Document:

exv10w7

 

Exhibit 10.7

SONICS, INC.

2007 EMPLOYEE STOCK PURCHASE PLAN

     The following constitute the provisions of the 2007 Employee Stock Purchase Plan of Sonics,
Inc.

     1. Purpose. The purpose of the Plan is to provide Employees of the Company and its
Designated Parents or Subsidiaries with an opportunity to purchase Common Stock of the Company
through accumulated payroll deductions. It is the intention of the Company to have the Plan
qualify as an “Employee Stock Purchase Plan” under Section 423 of the Code and the applicable
regulations thereunder. The provisions of the Plan, accordingly, shall be construed so as to
extend and limit participation in a manner consistent with the requirements of that Section of the
Code.

     2. Definitions. As used herein, the following definitions shall apply:

          (a) “Administrator” means either the Board or a committee of the Board that is
responsible for the administration of the Plan as is designated from time to time by resolution of
the Board.

          (b) “Applicable Laws” means the legal requirements relating to the administration of
employee stock purchase plans, if any, under applicable provisions of federal securities laws,
state corporate and securities laws, the Code and the applicable regulations thereunder, the rules
of any applicable stock exchange or national market system, and the rules of any foreign
jurisdiction applicable to participation in the Plan by residents therein.

          (c) “Board” means the Board of Directors of the Company.

          (d) “Code” means the Internal Revenue Code of 1986, as amended.

          (e) “Common Stock” means the common stock of the Company.

          (f) “Company” means Sonics, Inc., a Delaware corporation.

          (g) “Compensation” means an Employee’s base salary from the Company or one or more
Designated Parents or Subsidiaries, including such amounts of base salary as are deferred by the
Employee (i) under a qualified cash or deferred arrangement described in Section 401(k) of the
Code, or (ii) to a plan qualified under Section 125 of the Code. Compensation does not include
overtime, bonuses, annual awards, other incentive payments, reimbursements or other expense
allowances, fringe benefits (cash or noncash), moving expenses, deferred compensation,
contributions (other than contributions described in the first sentence) made on the Employee’s
behalf by the Company or one or more Designated Parents or Subsidiaries under any employee benefit
or welfare plan now or hereafter established, and any other payments not specifically referenced in
the first sentence.

          (h) “Corporate Transaction” means any of the following transactions:

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               (1) a merger or consolidation in which the Company is not the surviving entity, except for a
transaction the principal purpose of which is to change the state in which the Company is
incorporated;

               (2) the sale, transfer or other disposition of all or substantially all of the assets of the
Company (including the capital stock of the Company’s subsidiary corporations);

               (3) the complete liquidation or dissolution of the Company;

               (4) any reverse merger or series of related transactions culminating in a reverse merger
(including, but not limited to, a tender offer followed by a reverse merger) in which the Company
is the surviving entity but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company’s outstanding securities are transferred to a person or
persons different from those who held such securities immediately prior to such merger or the
initial transaction culminating in such merger; or

               (5) acquisition in a single or series of related transactions by any person or related group
of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but
excluding any such transaction or series of related transactions that the Administrator determines
shall not be a Corporate Transaction.

          (i) “Designated Parents or Subsidiaries” means the Parents or Subsidiaries which have
been designated by the Administrator from time to time as eligible to participate in the Plan.

          (j) “Effective Date” means the effective date of the Registration Statement relating
to the Company’s initial public offering of its Common Stock. However, should any Parent or
Subsidiary become a Designated Parent or Subsidiary after such date, then the Administrator, in its
discretion, shall designate a separate Effective Date with respect to the employee-participants of
such Designated Parent or Subsidiary.

          (k) “Employee” means any individual, including an officer or director, who is an
employee of the Company or a Designated Parent or Subsidiary for purposes of Section 423 of the
Code. For purposes of the Plan, the employment relationship shall be treated as continuing intact
while the individual is on sick leave or other leave of absence approved by the individual’s
employer. Where the period of leave exceeds ninety (90) days and the individual’s right to
reemployment is not guaranteed either by statute or by contract, the employment relationship will
be deemed to have terminated on the ninety-first (91st) day of such leave, for purposes of
determining eligibility to participate in the Plan.

          (l) “Enrollment Date” means the first day of each Offer Period.

          (m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

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          (n) “Exercise Date” means the last trading day of each Offer Period.

          (o) “Fair Market Value” means, as of any date, the value of Common Stock determined as
follows:

               (1) If the Common Stock is listed on one or more established stock exchanges or national
market systems, including without limitation The NASDAQ Global Select Market, The NASDAQ Global
Market or The NASDAQ Capital Market of The NASDAQ Stock Market LLC, its Fair Market Value shall be
the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on
the principal exchange or system on which the Common Stock is listed (as determined by the
Administrator) on the date of determination (or, if no closing sales price or closing bid was
reported on that date, as applicable, on the last trading date such closing sales price or closing
bid was reported), as reported in The Wall Street Journal or such other source as the Administrator
deems reliable;

               (2) If the Common Stock is regularly quoted on an automated quotation system (including the
OTC Bulletin Board) or by a recognized securities dealer, but selling prices are not reported, the
Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the date of determination (or, if no such prices were reported on
that date, on the last date such prices were reported), as reported in The Wall Street Journal or
such other source as the Administrator deems reliable; or

               (3) In the absence of an established market for the Common Stock of the type described in (1)
and (2), above, the Fair Market Value thereof shall be determined by the Administrator in good
faith.

               (4) On the initial Effective Date of the Plan, the Fair Market Value shall be the price at
which the Board, or if applicable, the Pricing Committee of the Board, and the underwriters agree
to offer the Common Stock to the public in the initial public offering of the Common Stock.

          (p) “Offer Period” means a period of approximately six months, commencing on February
1 and August 1 of each year and terminating on the next following July 31 or January 31,
respectively; provided, however, that the first Offer Period shall commence on the Effective Date
and shall end on the next following July 31.

          (q) “Parent” means a “parent corporation” of the Company, whether now or hereafter
existing, as defined in Section 424(e) of the Code.

          (r) “Participant” means an Employee of the Company or Designated Parent or Subsidiary
who has completed a subscription agreement as set forth in Section 5(a) and is thereby enrolled in
the Plan.

          (s) “Plan” means this Employee Stock Purchase Plan.

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          (u) “Purchase Price” shall mean an amount equal to 85% of the Fair Market Value of a
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower.

          (t) “Reserves” means, as of any date, the sum of (1) the number of shares of Common
Stock covered by each then outstanding option under the Plan which has not yet been exercised and
(2) the number of shares of Common Stock which have been authorized for issuance under the Plan but
not then subject to an outstanding option.

          (u) “Subsidiary” means a “subsidiary corporation” of the Company, whether now or
hereafter existing, as defined in Section 424(f) of the Code.

