Document:

exv10w2

 

Exhibit 10.2

SOLAR ENERTECH CORP.

2007 EQUITY INCENTIVE PLAN

     1. Establishment, Purpose and Term of Plan.

          1.1 Establishment. The Solar Enertech Corp. 2007 Equity Incentive Plan (the “Plan”) is hereby
established effective as of September 24, 2007.

          1.2 Purpose. The purpose of the Plan is to advance the interests of the Participating Company
Group and its stockholders by providing an incentive to attract, retain and reward persons
performing services for the Participating Company Group and by motivating such persons to
contribute to the growth and profitability of the Participating Company Group. The Company intends
that Awards granted pursuant to the Plan be exempt from or comply with Section 409A of the Code
(including any amendments or replacements of such section), and the Plan shall be so construed.

          1.3 Term of Plan. The Plan shall continue in effect until its termination by the Committee;
provided, however, that, to the extent required by applicable law, all Awards shall be granted, if
at all, within ten (10) years from the date the Plan is adopted by the Board.

     2. Definitions and Construction.

          2.1 Definitions. Whenever used herein, the following terms shall have their respective
meanings set forth below:

               (a) “Affiliate” means (i) an entity, other than a Parent Corporation, that directly, or
indirectly through one or more intermediary entities, controls the Company or (ii) an entity, other
than a Subsidiary Corporation, that is controlled by the Company directly or indirectly through one
or more intermediary entities. For this purpose, the term “control” (including the term
“controlled by”) means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of the relevant entity, whether through the ownership of
voting securities, by contract or otherwise; or shall have such other meaning assigned such term
for the purposes of registration on Form S-8 under the Securities Act.

               (b) “Award” means any Option, Restricted Stock Purchase Right, Restricted Stock Bonus or
Restricted Stock Unit Award granted under the Plan.

               (c) “Award Agreement” means a written or electronic agreement between the Company and a
Participant setting forth the terms, conditions and restrictions of the Award granted to the
Participant.

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

               (e) “Cause” means, unless such term or an equivalent term is otherwise defined with respect to
an Award by the Participant’s Award Agreement or by a written contract of employment or service,
any of the following: (i) the Participant’s theft,

 

 

dishonesty, willful misconduct, breach of fiduciary duty for personal profit, or falsification
of any Participating Company documents or records; (ii) the Participant’s material failure to abide
by a Participating Company’s code of conduct or other policies (including, without limitation,
policies relating to confidentiality and reasonable workplace conduct); (iii) the Participant’s
unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or
corporate opportunity of a Participating Company (including, without limitation, the Participant’s
improper use or disclosure of a Participating Company’s confidential or proprietary information);
(iv) any intentional act by the Participant which has a material detrimental effect on a
Participating Company’s reputation or business; (v) the Participant’s repeated failure or inability
to perform any reasonable assigned duties after written notice from a Participating Company of, and
a reasonable opportunity to cure, such failure or inability; (vi) any material breach by the
Participant of any employment, service, non-disclosure, non-competition, non-solicitation or other
similar agreement between the Participant and a Participating Company, which breach is not cured
pursuant to the terms of such agreement; or (vii) the Participant’s conviction (including any plea
of guilty or nolo contendere) of any criminal act involving fraud, dishonesty, misappropriation or
moral turpitude, or which impairs the Participant’s ability to perform his or her duties with a
Participating Company.

               (f) “Change in Control” means, unless such term or an equivalent term is otherwise defined
with respect to an Award by the Participant’s Award Agreement or written contract of employment or
service, the occurrence of any of the following:

                    (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of the Company representing more than fifty percent (50%) of
the total combined voting power of the Company’s then-outstanding securities entitled to vote
generally in the election of Directors; provided, however, that the following acquisitions shall
not constitute a Change in Control: (1) an acquisition by any such person who on the Effective Date
is the beneficial owner of more than fifty percent (50%) of such voting power, (2) any acquisition
directly from the Company, including, without limitation, a public offering of securities, (3) any
acquisition by the Company, (4) any acquisition by a trustee or other fiduciary under an employee
benefit plan of a Participating Company or (5) any acquisition by an entity owned directly or
indirectly by the stockholders of the Company in substantially the same proportions as their
ownership of the voting securities of the Company; or

                    (ii) an Ownership Change Event or series of related Ownership Change Events (collectively, a
“Transaction”) in which the stockholders of the Company immediately before the Transaction do not
retain immediately after the Transaction direct or indirect beneficial ownership of more than fifty
percent (50%) of the total combined voting power of the outstanding securities entitled to vote
generally in the election of Directors or, in the case of an Ownership Change Event described in
Section 2.1(x)(iii), the entity to which the assets of the Company were transferred (the
“Transferee”), as the case may be; or

 

 

                    (iii) the liquidation or dissolution of the Company.
provided, however, that a Change in Control shall be deemed not to include a transaction described
in subsections (i) or (ii) of this Section 2.1(f) in which a majority of the members of the board
of directors of the continuing, surviving or successor entity, or parent thereof, immediately after
such transaction is comprised of Incumbent Directors. Notwithstanding the foregoing, to the extent
that any amount constituting Section 409A Deferred Compensation would become payable under this
Plan by reason of a Change in Control, such amount shall become payable only if the event
constituting a Change in Control would also constitute a change in ownership or effective control
of the Company or a change in the ownership of a substantial portion of the assets of the Company
within the meaning of Section 409A.

     For purposes of the preceding sentence, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting securities of one or more
corporations or other business entities which own the Company or the Transferee, as the case may
be, either directly or through one or more subsidiary corporations or other business entities. The
Committee shall have the right to determine whether multiple sales or exchanges of the voting
securities of the Company or multiple Ownership Change Events are related, and its determination
shall be final, binding and conclusive.

               (g) “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations
promulgated thereunder.

               (h) “Committee” means the Compensation Committee and such other committee or subcommittee of
the Board, if any, duly appointed to administer the Plan and having such powers in each instance as
shall be specified by the Board. If, at any time, there is no committee of the Board then
authorized or properly constituted to administer the Plan, the Board shall exercise all of the
powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise
any or all of such powers.

               (i) “Company” means Solar EnerTech Corp., a Nevada corporation, or any successor corporation
thereto.

               (j) “Consultant” means a person engaged to provide consulting or advisory services (other than
as an Employee or a Director) to a Participating Company.

               (k) “Director” means a member of the Board.

               (l) “Disability” means the inability of the Participant, in the opinion of a qualified
physician acceptable to the Company, to perform the major duties of the Participant’s position with
the Participating Company Group because of the sickness or injury of the Participant.

               (m) “Dividend Equivalent Right” means the right of a Participant, granted at the discretion of
the Committee or as otherwise provided by the Plan, to receive a credit for the account of such
Participant in an amount equal to the cash dividends paid on one share of Stock for each share of
Stock represented by an Award held by such Participant.

               (n) “Employee” means any person treated as an employee (including an Officer or a Director who
is also treated as an employee) in the records of a Participating

 

 

Company. The Company shall determine in good faith and in the exercise of its discretion
whether an individual has become or has ceased to be an Employee and the effective date of such
individual’s employment or termination of employment, as the case may be. For purposes of an
individual’s rights, if any, under the terms of the Plan as of the time of the Company’s
determination of whether or not the individual is an Employee, all such determinations by the
Company shall be final, binding and conclusive as to such rights, if any, notwithstanding that the
Company or any court of law or governmental agency subsequently makes a contrary determination as
to such individual’s status as an Employee.

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

               (p) “Fair Market Value” means, as of any date, the value of a share of Stock or other property
as determined by the Committee, in its discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein, subject to the following:

                    (i) If, on such date, the Stock is listed on a national or regional securities exchange or
market system, or is quoted on the Over the Counter Bulletin Board (OTCBB), the Fair Market Value
of a share of Stock shall be the closing price of a share of Stock (or the mean of the closing bid
and asked prices of a share of Stock if the Stock is so quoted instead) as quoted on such national,
regional securities exchange, market system or OTCBB constituting the primary market for the Stock,
as reported in The Wall Street Journal, the OTCBB or such other source as the Company deems
reliable. If the relevant date does not fall on a day on which the Stock has traded over the
counter or on such securities exchange or market system, the date on which the Fair Market Value
shall be established shall be the last day on which the Stock was so traded prior to the relevant
date, or such other appropriate day as shall be determined by the Committee, in its discretion.

                    (ii) If, on such date, the Stock is not listed on a national or regional securities exchange,
market system or OTCBB, the Fair Market Value of a share of Stock shall be as determined by the
Committee in good faith without regard to any restriction other than
a restriction which, by its
terms, will never lapse, and subject to the applicable requirements, if any, of Section 409A of the
Code.

               (q) “Incumbent Director” means a director who either (i) is a member of the Board as of the
Effective Date or (ii) is elected, or nominated for election, to the Board with the affirmative
votes of at least a majority of the Incumbent Directors at the time of such election or nomination,
but who was not elected or nominated in connection with an actual or threatened proxy contest
relating to the election of directors of the Company.

               (r) “Insider” means an Officer, a Director of the Company or other person whose transactions
in Stock are subject to Section 16 of the Exchange Act.

               (s) “Insider Trading Policy” means the written policy of the Company pertaining to the
purchase, sale, transfer or other disposition of the Company’s equity

 

 

securities by Directors, Officers, Employees or other service providers who may possess
material, nonpublic information regarding the Company or its securities.

               (t) “Net-Exercise” means a procedure by which the Participant will be issued a number of whole
shares of Stock upon the exercise of an Option determined in accordance with the following formula:

                    N = X(A-B)/A, where

“N” = the number of shares of Stock to be issued to the
Participant upon exercise of the Option;

“X” = the total number of shares with respect to which the
Participant has elected to exercise the Option;

“A” = the Fair Market Value of one (1) share of Stock determined
on the exercise date; and

“B” = the exercise price per share (as defined in the
Participant’s Award Agreement)

               (u) “Nonstatutory Stock Option” means an Option not intended to be (as set forth in the Award
Agreement) or which does not qualify as an incentive stock option within the meaning of
Section 422(b) of the Code.

               (v) “Officer” means any person designated by the Board as an officer of the Company.

               (w) “Option” means a right granted under Section 6 to purchase Stock pursuant to the terms and
conditions of the Plan. All Options shall be Nonstatutory Stock Options.

