Document:

exv10w39

 

Exhibit 10.39

Stock Award Agreement

	 	 	 
	Type(s) of Award:

	 	Stock options, including without
limitation, global stock options and
key contributor stock options;
and/or restricted stock units
(“RSUs”).
	 
	 	 
	

	 	When vested, each stock option
entitles the holder to purchase one
share of Tellabs common stock at the
applicable option exercise price as
set forth in the Award Statement.

When vested, each RSU entitles the
holder to receive one share of
Tellabs common stock for each vested
RSU.
	 
	 	 
	Vesting:

	 	The date(s) upon which the stock
options become exercisable are set
forth on the Award Statement,
together with the expiration date of
the option.

The date(s) upon which the RSUs vest
are set forth on the Award
Statement.

In the event of termination of
employment due to death or
disability, or upon a Change in
Control, the options and RSUs will
become fully vested.
	 
	 	 
	Payment:

	 	The option may be exercised by
delivering a written notice,
including an electronic notice, to
the Company providing the number of
option shares to be exercised and
accompanied by full payment for the
option shares, including any tax
withholding due. The option price
may be paid to the Company in full
in cash or check made payable to the
Company, by wire transfer, or by
tendering previously-acquired shares
which have been held for a period of
not less than six months. No
payment is required with respect to
RSUs.
	 
	 	 
	Effect of Termination of
Employment

	 	Except for termination due to death
or disability, no further vesting
will occur after termination of
employment, and all unvested options
and RSUs will be forfeited and/or
cancelled.
	 
	 	 
	

	 	Vested stock options may be
exercised for a period of three
months following termination of
employment, seven months if
termination occurs after a Change in
Control, or one year if termination
is due to death or disability.
However, in no event may an option
be exercised after the expiration
date set forth on the Award Statement.
	 
	 	 
	U.S. Federal Income Tax
Considerations:

	 	The following discussion is a
summary of certain current U.S.
federal income tax consequences
relating to stock options and RSUs.
	 
	 	 
	

	 	Stock Options. No income is
recognized upon the grant of a
nonqualified stock option. Upon
exercise, ordinary income is

 

 

	 	 	 
	

	 	recognized in an amount equal to the
excess of the fair market value of a
share of common stock on the date of
exercise over the exercise price
multiplied by the number of options
exercised. A subsequent sale or
exchange of such shares will result
in gain or loss measured by the
difference between (a) the exercise
price, increased by any compensation
reported upon the participant’s
exercise of the option, and (b) the
amount realized on such sale or
exchange. Any gain or loss will be
capital in nature if the shares were
held as a capital asset and will be
long-term if such shares were held
for more than one year.
	 
	 	 
	

	 	Restricted Stock Units. No income
is recognized upon receipt of an
award of RSUs. Upon vesting, income
equal to the fair market value of
common stock issued is recognized.
The capital gain or loss holding
period for any common stock
distributed under an award will
begin when ordinary income is
recognized, and any subsequent
capital gain or loss will be
measured by the difference between
the ordinary income recognized and
the amount received upon sale or
exchange of the shares.
	 
	 	 
	Transferability:

	 	No option or RSU granted under the
Plan may be sold, transferred,
pledged, assigned, or otherwise
alienated or hypothecated, otherwise
than by will or by the laws of
descent and distribution. All
options granted under the Plan are
exercisable only by you during your
lifetime and by your designated
beneficiary in the event of your
death.
	 
	 	 
	Voting Rights/Dividends:

	 	Since stock options and RSUs do not
represent actual shares, no voting
rights arise upon receipt of stock
options or RSUs. Dividends, if any,
that would have been paid on the
underlying shares will be paid when
the stock option is exercised or
when the RSUs vest and such shares
are distributed.
	 
	 	 
	Tax Withholding:

	 	The holder will make appropriate
arrangements with the Company for
the satisfaction of all Federal,
state and local income and
employment tax withholding
requirements applicable to the
option exercise. The Company may
deduct or withhold from shares
issuable upon exercise of options or
the vesting of RSUs, a number of
shares having a fair market value
equal to the amount sufficient to
satisfy the minimum statutory
Federal, state and local tax
(including the FICA and Medicare tax
obligation) withholding required by
law with respect to the exercise or
distribution of shares made under or
as a result of the Plan.
	 
	 	 
	Scope of Terms:

	 	This discussion does not purport to
be complete, and does not cover,
among other things, foreign, state
and local tax treatment. For
employees outside the United States
the Company may modify the
provisions of these terms to comply
with applicable law, regulation or
accounting rules.

 

 

Stock Award Statement

Notice is hereby given of the following stock option grant (the “Option”) to purchase shares of
the Common Stock of Tellabs, Inc. (the “Company”):

	 	 	 
	Holder:

	 	Grant Date:
	 
	 	 
	Number of Option Shares:

	 	Exercise Price:
	 
	 	 
	Vesting Commencement Date:

	 	Expiration Date:
	 
	 	 
	Type of Option:

	 	Grant Number:
	 
	 	 
	SAP ID:

	 	Band:
	 
	 	 
	Location:

	 	Hire Date:

Exercise Schedule: The Option shall become exercisable with respect to twenty percent (20%) of
the Option Shares upon Holder’s completion of one (1) year of Service measured from the Vesting
Commencement Date, twenty percent (20%) of the Options Shares upon Holder’s completion of two (2)
years of Service measured from the Vesting Commencement Date and sixty percent (60%) of the Option
Shares upon Holder’s completion of three (3) years of Service measured from the Vesting
Commencement Date.

