section 422
of the Code.

 

3.                                      Continuance of Employment
Required; No Employment/Service Commitment.

 

                Except for any vesting in
connection with the Grantee’s termination of employment or other vesting event
pursuant to the terms of the Grantee’s Employment Agreement with the
Corporation entered into on the date hereof (as it may be amended from time to
time, the 

 

1

 

“Employment Agreement”) or the
Corporation’s Senior Executive Change in Control Agreement to which the Grantee
is a party (the “CIC Agreement”), the vesting
schedule applicable to the Option requires continued employment through each
applicable vesting date as a condition to the vesting of the applicable
installment of the Option and the rights and benefits under this Option
Agreement.  Employment for only a portion
of the vesting period, even if a substantial portion, will not entitle the
Grantee to any proportionate vesting or avoid or mitigate a termination of
rights and benefits upon or following a termination of employment or services
as provided in Section 5 below or under the Plan. Service solely as a
director of the Corporation or one of its Subsidiaries shall not be considered
continued employment for purposes of this Option Agreement.

 

                Nothing contained
in this Option Agreement or the Plan constitutes a continued employment or
service commitment by the Corporation or any of its Subsidiaries, affects the
Grantee’s status, if he or she is an employee, as an employee at will who is
subject to termination without cause, confers upon the Grantee any right to
remain employed by or in service to the Corporation or any Subsidiary,
interferes in any way with the right of the Corporation or any Subsidiary at
any time to terminate such employment or service, or affects the right of the
Corporation or any Subsidiary to increase or decrease the Grantee’s other
compensation.  Nothing in this paragraph,
however, is intended to adversely affect any independent contractual right of
the Grantee without his consent hereto.

 

4.                                      Method of Exercise of
Option.

 

The
Option shall be exercisable by the delivery to the Secretary of the Corporation
(or such other person as the Administrator may require pursuant to such
administrative exercise procedures as the Administrator may implement from time
to time) of:

 

·                  a written notice stating the number of shares
of Common Stock to be purchased pursuant to the Option or by the completion of
such other administrative exercise procedures as the Administrator may require
from time to time,

 

·                  payment in full for the Exercise Price of the
shares to be purchased in cash, check or by electronic funds transfer to the
Corporation, or (subject to compliance with all applicable laws, rules,
regulations and listing requirements and further subject to such rules as
the Administrator may adopt as to any non-cash payment) in shares of Common
Stock already owned by the Grantee, valued at their fair market value (as
determined under the Plan) on the exercise date;

 

·                  any written statements or agreements required
pursuant to Section 8.1 of the Plan; and

 

·                  satisfaction of the tax withholding
provisions of Section 8.5 of the Plan.

 

The
Administrator also may, but is not required to, authorize a non-cash payment
alternative by notice and third party payment in such manner as may be
authorized by the Administrator, or, subject to such procedures as the
Administrator may adopt, authorize a “cashless exercise” with a third party who
provides simultaneous financing for the purposes of (or who otherwise
facilitates) the exercise of the Option.

 

2

 

5.                                      Early
Termination of Option.

 

5.1          Expiration Date.  Subject to
earlier termination as provided below in this Section 5, the Option will
terminate on the “Expiration Date” set forth in the Grant Notice (the “Expiration Date”).

 

5.2          Possible Termination of Option upon Certain Corporate
Events.  The Option is subject to termination in
connection with certain corporate events as provided in Section 7.4 of the
Plan.

 

5.3          Termination of Option upon a Termination of Grantee’s
Employment.  Subject to earlier termination on the
Expiration Date of the Option or pursuant to Section 5.2 above and except
as provided in the Employment Agreement or the CIC Agreement, if the Grantee
ceases to be employed by the Corporation or a Subsidiary (the date that the
Grantee’s employment with the Corporation or a Subsidiary terminates is
referred to as the Grantee’s “Employment Termination
Date”), any portion of the Option that is not vested on the
Employment Termination Date shall terminate on the Employment Termination Date.
 If the Grantee’s employment with the
Corporation or a Subsidiary is terminated by the Corporation for Cause (as
defined below), the Option (whether vested or not) shall terminate on the
Employment Termination Date.