               (x) “Ownership Change Event” means the occurrence of any of the following with respect to the
Company: (i) the direct or indirect sale or exchange in a single or series of related transactions
by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the
Company; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale,
exchange, or transfer of all or substantially all of the assets of the Company (other than a sale,
exchange or transfer to one or more subsidiaries of the Company).

               (y) “Parent Corporation” means any present or future “parent corporation” of the Company, as
defined in Section 424(e) of the Code.

               (z) “Participant” means any eligible person who has been granted one or more Awards.

               (aa) “Participating Company” means the Company or any Parent Corporation, Subsidiary
Corporation or Affiliate.

 

 

               (bb) “Participating Company Group” means, at any point in time, all entities collectively
which are then Participating Companies.

               (cc) “Restricted Stock Award” means an Award of a Restricted Stock Bonus or a Restricted Stock
Purchase Right.

               (dd) “Restricted Stock Bonus” means Stock granted to a Participant pursuant to Section 7.

               (ee) “Restricted Stock Purchase Right” means a right to purchase Stock granted to a
Participant pursuant to Section 7.

               (ff) “Restricted Stock Unit” means a right granted to a Participant pursuant to Section 8 to
receive a share of Stock on a date determined in accordance with the provisions of such Section and
the Participant’s Award Agreement.

               (gg) “Rule 16b-3” means Rule 16b-3 under the Exchange Act, as amended from time to time, or
any successor rule or regulation.

               (hh) “Section 409A” means Section 409A of the Code.

               (ii) “Section 409A Deferred Compensation” means compensation provided pursuant to the Plan
that constitutes deferred compensation subject to and not exempted from the requirements of Section
409A.

               (jj) “Securities Act” means the Securities Act of 1933, as amended.

               (kk) “Service” means a Participant’s employment or service with the Participating Company
Group, whether in the capacity of an Employee, a Director or a Consultant. A Participant’s Service
shall not be deemed to have terminated merely because of a change in the capacity in which the
Participant renders Service to the Participating Company Group or a change in the Participating
Company for which the Participant renders such Service, provided that there is no interruption or
termination of the Participant’s Service. Furthermore, a Participant’s Service shall not be deemed
to have terminated if the Participant takes any military leave, sick leave, or other bona fide
leave of absence approved by the Company. However, if any such leave taken by a Participant
exceeds ninety (90) days, then on the ninety-first (91st) day following the commencement of such
leave the Participant’s Service shall be deemed to have terminated, unless the Participant’s right
to return to Service is guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company or required by law, a leave of absence shall not be treated as
Service for purposes of determining vesting under the Participant’s Award Agreement. A
Participant’s Service shall be deemed to have terminated either upon an actual termination of
Service or upon the corporation for which the Participant performs Service ceasing to be a
Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine
whether the Participant’s Service has terminated and the effective date of and reason for such
termination.

               (ll) “Stock” means the common stock of the Company, as adjusted from time to time in
accordance with Section 4.3.

 

 

               (mm) “Subsidiary Corporation” means any present or future “subsidiary corporation” of the
Company, as defined in Section 424(f) of the Code.

               (nn) “Vesting Conditions” mean those conditions established in accordance with the Plan prior
to the satisfaction of which shares subject to an Award remain subject to forfeiture or a
repurchase option in favor of the Company exercisable for the Participant’s monetary purchase
price, if any, for such shares upon the Participant’s termination of Service.

          2.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated
by the context, the singular shall include the plural and the plural shall include the singular.
Use of the term “or” is not intended to be exclusive, unless the context clearly requires
otherwise.

     3. Administration.

          3.1 Administration by the Committee. The Plan shall be administered by the Committee. All
questions of interpretation of the Plan, of any Award Agreement or of any other form of agreement
or other document employed by the Company in the administration of the Plan or of any Award shall
be determined by the Committee, and such determinations shall be final, binding and conclusive upon
all persons having an interest in the Plan or such Award, unless fraudulent or made in bad faith.
Any and all actions, decisions and determinations taken or made by the Committee in the exercise of
its discretion pursuant to the Plan or Award Agreement or other agreement thereunder (other than
determining questions of interpretation pursuant to the preceding sentence) shall be final, binding
and conclusive upon all persons having an interest therein.

          3.2 Authority of Officers. Any Officer shall have the authority to act on behalf of the
Company with respect to any matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein, provided the Officer has apparent
authority with respect to such matter, right, obligation, determination or election.

          3.3 Administration with Respect to Insiders. With respect to participation by Insiders in the
Plan, at any time that any class of equity security of the Company is registered pursuant to
Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements,
if any, of Rule 16b-3.

          3.4 Powers of the Committee. In addition to any other powers set forth in the Plan and
subject to the provisions of the Plan, the Committee shall have the full and final power and
authority, in its discretion:

               (a) to determine the persons to whom, and the time or times at which, Awards shall be granted
and the number of shares of Stock to be subject to each Award;

               (b) to determine the type of Award granted;

 

 

               (c) to determine the Fair Market Value of shares of Stock or other property;

               (d) to determine the terms, conditions and restrictions applicable to each Award (which need
not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the
exercise or purchase price of shares pursuant to any Award, (ii) the method of payment for shares
purchased pursuant to any Award, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with Award, including by the withholding or delivery of shares of
Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any
shares acquired pursuant thereto, (v)  the time of the expiration of any Award, (vi) the effect of
the Participant’s termination of Service on any of the foregoing, and (vii) all other terms,
conditions and restrictions applicable to any Award or shares acquired pursuant thereto not
inconsistent with the terms of the Plan;

               (e) to determine whether an Award will be settled in shares of Stock, cash, or in any
combination thereof;

               (f) to approve one or more forms of Award Agreement;

               (g) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or
conditions applicable to any Award or any shares acquired upon the exercise thereof;

               (h) to accelerate, continue, extend or defer the exercisability of any Award or the vesting of
any shares acquired upon the exercise thereof, including with respect to the period following a
Participant’s termination of Service;

               (i) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to
adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without
limitation, as the Committee deems necessary or desirable to comply with the laws or regulations of
or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose
citizens may be granted Awards; and

               (j) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or
any Award Agreement and to make all other determinations and take such other actions with respect
to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with
the provisions of the Plan or applicable law.

          3.5 Indemnification. In addition to such other rights of indemnification as they may have as
members of the Board or the Committee or as officers or employees of the Participating Company
Group, members of the Board or the Committee and any officers or employees of the Participating
Company Group to whom authority to act for the Board, the Committee or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees,
actually and necessarily incurred in connection with the defense of any action, suit or proceeding,
or in connection with any appeal therein, to which they or any of them may be a party by reason of
any action taken or failure to act under or in connection with the Plan, or any right granted
hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel

 

 

selected by the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such person is liable for gross negligence, bad faith or intentional
misconduct in duties; provided, however, that within sixty (60) days after the institution of such
action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at
its own expense to handle and defend the same.

     4. Shares Subject to Plan.

          4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Sections 4.2 and
4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be
10,000,000 which shall consist of authorized but unissued or reacquired shares of Stock or any
combination thereof.

          4.2 Share Counting. If an outstanding Award for any reason expires or is terminated or
canceled without having been exercised or settled in full, or if shares of Stock acquired pursuant
to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company for an
amount not greater than the Participant’s purchase price, the shares of Stock allocable to the
terminated portion of such Award or such forfeited or repurchased shares of Stock shall again be
available for issuance under the Plan. Shares of Stock shall not be deemed to have been issued
pursuant to the Plan with respect to any portion of an Award that is settled in cash. If the
exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of
shares of Stock owned by the Participant, or by means of a Net-Exercise, the number of shares
available for issuance under the Plan shall be reduced by the gross number of shares for which the
Option is exercised. Shares withheld or reacquired by the Company in satisfaction of tax
withholding obligations pursuant to Section 11.2 shall not again be available for issuance under
the Plan.

          4.3 Adjustments for Changes in Capital Structure. Subject to any required action by the
stockholders of the Company, in the event of any change in the Stock effected without receipt of
consideration by the Company, whether through merger, consolidation, reorganization,
reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change
in the capital structure of the Company, or in the event of payment of a dividend or distribution
to the stockholders of the Company in a form other than Stock (excepting normal cash dividends)
that has a material effect on the Fair Market Value of shares of Stock, appropriate and
proportionate adjustments shall be made in the number and class of shares subject to the Plan and
to any outstanding Awards, and in the exercise or purchase price per share of any outstanding
Awards in order to prevent dilution or enlargement of Participants’ rights under the Plan. For
purposes of the foregoing, conversion of any convertible securities of the Company shall not be
treated as “effected without receipt of consideration by the Company.” If a majority of the shares
which are of the same class as the shares that are subject to outstanding Awards are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares
of another corporation (the “New Shares”), the Committee may unilaterally amend the outstanding
Awards to provide that such Awards are for New Shares. In the event of any such amendment, the
number of shares subject to, and the exercise or purchase price per share of, the outstanding
Awards shall be adjusted in a fair and

 

 

equitable manner as determined by the Committee, in its discretion. Any fractional share
resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole
number, and the exercise price per share shall be rounded up to the nearest whole cent. In no
event may the exercise price of any Award be decreased to an amount less than the par value, if
any, of the stock subject to the Award. The Committee in its sole discretion, may also make such
adjustments in the terms of any Award to reflect, or related to, such changes in the capital
structure of the Company or distributions as it deems appropriate. The adjustments determined by
the Committee pursuant to this Section shall be final, binding and conclusive.

     5. Eligibility and Option Limitations.

          5.1 Persons Eligible for Awards. Awards may be granted only to Employees, Consultants and
Directors.

          5.2 Participation in Plan. Awards are granted solely at the discretion of the Committee.
Eligible persons may be granted more than one Award. However, eligibility in accordance with this
Section shall not entitle any person to be granted an Award, or, having been granted an Award, to
be granted an additional Award.