This Option was issued from the Tellabs, Inc. 2004 Incentive Compensation Plan (the “Plan”). If
you accept the terms of this Option, you shall be deemed to have consented to be bound by all of
the terms and conditions of this Stock Award Statement, which includes the accompanying Stock Award
Agreement and the Plan. You can access the Plan and the Summary Plan Description (SPD) via
HROnline at http://hronline.hq.tellabs.com. If any differences should arise between this Stock
Award Statement and the Plan, then the Plan will govern.

No Employment or Service Contract. Nothing in this Statement or in the attached Stock Award
Agreement or in the Plan shall confer upon Holder any right to continue in Service in any period of
specific duration or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining Holder) or of Holder, which rights are hereby
expressly reserved by each, to terminate Holder’s Service at any time for any reason, with or
without cause.

	 	 	 	 	 
	Dated:	 	TELLABS, INC.
	

	 	By:	 	 
	 	 	 	 

	 
	 	 	 	 
	

	 	Title:
	 	Executive Vice President, Human Resources
	 	 	 	 

	 
	 	 	 	 
	 	 	OPTIONEE:
	 
	 	 	 	 
	 
	 	 	 	 
	

	 	Address:	 	 
	 
	 	 	 	 
	 	 	 	 

	 
	 	 	 	 
	 	 	 	 

	 
	 	 	 	 
	 	 	 	 

	 
	 	 	 	 
	 
	 	 	 	 
	ATTACHMENTS:
	 	 	 	 
	 
	 	 	 	 
	Stock Award Agreement
	 	 	 	 

This Stock Award Statement, including the accompanying Stock Award Agreement, constitutes part of a
prospectus covering securities registered under the Securities Act of 1933, as amended.

 

 

Stock Award Statement

Notice is hereby given of the following stock option grant (the “Option”) to purchase shares of the
Common Stock of Tellabs, Inc. (the “Company”):

	 	 	 
	Holder:

	 	Grant Date:
	 
	 	 
	Number of Option Shares:

	 	Exercise Price:
	 
	 	 
	Vesting Commencement Date:

	 	Expiration Date:
	 
	 	 
	Type of Option:

	 	Grant Number:
	 
	 	 
	SAP ID:

	 	Band:
	 
	 	 
	Location:

	 	Hire Date:

Exercise Schedule: The Option shall become exercisable with respect to thirty-three (33%) of the
Option Shares upon Holder’s first anniversary of the Vesting Commencement Date and shall become
exercisable for the balance of the Option shares in twenty-four (24) successive equal monthly
installments upon Optionee’s completion of each additional month of service over the twenty-four
(24) month period measured from the first anniversary of the Vesting Commencement Date.

This Option was issued from the Tellabs, Inc. 2004 Incentive Compensation Plan (the “Plan”). If
you accept the terms of this Option, you shall be deemed to have consented to be bound by all of
the terms and conditions of this Stock Award Statement, which includes the accompanying Stock Award
Agreement and the Plan. You can access the Plan and the Summary Plan Description (SPD) via
HROnline at http://hronline.hq.tellabs.com. If any differences should arise between this Stock
Award Statement and the Plan, then the Plan will govern.

No Employment or Service Contract. Nothing in this Statement or in the attached Stock Award
Agreement or in the Plan shall confer upon Holder any right to continue in Service in any period of
specific duration or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining Holder) or of Holder, which rights are hereby
expressly reserved by each, to terminate Holder’s Service at any time for any reason, with or
without cause.

	 	 	 	 	 
	Dated:	 	TELLABS, INC.
	

	 	By:	 	 
	 	 	 	 

	 
	 	 	 	 
	

	 	Title:
	 	Executive Vice President, Human Resources
	 	 	 	 

	 
	 	 	 	 
	 	 	OPTIONEE:
	 
	 	 	 	 
	 
	 	 	 	 
	

	 	Address:	 	 
	 
	 	 	 	 
	 	 	 	 

	 
	 	 	 	 
	 	 	 	 

	 
	 	 	 	 
	 	 	 	 

	 
	 	 	 	 
	 
	 	 	 	 
	ATTACHMENTS:
	 	 	 	 
	 
	 	 	 	 
	Stock Award Agreement
	 	 	 	 

This Stock Award Statement, including the accompanying Stock Award Agreement, constitutes part of a
prospectus covering securities registered under the Securities Act of 1933, as amended.exv10w40

 

EXHIBIT 10.40

ADVANCED FIBRE COMMUNICATIONS

1993 STOCK OPTION/STOCK ISSUANCE PLAN

(AS AMENDED THROUGH SEPTEMBER 15, 1994)

ARTICLE I

GENERAL PROVISIONS

	 	1.  	PURPOSE

     A. This 1993 Stock Option/Stock Issuance Plan, as amended (“Plan”)
is intended to promote the interests of Advanced Fibre Communications, a
California corporation (the “Corporation”), by providing eligible individuals
who are responsible for the management, growth and financial success of the
Corporation or who otherwise render valuable services to the Corporation with
the opportunity to acquire a proprietary interest, or increase their proprietary
interest, in the Corporation and thereby provide them with an incentive to
remain in the service of the Corporation (or any parent or subsidiary
corporation).