     3. Eligibility.

          (a) General. Any individual who is an Employee on a given Enrollment Date shall be
eligible to participate in the Plan for the Offer Period commencing with such Enrollment Date. No
individual who is not an Employee shall be eligible to participate in the Plan.

          (b) Limitations on Grant and Accrual. Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) if, immediately after
the grant, such Employee (taking into account stock owned by any other person whose stock would be
attributed to such Employee pursuant to Section 424(d) of the Code) would own stock and/or hold
outstanding options to purchase stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of any Parent or Subsidiary, or
(ii) which permits the Employee’s rights to purchase stock under all employee stock purchase plans
of the Company and its Parents or Subsidiaries to accrue at a rate which exceeds Twenty-Five
Thousand Dollars (US$25,000) worth of stock (determined at the Fair Market Value of the shares at
the time such option is granted) for each calendar year in which such option is outstanding at any
time. The determination of the accrual of the right to purchase stock shall be made in accordance
with Section 423(b)(8) of the Code and the regulations thereunder.

          (c) Other Limits on Eligibility. Notwithstanding Subsection (a), above, the following
Employees shall not be eligible to participate in the Plan for any relevant Offer Period: (i)
Employees whose customary employment is 20 hours or less per week; (ii) Employees whose customary
employment is for not more than 5 months in any calendar year; and (iii) Employees who are subject
to rules or laws of a foreign jurisdiction that prohibit or make impractical the participation of
such Employees in the Plan.

     4. Offer Periods.

          (a) The Plan shall be implemented through consecutive Offer Periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan shall have been
purchased or (ii) the Plan shall have been sooner terminated in accordance with Section 19 hereof.
The maximum duration of an Offer Period shall be twenty-seven (27) months. Initially, the Plan
shall be implemented through consecutive Offer Periods of six (6) months’ duration commencing each
February 1 and August 1 following the Effective

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Date (except that the initial Offer Period shall commence on the Effective Date and shall end
on the next following July 31).

          (b) A Participant shall be granted a separate option for each Offer Period in which he or she
participates. The option shall be granted on the Enrollment Date and shall be automatically
exercised on the Exercise Date.

          (c) Except as specifically provided herein, the acquisition of Common Stock through
participation in the Plan for any Offer Period shall neither limit nor require the acquisition of
Common Stock by a Participant in any subsequent Offer Period.

     5. Participation.

          (a) All Employees eligible to participate in the Plan as of the first Enrollment Date of the
Plan shall automatically become a Participant in the initial Offer Period and be eligible to make a
direct payment for shares of the Common Stock on the Exercise Date of the initial Offer Period in
an amount equal to the lesser of the aggregate Purchase Price for five thousand (5,000) shares of
the Common Stock or ten percent (10%) of the Compensation that he or she receives during the
initial Offer Period, unless a change of status notice in the form of Exhibit C (or such
other form or method (including electronic forms) as the Administrator may designate from time to
time) is filed to the contrary or the Participant withdraws from the Plan as provided in Section
10. No subscription agreement need be filed by the Participant with the Company in order to
participate in the initial Offer Period.

          (b) After the initial Offer Period, an eligible Employee may become a Participant in the Plan
by completing a subscription agreement authorizing payroll deductions in the form of Exhibit
A to this Plan (or such other form or method (including electronic forms) as the Administrator
may designate from time to time) and filing it with the designated payroll office of the Company at
least five (5) business days prior to the Enrollment Date for the Offer Period in which such
participation will commence, unless a later time for filing the subscription agreement is set by
the Administrator for all eligible Employees with respect to a given Offer Period.

          (c) No payroll deductions shall be made for Participants during the initial Offer Period,
unless a change of status notice in the form of Exhibit C to this Plan (or such other form
or method (including electronic forms) as the Administrator may designate from time to time)
authorizing the commencement of payroll deductions is filed by the Participant with the Company
after a registration statement on Form S-8 has been filed with the Securities Exchange Commission
with respect to the shares being offered under the Plan. If so elected, the rate of payroll
deductions during the initial Offer Period may exceed the maximum permitted rate under Section 6(a)
to make-up for missed payroll deductions that would otherwise have been made prior to the filing of
the Form S-8 with respect to the Plan. Payroll deductions for a Participant in the second Offer
Period shall commence at the rate elected by the Participant under Section 6(a) with the first
partial or full payroll period beginning on the first day of the second Offer Period and shall end
on the Exercise Date, unless a change of status notice in the form of Exhibit B (or such
other form or method (including electronic forms) as the Administrator may designate from time to
time) is filed to the contrary or the Participant withdraws from the Plan as

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provided in Section 10. No direct payment for shares shall be permitted after the initial
Offer Period. Therefore, Participants in the initial Offer Period must file the change of status
notice in the form of Exhibit C to this Plan (or such other form or method (including electronic
forms) as the Administrator may designate from time to time) prior to the commencement of the
second Offer Period to assure maximum participation rights under the Plan.

          (d) For Offer Periods, other than the second Offer Period, payroll deductions for a
Participant shall commence with the first partial or full payroll period beginning on the
Enrollment Date and shall end on the Exercise Date, unless sooner terminated by the Participant as
provided in Section 10.

     6. Payroll Deductions.

          (a) At the time a Participant files a subscription agreement, the Participant shall elect to
have payroll deductions made during the Offer Period in amounts between one percent (1%) and not
exceeding ten percent (10%) of the Compensation which the Participant receives during the Offer
Period.

          (b) All payroll deductions made for a Participant shall be credited to the Participant’s
account under the Plan and will be withheld in whole percentages only. A Participant may not make
any additional payments into such account.

          (c) A Participant may discontinue participation in the Plan as provided in Section 10, or may
increase or decrease the rate of payroll deductions during the Offer Period by completing and
filing with the Company a change of status notice in the form of Exhibit B to this Plan (or such
other form or method (including electronic forms) as the Administrator may designate from time to
time) authorizing an increase or decrease in the payroll deduction rate. During the initial Offer
Period, a Participant may discontinue participation in the Plan as provided in Section 10 or
initiate payroll deductions by completing and filing with the Company a change of status notice in
the form of Exhibit C to this Plan (or such other form or method (including electronic forms) as
the Administrator may designate from time to time). Any increase or decrease in the rate of a
Participant’s payroll deductions shall be effective with the first full payroll period commencing
five (5) business days after the Company’s receipt of the change of status notice unless the
Company elects to process a given change in participation more quickly. A Participant’s
subscription agreement (as modified by any change of status notice) shall remain in effect for
successive Offer Periods unless terminated as provided in Section 10. The Administrator shall be
authorized to limit the number of payroll deduction rate changes during any Offer Period.

          (d) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of
the Code and Section 3(b) herein, a Participant’s payroll deductions shall be decreased to 0%.
Payroll deductions shall recommence at the rate provided in such Participant’s subscription
agreement, as amended, at the time when permitted under Section 423(b)(8) of the Code and Section
3(b) herein, unless such participation is sooner terminated by the Participant as provided in
Section 10.