     6. Stock Options.

          Options shall be evidenced by Award Agreements specifying the number of shares of Stock
covered thereby, in such form as the Committee shall from time to time establish. Award Agreements
evidencing Options may incorporate all or any of the terms of the Plan by reference and shall
comply with and be subject to the following terms and conditions:

          6.1 Exercise Price. The exercise price for each Option shall be established in the discretion
of the Committee; provided, however, that the exercise price per share for an Option shall be not
less than one hundred percent (100%) of the Fair Market Value of a share of Stock on the effective
date of grant of the Option. Notwithstanding the foregoing, an Option may be granted with an
exercise price lower than the minimum exercise price set forth above if such Option is granted
pursuant to an assumption or substitution for another option in a manner that would qualify under
the provisions of Section 424(a) of the Code.

          6.2 Exercisability and Term of Options. Options shall be exercisable at such time or times,
or upon such event or events, and subject to such terms, conditions, performance criteria and
restrictions as shall be determined by the Committee and set forth in the Award Agreement
evidencing such Option; provided, however, that no Option shall be exercisable after the expiration
of ten (10) years after the effective date of grant of such Option. Subject to the foregoing,
unless otherwise specified by the Committee in the grant of an Option, any Option granted hereunder
shall terminate ten (10) years after the effective date of grant of the Option, unless earlier
terminated in accordance with its provisions.

          6.3 Payment of Exercise Price.

               (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
exercise price for the number of shares of Stock being purchased pursuant to any Option shall be
made (i) in cash or by check or cash equivalent, (ii) subject to

 

 

Section 6.3(b)(i), by tender to the Company, or attestation to the ownership, of shares of
Stock owned by the Participant having a Fair Market Value not less than the exercise price,
(iii) subject to Section 6.3(b)(ii), by delivery of a properly executed notice of exercise together
with irrevocable instructions to a broker providing for the assignment to the Company of the
proceeds of a sale or loan with respect to some or all of the shares being acquired upon the
exercise of the Option (including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of Governors of the
Federal Reserve System) (a "Cashless Exercise"), (iv) by delivery of a properly executed notice
electing a Net-Exercise, (v) by such other consideration as may be approved by the Committee from
time to time to the extent permitted by applicable law, or (vi) by any combination thereof. The
Committee may at any time or from time to time grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price or which otherwise
restrict one or more forms of consideration.

               (b) Limitations on Forms of Consideration.

                    (i) Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company’s stock. Unless otherwise provided by the Committee, an
Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of
Stock unless such shares either have been owned by the Participant for more than six (6) months (or
such other period, if any, as the Committee may permit) and not used for another Option exercise by
attestation during such period, or were not acquired, directly or indirectly, from the Company.

                    (ii) Cashless Exercise. The Cashless Exercise program is available only if, at the time of
exercise, the offer and sale of shares of Stock pursuant to the Plan is registered on a then
effective registration statement on Form S-8 under the Securities Act. The Company reserves, at
any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline
to approve or terminate any program or procedures for the exercise of Options by means of a
Cashless Exercise, including with respect to one or more Participants specified by the Company
notwithstanding that such program or procedures may be available to other Participants.

          6.4 Effect of Termination of Service.

               (a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided
herein and unless otherwise provided by the Committee, an Option shall terminate immediately upon
the Participant’s termination of Service to the extent that it is then unvested and shall be
exercisable after the Participant’s termination of Service to the extent it is then vested only
during the applicable time period determined in accordance with this Section and thereafter shall
terminate:

                    (i) Disability. If the Participant’s Service terminates because of the Disability of the
Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on
which the Participant’s Service terminated, may be exercised by the

 

 

Participant (or the Participant’s guardian or legal representative) at any time prior to the
expiration of twelve (12) months after the date on which the Participant’s Service terminated, but
in any event no later than the date of expiration of the Option’s term as set forth in the Award
Agreement evidencing such Option (the “Option
Expiration Date”).

                    (ii) Death. If the Participant’s Service terminates because of the death of the Participant,
then the Option, to the extent unexercised and exercisable for vested shares on the date on which
the Participant’s Service terminated, may be exercised by the Participant’s legal representative or
other person who acquired the right to exercise the Option by reason of the Participant’s death at
any time prior to the expiration of twelve (12) months after the date on which the Participant’s
Service terminated, but in any event no later than the Option Expiration Date. The Participant’s
Service shall be deemed to have terminated on account of death if the Participant dies within three
(3) months after the Participant’s termination of Service.

                    (iii) Termination for Cause. Notwithstanding any other provision of the Plan to the contrary,
if the Participant’s Service is terminated for Cause or if, following the Participant’s termination
of Service and during any period in which the Option otherwise would remain exercisable, the
Participant engages in any act that would constitute Cause, the Option shall terminate in its
entirety and cease to be exercisable immediately upon such termination of Service or act.

                    (iv) Other Termination of Service. If the Participant’s Service terminates for any reason,
except Disability, death or Cause, the Option, to the extent unexercised and exercisable for vested
shares on the date on which the Participant’s Service terminated, may be exercised by the
Participant at any time prior to the expiration of three (3) months after the date on which the
Participant’s Service terminated, but in any event no later than the Option Expiration Date.

               (b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of
an Option within the applicable time periods set forth in Section 6.4(a) is prevented by the
provisions of Section 12 below, the Option shall remain exercisable until thirty (30) days after
the date such exercise first would no longer be prevented by such provisions, but in any event no
later than the Option Expiration Date.

          6.5 Transferability of Options. During the lifetime of the Participant, an Option shall be
exercisable only by the Participant or the Participant’s guardian or legal representative. An
Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set
forth in the Award Agreement evidencing such Option, an Option shall be assignable or transferable
subject to the applicable limitations, if any, described in the General Instructions to Form S-8
under the Securities Act.

 

 

     7. Restricted Stock Awards.

          Restricted Stock Awards shall be evidenced by Award Agreements specifying whether the Award is
a Restricted Stock Bonus or a Restricted Stock Purchase Right and the number of shares of Stock
subject to the Award, in such form as the Committee shall from time to time establish. Award
Agreements evidencing Restricted Stock Awards may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the following terms and conditions:

          7.1 Types of Restricted Stock Awards Authorized. Restricted Stock Awards may be granted in
the form of either a Restricted Stock Bonus or a Restricted Stock Purchase Right. Restricted Stock
Awards may be granted upon such conditions as the Committee shall determine, including, without
limitation, upon the attainment of one or more performance goals.

          7.2 Purchase Price. The purchase price for shares of Stock issuable under each Restricted
Stock Purchase Right shall be established by the Committee in its discretion. No monetary payment
(other than applicable tax withholding) shall be required as a condition of receiving shares of
Stock pursuant to a Restricted Stock Bonus, the consideration for which shall be services actually
rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required
by applicable state corporate law, the Participant shall furnish consideration in the form of cash
or past services rendered to a Participating Company or for its benefit having a value not less
than the par value of the shares of Stock subject to a Restricted Stock Award.

          7.3 Purchase Period. A Restricted Stock Purchase Right shall be exercisable within a period
established by the Committee, which shall in no event exceed thirty (30) days from the effective
date of the grant of the Restricted Stock Purchase Right.

          7.4 Payment of Purchase Price. Except as otherwise provided below, payment of the purchase
price for the number of shares of Stock being purchased pursuant to any Restricted Stock Purchase
Right shall be made (a) in cash or by check or cash equivalent, (b) by such other consideration as
may be approved by the Committee from time to time to the extent permitted by applicable law, or
(c) by any combination thereof.

          7.5 Vesting and Restrictions on Transfer. Shares issued pursuant to any Restricted Stock
Award may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such
Service requirements, conditions, restrictions or performance criteria as shall be established by
the Committee and set forth in the Award Agreement evidencing such Award. During any period in
which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions,
such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of
other than pursuant to an Ownership Change Event or as provided in Section 7.8. The Committee, in
its discretion, may provide in any Award Agreement evidencing a Restricted Stock Award that, if the
satisfaction of Vesting Conditions with respect to any shares subject to such Restricted Stock
Award would otherwise occur on a day on which the sale of such shares would violate the provisions
of the Insider Trading Policy, then satisfaction of the Vesting Conditions automatically shall be
determined on the next trading

 

 

day on which the sale of such shares would not violate the Insider Trading Policy. Upon
request by the Company, each Participant shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the
Company any and all certificates representing shares of Stock acquired hereunder for the placement
on such certificates of appropriate legends evidencing any such transfer restrictions.

          7.6 Voting Rights; Dividends and Distributions. Except as provided in this Section,
Section 7.5 and any Award Agreement, during any period in which shares acquired pursuant to a
Restricted Stock Award remain subject to Vesting Conditions, the Participant shall have all of the
rights of a stockholder of the Company holding shares of Stock, including the right to vote such
shares and to receive all dividends and other distributions paid with respect to such shares.
However, in the event of a dividend or distribution paid in shares of Stock or other property or
any other adjustment made upon a change in the capital structure of the Company as described in
Section 4.3, any and all new, substituted or additional securities or other property (other than
normal cash dividends) to which the Participant is entitled by reason of the Participant’s
Restricted Stock Award shall be immediately subject to the same Vesting Conditions as the shares
subject to the Restricted Stock Award with respect to which such dividends or distributions were
paid or adjustments were made.

          7.7 Effect of Termination of Service. Unless otherwise provided by the Committee in the Award
Agreement evidencing a Restricted Stock Award, if a Participant’s Service terminates for any
reason, whether voluntary or involuntary (including the Participant’s death or disability), then
(a) the Company shall have the option to repurchase for the purchase price paid by the Participant
any shares acquired by the Participant pursuant to a Restricted Stock Purchase Right which remain
subject to Vesting Conditions as of the date of the Participant’s termination of Service and
(b) the Participant shall forfeit to the Company any shares acquired by the Participant pursuant to
a Restricted Stock Bonus which remain subject to Vesting Conditions as of the date of the
Participant’s termination of Service. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to one or more persons
as may be selected by the Company.

          7.8 Nontransferability of Restricted Stock Award Rights. Rights to acquire shares of Stock
pursuant to a Restricted Stock Award shall not be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors
of the Participant or the Participant’s beneficiary, except transfer by will or the laws of descent
and distribution. All rights with respect to a Restricted Stock Award granted to a Participant
hereunder shall be exercisable during his or her lifetime only by such Participant or the
Participant’s guardian or legal representative.

     8. Restricted Stock Unit Awards.

          Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of
Restricted Stock Units subject to the Award, in such form as the Committee shall from time to time
establish. Award Agreements evidencing Restricted Stock Units may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the following terms and
conditions:

 

 

          8.1 Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be granted upon
such conditions as the Committee shall determine, including, without limitation, upon the
attainment of one or more performance goals.