     B. For purposes of the Plan, the following provisions shall be
applicable in determining the parent and subsidiary corporations of the

Corporation:

          (i) Any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation shall be considered to be a
PARENT corporation of the Corporation, provided each such corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

          (ii) Each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation shall be considered to be a
SUBSIDIARY of the Corporation, provided each such corporation (other than the
last corporation) in the unbroken chain owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.

	 	2.  	STRUCTURE OF THE PLAN

     A. The Plan shall be divided into two (2) separate components: the
Option Grant Program specified in Article II and the Stock Issuance Program
specified in Article III. Under the Option Grant Program, eligible individuals
may, at the discretion of the Plan Administrator, be granted options to purchase
shares of the Common Stock (as defined below) at a discount of up to fifteen
percent (15%) of the Fair Market Value of such shares on the grant date. Such
securities may be fully vested when issued or may vest

 

 

over time. Under the Stock Issuance Program, eligible individuals may effect
immediate purchases of the Common Stock (as defined below) at discounts from the
Fair Market Value of such shares of up to fifteen percent (15%). Such shares
may be fully vested when issued or may vest over time.

     B. The provisions of Articles I and IV of the Plan shall apply to
both the Option Grant Program and the Stock Issuance Program and shall

accordingly govern the interests of all individuals under the Plan.

	 	3.  	ADMINISTRATION OF THE PLAN

     A. The Plan shall be administered by the Corporation’s Board of
Directors (the “Board”). The Board, however, may at any time appoint a
committee (“Committee”) of two (2) or more Board members and delegate to such
Committee one or more of the administrative powers allocated to the Board
pursuant to the provisions of the Plan. Members of the Committee shall serve
for such period of time as the Board may determine and shall be subject to
removal by the Board at any time. The Board may also at any time terminate the
functions of the Committee and reassume all powers and authority previously
delegated to the Committee.

     B. The Plan Administrator (either the Board or the Committee, to the
extent the Committee is at the time responsible for the administration of the
Plan) shall have full power and authority (subject to the express provisions of
the Plan) to establish such rules and regulations as it may deem appropriate for
proper plan administration and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding option grants or share
issuances as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest
under the Plan or any outstanding option or share issuance.

	 	4.  	OPTION GRANTS AND SHARE ISSUANCES

     A. The persons eligible to receive option grants pursuant to the
Option Grant Program (“Optionee”) and/or share issuances under the Stock

Issuance Program (“Participant”) are limited to the following:

          (i) employees (including officers and directors) of the
Corporation (or its parent or subsidiary corporations) who are responsible for
the management, growth and financial success of the Corporation (or its parent
or subsidiary corporations);

          (ii) non-employee members of the Board or the non-employee
members of the board of directors of any parent or subsidiary corporations; and

          (iii) consultants who provide valuable services to the Corporation
(or its parent or subsidiary corporations).

2.

 

 

     B. The Plan Administrator shall have full authority to determine,
(I) with respect to the option grants made under the Plan, which eligible
individuals are to receive option grants, the number of shares to be covered by
each such grant, the status of the granted option as either an incentive stock
option (“Incentive Option”) which satisfies the requirements of Section 422 of
the Internal Revenue Code or a non-statutory option not intended to meet such
requirements, the time or times at which each granted option is to become
exercisable and the maximum term for which the option may remain outstanding,
and (II) with respect to share issuances under the Stock Issuance Program, the
number of shares to be issued to each Participant, the vesting schedule (if any)
to be applicable to the issued shares, and the consideration to be paid by the
individual for such shares.

     C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with Article II of the Plan or to effect share
issuances in accordance with Article III of the Plan.

	 	5.  	STOCK SUBJECT TO THE PLAN

     A. The stock issuable under the Plan shall be shares of the
Corporation’s authorized but unissued or reacquired common stock (“Common
Stock”). The maximum number of shares which may be issued over the term of the
Plan shall not exceed 850,000 shares. The total number of shares issuable under
the Plan shall be subject to adjustment from time to time in accordance with the
provisions of Section 5.C of this Article I.

     B. Shares subject to the unexercised portion of any outstanding
options under the Plan which expire or terminate prior to exercise in full or
which are otherwise cancelled in accordance with the cancellation-regrant
provisions of Section 4 of Article II will be available for subsequent option
grants or stock issuances under the Plan. Shares issued under either the Option
Grant Program or the Stock Issuance Program (whether as vested or unvested
shares) and repurchased by the Corporation shall NOT be available for subsequent
option grants or stock issuances under the Plan.

     C. In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without receipt of consideration, then
appropriate adjustments shall be made to (i) the aggregate number and/or class
of shares issuable under the Plan and (ii) the aggregate number and/or class of
shares and the option price per share in effect under each outstanding option in
order to prevent the dilution or enlargement of benefits thereunder. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.

     D. Common Stock issuable under the Plan, whether under the Option
Grant Program or the Stock Issuance Program, may be subject to such restrictions
on transfer, repurchase rights or other restrictions as may be determined by the
Plan Administrator.

3.