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     7. Grant of Option. On the Enrollment Date, each Participant shall be granted an
option to purchase (at the applicable Purchase Price) five thousand (5,000) shares of the Common
Stock, subject to adjustment as provided in Section 18 hereof; provided (i) that such option shall
be subject to the limitations set forth in Sections 3(b), 6 and 12 hereof, and (ii) the maximum
number of shares of Common Stock a Participant shall be permitted to purchase in any Offer Period
shall be five thousand (5,000) shares, subject to adjustment as provided in Section 18 hereof.
Exercise of the option shall occur as provided in Section 8, unless the Participant has withdrawn
pursuant to Section 10, and the option, to the extent not exercised, shall expire on the last day
of the Offer Period with respect to which such option was granted. Notwithstanding the foregoing,
shares subject to the option may only be purchased with accumulated payroll deductions credited to
a Participant’s account in accordance with Section 6 of the Plan. In addition, to the extent an
option is not exercised on each Purchase Date, the option shall lapse and thereafter cease to be
exercisable.

     8. Exercise of Option. Unless a Participant withdraws from the Plan as provided in
Section 10, below, the Participant’s option for the purchase of shares of Common Stock will be
exercised automatically on each Exercise Date, by applying the accumulated payroll deductions in
the Participant’s account to purchase the number of full shares subject to the option by dividing
such Participant’s payroll deductions accumulated prior to such Exercise Date and retained in the
Participant’s account as of the Exercise Date by the applicable Purchase Price, provided, however,
that if a Participant is eligible to purchase any shares on the first Exercise Date of the initial
Offer Period by direct payment, the Participant’s option for the purchase of shares will be
exercised to the extent possible by applying the direct payment amount made by the Participant to
purchase the number of full shares subject to the option by dividing such direct payment amount by
the applicable Purchase Price and, provided, further, in no event may the accumulated payroll
deductions and direct payment amounts applied to the purchase of shares on the first Exercise Date
of the initial Offer Period exceed the amount specified in Section 5(a). No fractional shares will
be purchased; any payroll deductions accumulated in a Participant’s account which are not
sufficient to purchase a full share shall be carried over to the next Offer Period, whichever
applies, or returned to the Participant, if the Participant withdraws from the Plan. Any direct
payment amounts which are not sufficient to purchase a full share shall be returned to the
Participant. Notwithstanding the foregoing, any amount remaining in a Participant’s account or any
excess direct payment amount following the purchase of shares on the Exercise Date due to the
application of Section 423(b)(8) of the Code or Section 7, above, shall be returned to the
Participant and shall not be carried over to the next Offer Period. During a Participant’s
lifetime, a Participant’s option to purchase shares hereunder is exercisable only by the
Participant.

     9. Delivery. Upon receipt of a request from a Participant after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to such Participant, as
promptly as practicable, of a certificate representing the shares purchased upon exercise of the
Participant’s option.

     10. Withdrawal; Termination of Employment.

          (a) A Participant may either (i) withdraw all but not less than all the payroll deductions
credited to the Participant’s account and not yet used to exercise the Participant’s

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option under the Plan or (ii) terminate future payroll deductions, but allow accumulated
payroll deductions to be used to exercise the Participant’s option under the Plan at any time by
giving written notice to the Company in the form of Exhibit B to this Plan (or such other form or
method (including electronic forms) as the Administrator may designate from time to time). During
the initial Offer Period, a Participant may elect to withdraw from the Plan and not purchase shares
by direct payment by giving written notice to the Company in the form of Exhibit C to this Plan (or
such other form or method (including electronic forms) as the Administrator may designate from time
to time). If the Participant elects withdrawal alternative (i) described above, all of the
Participant’s payroll deductions credited to the Participant’s account will be paid to such
Participant as promptly as practicable after receipt of notice of withdrawal, such Participant’s
option for the Offer Period will be automatically terminated, and no further payroll deductions for
the purchase of shares will be made during the Offer Period. If the Participant elects withdrawal
alternative (ii) described above, no further payroll deductions for the purchase of shares will be
made during the Offer Period, all of the Participant’s payroll deductions credited to the
Participant’s account will be applied to the exercise of the Participant’s option on the next
Exercise Date (subject to Sections 3(b), 6, 7 and 12), and after such Exercise Date, such
Participant’s option for the Offer Period will be automatically terminated and all remaining
accumulated payroll deduction amounts shall be returned to the Participant. If a Participant
withdraws from an Offer Period, payroll deductions will not resume at the beginning of the
succeeding Offer Period unless the Participant delivers to the Company a new subscription
agreement.

          (b) Upon termination of a Participant’s employment relationship (as described in Section 2(k))
at a time more than three (3) months from the next scheduled Exercise Date, the payroll deductions
credited to such Participant’s account during the Offer Period but not yet used to exercise the
option will be returned to such Participant or, in the case of his/her death, to the person or
persons entitled thereto under Section 14, and such Participant’s option will be automatically
terminated without exercise of any portion of such option. Upon termination of a Participant’s
employment relationship (as described in Section 2(k)) within three (3) months of the next
scheduled Exercise Date, the payroll deductions credited to such Participant’s account during the
Offer Period but not yet used to exercise the option will be applied to the purchase of Common
Stock on the next Exercise Date, unless the Participant (or in the case of the Participant’s death,
the person or persons entitled to the Participant’s account balance under Section 14) withdraws
from the Plan by submitting a change of status notice in accordance with subsection (a) of this
Section 10. In such a case, no further payroll deductions will be credited to the Participant’s
account following the Participant’s termination of employment and the Participant’s option under
the Plan will be automatically terminated after the purchase of Common Stock on the next scheduled
Exercise Date.

     11. Interest. No interest shall accrue on the payroll deductions credited to a
Participant’s account under the Plan.

     12. Stock.

          (a) The maximum number of shares of Common Stock which shall be made available for sale under
the Plan shall be One Million (1,000,000) shares, subject to adjustment upon changes in
capitalization of the Company as provided in Section 18. With respect to any

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amendment to increase the total number of shares of Common Stock under the Plan, the
Administrator shall have discretion to disallow the purchase of any increased shares of Common
Stock for Offer Periods in existence prior to such increase. If the Administrator determines that
on a given Exercise Date the number of shares with respect to which options are to be exercised may
exceed (x) the number of shares then available for sale under the Plan or (y) the number of shares
available for sale under the Plan on the Enrollment Date(s) of one or more of the Offer Periods in
which such Exercise Date is to occur, the Administrator may make a pro rata allocation of the
shares remaining available for purchase on such Enrollment Dates or Exercise Date, as applicable,
in as uniform a manner as shall be practicable and as it shall determine to be equitable, and shall
either continue all Offer Periods then in effect or terminate any one or more Offer Periods then in
effect pursuant to Section 19, below. Any amount remaining in a Participant’s payroll account
following such pro rata allocation shall be returned to the Participant and shall not be carried
over to any future Offer Period, as determined by the Administrator.