          8.2 Purchase Price. No monetary payment (other than applicable tax withholding, if any) shall
be required as a condition of receiving a Restricted Stock Unit Award, the consideration for which
shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding
the foregoing, if required by applicable state corporate law, the Participant shall furnish
consideration in the form of cash or past services rendered to a Participating Company or for its
benefit having a value not less than the par value of the shares of Stock issued upon settlement of
the Restricted Stock Unit Award.

          8.3 Vesting. Restricted Stock Unit Awards may (but need not) be made subject to Vesting
Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or
performance criteria as shall be established by the Committee and set forth in the Award Agreement
evidencing such Award. The Committee, in its discretion, may provide in any Award Agreement
evidencing a Restricted Stock Unit Award that, if the satisfaction of Vesting Conditions with
respect to any shares subject to the Award would otherwise occur on a day on which the sale of such
shares would violate the provisions of the Insider Trading Policy, then satisfaction of the Vesting
Conditions automatically shall be determined on the first to occur of (a) the next trading day on
which the sale of such shares would not violate the Insider Trading Policy or (b) the later of
(i) the last day of the calendar year in which the original vesting date occurred or (ii) the last
day of the Company’s taxable year in which the original vesting date occurred.

          8.4 Voting Rights, Dividend Equivalent Rights and Distributions. Participants shall have no
voting rights with respect to shares of Stock represented by Restricted Stock Units until the date
of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion,
may provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant
shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on
Stock during the period beginning on the date such Award is granted and ending, with respect to
each share subject to the Award, on the earlier of the date the Award is settled or the date on
which it is terminated. Such Dividend Equivalent Rights, if any, shall be paid by crediting the
Participant with additional whole Restricted Stock Units as of the date of payment of such cash
dividends on Stock. The number of additional Restricted Stock Units (rounded to the nearest whole
number) to be so credited shall be determined by dividing (a) the amount of cash dividends paid on
such date with respect to the number of shares of Stock represented by the Restricted Stock Units
previously credited to the Participant by (b) the Fair Market Value per share of Stock on such
date. Such additional Restricted Stock Units shall be subject to the same terms and conditions and
shall be settled in the same manner and at the same time as the Restricted Stock Units originally
subject to the Restricted Stock Unit Award. In the event of a dividend or distribution paid in
shares of Stock or other property or any other adjustment made upon a change in the capital
structure of the Company as described in Section 4.3, appropriate adjustments shall be made in the
Participant’s Restricted Stock Unit Award so that it represents the right to receive upon
settlement any and all new, substituted or additional securities or other property (other than
normal cash dividends) to

 

 

which the Participant would be entitled by reason of the shares of Stock issuable upon
settlement of the Award, and all such new, substituted or additional securities or other property
shall be immediately subject to the same Vesting Conditions as are applicable to the Award.

          8.5 Effect of Termination of Service. Unless otherwise provided by the Committee and set
forth in the Award Agreement evidencing a Restricted Stock Unit Award, if a Participant’s Service
terminates for any reason, whether voluntary or involuntary (including the Participant’s death or
disability), then the Participant shall forfeit to the Company any Restricted Stock Units pursuant
to the Award which remain subject to Vesting Conditions as of the date of the Participant’s
termination of Service.

          8.6 Settlement of Restricted Stock Unit Awards. The Company shall issue to a Participant on
the date on which Restricted Stock Units subject to the Participant’s Restricted Stock Unit Award
vest or on such other date determined by the Committee, in its discretion, and set forth in the
Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities
or other property pursuant to an adjustment described in Section 8.4) for each Restricted Stock
Unit then becoming vested or otherwise to be settled on such date, subject to the withholding of
applicable taxes, if any. If permitted by the Committee, the Participant may elect, consistent
with the requirements of Section 409A, to defer receipt of all or any portion of the shares of
Stock or other property otherwise issuable to the Participant pursuant to this Section, and such
deferred issuance date(s) and amount(s) elected by the Participant shall be set forth in the Award
Agreement. Notwithstanding the foregoing, the Committee, in its discretion, may provide in any
Award Agreement for settlement of any Restricted Stock Unit Award by payment to the Participant in
cash of an amount equal to the Fair Market Value on the payment date of the shares of Stock or
other property otherwise issuable to the Participant pursuant to this Section.

          8.7 Nontransferability of Restricted Stock Unit Awards. The right to receive shares pursuant
to a Restricted Stock Unit Award shall not be subject in any manner to anticipation, alienation,
sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and
distribution. All rights with respect to a Restricted Stock Unit Award granted to a Participant
hereunder shall be exercisable during his or her lifetime only by such Participant or the
Participant’s guardian or legal representative.

     9. Standard Forms of Award Agreements.

          9.1 Award Agreements. Each Award shall comply with and be subject to the terms and conditions
set forth in the appropriate form of Award Agreement approved by the Committee and as amended from
time to time. No Award or purported Award shall be a valid and binding obligation of the Company
unless evidenced by a fully executed Award Agreement. Any Award Agreement may consist of an
appropriate form of Notice of Grant and a form of Agreement incorporated therein by reference, or
such other form or forms, including electronic media, as the Committee may approve from time to
time.

          9.2 Authority to Vary Terms. The Committee shall have the authority from time to time to vary
the terms of any standard form of Award Agreement either in connection

 

 

with the grant or amendment of an individual Award or in connection with the authorization of
a new standard form or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Award Agreement are not inconsistent with the terms of
the Plan.

     10. Change in Control.

          10.1 Effect of Change in Control on Awards. Subject to the requirements and limitations of
Section 409A if applicable, the Committee may provide for any one or more of the following:

               (a) Accelerated Vesting. The Committee may, in its discretion, provide in any Award Agreement
or, in the event of a Change in Control, may take such actions as it deems appropriate to provide
for the acceleration of the exercisability, vesting and/or settlement in connection with such
Change in Control of each or any outstanding Award or portion thereof and shares acquired pursuant
thereto upon such conditions, including termination of the Participant’s Service prior to, upon, or
following such Change in Control, to such extent as the Committee shall determine.

               (b) Assumption, Continuation or Substitution. In the event of a Change in Control, the
surviving, continuing, successor, or purchasing corporation or other business entity or parent
thereof, as the case may be (the "Acquiror"), may, without the consent of any Participant, either
assume or continue the Company’s rights and obligations under each or any Award or portion thereof
outstanding immediately prior to the Change in Control or substitute for each or any such
outstanding Award or portion thereof a substantially equivalent award with respect to the
Acquiror’s stock, as applicable. For purposes of this Section, if so determined by the Committee,
in its discretion, an Award denominated in shares of Stock shall be deemed assumed if, following
the Change in Control, the Award confers the right to receive, subject to the terms and conditions
of the Plan and the applicable Award Agreement, for each share of Stock subject to the Award
immediately prior to the Change in Control, the consideration (whether stock, cash, other
securities or property or a combination thereof) to which a holder of a share of Stock on the
effective date of the Change in Control was entitled; provided, however, that if such consideration
is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror,
provide for the consideration to be received upon the exercise or settlement of the Award, for each
share of Stock subject to the Award, to consist solely of common stock of the Acquiror equal in
Fair Market Value to the per share consideration received by holders of Stock pursuant to the
Change in Control. If any portion of such consideration may be received by holders of Stock
pursuant to the Change in Control on a contingent or delayed basis, the Committee may, in its sole
discretion, determine such Fair Market Value per share as of the time of the Change in Control on
the basis of the Committee’s good faith estimate of the present value of the probable future
payment of such consideration. Any Award or portion thereof which is neither assumed or continued
by the Acquiror in connection with the Change in Control nor exercised or settled as of the time of
consummation of the Change in Control shall terminate and cease to be outstanding effective as of
the time of consummation of the Change in Control.

 

 

               (c) Cash-Out of Awards. The Committee may, in its discretion and without the consent of any
Participant, determine that, upon the occurrence of a Change in Control, each or any Award or a
portion thereof outstanding immediately prior to the Change in Control and not previously exercised
or settled shall be canceled in exchange for a payment with respect to each vested share (and each
unvested share, if so determined by the Committee) of Stock subject to such canceled Award in
(i) cash, (ii) stock of the Company or of a corporation or other business entity a party to the
Change in Control, or (iii) other property which, in any such case, shall be in an amount having a
Fair Market Value equal to the Fair Market Value of the consideration to be paid per share of Stock
in the Change in Control, reduced by the exercise or purchase price per share, if any, under such
Award. If any portion of such consideration may be received by holders of Stock pursuant to the
Change in Control on a contingent or delayed basis, the Committee may, in its sole discretion,
determine such Fair Market Value per share as of the time of the Change in Control on the basis of
the Committee’s good faith estimate of the present value of the probable future payment of such
consideration. In the event such determination is made by the Committee, the amount of such
payment (reduced by applicable withholding taxes, if any) shall be paid to Participants in respect
of the vested portions of their canceled Awards as soon as practicable following the date of the
Change in Control and in respect of the unvested portions of their canceled Awards in accordance
with the vesting schedules applicable to such Awards.

          10.2 Federal Excise Tax Under Section 4999 of the Code.

               (a) Excess Parachute Payment. In the event that any acceleration of vesting pursuant to an
Award and any other payment or benefit received or to be received by a Participant would subject
the Participant to any excise tax pursuant to Section 4999 of the Code due to the characterization
of such acceleration of vesting, payment or benefit as an “excess parachute payment” under Section
280G of the Code, the Participant may elect, in his or her sole discretion, to reduce the amount of
any acceleration of vesting called for under the Award in order to avoid such characterization.

               (b) Determination by Independent Accountants. To aid the Participant in making any election
called for under Section 10.2(a), no later than the date of the occurrence of any event that might
reasonably be anticipated to result in an “excess parachute payment” to the Participant as
described in Section 10.2(a), the Company shall request a determination in writing by independent
public accountants selected by the Company (the “Accountants”). As soon as practicable thereafter,
the Accountants shall determine and report to the Company and the Participant the amount of such
acceleration of vesting, payments and benefits which would produce the greatest after-tax benefit
to the Participant. For the purposes of such determination, the Accountants may rely on
reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and the Participant shall furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make their required determination.
The Company shall bear all fees and expenses the Accountants may reasonably charge in connection
with their services contemplated by this Section 10.2(b).