 

 

ARTICLE II

OPTION GRANT PROGRAM

	 	1.  	TERMS AND CONDITIONS OF OPTIONS

     Options granted pursuant to the Plan shall be authorized by action of
the Plan Administrator and may, at the Plan Administrator’s discretion, be
either Incentive Options or nonstatutory options. Individuals who are not
Employees (as defined in subsection (c) below) may only be granted non-statutory
options. Each granted option shall be evidenced by one or more instruments in
the form approved by the Plan Administrator; PROVIDED, however, that each such
instrument shall comply with the terms and conditions specified in Sections 1
and 3 of this Article II. Each instrument evidencing an Incentive Option shall,
in addition, be subject to the applicable provisions of Section 2 of this
Article II.

     A. OPTION PRICE.

          (1) The option price per share shall be fixed by the Plan
Administrator. In no event, however, shall the option price per share be less
than eighty-five percent (85%) of the Fair Market Value of a share of Common
Stock on the date of the option grant.

          (2) If the individual to whom the option is granted is the owner
of stock (as determined under Section 424(d) of the Internal Revenue Code)
possessing ten percent (10%) or more of the total combined voting power of all
classes of stock of the Corporation or any parent or subsidiary corporation
(such individual to be designated a “10% Shareholder”), then the option price
per share shall not be less than one hundred ten percent (110%) of the Fair
Market Value of one share of Common Stock on the date of the option grant.

          (3) The option price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Article IV, Section 1, be
payable in cash or check drawn to the Corporation’s order.

     Should the Corporation’s outstanding Common Stock be registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the “1934
Act”) at the time the option is exercised, then the option price may also be
paid as follows:

            a. in shares of Common Stock held by Optionee for the
requisite period necessary to avoid a charge to the Corporation’s earnings
for financial reporting purposes and valued at Fair Market Value on the
exercise date; or

            b. through a special sale and remittance procedure
pursuant to which Optionee is to concurrently provide irrevocable written

instructions (I) to

4.

 

 

a Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, an amount sufficient to cover the
aggregate option price payable for the purchased shares plus all applicable
Federal, state, and local income and employment taxes required to be
withheld by the Corporation by reason of such purchase and (II)
concurrently to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to effect the
sale transaction.

          Except to the extent such sale and remittance procedure is
utilized, payment of the option price must occur at the time the option is

exercised.

          (4) The Fair Market Value of a share of Common Stock on any
relevant date under the Plan shall be determined in accordance with the

following provisions:

            a. If the Common Stock is not at the time listed or
admitted to trading on any stock exchange but is traded on the Nasdaq
National Market, the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers through its
Nasdaq system or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.

            b. If the Common Stock is at the time listed or admitted
to trading on any stock exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question on
the stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.

            c. If the Common Stock is at the time neither listed nor
admitted to trading on any stock exchange nor traded on the Nasdaq National
Market, then such Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.

     B. TERM AND EXERCISE OF OPTIONS. Each option granted under the Plan
shall be exercisable at such time or times, during such period, and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the stock option agreement evidencing such option. However, no option
granted under the Plan shall have a term in excess of ten (10) years from the
grant date, and no option granted to a 10% Shareholder shall have a term in
excess of five (5) years from the grant date. During the

5.

 

 

lifetime of Optionee, the option shall be exercisable only by Optionee and shall
not be assignable or transferable by Optionee otherwise than by will or by the
laws of descent and distribution following Optionee’s death.

     C. TERMINATION OF SERVICE.

          (1) Except to the extent otherwise provided pursuant to this
subsection, the following provisions shall govern the exercise period applicable
to any options held by Optionee at the time of cessation of Service or death:

            a. Should Optionee cease to remain in Service for any
reason other than death or Disability, then the period during which each
outstanding option held by such Optionee is to remain exercisable shall be
limited to the three (3)-month period following the date of such cessation
of Service.

            b. Should such Service terminate by reason of Disability,
then the period during which each outstanding option held by the optionee
is to remain exercisable shall be limited to the six (6)-month period
following the date of such cessation of Service. However, should such
Disability be deemed to constitute Permanent Disability, then the period
during which each outstanding option held by the optionee is to remain
exercisable shall be extended by an additional six (6) months so that the
exercise period shall be limited to the twelve (12)-month period following
the date of the optionee’s cessation of Service by reason of such Permanent
Disability.

            c. Should Optionee die while holding one or more
outstanding options, then the period during which each such option is to
remain exercisable shall be limited to the twelve (12)-month period
following the date of Optionee’s death. During such limited period, the
option may be exercised by the personal representative of Optionee’s estate
or by the person or persons to whom the option is transferred pursuant to
Optionee’s will or in accordance with the laws of descent and distribution.

            d. Under no circumstances, however, shall any such option
be exercisable after the specified expiration date of the option term.

            e. During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of Optionee’s
cessation of Service. Upon the expiration of the applicable exercise
period or (if earlier) upon the expiration of the option term, the option
shall terminate and cease to be exercisable for any vested shares for which
the option has not been exercised. However, the option shall, immediately
upon Optionee’s cessation of Service, terminate and cease to be outstanding
with respect to any option shares for which the option is not at that time
exercisable or in which Optionee is not otherwise at that time vested.

6.

 

 

          (2) The Plan Administrator shall have full power and authority
to extend the period of time for which the option is to remain exercisable
following Optionee’s cessation of Service or death from the limited period in
effect under this Article II to such greater period of time as the Plan
Administrator shall deem appropriate; PROVIDED, that in no event shall such
option be exercisable after the specified expiration date of the option term.