 

5.4          Termination of Option upon a Termination of Grantee’s
Employment and Services.  Subject to earlier termination
on the Expiration Date of the Option or pursuant to Sections 5.2 and 5.3 above,
if the Grantee both ceases to be employed by the Corporation or a Subsidiary
and ceases to provide services to the Corporation or a Subsidiary as a
director, the following rules shall apply (the last day that the Grantee
is either employed by or providing services to the Corporation or a Subsidiary
as a director is referred to as the Grantee’s “Severance
Date”):

 

·                  other than as expressly provided below in
this Section 5.4, (a) the Grantee will have until the date that is 3
months after his or her Severance Date to exercise the Option (or portion
thereof) to the extent that it was vested on the Severance Date or becomes
vested as of any Severance Date that is also an Employment Termination Date,
and  (b) the Option, to the extent
exercisable for the 3-month period following the Severance Date and not
exercised during such period, shall terminate at the close of business on the
last day of the 3-month period;

 

·                  if the Grantee’s Severance Date occurs as a
result of the Grantee’s death or Disability (as defined below), (a) the
Grantee (or his beneficiary or personal representative, as the case may be)
will have until the date that is 12 months after the Grantee’s Severance Date
to exercise the Option to the extent that it was vested on the Severance Date
or becomes vested as of any Severance Date that is also an Employment
Termination Date, and (b) the Option, to the extent exercisable for the
12-month period following the Severance Date and not exercised during such
period, shall terminate at the close of business on the last day of the
12-month period;

 

3

 

“Disability” for purposes of the Option shall have the same meaning
as is specified in the Employment Agreement. “Cause”
for purposes of the Option shall have the same meaning as is specified in the
Employment Agreement, provided that following the occurrence of a “change in
control’ as defined in the CIC Agreement, the cause definition contained in the
CIC Agreement shall apply for purposes of the Option.

 

In
all events the Option is subject to earlier termination on the Expiration Date
of the Option or as contemplated by Section 5.2.  The Administrator shall be the sole judge of
whether the Grantee continues to render employment or services for purposes of
this Option Agreement.

 

6.                                      Non-Transferability.

 

The
Option and any other rights of the Grantee under this Option Agreement or the
Plan are nontransferable and exercisable only by the Grantee, except as set
forth in Section 5.7 of the Plan.

 

7.                                      Notices.

 

Any
notice to be given under the terms of this Option Agreement shall be in writing
and addressed to the Corporation at its principal office to the attention of the
Secretary, and to the Grantee at the address last reflected on the Corporation’s
payroll records, or at such other address as either party may hereafter
designate in writing to the other.  Any
such notice shall be delivered in person or shall be enclosed in a properly
sealed envelope addressed as aforesaid, registered or certified, and deposited
(postage and registry or certification fee prepaid) in a post office or branch
post office regularly maintained by the United States Government.  Any such notice shall be given only when
received, but if the Grantee is no longer employed by the Corporation or a
Subsidiary, shall be deemed to have been duly given five business days after
the date mailed in accordance with the foregoing provisions of this Section 7.

 

8.                                      Plan.

 

The
Option and all rights of the Grantee under this Option Agreement are subject to
the terms and conditions of the Plan, incorporated herein by this
reference.  The Grantee agrees to be
bound by the terms of the Plan and this Option Agreement.  The Grantee acknowledges having read and
understanding the Plan, the Prospectus for the Plan, and this Option
Agreement.  Unless otherwise expressly
provided in other sections of this Option Agreement, provisions of the Plan
that confer discretionary authority on the Board or the Administrator do not
and shall not be deemed to create any rights in the Grantee unless such rights
are expressly set forth herein or are otherwise in the sole discretion of the
Board or the Administrator so conferred by appropriate action of the Board or
the Administrator under the Plan after the date hereof.  Notwithstanding the foregoing or any other
provision of this Option Agreement, Section 7.7 of the Plan shall not be
applicable to the Option.