          (b) A Participant will have no interest or voting right in shares covered by the Participant’s
option until such shares are actually purchased on the Participant’s behalf in accordance with the
applicable provisions of the Plan. No adjustment shall be made for dividends, distributions or
other rights for which the record date is prior to the date of such purchase.

          (c) Shares to be delivered to a Participant under the Plan will be registered in the name of
the Participant or in the name of the Participant and his or her spouse, as designated in the
Participant’s subscription agreement.

     13. Administration. The Plan shall be administered by the Administrator which shall
have full and exclusive discretionary authority to construe, interpret and apply the terms of the
Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan. Every
finding, decision and determination made by the Administrator shall, to the full extent permitted
by Applicable Law, be final and binding upon all persons.

     14. Designation of Beneficiary.

          (a) Each Participant will file a written designation of a beneficiary who is to receive any
shares and cash, if any, from the Participant’s account under the Plan in the event of such
Participant’s death. If a Participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.

          (b) Such designation of beneficiary may be changed by the Participant (and the Participant’s
spouse, if any) at any time by written notice. In the event of the death of a Participant and in
the absence of a beneficiary validly designated under the Plan who is living (or in existence) at
the time of such Participant’s death, the Company shall deliver such shares and/or cash to the
executor or administrator of the estate of the Participant, or if no such executor or administrator
has been appointed (to the knowledge of the Administrator), the Administrator shall deliver such
shares and/or cash to the spouse (or domestic partner, as determined by the Administrator) of the
Participant, or if no spouse (or domestic partner) is known to the Administrator, then to the issue
of the Participant, such distribution to be made per stirpes (by

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right of representation), or if no issue are known to the Administrator, then to the heirs at
law of the Participant determined in accordance with Section 27.

     15. Transferability. No payroll deductions credited to a Participant’s account,
options granted hereunder, or any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way
(other than by will, the laws of descent and distribution, or as provided in Section 14 hereof) by
the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Administrator may, in its sole discretion, treat such act as an
election to withdraw funds from an Offer Period in accordance with Section 10.

     16. Use of Funds. All payroll deductions received or held by the Company under the
Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated
to segregate such payroll deductions or hold them exclusively for the benefit of Participants. All
payroll deductions received or held by the Company may be subject to the claims of the Company’s
general creditors. Participants shall have the status of general unsecured creditors of the
Company. Any amounts payable to Participants pursuant to the Plan shall be unfunded and unsecured
obligations for all purposes, including, without limitation, Title I of the Employee Retirement
Income Security Act of 1974, as amended. The Company shall retain at all times beneficial
ownership of any investments, including trust investments, which the Company may make to fulfill
its payment obligations hereunder. Any investments or the creation or maintenance of any trust or
any Participant account shall not create or constitute a trust or fiduciary relationship between
the Administrator, the Company or any Designated Parent or Subsidiary and a Participant, or
otherwise create any vested or beneficial interest in any Participant or the Participant’s
creditors in any assets of the Company or a Designated Parent or Subsidiary. The Participants shall
have no claim against the Company or any Designated Parent or Subsidiary for any changes in the
value of any assets that may be invested or reinvested by the Company with respect to the Plan.

     17. Reports. Individual accounts will be maintained for each Participant in the Plan.
Statements of account will be given to Participants at least annually, which statements will set
forth the amounts of payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.

     18. Adjustments Upon Changes in Capitalization; Corporate Transactions.

          (a) Adjustments Upon Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the Reserves, the Purchase Price, the maximum number of shares that
may be purchased in any Offer Period, as well as any other terms that the Administrator determines
require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number
of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, (ii) any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of consideration by the Company,
or (iii) any other transaction with respect to Common Stock including a corporate merger,
consolidation, acquisition of property or stock, separation (including a spin-off or other
distribution of stock or property), reorganization, liquidation (whether partial or complete) or
any similar transaction; provided, however that

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conversion of any convertible securities of the Company shall not be deemed to have been
“effected without receipt of consideration.” Such adjustment shall be made by the Administrator
and its determination shall be final, binding and conclusive. Except as the Administrator
determines, no issuance by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall affect, and no adjustment by reason hereof shall be made
with respect to, the Reserves and the Purchase Price.

          (b) Corporate Transactions. In the event of a proposed Corporate Transaction, each
option under the Plan shall be assumed by such successor corporation or a parent or subsidiary of
such successor corporation, unless the Administrator, in the exercise of its sole discretion and in
lieu of such assumption, determines to shorten the Offer Period then in progress by setting a new
Exercise Date (the “New Exercise Date”). If the Administrator shortens the Offer Period then in
progress in lieu of assumption in the event of a Corporate Transaction, the Administrator shall
notify each Participant in writing at least ten (10) business days prior to the New Exercise Date,
that the Exercise Date for the Participant’s option has been changed to the New Exercise Date and
that either:

               (1) the Participant’s option will be exercised automatically on the New Exercise Date, unless
prior to such date the Participant has withdrawn from the Offer Period as provided in Section 10;
or

               (2) the Company shall pay to the Participant on the New Exercise Date an amount in cash, cash
equivalents, or property as determined by the Administrator that is equal to the difference in the
Fair Market Value of the shares subject to the option and the Purchase Price due had the
Participant’s option been exercised automatically under Subsection (b)(i) above.

     For purposes of this Subsection, an option granted under the Plan shall be deemed to be
assumed if, in connection with the Corporate Transaction, the option is replaced with a comparable
option with respect to shares of capital stock of the successor corporation or Parent thereof. The
determination of option comparability shall be made by the Administrator prior to the Corporate
Transaction and its determination shall be final, binding and conclusive on all persons.

     19. Amendment or Termination.

          (a) The Administrator may at any time and for any reason terminate or amend the Plan and such
termination can affect options previously granted and the Plan or any one or more Offer Periods may
be terminated by the Administrator on any Exercise Date or by the Administrator establishing a new
Exercise Date with respect to any Offer Period then in progress if the Administrator determines
that the termination of the Plan or such one or more Offer Periods is in the best interests of the
Company and its stockholders. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other Applicable Law), the Company shall obtain stockholder
approval in such a manner and to such a degree as required.

11

 

          (b) Without stockholder consent, the Administrator shall be entitled to limit the frequency
and/or number of changes in the amount withheld during Offer Periods, determine the length of any
future Offer Period, determine whether future Offer Periods shall be consecutive or overlapping,
establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars,
establish additional terms, conditions, rules or procedures to accommodate the rules or laws of
applicable foreign jurisdictions, permit payroll withholding in excess of the amount designated by
a Participant in order to adjust for delays or mistakes in the Company’s processing of properly
completed withholding elections, establish reasonable waiting and adjustment periods and/or
accounting and crediting procedures to ensure that amounts applied toward the purchase of Common
Stock for each Participant properly correspond with amounts withheld from the Participant’s
Compensation, and establish such other limitations or procedures as the Administrator determines in
its sole discretion advisable and which are consistent with the Plan.