     For purposes of the Plan, SERVICE shall mean the provision of services
to the Corporation (or one or more of its parent or subsidiary corporations) by
an individual in the capacity of an Employee, a non-employee member of the board
of directors, or a consultant. Optionee shall be considered to be an EMPLOYEE
for so long as such individual remains in the employ of the Corporation (or one
or more of its parent or subsidiary corporations).

     For purposes of the Plan, DISABILITY shall mean the inability of an
individual to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment and shall be determined by
the Plan Administrator on the basis of such medical evidence as the Plan
Administrator deems warranted under the circumstances. Disability shall be
deemed to constitute PERMANENT DISABILITY in the event that such Disability is
expected to result in death or has lasted or can be expected to last for a
continuous period of not less than twelve (12) months.

     D. SHAREHOLDER RIGHTS. An Optionee shall have none of the rights of
a shareholder with respect to any shares covered by the option until such
Optionee shall have exercised the option and paid the option price.

     E. REPURCHASE RIGHTS. The shares of Common Stock issued under the
Plan shall be subject to certain repurchase rights of the Corporation
in accordance with the following provisions:

          (1) UNVESTED SHARES. The Plan Administrator shall have the
discretion to authorize the issuance of unvested shares of Common Stock under
the Plan. Should Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the option price paid per
share, all or (at the discretion of the Corporation and with the consent of
Optionee) any of those unvested shares. The terms and conditions upon which
such repurchase right shall be exercisable (including the period and procedure
for exercise and the appropriate vesting schedule for the purchased shares)
shall be established by the Plan Administrator and set forth in the instrument
evidencing such repurchase right. In no event, however, may the Plan
Administrator impose a vesting schedule upon any option granted under the Plan
or any shares of Common Stock issued under the Plan which is more restrictive
than twenty percent (20%) per year annual vesting, beginning one year after the
grant date of the option.

     All outstanding repurchase rights under the Plan shall terminate
automatically upon the occurrence of any Corporate Transaction under Section 3
of this Article II, except

7.

 

to the extent the repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with the Corporate Transaction.

          (2) FIRST REFUSAL RIGHTS. Until such time as the Corporation’s
outstanding shares of Common Stock are first registered under Section 12(g) of
the 1934 Act, the Corporation shall have the right of first refusal with respect
to any proposed sale or other disposition by Optionee (or any successor in
interest by reason of purchase, gift or other mode of transfer) of any shares of
Common Stock issued under the Plan. Such right of first refusal shall be
exercisable by the Corporation (or its assignees) in accordance with the terms
and conditions established by the Plan Administrator and set forth in the
instrument evidencing such right.

	 	2.  	INCENTIVE OPTIONS

     The terms and conditions specified below shall be applicable to all
Incentive Options granted under the Plan. Incentive Options may only be granted
to individuals who are Employees. Options which are specifically designated as
“nonstatutory” options when issued under the Plan shall NOT be subject to such
terms and conditions.

     A. OPTION PRICE. The option price per share of the Common Stock
subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the Fair Market Value of a share of Common Stock on the grant
date.

     B. DOLLAR LIMITATION. The aggregate Fair Market Value (determined
as of the respective date or dates of grant) of the Common Stock for which one
or more options granted to any Employee under this Plan (or any other option
plan of the Corporation or any parent or subsidiary corporation) may for the
first time become exercisable as incentive stock options under the Federal tax
laws during any one calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000). To the extent the Employee holds two or more such
options which become exercisable for the first time in the same calendar year,
the foregoing limitation on the exercisability of such options as Incentive
Options under the Federal tax laws shall be applied on the basis of the order in
which such options are granted.

     Except as modified by the preceding provisions of this Section 2, all
the provisions of the Plan shall be applicable to the Incentive Options granted
hereunder.

	 	3.  	CORPORATE TRANSACTION

     A. In the event of one or more of the following shareholder-approved
transactions (“Corporate Transaction”):

   (i) a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which is to

change the State of the Corporation’s incorporation;

8.

 

 

   (ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Corporation in complete liquidation or dissolution of

the Corporation; or

   (iii) any reverse merger in which the Corporation is the surviving
entity but in which all of the Corporation’s outstanding voting stock is

transferred to the acquiring entity or its wholly-owned subsidiary,

then each option outstanding under the Plan shall terminate upon the
consummation of such Corporate Transaction and cease to be exercisable, unless
assumed by the successor corporation or parent thereof.

     B. Each outstanding option which is assumed in connection with the
Corporate Transaction or is otherwise to continue in effect shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would be issuable, in
consummation of such Corporate Transaction, to an actual holder of the same
number of shares of Common Stock as are subject to such option immediately prior
to such Corporate Transaction, and appropriate adjustments shall also be made to
the option price payable per share, provided the aggregate option price payable
for such securities shall remain the same. Appropriate adjustments shall also
be made to the class and number of securities available for issuance under the
Plan following the consummation of such Corporate Transaction.