 

9.                                      Entire Agreement.

 

This
Option Agreement, the Plan, the Employment Agreement and the CIC Agreement
together constitute the entire agreement and supersede all prior understandings
and agreements, written or oral, of the parties hereto with respect to the
subject matter hereof.  The Plan and this

 

4

 

Option
Agreement may be amended pursuant to Section 8.6 of the Plan.  Such amendment must be in writing and signed
by the Corporation.  The Corporation may,
however, unilaterally waive any provision hereof in writing to the extent such
waiver does not adversely affect the interests of the Grantee hereunder, but no
such waiver shall operate as or be construed to be a subsequent waiver of the
same provision or a waiver of any other provision hereof.

 

10.                               Governing Law.

 

This
Option Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware.

 

11.                               Effect of this Agreement.

 

Subject
to the Corporation’s right to terminate the Option pursuant to Section 7.4
of the Plan, this Option Agreement shall be assumed by, be binding upon and
inure to the benefit of any successor or successors to the Corporation.

 

12.                               Counterparts.

 

This
Option Agreement may be executed simultaneously in any number of counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.

 

13.                               Section Headings.

 

The
section headings of this Option Agreement are for convenience of reference only
and shall not be deemed to alter or affect any provision hereof.

 

5Exhibit 10.4

 

Notice
of Grant of Stock Appreciation Rights and

Terms and Conditions of Richard J. Thompson Appreciation Rights

 

Grantee:                Richard J. Thompson

 

Effective February 18, 2008 (the “Award Date”),
you (the “Grantee”) have been granted stock appreciation rights (the “SARs”)
with respect to 250,000 shares of Common Stock of Power-One, Inc. (the “Corporation”).  The SARs shall have a base price of $2.38 per
share (the “Base Price”).

 

The aggregate Base Price of the shares subject to
the SARs is $595,000.

 

The SARs will become vested as to 100% of the total
number of shares of Common Stock subject to the SARs on February 18,
2012.  The SARs will vest earlier in the
following circumstances: (i) 50% of the shares of Common Stock subject to
the SARs shall become vested on March 1, 2010 if (A) the closing
price per share of the Corporation’s Common Stock on the principal exchange on
which such stock is traded on any 20 out of 30 consecutive trading days in the
period beginning October 1, 2009 and ending March 1, 2010 exceeds
150% of the Base Price (as appropriately adjusted for stock splits and similar
transactions) and (B) the Corporation’s consolidated net income for the
2009 calendar year as determined under generally accepted accounting principles
(“GAAP”) equals or exceeds 5% of the Corporation’s consolidated net sales
revenue for such period determined under GAAP; and (ii) 25% of the shares
of Common Stock subject to the SARs shall become vested on March 1, 2011
if (X) the closing price per share of the Corporation’s Common Stock on
the principal exchange on which such stock is traded on any 20 out of 30
consecutive trading days beginning October 1, 2010 and ending March 1,
2011 exceeds 160% of the Base Price (as appropriately adjusted for stock splits
and similar transactions) and (Y) the Corporation’s consolidated net
income for the 2010 calendar year as determined under GAAP equals or exceeds
7.5% of the Corporation’s consolidated net sales revenue for such period
determined under GAAP.  In all cases in
which the Corporation’s consolidated net income and consolidated net sales
revenue is a vesting measurement, extraordinary charges as defined in the
Grantee’s Employment Agreement with the Corporation entered into on the date
hereof (as it may be amended from time to time, the “Employment Agreement”)
shall be excluded.  Pursuant to the
provisions of the Employment Agreement, a portion of the shares of Common Stock
subject to the SARs will also become vested in connection with the Grantee’s
termination of employment due to death, disability, by the Corporation without Cause
(as defined in the Employment Agreement), due to a Substantial Breach (as
defined in the Employment Agreement) by the Corporation, or due to a
non-renewal of the Employment Agreement by the Corporation.  The Grantee is also a party to the
Corporation’s Senior Executive Change in Control Agreement, which provides for
accelerated vesting of the shares of Common Stock subject to the SARs under the
circumstances provided therein.