 

 

     11. Tax Withholding.

          11.1 Tax Withholding in General. The Company shall have the right to deduct from any and all
payments made under the Plan, or to require the Participant, through payroll withholding, cash
payment or otherwise, to make adequate provision for, the federal, state, local and foreign taxes,
if any, required by law to be withheld by the Participating Company Group with respect to an Award
or the shares acquired pursuant thereto. The Company shall have no obligation to deliver shares of
Stock, to release shares of Stock from an escrow established pursuant to an Award Agreement, or to
make any payment in cash under the Plan until the Participating Company Group’s tax withholding
obligations have been satisfied by the Participant.

          11.2 Withholding in Shares. The Company shall have the right, but not the obligation, to
deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an
Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a
Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding
obligations of the Participating Company Group. The Fair Market Value of any shares of Stock
withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount
determined by the applicable minimum statutory withholding rates.

     12. Compliance with Securities Law.

          The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject
to compliance with all applicable requirements of federal, state and foreign law with respect to
such securities and the requirements of any stock exchange or market system upon which the Stock
may then be listed. In addition, no Award may be exercised or shares issued pursuant to an Award
unless (a) a registration statement under the Securities Act shall at the time of such exercise or
issuance be in effect with respect to the shares issuable pursuant to the Award or (b) in the
opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in
accordance with the terms of an applicable exemption from the registration requirements of the
Securities Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the
lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite authority shall not
have been obtained. As a condition to issuance of any Stock, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.

     13. Compliance with Section 409A.

          13.1 Awards Subject to Section 409A. The provisions of this Section 13 shall apply to any
Award or portion thereof that is or becomes subject to Section 409A, notwithstanding any provision
to the contrary contained in the Plan or the Award Agreement applicable to such Award. Awards
subject to Section 409A include, without limitation:

 

 

               (a) Any Nonstatutory Stock Option having an exercise price per share less than the Fair Market
Value determined as of the date of grant of such Option or that permits the deferral of
compensation other than the deferral of recognition of income until the exercise or transfer of the
Option or the time the shares acquired pursuant to the exercise of the option first become
substantially vested.

               (b) Any Restricted Stock Award that either provides by its terms, or under which the
Participant makes an election, for settlement of all or any portion of the Award either (i) on one
or more dates following the end of the Short-Term Deferral Period (as defined below) or (ii) upon
or after the occurrence of any event that will or may occur later than the end of the Short-Term
Deferral Period.

     Subject to U.S. Treasury Regulations promulgated pursuant to Section 409A (“Section 409A
Regulations”) or other applicable guidance, the term “Short-Term Deferral Period” means the period
ending on the later of (i) the 15th day of the third month following the end of the Company’s
fiscal year in which the applicable portion of the Award is no longer subject to a substantial risk
of forfeiture or (ii) the 15th day of the third month following the end of the Participant’s
taxable year in which the applicable portion of the Award is no longer subject to a substantial
risk of forfeiture. For this purpose, the term “substantial risk of forfeiture” shall have the
meaning set forth in Section 409A Regulations or other applicable guidance.

          13.2 Deferral and/or Distribution Elections. Except as otherwise permitted or required by
Section 409A or Section 409A Regulations or other applicable guidance, the following rules shall
apply to any deferral and/or distribution elections (each, an “Election”) that may be permitted or
required by the Committee pursuant to an Award subject to Section 409A:

               (a) All Elections must be in writing and specify the amount (or an objective, nondiscretionary
formula determining the amount) of the distribution in settlement of an Award being deferred, as
well as the time and form of distribution as permitted by this Plan.

               (b) All Elections shall be made by the end of the Participant’s taxable year prior to the year
in which services commence for which an Award may be granted to such Participant; provided,
however, that if the Award qualifies as “performance-based compensation” for purposes of Section
409A (and is based on a performance period of at least 12 consecutive months), then the Election
may be made no later than six (6) months prior to the end of the performance period, provided that
the Participant’s service is continuous from the later of the beginning of the performance period
or the date on which the performance goals are established through the date such election is made
and provided further that no election may be made after the compensation has become readily
ascertainable (as provided by Section 409A Regulations).

               (c) Elections shall continue in effect until a written election to revoke or change such
Election is received by the Company, except that a written election to revoke or change such
Election must be made prior to the last day for making an Election determined in accordance with
paragraph (b) above or as permitted by Section 13.3.

 

 

          13.3 Subsequent Elections. Except as otherwise permitted or required by Section 409A
Regulations or other applicable guidance, any Award subject to Section 409A which permits a
subsequent Election to delay the distribution or change the form of distribution in settlement of
such Award shall comply with the following requirements:

               (a) No subsequent Election may take effect until at least twelve (12) months after the date on
which the subsequent Election is made;

               (b) Each subsequent Election related to a distribution in settlement of an Award not described
in Section 13.4(b), 13.4(c) or 13.4(f) must result in a delay of the distribution for a period of
not less than five (5) years from the date such distribution would otherwise have been made; and

               (c) No subsequent Election related to a distribution pursuant to Section 13.4(d) shall be made
less than twelve (12) months prior to the date of the first scheduled payment under such
distribution.

          13.4 Distributions Pursuant to Deferral Elections. Except as otherwise permitted or required
by Section 409A Regulations or other applicable guidance, no distribution in settlement of an Award
subject to Section 409A may commence earlier than:

               (a) The Participant’s separation from service (as defined by Section 409A Regulations);

               (b) The date the Participant becomes Disabled (as defined below);

               (c) The Participant’s death;

               (d) A specified time (or pursuant to a fixed schedule) that is either (i) specified by the
Committee upon the grant of an Award and set forth in the Award Agreement evidencing such Award or
(ii) specified by the Participant in an Election complying with the requirements of Section 13.2
and/or 13.3, as applicable;

               (e) A change in the ownership or effective control of the Company or in the ownership of a
substantial portion of the assets of the Company (as defined by Section 409A Regulations); or

               (f) The occurrence of an Unforeseeable Emergency (as defined by Section 409A Regulations).

     Notwithstanding anything else herein to the contrary, to the extent that a Participant is a
“Specified Employee” (as defined by Section 409A Regulations) of the Company, no distribution
pursuant to Section 13.4(a) in settlement of an Award subject to Section 409A may be made before
the date (the “Delayed Payment Date”) which is six (6) months after such Participant’s date of
separation from service, or, if earlier, the date of the Participant’s death. All such amounts
that would, but for this paragraph, become payable prior to the Delayed Payment Date shall be
accumulated and paid on the Delayed Payment Date.

 

 

          13.5 Unforeseeable Emergency. The Committee shall have the authority to provide in any Award
subject to Section 409A for distribution in settlement of all or a portion of such Award in the
event that a Participant establishes, to the satisfaction of the Committee, the occurrence of an
Unforeseeable Emergency. In such event, the amount(s) distributed with respect to such
Unforeseeable Emergency cannot exceed the amounts reasonably necessary to satisfy such
Unforeseeable Emergency plus amounts necessary to pay taxes or penalties reasonably anticipated as
a result of such distribution(s), after taking into account the extent to which such hardship is or
may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of
the Participant’s assets (to the extent the liquidation of such assets would not itself cause
severe financial hardship), or by cessation of deferrals under the Plan. All distributions with
respect to an Unforeseeable Emergency shall be made in a lump sum within 90 days of the occurrence
of Unforeseeable Emergency and following the Committee’s determination that an Unforeseeable
Emergency has occurred.

     The occurrence of an Unforeseeable Emergency shall be judged and determined by the Committee.
The Committee’s decision with respect to whether an Unforeseeable Emergency has occurred and the
manner in which, if at all, the distribution in settlement of an Award shall be altered or
modified, shall be final, conclusive, and not subject to approval or appeal.

          13.6 Disabled. The Committee shall have the authority to provide in any Award subject to
Section 409A for distribution in settlement of such Award in the event that the Participant becomes
Disabled. A Participant shall be considered “Disabled” if either:

               (a) the Participant is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to result in death or
can be expected to last for a continuous period of not less than twelve (12) months, or

               (b) the Participant is, by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a continuous period of not
less than twelve (12) months, receiving income replacement benefits for a period of not less than
three (3) months under an accident and health plan covering employees of the Participant’s
employer.

     All distributions payable by reason of a Participant becoming Disabled shall be paid in a lump
sum or in periodic installments as established by the Participant’s Election, commencing within 90
days following the date the Participant becomes Disabled. If the Participant has made no Election
with respect to distributions upon becoming Disabled, all such distributions shall be paid in a
lump sum within 90 days following the date the Participant becomes Disabled.

          13.7 Death. If a Participant dies before complete distribution of amounts payable upon
settlement of an Award subject to Section 409A, such undistributed amounts shall be distributed to
his or her beneficiary under the distribution method for death established by the Participant’s
Election, or, if the Participant has made no Election with respect to distributions upon death, in
a lump sum, within 90 days following the Participant’s death and following receipt by the Committee
of satisfactory notice and confirmation of the Participant’s death.

 

 

          13.8 No Acceleration of Distributions. Notwithstanding anything to the contrary herein, this
Plan does not permit the acceleration of the time or schedule of any distribution under this Plan
pursuant to any Award subject to Section 409A, except as provided by Section 409A and Section 409A
Regulations.

     14. Amendment or Termination of Plan.

          The Committee may amend, suspend or terminate the Plan at any time. However, without the
approval of the Company’s stockholders, there shall be no amendment of the Plan that would require
approval of the Company’s stockholders under any applicable law, regulation or rule, including the
rules of any stock exchange or market system upon which the Stock may then be listed. No
amendment, suspension or termination of the Plan shall affect any then outstanding Award unless
expressly provided by the Committee. Except as provided by the next sentence, no amendment,
suspension or termination of the Plan may adversely affect any then outstanding Award without the
consent of the Participant. Notwithstanding any other provision of the Plan or any Award Agreement
to the contrary, the Committee may, in its sole and absolute discretion and without the consent of
any Participant, amend the Plan or any Award Agreement, to take effect retroactively or otherwise,
as it deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement
to any present or future law, regulation or rule applicable to the Plan, including, but not limited
to, Section 409A of the Code and all applicable guidance promulgated thereunder.