     C. The grant of options under this Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.

	 	4.  	CANCELLATION AND NEW GRANT OF OPTIONS

     The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options under the Plan covering the same or different
numbers of shares of Common Stock but having an option price per share not less
than eighty-five percent (85%) of the Fair Market Value per share of Common
Stock on the new grant date (or one hundred percent (100%) of such Fair Market
Value in the case of an Incentive Option or, in the case of an option grant to a
10% Shareholder, not less than one hundred and ten percent (110%) of such Fair
Market Value).

	 	5.  	EXTENSION OF EXERCISE PERIOD

     The Plan Administrator shall have full power and authority to extend
(either at the time the option is granted or at any time while the option
remains outstanding) the period of time for which the option is to remain
exercisable following Optionee’s cessation of Service, from the limited period
otherwise applicable under subsection 1(c) of Article II, to such greater period
of time as the Plan Administrator may deem appropriate under the

9.

 

circumstances. In no event, however, shall such option be exercisable after the
specified expiration date of the option term.

	 	6.  	CASH-OUT OF OPTIONS

     A. One or more Optionees may, in the Plan Administrator’s sole
discretion, be granted limited cash-out rights to operate in tandem with their
outstanding options under the Plan; such limited cash-out rights shall be
exercisable only if the Corporation’s outstanding Common Stock is registered
under Section 12(g) of the 1934 Act and Optionee is subject to the short-swing
profit restrictions of the Federal securities laws. Any option with such a
limited right in effect for at least six (6) months shall automatically be
cancelled upon the acquisition of fifty percent (50%) or more of the
Corporation’s outstanding Common Stock (excluding for purposes of calculating
such percent the Common Stock holdings of officers and directors of the
Corporation who are subject to the short-swing profit restrictions of the
Federal securities laws) pursuant to a tender or exchange offer made by a person
or group of related persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by or is under common control
with the Corporation) which the Board does not recommend the Corporation’s
shareholders to accept. In return for the cancelled option, Optionee shall be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Cash-Out Price of the shares of Common Stock in which Optionee
is vested under the cancelled option over (ii) the aggregate option price
payable for such vested shares. The cash distribution payable upon such
cancellation shall be made within five (5) days following the completion of such
tender or exchange offer, and neither the approval of the Plan Administrator nor
the consent of the Board shall be required in connection with such cancellation
and distribution.

     B. For purposes of calculating the cash distribution, the Cash-Out
Price per share of the vested Common Stock subject to the cancelled option shall
be deemed to be equal to the GREATER of (i) the value per share on the date of
surrender, as determined in accordance with the valuation provisions of
subsection 1(a)(4) of Article II, or (ii) the highest reported price per share
paid in effecting the tender or exchange offer. However, if the cancelled
option is an Incentive Option, then the Cash-Out Price shall not exceed the
value per share determined under clause (i) above.

     C. The shares of Common Stock subject to any option cancelled for an
appreciation distribution in accordance with this Section 6 shall NOT be
available for subsequent option grants or share issuances under the Plan.

10.

 

 

ARTICLE III

STOCK ISSUANCE PROGRAM

	 	1.  	TERMS AND CONDITIONS OF STOCK ISSUANCES

     Shares of Common Stock shall be issuable under the Stock Issuance
Program through direct and immediate issuances without any intervening stock
option grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement (“Issuance Agreement”) which complies with each of the terms and
conditions of this Article III.

     A. ISSUE PRICE.

          (1) The purchase price per share shall be fixed by the Plan
Administrator, but in no event shall it be less than eighty-five percent (85%)
of the Fair Market Value of a share of Common Stock at the time of issuance.
However, if any individual to whom a share issuance is made hereunder is a 10%
Shareholder (as defined in subsection 1(a)(2) of Article II), then the purchase
price per share shall not be less than one hundred ten percent (110%) of the
Fair Market Value of a share of Common Stock at the time of issuance. Fair
Market Value shall be determined in accordance with Article II, Section 1(A)(4).

          (2) Shares shall be issued under the Plan for such consideration
as the Plan Administrator shall from time to time determine, provided that,
except as set forth in Article IV, Section 1, in no event shall shares be issued
for consideration other than

               (A) cash or check payable to the Corporation, or

               (B) past services rendered to the Corporation (or any
parent or subsidiary corporation).

     B. VESTING SCHEDULE.

          (1) The interest of a Participant in the shares of Common Stock
issued to him/her under the Plan may, in the absolute discretion of the Plan
Administrator, be fully and immediately vested upon issuance or may vest in one
or more installments in accordance with the vesting provisions of subsection
(B)(4). Except as otherwise provided in subsection (B)(2), the Participant may
not transfer any purchased shares in which he/she does not have a vested
interest. Accordingly, all unvested shares issued under the Plan shall bear the
restrictive legend specified in subsection (C)(1), until such legend is removed
in accordance with subsection (C)(2). The Participant, however, shall have all
the rights of a shareholder with respect to the shares of Common Stock issued to
him/her hereunder, whether or not his/her interest in such shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any cash dividends or other distributions paid or made with respect to
such shares. Any new, additional or different shares of stock

11.