 

The SARs will expire on the tenth anniversary of the
Award Date (the “Expiration Date”).

 

In all cases, the SARs are subject to early
termination under Section 5 of the Terms (as defined below) and Section 7.4
of the Plan (as defined below), which provision of the Plan shall equally apply
to the SARs whether or not the SARs are settled under the Plan.  The SARs and applicable performance targets
are subject to adjustment pursuant to Section 7.1 of the Plan (which
provision of the Plan shall equally apply to the SARs whether or not the SARs
are settled under the Plan).

 

By
your signature and the Corporation’s signature below, you and the Corporation
agree that the  SARs are granted under
and governed by the Terms and Conditions of Richard J. Thompson Stock
Appreciation Rights (the “Terms”), which are attached and incorporated herein
by this reference.  This Notice of Grant
of Stock Appreciation Rights, together with the Terms, will be referred to as
your SAR Agreement.  The SARs have been
granted to you in addition to, and not in lieu of, any other form of
compensation otherwise payable or to be paid to you.  Capitalized terms are defined in the Plan if
not defined herein or in the Terms.  You
acknowledge receipt of a copy of the Terms, the Plan and the Prospectus for the
Plan.

 

	
  /s/  RANDALL
  H. HOLLIDAY

  	
   

  	
   

  
	
  Power-One, Inc.

  	
  Date  02/18/2008

  
	
   

  	
   

  
	
  /s/  RICHARD
  J. THOMPSON

  	
   

  	
   

  
	
  Richard
  J. Thompson

  	
  Date  02/18/2008

  

 

 

POWER-ONE,
INC.

TERMS AND
CONDITIONS OF RICHARD J. THOMPSON STOCK APPRECIATION RIGHTS

 

1.                                      General.

 

These Terms and Conditions of Richard J. Thompson
Stock Appreciation Rights (these “Terms”) apply
to a particular stock appreciation rights award (the “SARs”)
if incorporated by reference in the Notice of Grant of Stock Appreciation
Rights (the “Grant Notice”) corresponding to
that particular grant.  The recipient of
the SARs identified in the Grant Notice is referred to as the “Grantee.”  The per
share base price of the SARs as set forth in the Grant Notice is referred to as
the “Base Price.”  The effective date of grant of the SARs as
set forth in the Grant Notice is referred to as the “Award Date.”  The 
base price and the number of shares covered by the SARs are subject to
adjustment under Section 7.1 of the Plan (which provision of the Plan
shall equally apply to the SARs whether or not the SARs are settled under the
Plan).

 

Capitalized terms are defined in the Power-One, Inc.
2004 Stock Incentive Plan (the “Plan”) if not
defined herein.  The SARs have been
granted to the Grantee in addition to, and not in lieu of, any other form of
compensation otherwise payable or to be paid to the Grantee.  The Grant Notice and these Terms are collectively
referred to as the “SAR Agreement” applicable to the SAR.

 

2.                                      Vesting; Limits on Exercise.

 

The SARs shall vest and
become exercisable in percentage installments of the aggregate number of shares
subject to the SARs as set forth on the Grant Notice.  The SARs may be exercised only to the extent
the SARs are vested and exercisable.

 

·                  Cumulative Exercisability. 
To the extent that the SARs are vested and exercisable, the Grantee has the
right to exercise the SARs (to the extent not previously exercised), and such
right shall continue, until the expiration or earlier termination of the SARs.

 

·                  No Fractional SARs. 
Fractional SARs shall be disregarded, but may be cumulated.

 

·                  Minimum Exercise. 
No fewer than 100 SARs (subject to adjustment under Section 7.1 of
the Plan, whether or not the SARs are settled under the Plan) may be exercised
at any one time, unless the number exercised is the total number of SARs then
exercisable.