     15. Miscellaneous Provisions.

          15.1 Repurchase Rights. Shares issued under the Plan may be subject to one or more repurchase
options, or other conditions and restrictions as determined by the Committee in its discretion at
the time the Award is granted. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to one or more persons
as may be selected by the Company. Upon request by the Company, each Participant shall execute any
agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder
and shall promptly present to the Company any and all certificates representing shares of Stock
acquired hereunder for the placement on such certificates of appropriate legends evidencing any
such transfer restrictions.

          15.2 Forfeiture Events.

               (a) The Committee may specify in an Award Agreement that the Participant’s rights, payments,
and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or
recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting
or performance conditions of an Award. Such events may include, but shall not be limited to,
termination of Service for Cause or any act by a Participant, whether before or after termination
of Service, that would constitute Cause for termination of Service.

               (b) If the Company is required to prepare an accounting restatement due to the material
noncompliance of the Company, as a result of misconduct, with any financial reporting requirement
under the securities laws, any Participant who knowingly or through gross

 

 

negligence engaged in the misconduct, or who knowingly or through gross negligence failed to
prevent the misconduct, and any Participant who is one of the individuals subject to automatic
forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company the
amount of any payment in settlement of an Award earned or accrued during the twelve- (12-) month
period following the first public issuance or filing with the United States Securities and Exchange
Commission (whichever first occurred) of the financial document embodying such financial reporting
requirement.

          15.3 Provision of Information. Each Participant shall be given access to information
concerning the Company equivalent to that information generally made available to the Company’s
common stockholders.

          15.4 Rights as Employee, Consultant or Director. No person, even though eligible pursuant to
Section 5, shall have a right to be selected as a Participant, or, having been so selected, to be
selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall
confer on any Participant a right to remain an Employee, Consultant or Director or interfere with
or limit in any way any right of a Participating Company to terminate the Participant’s Service at
any time. To the extent that an Employee of a Participating Company other than the Company
receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean
that the Company is the Employee’s employer or that the Employee has an employment relationship
with the Company.

          15.5 Rights as a Stockholder. A Participant shall have no rights as a stockholder with
respect to any shares covered by an Award until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions or other rights
for which the record date is prior to the date such shares are issued, except as provided in
Section 4.3 or another provision of the Plan.

          15.6 Delivery of Title to Shares. Subject to any governing rules or regulations, the Company
shall issue or cause to be issued the shares of Stock acquired pursuant to an Award and shall
deliver such shares to or for the benefit of the Participant by means of one or more of the
following: (a) by delivering to the Participant evidence of book entry shares of Stock credited to
the account of the Participant, (b) by depositing such shares of Stock for the benefit of the
Participant with any broker with which the Participant has an account relationship, or (c) by
delivering such shares of Stock to the Participant in certificate form.

          15.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the
exercise or settlement of any Award.

          15.8 Retirement and Welfare Plans. Neither Awards made under this Plan nor shares of Stock or
cash paid pursuant to such Awards shall be included as “compensation” for purposes of computing the
benefits payable to any Participant under any Participating Company’s retirement plans (both
qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides
that such compensation shall be taken into account in computing such benefits.

 

 

          15.9 Severability. If any one or more of the provisions (or any part thereof) of this Plan
shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so
as to make it valid, legal and enforceable, and the validity, legality and enforceability of the
remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired
thereby.

          15.10 No Constraint on Corporate Action. Nothing in this Plan shall be construed to:
(a) limit, impair, or otherwise affect the Company’s or another Participating Company’s right or
power to make adjustments, reclassifications, reorganizations, or changes of its capital or
business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or
any part of its business or assets; or (b) limit the right or power of the Company or another
Participating Company to take any action which such entity deems to be necessary or appropriate.

          15.11 Unfunded Obligation. 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. No Participating Company shall be required to segregate
any monies from its general funds, or to create any trusts, or establish any special accounts with
respect to such obligations. 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
Committee or any Participating Company and a Participant, or otherwise create any vested or
beneficial interest in any Participant or the Participant’s creditors in any assets of any
Participating Company. The Participants shall have no claim against any Participating Company for
any changes in the value of any assets which may be invested or reinvested by the Company with
respect to the Plan.

          15.12 Choice of Law. Except to the extent governed by applicable federal law, the validity,
interpretation, construction and performance of the Plan and each Award Agreement shall be governed
by the laws of the State of California, without regard to its conflict of law rules.exv10w3

 

Exhibit 10.3

SOLAR ENERTECH CORP.

NOTICE OF GRANT OF STOCK OPTION

(For U.S. Participant)

The
Participant has been granted an option (the
“Option”) to purchase certain shares of Stock of
Solar Enertech Corp. pursuant to the Solar Enertech Corp. 2007 Equity
Incentive Plan (the “Plan”),
as follows:

	 	 	 	 	 
	Participant:

	 	                    
	 	Employee ID:                     
	 
	 	 	 	 
	Date of Grant:

	 	                    	 	 
	 
	 	 	 	 
	Number of Option Shares:

	 	                    	 	 
	 
	 	 	 	 
	Exercise Price Per Share:

	 	$                    	 	 
	 
	 	 	 	 
	Vesting Commencement Date:

	 	                    	 	 
	 
	 	 	 	 
	Option Expiration Date:	 	The tenth anniversary of the Date of Grant.
	 
	 	 	 	 
	Tax Status of Option:	 	Nonstatutory Stock Option
	 
	 	 	 	 
	Vested Shares:	 	Except as provided in the Stock Option Agreement and provided the Participant’s
Service has not terminated prior to the applicable date, the number of Vested Shares
(disregarding any resulting fractional share) as of any date is determined by
multiplying the Number of Option Shares by the “Vested Ratio” determined as of such
date as follows:

	 	 	 	 	 	 	 
	 	 	 	 	Vested Ratio
	 
	 	Prior to first anniversary of Vesting Commencement Date	 	 	0	 
	 
	 	 	 	 	 	 
	 
	 	On first anniversary of Vesting Commencement Date (the “Initial

Vesting Date”)	 	 	1/4	 
	 
	 	 	 	 	 	 
	 
	 	Plus	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	For each additional full month of Participant’s Service from Initial Vesting Date until the Vested Ratio equals 1/1, an additional	 	 	1/48	 

By their signatures below, the Company and the Participant agree that the Option is governed by
this Grant Notice and by the provisions of the Plan and the Stock Option Agreement, both of which
are attached to and made a part of this document. The Participant acknowledges receipt of copies
of the Plan and the Stock Option Agreement, represents that the Participant has read and is
familiar with their provisions, and hereby accepts the Option subject to all of their terms and
conditions.

	 	 	 	 	 
	SOLAR ENTERTECH CORPORATION	 	PARTICIPANT
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 
	 	 
	 

	 	 	 	Signature
	Its:
	 	 	 	 
	 

	 
	 	 
	 

	 	 	 	Date
	Address:
	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Address
	 
	 	 	 	 
	 

	 	 	 	 

	 	 	 
	ATTACHMENTS:

	 	2007 Equity Incentive Plan, as amended to the Date of Grant; Stock Option Agreement
and Exercise Notice

 

 

THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.

SOLAR ENERTECH CORP.

STOCK OPTION AGREEMENT

(For U.S. Participant)

     Solar EnerTech Corp. has granted to the Participant named in the Notice of Grant of Stock
Option (the “Grant Notice”) to which
this Stock Option Agreement (the “Option
Agreement”) is
attached an option (the “Option”) to purchase certain shares of Stock upon the terms and conditions
set forth in the Grant Notice and this Option Agreement. The Option has been granted pursuant to
and shall in all respects be subject to the terms and conditions of the Solar EnerTech Corp. 2007
Equity Incentive Plan (the “Plan”), as amended to the Date of Grant, the provisions of which are
incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges
receipt of and represents that the Participant has read and is familiar with the Grant Notice, this
Option Agreement and the Plan, (b) accepts the Option subject to all of the terms and conditions of
the Grant Notice, this Option Agreement and the Plan and (c) agrees to accept as binding,
conclusive and final all decisions or interpretations of the Committee upon any questions arising
under the Grant Notice, this Option Agreement or the Plan.

     1. Definitions and Construction.

          1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings
assigned to such terms in the Grant Notice or the Plan.

          1.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of this Option Agreement. Except when
otherwise indicated by the context, the singular shall include the plural and the plural shall
include the singular. Use of the term “or” is not intended to be exclusive, unless the context
clearly requires otherwise.

     2. Tax Status of Option.

          This Option is intended to be a Nonstatutory Stock Option and shall not be treated as an
incentive stock option within the meaning of Section 422(b) of the Code.

     3. Administration.

          All questions of interpretation concerning this Option Agreement shall be determined by the
Committee. All determinations by the Committee shall be final and binding upon all persons having
an interest in the Option as provided by the Plan. Any Officer shall have

2

 

the authority to act on behalf of the Company with respect to any matter, right, obligation,
or election which is the responsibility of or which is allocated to the Company herein, provided
the Officer has apparent authority with respect to such matter, right, obligation, or election.

     4. Exercise of the Option.

          4.1 Right to Exercise. Except as otherwise provided herein, the Option shall be exercisable
on and after the Initial Vesting Date and prior to the termination of the Option (as provided in
Section 6) in an amount not to exceed the number of Vested Shares less the number of shares
previously acquired upon exercise of the Option. In no event shall the Option be exercisable for
more shares than the Number of Option Shares, as adjusted pursuant to Section 9.

          4.2 Method of Exercise. Exercise of the Option shall be by means of electronic or written
notice (the "Exercise Notice") in a form authorized by the Company. An electronic Exercise Notice
must be digitally signed or authenticated by the Participant in such manner as required by the
notice and transmitted to the Company or an authorized representative of the Company (including a
third-party administrator designated by the Company). In the event that the Participant is not
authorized or is unable to provide an electronic Exercise Notice, the Option shall be exercised by
a written Exercise Notice addressed to the Company, which shall be signed by the Participant and
delivered in person, by certified or registered mail, return receipt requested, by confirmed
facsimile transmission, or by such other means as the Company may permit, to the Company, or an
authorized representative of the Company (including a third-party administrator designated by the
Company). Each Exercise Notice, whether electronic or written, must state the Participant’s
election to exercise the Option, the number of whole shares of Stock for which the Option is being
exercised and such other representations and agreements as to the Participant’s investment intent
with respect to such shares as may be required pursuant to the provisions of this Option Agreement.
Further, each Exercise Notice must be received by the Company prior to the termination of the
Option as set forth in Section 6 and must be accompanied by full payment of the aggregate Exercise
Price for the number of shares of Stock being purchased. The Option shall be deemed to be
exercised upon receipt by the Company of such electronic or written Exercise Notice and the
aggregate Exercise Price.