     20. Notices. All notices or other communications by a Participant to the Company
under or in connection with the Plan shall be deemed to have been duly given when received in the
form specified by the Administrator at the location, or by the person, designated by the
Administrator for the receipt thereof.

     21. Conditions Upon Issuance of Shares. Shares shall not be issued with respect to an
option unless the exercise of such option and the issuance and delivery of such shares pursuant
thereto shall comply with all Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance. As a condition to the exercise of an
option, the Company may require the Participant to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any present intention
to sell or distribute such shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned Applicable Laws. In addition, no options
shall be exercised or shares issued hereunder before the Plan shall have been approved by
stockholders of the Company as provided in Section 23.

     22. Term of Plan. The Plan shall become effective upon the earlier to occur of its
adoption by the Board or its approval by the stockholders of the Company. It shall continue in
effect for a term of twenty (20) years unless sooner terminated under Section 19.

     23. Stockholder Approval. Continuance of the Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months before or after the date the Plan is adopted.
Such stockholder approval shall be obtained in the degree and manner required under Applicable
Laws.

     24. No Employment Rights. The Plan does not, directly or indirectly, create any right
for the benefit of any employee or class of employees to purchase any shares under the Plan, or
create in any employee or class of employees any right with respect to continuation of employment
by the Company or a Designated Parent or Subsidiary, and it shall not be deemed to interfere in any
way with such employer’s right to terminate, or otherwise modify, an employee’s employment at any
time.

12

 

     25. No Effect on Retirement and Other Benefit Plans. Except as specifically provided
in a retirement or other benefit plan of the Company or a Designated Parent or Subsidiary,
participation in the Plan shall not be deemed compensation for purposes of computing benefits or
contributions under any retirement plan of the Company or a Designated Parent or Subsidiary, and
shall not affect any benefits under any other benefit plan of any kind or any benefit plan
subsequently instituted under which the availability or amount of benefits is related to level of
compensation. The Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee Retirement
Income Security Act of 1974, as amended.

     26. Effect of Plan. The provisions of the Plan shall, in accordance with its terms,
be binding upon, and inure to the benefit of, all successors of each Participant, including,
without limitation, such Participant’s estate and the executors, administrators or trustees
thereof, heirs and legatees, and any receiver, trustee in bankruptcy or representative of creditors
of such Participant.

     27. Governing Law. The Plan is to be construed in accordance with and governed by the
internal laws of the State of California (as permitted by Section 1646.5 of the California Civil
Code, or any similar successor provision) without giving effect to any choice of law rule that
would cause the application of the laws of any jurisdiction other than the internal laws of the
State of California to the rights and duties of the parties, except to the extent the internal laws
of the State of California are superseded by the laws of the United States. Should any provision
of the Plan be determined by a court of law to be illegal or unenforceable, the other provisions
shall nevertheless remain effective and shall remain enforceable.

     28. Dispute Resolution. The provisions of this Section 28 (and as restated in the
Subscription Agreement) shall be the exclusive means of resolving disputes arising out of or
relating to the Plan. The Company and the Participant, or their respective successors (the
“parties”), shall attempt in good faith to resolve any disputes arising out of or relating to the
Plan by negotiation between individuals who have authority to settle the controversy. Negotiations
shall be commenced by either party by notice of a written statement of the party’s position and the
name and title of the individual who will represent the party. Within thirty (30) days of the
written notification, the parties shall meet at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, to resolve the dispute. If the dispute has
not been resolved by negotiation, the parties agree that any suit, action, or proceeding arising
out of or relating to the Plan shall be brought in the United States District Court for the
Northern District of California (or should such court lack jurisdiction to hear such action, suit
or proceeding, in a California state court in the County of Santa Clara) and that the parties shall
submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent
permitted by law, any objection the party may have to the laying of venue for any such suit, action
or proceeding brought in such court. If any one or more provisions of this Section 28 shall for
any reason be held invalid or unenforceable, it is the specific intent of the parties that such
provisions shall be modified to the minimum extent necessary to make it or its application valid
and enforceable.

13

 

Exhibit A

Sonics, Inc. 2007 Employee Stock Purchase Plan

SUBSCRIPTION AGREEMENT

Effective with the Offer Period beginning on:

o ESPP Effective Date     
o February 1, 200__ or     
o August 1, 200__

1. Personal Information

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Legal Name (Please Print)	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	(Last)
	 	(First)
	 	(MI)
	 	Location
	 	Department
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Street Address 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	Daytime Telephone	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	City, State/Country, Zip 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	E-Mail Address	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Social Security No. 	 	 	 	 	 	 	Employee I.D. No.	 	 	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	Manager
	 	Mgr. Location

	2.	 	Eligibility Any Employee whose customary employment is more than 20 hours per week and
more than 5 months per calendar year and who does not hold (directly or indirectly) five
percent (5%) or more of the combined voting power of the Company, a parent or a subsidiary,
whether in stock or options to acquire stock is eligible to participate in the Sonics, Inc.
2007 Employee Stock Purchase Plan (the “ESPP”); provided, however, that Employees who are
subject to the rules or laws of a foreign jurisdiction that prohibit or make impractical the
participation of such Employees in the ESPP are not eligible to participate.
	 
	3.	 	Definitions Each capitalized term in this Subscription Agreement shall have the meaning
set forth in the ESPP.
	 
	4.	 	Subscription I hereby elect to participate in the ESPP and subscribe to purchase shares
of the Company’s Common Stock in accordance with this Subscription Agreement and the ESPP. I
have received a complete copy of the ESPP and a prospectus describing the ESPP and understand
that my participation in the ESPP is in all respects subject to the terms of the ESPP. The
effectiveness of this Subscription Agreement is dependent on my eligibility to participate in
the ESPP.

	5.	 	Payroll Deduction Authorization I hereby authorize payroll deductions from my Compensation
during the Offer Period in the percentage specified below (payroll reductions may not exceed
10% 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Percentage to be Deducted (circle one)
	 	 	1	%	 	 	2	%	 	 	3	%	 	 	4	%	 	 	5	%	 	 	6	%	 	 	7	%	 	 	8	%	 	 	9	%	 	 	 	 

	 	 	of Compensation nor the limitation under Section 423(b)(8) of the Code and the regulations
thereunder):
	 
	6.	 	ESPP Accounts and Purchase Price I understand that all payroll deductions will be
credited to my account under the ESPP. No additional payments may be made to my account. No
interest will be credited on funds held in the account at any time including any refund of the
account caused by withdrawal from the ESPP. All payroll deductions shall be accumulated for
the purchase of Company Common Stock at the applicable Purchase Price determined in accordance
with the ESPP.