 

 

or other property (including money paid other than as a regular cash dividend)
which the holder of unvested Common Stock may have the right to receive by
reason of a stock dividend, stock split, reclassification or other change
affecting the outstanding Common Stock as a class without the Corporation’s
receipt of consideration shall be issued subject to (i) the same vesting
requirements under subsection (B)(4) applicable to the unvested Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

          (2) As used in this Article III, the term “transfer” shall
include (without limitation) any sale, pledge, encumbrance, gift or other
disposition of such shares. However, the Participant shall have the right to
make a gift of unvested shares acquired under the Stock Issuance Program to
his/her spouse, parents or issue or to a trust established for such spouse,
parents or issue, provided the transferee of such shares delivers to the
Corporation a written agreement to be bound by all the provisions of the Plan
and the Issuance Agreement executed by the Participant at the time of his/her
acquisition of the gifted shares.

          (3) Should the Participant cease Service for any reason while
his/her interest in the Common Stock remains unvested, then the Corporation
shall have the right to repurchase, at the original purchase price paid by the
Participant, all or (at the discretion of the Corporation and with the consent
of the Participant) any shares in which the Participant is not at the time
vested, and the Participant shall thereafter cease to have any further
shareholder rights with respect to the repurchased shares.

          (4) Any shares of Common Stock issued under the Stock Issuance
Program which are not vested at the time of such issuance shall vest in one or
more installments thereafter. The elements of the vesting schedule, namely the
performance or service objectives to be completed or achieved, the number of
installments in which the shares are to vest, the interval or intervals (if any)
which are to lapse between installments and the effect which death, Disability
or other event designated by the Plan Administrator is to have upon the vesting
schedule, shall be determined by the Plan Administrator and specified in the
Issuance Agreement. In no event, however, may the Plan Administrator impose a
vesting schedule upon any stock issuance effected under the Stock Issuance
Program which is more restrictive than twenty percent (20%) per year annual
vesting, beginning one year after the issue date of the Common Stock.

          (5) The Plan Administrator may in its discretion elect not to
exercise, in whole or in part, its repurchase rights with respect to any
unvested Common Stock or other assets which would otherwise at the time be
subject to repurchase pursuant to the provisions of subsection (B)(3).

          (6) No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until, in the opinion of counsel for the
Corporation (or its successor in the event of any Corporate Transaction), there
shall have been compliance with all applicable requirements of the Federal and
state securities laws and all other applicable legal and regulatory
requirements.

12.

 

     C. STOCK LEGENDS.

          (1) Each certificate representing unvested shares of Common
Stock (or other securities) issued under the Stock Issuance Program shall bear a
restrictive legend substantially as follows:

     “The securities represented by this certificate are unvested and
are accordingly subject to repurchase by the Corporation pursuant to
the provisions of the Issuance Agreement between the Corporation and
the registered holder of the securities (or his/her predecessor in
interest). Such agreement imposes restrictions on the transferability
of the securities represented by this certificate and grants certain
repurchase rights to the Corporation in the event the registered
holder (or predecessor in interest) terminates his/her employment or
service with the Corporation. A copy of such agreement is on file at
the principal office of the Corporation.”

          (2) As the interest of the Participant vests with respect to any
stock certificate representing shares acquired under the Stock Issuance Program,
the Corporation shall, upon the Participant’s delivery of such certificate
during the period or periods designated each year by the Plan Administrator,
issue a new certificate for the vested shares without the restrictive legend of
subsection (c)(1) and a second certificate for the balance of the shares with
such legend. If the Corporation repurchases any unvested shares of the
Participant pursuant to the provisions of subsection (b)(3), the Corporation
shall at the time the repurchase is effected deliver a new certificate, without
the restrictive legend of subsection (c)(1), representing the number of shares
(if any) in which the Participant is vested and which are accordingly no longer
subject to repurchase by the Corporation.

     D. RIGHT OF FIRST REFUSAL. Until such time as the Corporation’s
outstanding shares of Common Stock are first registered under Section 12(g) of
the 1934 Act, the Corporation shall have a right of first refusal with respect
to any proposed disposition by the Participant (or any successor in interest by
reason of purchase, gift or other mode of transfer) of one or more shares of
such Common Stock. Such right of first refusal shall be exercisable by the
Corporation (or its assignees) in accordance with the terms and conditions
specified in the instrument evidencing such right.

	 	2.  	CORPORATE TRANSACTION

     All of the Corporation’s outstanding repurchase rights under this
Article III shall automatically terminate upon the occurrence of a Corporate
Transaction (as defined in Section 3 of Article II), except to the extent the
Corporation’s outstanding repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with the Corporate Transaction.

13.

 

ARTICLE IV

MISCELLANEOUS

	 	1.  	LOANS

     A. The Plan Administrator may assist any Optionee or Participant
(including an Optionee or Participant who is an officer or director of the
Corporation) in the exercise of one or more options granted to such Optionee
under Article II or the purchase of one or more shares issued to such
Participant under Article III, including the satisfaction of any Federal, state
and local income and employment tax obligations arising therefrom, by:

          (i) authorizing the extension of a loan from the Corporation to
such Optionee or Participant, or

          (ii) permitting Optionee or Participant to pay the option price
or purchase price for the purchased Common Stock in installments over a period
of years.

     B. The terms of any loan or installment method of payment (including
the interest rate and terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Loans or installment payments may be
granted with or without security or collateral. However, any loan made to a
consultant or other non-employee advisor must be secured by property other than
the purchased shares of Common Stock. In all events the maximum credit
available to each Optionee or Participant may not exceed the SUM of (i) the
aggregate option price or purchase price payable for the purchased shares plus
(ii) any Federal, state and local income and employment tax liability incurred
by Optionee or Participant in connection with such exercise or purchase.