          4.3 Payment of Exercise Price.

               (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised
shall be made (i) in cash or by check or cash equivalent, (ii) if permitted by the Company and
subject to Section 4.3(b)(i), by tender to the Company, or attestation to the ownership, of whole
shares of Stock owned by the Participant having a Fair Market Value not less than the aggregate
Exercise Price, (iii) subject to Section 4.3(b)(ii), by means of a Cashless Exercise, (iv) by means
of a Net Exercise, as defined in Section 4.3(b)(iii), or (v) by any combination of the foregoing.

               (b) Limitations on Forms of Consideration.

                    (i) Tender of Stock. Notwithstanding the foregoing, the Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares

3

 

of Stock to the extent such tender or attestation would constitute a violation of the
provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.
If required by the Company, the Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock unless such shares either have been owned by the
Participant for more than six (6) months or such other period, if any, required by the Company (and
not used for another option exercise by attestation during such period) or were not acquired,
directly or indirectly, from the Company.

               (ii) Cashless
Exercise. A “Cashless Exercise” means the delivery of a properly executed
notice together with irrevocable instructions to a broker in a form acceptable to the Company
providing for the assignment to the Company of the proceeds of a sale or loan with respect to some
or all of the shares of Stock acquired upon the exercise of the Option pursuant to a program or
procedure approved by the Company and with the provisions of Regulation T as promulgated from time
to time by the Board of Governors of the Federal Reserve System. The Cashless Exercise program is
available only if, at the time of exercise, the offer and sale of shares of Stock pursuant to the
Plan is registered on a then effective registration statement on Form S-8 under the Securities Act.
The Company reserves, at any and all times, the right, in the Company’s sole and absolute
discretion, to establish, decline to approve or terminate any such program or procedure, including
with respect to the Participant notwithstanding that such program or procedures may be available to
others.

               (iii) Net
Exercise. A “Net Exercise” means a procedure by which the Participant will be
issued a number of whole shares of Stock upon the exercise of an Option determined in accordance
with the following formula:

               N = X(A-B)/A, where

“N” = the number of shares of Stock to be issued to the
Participant upon exercise of the Option;

“X” = the total number of shares with respect to which the
Participant has elected to exercise the Option;

“A” = the Fair Market Value of one (1) share of Stock determined
on the exercise date; and

“B” = the exercise price per share (as defined in the
Participant’s Award Agreement)

The Company reserves, at any and all times, the right, in the Company’s sole and absolute
discretion, to establish, decline to approve or terminate any such program or procedure, including
with respect to the Participant notwithstanding that such program or procedures may be available to
others.

4

 

          4.4 Tax Withholding.

               (a) In General. At the time the Option is exercised, in whole or in part, or at any time
thereafter as requested by the Company, the Participant hereby authorizes withholding from payroll
and any other amounts payable to the Participant, and otherwise agrees to make adequate provision
for (including by means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding obligations of the
Participating Company Group, if any, which arise in connection with the Option. The Company shall
have no obligation to deliver shares of Stock until the tax withholding obligations of the
Participating Company Group have been satisfied by the Participant.

               (b) Withholding in Shares. The Company may permit or require the Participant to satisfy all
or any portion of a Participating Company’s tax withholding obligations upon exercise of the Option
by deducting from the shares of Stock otherwise issuable to the Participant upon such exercise a
number of whole shares having a fair market value, as determined by the Company as of the date of
exercise, not in excess of the amount of such tax withholding obligations determined by the
applicable minimum statutory withholding rates. Any adverse consequences to the Participant
resulting from the procedure permitted under this Section, including, without limitation, tax
consequences, shall be the sole responsibility of the Participant.

          4.5 Beneficial Ownership of Shares; Certificate Registration. The Participant hereby
authorizes the Company, in its sole discretion, to deposit for the benefit of the Participant with
any broker with which the Participant has an account relationship of which the Company has notice
any or all shares acquired by the Participant pursuant to the exercise of the Option. Except as
provided by the preceding sentence, a certificate for the shares as to which the Option is
exercised shall be registered in the name of the Participant, or, if applicable, in the names of
the heirs of the Participant.

          4.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and
the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all
applicable requirements of federal, state or foreign law with respect to such securities. The
Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other law or regulations
or the requirements of any stock exchange or market system upon which the Stock may then be listed.
In addition, the Option may not be exercised unless (i) a registration statement under the
Securities Act shall at the time of exercise of the Option be in effect with respect to the shares
issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the
shares issuable upon exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act. THE PARTICIPANT IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the
lawful issuance and sale of any shares subject to the Option shall relieve

5

 

the Company of any liability in respect of the failure to issue or sell such shares as to
which such requisite authority shall not have been obtained. As a condition to the exercise of the
Option, the Company may require the Participant to satisfy any qualifications that may be necessary
or appropriate, to evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the Company.

          4.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the
exercise of the Option.

     5. Nontransferability of the Option.

          During the lifetime of the Participant, the Option shall be exercisable only by the
Participant or the Participant’s guardian or legal representative. The Option shall not be subject
in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary,
except transfer by will or by the laws of descent and distribution. Following the death of the
Participant, the Option, to the extent provided in Section 7, may be exercised by the Participant’s
legal representative or by any person empowered to do so under the deceased Participant’s will or
under the then applicable laws of descent and distribution.

     6. Termination of the Option.

          The Option shall terminate and may no longer be exercised after the first to occur of (a) the
close of business on the Option Expiration Date, (b) the close of business on the last date for
exercising the Option following termination of the Participant’s Service as described in Section 7,
or (c) a Change in Control to the extent provided in Section 8.

     7. Effect of Termination of Service.

          7.1 Option Exercisability. The Option shall terminate immediately upon the Participant’s
termination of Service to the extent that it is then unvested and shall be exercisable after the
Participant’s termination of Service to the extent it is then vested only during the applicable
time period as determined below and thereafter shall terminate.

               (a) Disability. If the Participant’s Service terminates because of the Disability of the
Participant, the Option, to the extent unexercised and exercisable for Vested Shares on the date on
which the Participant’s Service terminated, may be exercised by the Participant (or the
Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12)
months after the date on which the Participant’s Service terminated, but in any event no later than
the Option Expiration Date.

               (b) Death. If the Participant’s Service terminates because of the death of the Participant,
the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the
Participant’s Service terminated, may be exercised by the Participant’s legal representative or
other person who acquired the right to exercise the Option by reason of the Participant’s death at
any time prior to the expiration of twelve (12) months after the date on which the Participant’s
Service terminated, but in any event no later than the Option Expiration

6

 

Date. The Participant’s Service shall be deemed to have terminated on account of death if the
Participant dies within three (3) months after the Participant’s termination of Service.

               (c) Termination for Cause. If the Participant’s Service is terminated for Cause or if,
following the Participant’s termination of Service and during any period in which the Option
otherwise would remain exercisable, the Participant engages in any act that would constitute Cause,
the Option shall terminate in its entirety and cease to be exercisable immediately upon such
termination of Service or act.

               (d) Other Termination of Service. If the Participant’s Service terminates for any reason,
except Disability, death or Cause, the Option, to the extent unexercised and exercisable for Vested
Shares by the Participant on the date on which the Participant’s Service terminated, may be
exercised by the Participant at any time prior to the expiration of three (3) months after the
date on which the Participant’s Service terminated, but in any event no later than the Option
Expiration Date.

          7.2 Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other than
termination of Service for Cause, if the exercise of the Option within the applicable time periods
set forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option shall remain
exercisable until thirty (30) days after the date such exercise would no longer be prevented by
such provisions, but in any event no later than the Option Expiration Date.

     8. Effect of Change in Control.

          In the event of a Change in Control, except to the extent that the Committee determines to
cash out the Option in accordance with Section 10.1(c) of the Plan, the surviving, continuing,
successor, or purchasing entity or parent thereof, as the case may be (the "Acquiror"), may,
without the consent of the Participant, assume or continue in full force and effect the Company’s
rights and obligations under all or any portion of the Option or substitute for all or any portion
of the Option a substantially equivalent option for the Acquiror’s stock. For purposes of this
Section, the Option or any portion thereof shall be deemed assumed if, following the Change in
Control, the Option confers the right to receive, subject to the terms and conditions of the Plan
and this Option Agreement, for each share of Stock subject to such portion of the Option
immediately prior to the Change in Control, the consideration (whether stock, cash, other
securities or property or a combination thereof) to which a holder of a share of Stock on the
effective date of the Change in Control was entitled; provided, however, that if such consideration
is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror,
provide for the consideration to be received upon the exercise of the Option, for each share of
Stock subject to the Option, to consist solely of common stock of the Acquiror equal in Fair Market
Value to the per share consideration received by holders of Stock pursuant to the Change in
Control. The Option shall terminate and cease to be outstanding effective as of the time of
consummation of the Change in Control to the extent that the Option is neither assumed or continued
by the Acquiror in connection with the Change in Control nor exercised as of the date of the Change
in Control.

7

 

     9. Adjustments for Changes in Capital Structure.

          Subject to any required action by the stockholders of the Company, in the event of any change
in the Stock effected without receipt of consideration by the Company, whether through merger,
consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of
shares, or similar change in the capital structure of the Company, or in the event of payment of a
dividend or distribution to the stockholders of the Company in a form other than Stock (excepting
normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock,
appropriate and proportionate adjustments shall be made in the number, Exercise Price and kind of
shares subject to the Option, in order to prevent dilution or enlargement of the Participant’s
rights under the Option. For purposes of the foregoing, conversion of any convertible securities
of the Company shall not be treated as “effected without receipt of consideration by the Company.”
Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to
the nearest whole number, and the Exercise Price shall be rounded up to the nearest whole cent. In
no event may the Exercise Price be decreased to an amount less than the par value, if any, of the
stock subject to the Option. The Committee in its sole discretion, may also make such adjustments
in the terms of the Option to reflect, or related to, such changes in the capital structure of the
Company or distributions as it deems appropriate. All adjustments pursuant to this Section shall
be determined by the Committee, and its determination shall be final, binding and conclusive.