A-1 

 

	7.	 	Withdrawal and Changes in Payroll Deduction I understand that I may discontinue my
participation in the ESPP at any time prior to an Exercise Date as provided in Section 10 of
the ESPP, but if I do not withdraw from the ESPP, any accumulated payroll deductions will be
applied automatically to purchase Company Common Stock. I may increase or decrease the rate
of my payroll deductions in whole percentage increments to not less than one percent (1%) on
one occasion during any Offer Period by completing and timely filing a Change of Status
Notice. Any increase or decrease will be effective for the full payroll period occurring
after five (5) business days from the Company’s receipt of the Change of Status Notice.
	 
	8.	 	Perpetual Subscription I understand that this Subscription Agreement shall remain in
effect for successive Offer Periods until I withdraw from participation in the ESPP, or
termination of the ESPP.
	 
	9.	 	Taxes I have reviewed the ESPP prospectus discussion of the federal tax consequences of
participation in the ESPP and consulted with tax consultants as I deemed advisable prior to my
participation in the ESPP. I hereby agree to notify the Company in writing within thirty (30)
days of any disposition (transfer or sale) of any shares purchased under the ESPP if such
disposition occurs within two (2) years of the Enrollment Date (the first day of the Offer
Period during which the shares were purchased) or within one (1) year of the Exercise Date
(the date I purchased such shares), and I will make adequate provision to the Company for
foreign, federal, state or other tax withholding obligations, if any, which arise upon the
disposition of the shares. In addition, the Company may withhold from my Compensation any
amount necessary to meet applicable tax withholding obligations incident to my participation
in the ESPP, including any withholding necessary to make available to the Company any tax
deductions or benefits contingent on such withholding.
	 
	10.	 	Dispute Resolution The provisions of this Section 10 and Section 28 of the ESPP shall be
the exclusive means of resolving disputes arising out of or relating to the Plan. The Company
and I, or our respective successors (the “parties”), shall attempt in good faith to resolve
any disputes arising out of or relating to the Plan by negotiation between individuals who
have authority to settle the controversy. Negotiations shall be commenced by either party by
notice of a written statement of the party’s position and the name and title of the individual
who will represent the party. Within thirty (30) days of the written notification, the
parties shall meet at a mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary, to resolve the dispute. If the dispute has not been resolved by
negotiation, the Company and I agree that any suit, action, or proceeding arising out of or
relating to the Plan shall be brought in the United States District Court for the Northern
District of California (or should such court lack jurisdiction to hear such action, suit or
proceeding, in a California state court in the County of Santa Clara) and that we shall submit
to the jurisdiction of such court. The Company and I irrevocably waive, to the fullest extent
permitted by law, any objection we may have to the laying of venue for any such suit, action
or proceeding brought in such court. If any one or more provisions of this Section 10 or
Section 28 of the ESPP shall for any reason be held invalid or unenforceable, it is the
specific intent of the Company and I that such provisions shall be modified to the minimum
extent necessary to make it or its application valid and enforceable.

A-2 

 

	11.	 	Designation of Beneficiary In the event of my death, I hereby designate the following person or trust as my beneficiary to
receive all payments and shares due to me under the ESPP:

	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	o I am singler
	 	 	 	o I am married	 	 
	Beneficiary (please print)	 	 	 	 	 	 	 	Relationship to Beneficiary (if any)
	 	 	 	 	 	 	 
	 

	 	 	 	(Last)
	 	(First)
	 	(MI)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Street Address
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	City, State/Country, Zip	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

	12.	 	Termination of ESPP I understand that the Company has the right, exercisable in its sole
discretion, to amend or terminate the ESPP at any time, and a termination may be effective as
early as an Exercise Date, including the establishment of an alternative date for an Exercise
Date within each outstanding Offer Period.

	 	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	Employee Signature:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	spouse’s signature (if beneficiary is other than spouse)

A-3 

 

Exhibit B

Sonics, Inc. 2007 Employee Stock Purchase Plan

CHANGE OF STATUS NOTICE

 

Participant Name (Please Print)

 

Social Security Number

o Withdrawal From ESPP

I hereby withdraw from the Sonics, Inc. 2007 Employee Stock Purchase Plan (the “ESPP”)
and agree that my option under the applicable Offer Period will be automatically terminated
and all accumulated payroll deductions credited to my account will be refunded to me or
applied to the purchase of Common Stock depending on the alternative indicated below. No
further payroll deductions will be made for the purchase of shares in the applicable Offer
Period and I shall be eligible to participate in a future Offer Period only by timely
delivery to the Company of a new Subscription Agreement.

o Withdrawal and Purchase of Common Stock

Payroll deductions will terminate, but your account balance will be applied to purchase
Common Stock on the next Exercise Date. Any remaining balance will be refunded.

o Withdrawal Without Purchase of Common Stock

Entire account balance will be refunded to me and no Common Stock will be purchased on
the next Exercise Date provided this notice is submitted to the Company ten (10) business
days prior to the next Exercise Date.

o Change in Payroll Deduction

I hereby elect to change my rate of payroll deduction under the ESPP as follows (select
one):

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Percentage to be Deducted (circle one)
	 	 	1	%	 	 	2	%	 	 	3	%	 	 	4	%	 	 	5	%	 	 	6	%	 	 	7	%	 	 	8	%	 	 	9	%	 	 		

An increase or a decrease in payroll deduction will be effective for the first full payroll
period commencing no fewer than five (5) business days following the Company’s receipt of
this notice, unless this change is processed more quickly.

B-1 

 

o     
Change of Beneficiary     o
     I am single     
o     I am married

This change of beneficiary shall terminate my previous beneficiary designation under the
ESPP. In the event of my death, I hereby designate the following person or trust as my
beneficiary to receive all payments and shares due to me under the ESPP:

	 	 	 	 	 	 	 	 	 	 	 
	Beneficiary (please print)	 	 	 	 	 	 	 	Relationship to Beneficiary (if any)
	 	 	 	 	 	 	 
	 

	 	 	 	(Last)
	 	(First)
	 	(MI)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Street Address
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	City, State/Country, Zip	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	Employee Signature:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	spouse’s signature (if beneficiary is other than spouse)

B-1 

 

Exhibit C

Sonics, Inc. 2007 Employee Stock Purchase Plan

CHANGE OF STATUS NOTICE

DURING INITIAL OFFER PERIOD

 

Participant Name (Please Print)

 

Social Security Number

o Withdrawal From ESPP

I hereby withdraw from the Sonics, Inc. 2007 Employee Stock Purchase Plan (the “ESPP”)
and agree that my option under the applicable Offer Period will be automatically terminated.
No payroll deductions will be made for the purchase of shares in the initial Offer Period
and I shall be eligible to participate in a future Offer Period only by timely delivery to
the Company of a new Subscription Agreement.

o Withdrawal Without Purchase by Direct Payment

I elect not to purchase shares by direct payment during the initial Offer Period.

o Initiate Payroll Deduction During Initial Offer Period

I hereby elect to initiate payroll deduction under the ESPP as follows (select one):

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Percentage to be Deducted (circle one)
	 	 	1	%	 	 	2	%	 	 	3	%	 	 	4	%	 	 	5	%	 	 	6	%	 	 	7	%	 	 	8	%	 	 	9	%	 	 		

To the extent possible, the rate of payroll deduction will exceed the percentage indicated
to yield the correct amount of withholding on the Exercise Date to cover payroll periods
during which no withholding for participation in the Plan was made.