 

3.                                      Continuance of Employment
Required; No Employment/Service Commitment.

 

                Except for any vesting in connection with the Grantee’s
termination of employment or other vesting event pursuant to the terms of the
Grantee’s Employment Agreement with the Corporation entered into on the date
hereof (as it may be amended from time to time, the “Employment
Agreement”) or the Corporation’s Senior Executive Change in Control
Agreement to which the Grantee is a party (the “CIC
Agreement”), the vesting schedule applicable to the SARs requires
continued employment through each applicable vesting date as a 

 

1

 

condition to the vesting
of the applicable installment of the SARs and the rights and benefits under
this SAR Agreement.  Employment for only
a portion of the vesting period, even if a substantial portion, will not
entitle the Grantee to any proportionate vesting or avoid or mitigate a
termination of rights and benefits upon or following a termination of
employment or services as provided in Section 5 below or under the Plan
(which provisions of the Plan shall equally apply to the SARs whether or not
the SARs are settled under the Plan). Service solely as a director of the
Corporation or one of its Subsidiaries shall not be considered continued employment
for purposes of this SAR Agreement.

 

                Nothing contained in this SAR Agreement or the Plan
constitutes a continued employment or service commitment by the Corporation or
any of its Subsidiaries, affects the Grantee’s status, if he or she is an
employee, as an employee at will who is subject to termination without cause,
confers upon the Grantee any right to remain employed by or in service to the
Corporation or any Subsidiary, interferes in any way with the right of the
Corporation or any Subsidiary at any time to terminate such employment or
service, or affects the right of the Corporation or any Subsidiary to increase
or decrease the Grantee’s other compensation. 
Nothing in this paragraph, however, is intended to adversely affect any
independent contractual right of the Grantee without his consent hereto.

 

4.                                      Method of Exercise and
Payment of SARs.

 

4.1          The
SARs shall be exercisable by the delivery to the Secretary of the Corporation
(or such other person as the Administrator may require pursuant to such
administrative exercise procedures as the Administrator may implement from time
to time) of:

 

·                  a written notice stating the number of
SARs to be exercised or by the completion of such other administrative exercise
procedures as the Administrator may require from time to time,

 

·                  any written statements or agreements
required pursuant to Section 8.1 of the Plan (which provision of the Plan
shall equally apply to the SARs whether or not the SARs are settled under the
Plan); and

 

·                  satisfaction of the tax withholding
provisions of Section 8.5 of the Plan (which provision of the Plan shall
equally apply to the SARs whether or not the SARs are settled under the Plan).

 

4.2          Payment of SARs.

 

(A)          Amount.  Upon the exercise of the SARs and the
attendant surrender of an exercisable portion of the SARs, the Grantee will be
entitled to receive payment of an amount (subject to the tax withholding
provisions of Section 4.1) determined by multiplying:

 

·                  the difference (but not less than zero)
obtained by subtracting the Base Price of the SARs being exercised from the
per-share fair market value (determined in accordance with the applicable
provisions of the Plan, whether or not the 

 

2

 

                        SARs are settled under the Plan) of the Common Stock
as of the date of exercise (the “Exercise Date”),
by

 

·                  the number of SARs being exercised.

 

(B)           Form of
Payment.  The amount determined under
Section 4.2(A) will be paid to the Grantee on or as soon as
administratively practicable after the Exercise Date. If, prior to the
applicable Exercise Date, the Corporation’s stockholders approve an amendment
to the limitations on individual awards contained in Section 4.2 of the Plan
such that the Corporation may issue shares of Common Stock in respect of the
SARs (the “Plan Amendment”), the amount
determined under Section 4.2(A) shall be paid by the Corporation
through delivery to the Grantee of a number of shares of Common Stock (either
by delivering one or more certificates for such shares or by entering such
shares in book entry form, as determined by the Corporation in its discretion)
equal to (i) the amount of the payment determined under Section 4.2(A),
divided by (ii) the fair market value(determined in accordance with the
applicable provisions of the Plan, whether or not the SARs are settled under
the Plan) of a share of Common Stock as of the Exercise Date.  If the Corporation’s stockholders do not approve
the Plan Amendment prior to the applicable Exercise Date, the amount determined
under Section 4.2(A) shall be paid by the Corporation to the Grantee
in cash.  The Grantee shall have no
further rights with respect to any SARs that are paid or that terminate
pursuant to Section 5.