     C. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under the financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Board in its discretion deems appropriate.

	 	2.  	NO EMPLOYMENT OR SERVICE RIGHTS

     Nothing under the Plan shall confer upon Optionee or the Participant
any right to continue in the service or employ of the Corporation (or any parent
or subsidiary corporation of the Corporation employing or retaining such
Optionee or Participant) for any period of specific duration or interfere with
or otherwise restrict in any way the rights of the Corporation (or any parent or
subsidiary corporation of the Corporation employing or retaining such Optionee
or Participant) or of Optionee or the Participant, which rights are hereby
expressly reserved by each, to terminate the Service of Optionee or Participant
at any time for any reason whatsoever, with or without cause.

14.

 

 

	 	3.  	AMENDMENT OF THE PLAN AND AWARDS

     A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects whatsoever. However, no such
amendment or modification shall adversely affect the rights and obligations of
an Optionee with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any Participant with respect to Common Stock
issued under the Plan prior to such action, unless Optionee or Participant
consents to such amendment. In addition, the Board shall not, without the
approval of the Corporation’s shareholders, amend the Plan to (i) materially
increase the maximum number of shares issuable under the Plan (except for
permissible adjustments under Article I, Section 5(C), (ii) materially increase
the benefits accruing to individuals who participate under the Plan, or (iii)
materially modify the eligibility requirements for participation under the Plan.

     B. (i) Options to purchase shares of Common Stock may be granted
under the Option Grant Program and (ii) shares of Common Stock may be issued
under the Stock Issuance Program, which are in both instances in excess of the
number of shares then available for issuance under the Plan, provided any excess
shares actually issued under the Option Grant Program or the Stock Issuance
Program are held in escrow until there is obtained shareholder approval of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such shareholder approval is not obtained
within twelve (12) months after the date the initial excess issuances are made,
whether as stock option grants or direct stock issuances, then (I) any
unexercised options representing such excess shall terminate and cease to be
exercisable and (II) the Corporation shall promptly refund to Optionees and
Participants the option or purchase price paid for any excess shares issued
under the Plan and held in escrow, together with interest (at the applicable
Short Term Federal Rate) for the period the shares were held in escrow, and such
shares shall thereupon be automatically cancelled and cease to be outstanding.

	 	4.  	EFFECTIVE DATE AND TERM OF PLAN

     A. The Plan was initially adopted by the Board on February 9, 1993
and was approved by the Corporation’s shareholders on April 12, 1993. On
September 14, 1993 the Board approved an amendment to the Plan (“the 1993
Amendment”) to authorize an increase in the aggregate number of shares of Common
Stock available for issuance under the Plan from 450,000 to 650,000 shares. The
increase was approved by the Corporation’s shareholders on September 27, 1993.
The Board further amended the Plan, effective September 15, 1994 (“the 1994
Amendment”), to increase the aggregate number of shares authorized for issuance
thereunder by an additional 200,000 shares to 850,000 shares. The increase was
approved by the Corporation’s shareholders on October 14, 1994. In connection
with both the 1993 and 1994 Amendments, minor technical revisions were made to
the Plan to bring it into compliance with the current requirements of the
California Corporations Commissioner.

15.

 

     B. The provisions of the 1993 and 1994 Amendments shall apply only
to options granted under the Plan from and after the date such Amendments were
adopted by the Board. Each option issued and outstanding under the Plan
immediately prior to adoption of each such Amendment shall continue to be
governed by the terms and conditions of the Plan (and the instrument evidencing
such grant) as in effect on the date each such option was previously granted,
and nothing in the 1993 or 1994 Amendments shall be deemed to affect or
otherwise modify the rights or obligations of the holders of such prior options
with respect to the acquisition of shares of Common Stock thereunder.

     C. The Plan shall terminate upon the EARLIER of (i) February 8, 2003
or (ii) the date on which all shares available for issuance under the Plan have
been issued pursuant to the exercise of options granted under Article II or the
issuance of shares under Article III. If the date of termination is determined
under clause (i) above, then no options outstanding on such date under Article
II and no shares issued and outstanding on such date under Article III shall be
affected by the termination of the Plan, and such securities shall thereafter
continue to have force and effect in accordance with the provisions of the stock
option agreements evidencing such options and the stock issuance agreements
evidencing the issuance of such shares.

	 	5.  	USE OF PROCEEDS

     Any cash proceeds received by the Corporation from the issuance of
shares of Common Stock under the Plan shall be used for general
corporate purposes.

	 	6.  	WITHHOLDING

     The Corporation’s obligation to deliver shares upon the exercise of
any options granted under Article II or upon the purchase of any shares issued
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.

	 	7.  	REGULATORY APPROVALS

     The implementation of the Plan, the granting of any options under the
Option Grant Program, the issuance of any shares under the Stock Issuance
Program, and the issuance of Common Stock upon the exercise of the option grants
made hereunder shall be subject to the Corporation’s procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.

	 	8.  	FINANCIAL REPORTS

     The Corporation shall deliver a balance sheet and an income statement
at least annually to each individual holding an outstanding option under and
each participant in the Plan, unless such Optionee or participant is a key
employee whose duties in connection with the Corporation assure such individual
access to equivalent information.

16.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00080-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00080-of-00352.parquet"}]]