I understand that this notice and payroll withholding rate shall remain in effect for
successive Offer Periods until I withdraw from participation in the ESPP, change withholding
rates, or the ESPP terminates.

An increase or a decrease in payroll deduction or direct payment percentage will be
effective for the first full payroll period commencing no fewer than five (5) business days
following the Company’s receipt of this notice, unless this change is processed more
quickly.

B-1 

 

Designation of Beneficiary

In the event of my death, I hereby designate the following person or trust as my beneficiary
to receive all payments and shares due to me under the ESPP:      o I am single o      I am married

	 	 	 	 	 	 	 	 	 	 	 
	Beneficiary (please print)	 	 	 	 	 	 	 	Relationship to Beneficiary (if any)
	 	 	 	 	 	 	 
	 

	 	 	 	(Last)
	 	(First)
	 	(MI)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Street Address
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	City, State/Country, Zip	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	Employee Signature:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	spouse’s signature (if beneficiary is other than spouse)

B-1exv10w8

 

Exhibit 10.8

Sonics Incentive Plan

February 12, 2006

Purpose of Document

This document is the culmination of telephone and e-mail discussions among the members of the
Compensation Committee of Sonics, Inc. It describes two things:

	 	 	 
	Management Team Option Grants

	 	From input given by the Company and
the analysis of the Compensation
Committee, this document will
present the recommended stock option
grants for the Sonics Management
Team. These grants will take into
account mechanisms proposed by the
Incentive Plan, below.
	 
	 	 
	Incentive Plan

	 	As the Company prepares for and IPO
or other event representing value
for Shareholders, it will be
pursuing very difficult goals
requiring a tremendous effort by the
Management Team. This document
describes a plan by which an
incentive can be supplied to
Management team to do “what it
takes” to meet Company goals.

This document SHALL NOT be considered a full or legally appropriate description of the Incentive
Plan. Instead, it is meant to communicate the intentions and recommendation of the Compensation
Committee. Final measurement and interpretation of the resultant plan shall be made according to
the plan documents generated by this effort.

Stock Option Grants

The following table lists the recommended “refresh” stock option grants for the Management
Team. The term “refresh” is used to indicate that these grants are recommended to bring the
members of the Management Team to a an option position that is commensurate with their position and
ability to contribute to the success of the Company.

Company Recommendation — Refresh Grants

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Previous Position (1)	 	 	 	“Refresh” Options (2)	 	 	Total
	Name	 	#	 	%	 	 	#	 	%	 	 	#	 	%
	 	 	 	 	 	 	 
	Grant Pierce
	 	 	3,533,719	 	 	 	4.84	%	 	 	 	2,616,000	 	 	 	2.53	%	 	 	 	6,149,719	 	 	 	5.95	%
	Drew Wingard
	 	 	3,533,719	 	 	 	4.84	%	 	 	 	2,616,000	 	 	 	2.53	%	 	 	 	6,149,719	 	 	 	5.95	%
	James Mac Hale
	 	 	—	 	 	 	0.00	%	 	 	 	700,000	 	 	 	0.68	%	 	 	 	700,000	 	 	 	0.68	%
	David O’Brien
	 	 	—	 	 	 	0.00	%	 	 	 	600,000	 	 	 	0.58	%	 	 	 	600,000	 	 	 	0.58	%
	Phillip Casini
	 	 	446,003	 	 	 	0.61	%	 	 	 	554,000	 	 	 	0.54	%	 	 	 	1,000,003	 	 	 	0.97	%
	Marty Kovacich
	 	 	686,159	 	 	 	0.94	%	 	 	 	1,314,000	 	 	 	1.27	%	 	 	 	2,000,159	 	 	 	1.94	%
	Ray Brinks
	 	 	1,029,238	 	 	 	1.41	%	 	 	 	471,000	 	 	 	0.46	%	 	 	 	1,500,238	 	 	 	1.45	%
	 	 	 	 	 	 	 
	TOTAL
	 	 	9,228,838	 	 	 	12.64	%	 	 	 	8,871,000	 	 	 	8.58	%	 	 	 	18,099,838	 	 	 	17.51	%

Compensation Committee Recommendation — Refresh Grants

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Previous Position (1)	 	 	 	“Refresh” Options (2)	 	 	Total
	Name	 	#	 	%	 	 	#	 	%	 	 	#	 	%
	 	 	 	 	 	 	 
	Grant Pierce (3)
	 	 	3,533,719	 	 	 	4.84	%	 	 	 	2,150,000	 	 	 	2.08	%	 	 	 	5,683,719	 	 	 	5.50	%
	Drew Wingard (3)
	 	 	3,533,719	 	 	 	4.84	%	 	 	 	2,150,000	 	 	 	2.08	%	 	 	 	5,683,719	 	 	 	5.50	%
	James Mac Hale
	 	 	—	 	 	 	0.00	%	 	 	 	700,000	 	 	 	0.68	%	 	 	 	700,000	 	 	 	0.68	%
	David O’Brien
	 	 	—	 	 	 	0.00	%	 	 	 	600,000	 	 	 	0.58	%	 	 	 	600,000	 	 	 	0.58	%
	Phillip Casini
	 	 	446,003	 	 	 	0.61	%	 	 	 	554,000	 	 	 	0.54	%	 	 	 	1,000,003	 	 	 	0.97	%
	Marty Kovacich (3)
	 	 	686,159	 	 	 	0.94	%	 	 	 	1,125,000	 	 	 	1.09	%	 	 	 	1,811,159	 	 	 	1.75	%
	Ray Brinks
	 	 	1,029,238	 	 	 	1.41	%	 	 	 	471,000	 	 	 	0.46	%	 	 	 	1,500,238	 	 	 	1.45	%
	 	 	 	 	 	 	 
	TOTAL
	 	 	9,228,838	 	 	 	12.64	%	 	 	 	7,750,000	 	 	 	7.50	%	 	 	 	16,978,838	 	 	 	16.43	%

 

			
	(1)	 	- the “Previous Position” is calculated relative to ownership pre-financing
	 
	(2)	 	- the “Refresh Options” and “Total” are calculated relative to
ownership post-financing
	 
	(3)	 	- these option grants differs from initial Company recommendations

 

 

Incentive Plan Description

The “Incentive Plan” is intended to create close alignment of Company, Board, and Management
Team goals over the course of the next 18 months — a critical time within which attainment of
Company goals could lead to a significant value-increasing event for the Company Shareholders such
as an IPO. Through personal incentives for the management team, it is believed that the Company
may more precisely reach its goals quickly, directly benefiting all Shareholders of the Company by
increasing the Company value. Further, these incentives, as granted and evaluated by the Board,
ensure close communication with the Management Team.