 

(C)           SARs Not Funded.
 SARs payable under this SAR Agreement
will be paid from the general assets of the Corporation, and no special or
separate reserve, fund or deposit will be made to assure payment of the
SARs.  Neither this SAR Agreement nor any
action taken pursuant to the provisions of this SAR Agreement will create, or
be construed to create, a trust of any kind or a fiduciary relationship between
the Corporation and the Grantee (or any other person).  To the extent that the Grantee (or any permitted
transferee) acquires a right to receive payment pursuant to any SAR hereunder,
such right will be no greater than the right of any unsecured general creditor
of the Corporation.

 

5.                                      Early Termination of
SARs.

 

5.1          Expiration Date.  Subject to
earlier termination as provided below in this Section 5, the SARs will
terminate on the “Expiration Date” set forth in the Grant Notice (the “Expiration Date”).

 

5.2          Possible Termination of SARs upon Certain Corporate Events. 
The SARs are subject to termination in connection with certain corporate
events as provided in Section 7.4 of the Plan (which provision of the Plan
shall equally apply to the SARs whether or not the SARs are settled under the
Plan).

 

5.3          Termination of SARs upon a Termination of Grantee’s Employment.  Subject to earlier termination on the Expiration Date
of the SARs or pursuant to Section 5.2 above and except as provided in the
Employment Agreement or the CIC Agreement, if the Grantee ceases to be employed
by the Corporation or a Subsidiary (the date that the Grantee’s employment with

 

3

 

the Corporation or a Subsidiary terminates is referred to as the
Grantee’s “Employment Termination Date”), any
portion of the SARs that is not vested on the Employment Termination Date shall
terminate on the Employment Termination Date.  If the Grantee’s employment with the
Corporation or a Subsidiary is terminated by the Corporation for Cause (as
defined below), the SARs (whether vested or not) shall terminate on the
Employment Termination Date.

 

5.4          Termination of SARs upon a Termination of Grantee’s
Employment and Services.  Subject to earlier termination
on the Expiration Date of the SARs or pursuant to Sections 5.2 and 5.3 above,
if the Grantee both ceases to be employed by the Corporation or a Subsidiary
and ceases to provide services to the Corporation or a Subsidiary as a director,
the following rules shall apply (the last day that the Grantee is either
employed by or providing services to the Corporation or a Subsidiary as a
director is referred to as the Grantee’s “Severance Date”):

 

·                  other than as expressly provided below in
this Section 5.4, (a) the Grantee will have until the date that is 3
months after his or her Severance Date to exercise the SARs (or portion thereof)
to the extent the SARs are vested on the Severance Date or become vested as of
any Severance Date that is also an Employment Termination Date, and  (b) the SARs, to the extent exercisable
for the 3-month period following the Severance Date and not exercised during
such period, shall terminate at the close of business on the last day of the 3-month
period;

 

·                  if the Grantee’s Severance Date occurs as
a result of the Grantee’s death or Disability (as defined below), (a) the
Grantee (or his beneficiary or personal representative, as the case may be)
will have until the date that is 12 months after the Grantee’s Severance Date
to exercise the SARs to the extent the SARs are vested on the Severance Date or
become vested as of any Severance Date that is also an Employment Termination
Date, and (b) the SARs, to the extent exercisable for the 12-month period
following the Severance Date and not exercised during such period, shall
terminate at the close of business on the last day of the 12-month period;

 

“Disability”
for purposes of the SARs shall have the same meaning as is specified in the
Employment Agreement. “Cause” for
purposes of the SARs shall have the same meaning as is specified in the
Employment Agreement, provided that following the occurrence of a “change in
control’ as defined in the CIC Agreement, the cause definition contained in the
CIC Agreement shall apply for purposes of the SARs.

 

In all events the SARs
are subject to earlier termination on the Expiration Date of the SARs or as
contemplated by Section 5.2.  The
Administrator shall be the sole judge of whether the Grantee continues to
render employment or services for purposes of this SAR Agreement.

 

6.                                      Non-Transferability.

 

The SARs and any other
rights of the Grantee under this SAR Agreement or the Plan (to the extent the
SARs are settled under the Plan) are nontransferable and exercisable only by the
Grantee, except as set forth in Section 5.7 of the Plan (which provision
of the Plan shall equally apply to the SARs whether or not the SARs are settled
under the Plan).

 

4

 

7.                                      Notices.

 

Any notice to be given
under the terms of this SAR Agreement shall be in writing and addressed to the
Corporation at its principal office to the attention of the Secretary, and to
the Grantee at the address last reflected on the Corporation’s payroll records,
or at such other address as either party may hereafter designate in writing to
the other.  Any such notice shall be delivered
in person or shall be enclosed in a properly sealed envelope addressed as
aforesaid, registered or certified, and deposited (postage and registry or
certification fee prepaid) in a post office or branch post office regularly
maintained by the United States Government. 
Any such notice shall be given only when received, but if the Grantee is
no longer employed by the Corporation or a Subsidiary, shall be deemed to have
been duly given five business days after the date mailed in accordance with the
foregoing provisions of this Section 7.

 

8.                                      Plan.

 

Whether or not the SARs
are settled under the Plan, the Grantee agrees to be bound by the terms of the
Plan and this SAR Agreement.  The Grantee
acknowledges having read and understanding the Plan, the Prospectus for the
Plan, and this SAR Agreement.  Unless
otherwise expressly provided in other sections of this SAR Agreement,
provisions of the Plan that confer discretionary authority on the Board or the
Administrator do not and shall not be deemed to create any rights in the
Grantee unless such rights are expressly set forth herein or are otherwise in
the sole discretion of the Board or the Administrator so conferred by
appropriate action of the Board or the Administrator under the Plan after
the date hereof.  Notwithstanding the
foregoing or any other provision of this SAR Agreement, Section 7.7 of the
Plan shall not be applicable to the SARs.

 

9.                                      Entire Agreement.

 

This SAR Agreement, the
Plan, the Employment Agreement and the CIC Agreement together constitute the
entire agreement and supersede all prior understandings and agreements, written
or oral, of the parties hereto with respect to the subject matter hereof.  The Plan and this SAR Agreement may be
amended only in the manner provided for pursuant to Section 8.6 of the
Plan (which provision of the Plan shall equally apply to the SARs whether or
not the SARs are settled under the Plan). 
Such amendment must be in writing and signed by the Corporation.  The Corporation may, however, unilaterally
waive any provision hereof in writing to the extent such waiver does not
adversely affect the interests of the Grantee hereunder, but no such waiver shall
operate as or be construed to be a subsequent waiver of the same provision or a
waiver of any other provision hereof.

 

10.                               Governing Law.

 

This SAR Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware.

 

11.                               Effect of this Agreement.

 

Subject to the
Corporation’s right to terminate the SAR in the manner provided for pursuant to
Section 7.4 of the Plan (which provision of the Plan shall equally apply
to the SARs 

 

5

 

whether or not the SARs
are settled under the Plan), this SAR Agreement shall be assumed by, be binding
upon and inure to the benefit of any successor or successors to the
Corporation.

 

12.                               Counterparts.

 

This SAR Agreement may be
executed simultaneously in any number of counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.

 

13.                               Section Headings.

 

The section headings of
this SAR Agreement are for convenience of reference only and shall not be
deemed to alter or affect any provision hereof.

 

6

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