The incentives that this plan provides will be subject to the performance of the Company relative
to goals as set and agreed to by the Management Team and the Company Board of Directors.
Performance metrics will be set each 6 month period for a total of 18 months. Evaluation of the
Company’s performance relative to these metrics will be judged by the Board with Management Team
consultation.

The incentives that this plan provides are in the form of Company equity. That is, the members of
the Management Team will be incentivized through a potential increased ownership in the Company
itself.1 This is provided in two parts: “Incentive Options” and “Acceleration.” The
former refers to additional stock options granted to members of the Management Team, and the latter
refers to advanced vesting of options faster than the existing stock option agreement provides.
Each will be described later in this document.

Note — given the dramatic difference between the stock positions of the founders (Grant and Drew)
and the rest of the management team, they are treated differently in this plan.

Incentive Plan Implementation & Measurement

This Incentive Plan is based upon three 6-month periods, beginning at the time this plan is
implemented.

	 	–	 	Each 6 months for three periods, beginning upon implementation of this plan, the
Management Team will propose a set of goals for the Company as well as a set of goals for
each member of the Management Team. The Compensation Committee will work with the
Management Team to arrive at these goals, which will then be presented to the Board for
approval.
	 
	 	–	 	At the end of each 6-month period, the Management Team will report on their progress
relative to the goals to the Compensation Committee, together providing a recommendation to
the Board as to their attainment of the goals. Goals can be partially met unless stated
otherwise.
	 
	 	–	 	At the Board’s sole discretion, with consultation with the Management Team, a judgment
will be made as to the attainment of the goals. The Board can award none, all, or a
partial amount of the period’s incentive based upon performance of the Management Team.
	 
	 	–	 	It is the intent of this plan not to award any incentive upon attainment of less than
80% of agreed-upon goals.
	 
	 	–	 	It is the intent of this plan that the members of the Management Team are treated as a
whole. The entire team is awarded the deemed percentage of the period’s incentive.
	 
	 	–	 	The pursuit of the Incentive Plan is the responsibility of the Management Team.

Incentive Stock Options

Non-founder members of the Management Team will be given the opportunity to earn more stock
options as part of this incentive plan. These Incentive options will be granted only upon the
attainment of the mutually agreed-upon goals as agreed to by the Management Team and Board.

Note that the founders, Grant and Drew, do not participate in the Incentive Options portion of this
plan. Given the size of the employee option pool, it would be impossible to grant proportionally
meaningful additional options for the founders given their existing option grants. All members of
the Management Team, however, participate in the acceleration plan.

 

			
	1	 	It should be noted that cash incentives were
also considered. However, equity-based incentives were considered more
advantageous for two reasons: 1 – cash is extremely valuable for the
Company at this stage of its development, and cash-based incentives should be
kept to a minimum; 2 – tying incentives to equity in the Company has a
long-lasting benefit in that after the incentive is granted the employee has an
increased reason to make the Company successful.

					
	 	 	 	 	 
	 
	 	Sonics Incentive/Stock Plan
	 	Page 2 of 3
	 	 	 	 	 

 

 

 

The numbers in the table below represent mostly a pro-rata distribution of an additional set of
options relative to the Company-proposed option refresh. The resulting options total is the same
as the Company proposal.

The results of the attainment of each period’s goals will be applied to the available incentive
options for the period. For example, if a member of the Management Team had 300 Incentive Options
available in this plan, then 100 of those options will be available each 6-month period. If the
Management Team meets 90% of their goals for the period, then this member will be granted 90
Incentive Options.

Incentive Options

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Post Refresh	 	 	 	Incentive Options	 	 	 	New Total
	Name	 	#	 	%	 	 	#	 	%	 	 	#	 	%
	 	 	 	 	 	 	 
	Grant Pierce
	 	 	5,683,719	 	 	 	5.50	%	 	 	 	0	 	 	 	0.00	%	 	 	 	5,683,719	 	 	 	5.50	%
	Drew Wingard
	 	 	5,683,719	 	 	 	5.50	%	 	 	 	0	 	 	 	0.00	%	 	 	 	5,683,719	 	 	 	5.50	%
	James Mac Hale
	 	 	700,000	 	 	 	0.68	%	 	 	 	129,006	 	 	 	0.12	%	 	 	 	829,006	 	 	 	0.80	%
	David O’Brien
	 	 	600,000	 	 	 	0.58	%	 	 	 	110,577	 	 	 	0.11	%	 	 	 	710,577	 	 	 	0.69	%
	Phillip Casini
	 	 	1,000,003	 	 	 	0.97	%	 	 	 	184,295	 	 	 	0.18	%	 	 	 	1,184,298	 	 	 	1.15	%
	Marty Kovacich
	 	 	1,811,159	 	 	 	1.75	%	 	 	 	333,787	 	 	 	0.32	%	 	 	 	2,144,946	 	 	 	2.07	%
	Ray Brinks
	 	 	1,500,238	 	 	 	1.45	%	 	 	 	276,486	 	 	 	0.27	%	 	 	 	1,776,724	 	 	 	1.72	%
	 	 	 	 	 	 	 
	TOTAL
	 	 	16,978,838	 	 	 	16.42	%	 	 	 	1,034,152	 	 	 	1.00	%	 	 	 	18,012,990	 	 	 	17.42	%

Incentive Stock Options will be granted under the existing Sonics employee stock plan.

Founder Incentive Acceleration

The two founders (Drew and Grant) are treated differently in this incentive plan. Instead of
receiving additional stock, the founders receive acceleration of their granted options in
proportion to the period’s goals attained.

	 	–	 	for each 6-month period, the founders have the opportunity to advance vesting by 6
months. For example, if the Management Team meets its goals by 100% in the first period,
the founders receive an additional 6 months of vesting. The effect of which is that for
the 6-month period they vest one year (adding the real-time vesting of 6 months to the
acceleration of 6 months). The acceleration is proportional to the achievement of goals,
such that, for example, 80% achievement yields roughly 5 months of acceleration. If the
Management Team meets 100% of their goals for all three periods, the founders will have
vested 3 years over the course of 18 months.

Special Conditions

The entire Management Team will be able to receive the following according to this plan:

	 	–	 	Upon a merger/acquisition where the Sonics enterprise value is $150 million or greater,
all members of the Management Team will receive one year of acceleration.
	 
	 	–	 	Alternately, upon an IPO with a resulting enterprise value of $200 million or greater,
all members of the Management Team will receive one year of acceleration.

All acceleration is in addition to the 25% provided in the employee stock plan granted under
double-trigger change-of-control.

					
	 	 	 	 	 
	 
	 	Sonics Incentive/Stock Plan
	 	Page 3 of 3

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