     10. Rights as a Stockholder, Director, Employee or Consultant.

          The Participant shall have no rights as a stockholder with respect to any shares covered by
the Option until the date of the issuance of the shares for which the Option has been exercised (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions or other rights
for which the record date is prior to the date the shares are issued, except as provided in
Section 9. If the Participant is an Employee, the Participant understands and acknowledges that,
except as otherwise provided in a separate, written employment agreement between a Participating
Company and the Participant, the Participant’s employment is “at will” and is for no specified
term. Nothing in this Option Agreement shall confer upon the Participant any right to continue in
the Service of a Participating Company or interfere in any way with any right of the Participating
Company Group to terminate the Participant’s Service as a Director, an Employee or Consultant, as
the case may be, at any time.

     11. Representations and Warranties.

          In connection with the receipt of the Option and any acquisition of shares upon the exercise
thereof (collectively, the "Securities"), the Participant hereby agrees, represents and warrants as
follows:

          11.1 Investment Intent. The Participant is acquiring the Securities solely for the
Participant’s own account for investment and not with a view to or for sale in connection with any
distribution of the Securities or any portion thereof and not with any present intention of
selling, offering to sell or otherwise disposing of or distributing the Securities or any portion

8

 

thereof in any transaction other than a transaction exempt from registration under the
Securities Act. The Participant further represents that the entire legal and beneficial interest
of the Securities is being acquired, and will be held, for the account of the Participant only and
neither in whole nor in part for any other person.

          11.2 Absence of Solicitation. The Participant was not presented with or solicited by any form
of general solicitation or general advertising, including, but not limited to, any advertisement,
article, notice, or other communication published in any newspaper, magazine, or similar media, or
broadcast over television, radio or similar communications media, or presented at any seminar or
meeting whose attendees have been invited by any general solicitation or general advertising.

          11.3 Residence. The Participant’s principal residence is located at the address indicated
beneath the Participant’s signature on the Grant Notice.

          11.4 Information Concerning the Company. The Participant is aware of the Company’s business
affairs and financial condition and has acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. The Participant further
represents and warrants that the Participant has discussed the Company and its plans, operations
and financial condition with its Officers, has received all such information as the Participant
deems necessary and appropriate to enable the Participant to evaluate the financial risk inherent
in acquiring the Securities and has received satisfactory and complete information concerning the
business and financial condition of the Company in response to all inquiries in respect thereof.

          11.5 Economic Risk. The Participant realizes that his acquisition of the Securities will be a
highly speculative investment and that the Participant is able, without impairing his or her
financial condition, to hold the Securities for an indefinite period of time and to suffer a
complete loss on the Participant’s investment.

          11.6 Capacity to Protect Interests. The Participant has (i) a preexisting personal or
business relationship with the Company or any of its Officers, directors, or controlling persons,
consisting of personal or business contacts of a nature and duration to enable the Participant to
be aware of the character, business acumen and general business and financial circumstances of the
person with whom such relationship exists, or (ii) such knowledge and experience in financial and
business matters as to make the Participant capable of evaluating the merits and risks of an
investment in the Securities and to protect the Participant’s own interests in the transaction, or
(iii) both such relationship and such knowledge and experience.

          11.7 Restricted Securities. The Participant understands and acknowledges that:

               (a) The issuance of the Securities to the Participant has not been registered under the
Securities Act, and the Securities must be held indefinitely unless a transfer of the Securities is
subsequently registered under the Securities Act or an exemption from such registration is
available, and that the Company is under no obligation to register the Securities;

9

 

               (b) The Company will make a notation in its records of the aforementioned restrictions on
transfer and legends.

          11.8 Disposition Under Rule 144. The Participant understands that any shares acquired upon
exercise of the Option will be restricted securities within the meaning of Rule 144 promulgated
under the Securities Act; that the exemption from registration under Rule 144 will not be available
in any event for at least one year from the date of acquisition of the shares, and even then will
not be available unless (a) a public trading market then exists for the Common Stock of the
Company, (b) adequate information concerning the Company is then available to the public, and (c)
other terms and conditions of Rule 144 are complied with; and that any sale of the shares may be
made only in limited amounts in accordance with such terms and conditions. There can be no
assurance that the requirements of Rule 144 will be met, or that the shares will ever be salable.

          11.9 Further Limitations on Disposition. Without in any way limiting the Participant’s
representations and warranties set forth above, the Participant further agrees that the Participant
will in no event make any disposition of all or any portion of any shares which the Participant
acquires upon exercise of the Option unless:

               (a) There is then in effect a Registration Statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with said Registration Statement;
or

               (b) The Participant will have notified the Company of the proposed disposition and furnished
the Company with a detailed statement of the circumstances surrounding the proposed disposition,
and either:

                    (i) The Participant will have furnished the Company with an opinion of the Participant’s own
counsel to the effect that such disposition will not require registration of such shares under the
Securities Act, and such opinion of the Participant’s counsel will have been concurred in by
counsel for the Company and the Company will have advised the Participant of such concurrence; or

                    (ii) The disposition is made in compliance with Rule 144 or Rule 701 after the Participant has
furnished the Company such detailed statement and after the Company has had a reasonable
opportunity to discuss the matter with the Participant.

          11.10 Reliance by Company. The Participant understands that the Option and any shares
acquired upon exercise of the Option have not been qualified under the Corporate Securities Law of
1968, as amended, of the State of California by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the Participant’s
representations as expressed herein. The Participant understands that the Company is relying on
the Participant’s representations and warrants that the Company is entitled to rely on such
representations and that such reliance is reasonable.

10

 

     12. Legends.

          The Company may at any time place legends referencing any applicable federal, state or foreign
securities law restrictions on all certificates representing shares of stock subject to the
provisions of this Option Agreement. The Participant shall, at the request of the Company,
promptly present to the Company any and all certificates representing shares acquired pursuant to
the Option in the possession of the Participant in order to carry out the provisions of this
Section. Unless otherwise specified by the Company, legends placed on such certificates may
include, but shall not be limited to, the following:

“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE
ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.”

     13. Miscellaneous Provisions.

          13.1 Termination or Amendment. The Committee may terminate or amend the Plan or the Option at
any time; provided, however, that except as provided in Section 8 in connection with a Change in
Control, no such termination or amendment may adversely affect the Option or any unexercised
portion hereof without the consent of the Participant unless such termination or amendment is
necessary to comply with any applicable law or government regulation, including, but not limited
to, Section 409A. No amendment or addition to this Option Agreement shall be effective unless in
writing.

          13.2 Further Instruments. The parties hereto agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent of this Option
Agreement.

          13.3 Binding Effect. Subject to the restrictions on transfer set forth herein, this Option
Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective
heirs, executors, administrators, successors and assigns.

          13.4 Delivery of Documents and Notices. Any document relating to participation in the Plan or
any notice required or permitted hereunder shall be given in writing and shall be deemed
effectively given (except to the extent that this Option Agreement provides for effectiveness only
upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail
address, if any, provided for the Participant by a Participating Company, or upon deposit in the
U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally
recognized overnight courier service, with postage and fees prepaid, addressed

11

 

to the other party at the address of such party set forth in the Grant Notice or at such other
address as such party may designate in writing from time to time to the other party.

               (a) Description of Electronic Delivery. The Plan documents, which may include but do not
necessarily include: the Plan, the Grant Notice, this Option Agreement, the Plan Prospectus, and
any reports of the Company provided generally to the Company’s stockholders, may be delivered to
the Participant electronically. In addition, the Participant may deliver electronically the Grant
Notice and Exercise Notice called for by Section 4.2 to the Company or to such third party involved
in administering the Plan as the Company may designate from time to time. Such means of electronic
delivery may include but do not necessarily include the delivery of a link to a Company intranet or
the Internet site of a third party involved in administering the Plan, the delivery of the document
via e-mail or such other means of electronic delivery specified by the Company.

               (b) Consent to Electronic Delivery. The Participant acknowledges that the Participant has
read Section 13.4(a) of this Option Agreement and consents to the electronic delivery of the Plan
documents and the delivery of the Grant Notice and Exercise Notice, as described in
Section 13.4(a). The Participant acknowledges that he or she may receive from the Company a paper
copy of any documents delivered electronically at no cost to the Participant by contacting the
Company by telephone or in writing. The Participant further acknowledges that the Participant will
be provided with a paper copy of any documents if the attempted electronic delivery of such
documents fails. Similarly, the Participant understands that the Participant must provide the
Company or any designated third party administrator with a paper copy of any documents if the
attempted electronic delivery of such documents fails. The Participant may revoke his or her
consent to the electronic delivery of documents described in Section 13.4(a) or may change the
electronic mail address to which such documents are to be delivered (if Participant has provided an
electronic mail address) at any time by notifying the Company of such revoked consent or revised
e-mail address by telephone, postal service or electronic mail. Finally, the Participant
understands that he or she is not required to consent to electronic delivery of documents described
in Section 13.4(a).

          13.5 Integrated Agreement. The Grant Notice, this Option Agreement and the Plan shall
constitute the entire understanding and agreement of the Participant and the Participating Company
Group with respect to the subject matter contained herein and supersede any prior agreements,
understandings, restrictions, representations, or warranties among the Participant and the
Participating Company Group with respect to such subject matter. To the extent contemplated
herein, the provisions of the Grant Notice, the Option Agreement and the Plan shall survive any
exercise of the Option and shall remain in full force and effect.

          13.6 Applicable Law. This Option Agreement shall be governed by the laws of the State of
California as such laws are applied to agreements between California residents entered into and to
be performed entirely within the State of California.

          13.7 Counterparts. The Grant Notice may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same instrument.

12

 

Participant:                                        

Date:                                        

STOCK OPTION EXERCISE NOTICE

Solar EnerTech Corp.

Attention: Stock Administration

Ladies and Gentlemen:

     1. Option. I was granted an option (the “Option”) to purchase shares of the common
stock (the “Shares”) of Solar EnerTech Corp. (the “Company”) pursuant to the Company’s 2007 Equity
Incentive Plan (the “Plan”), my Notice of Grant of Stock Option (the “Grant Notice”) and my Stock
Option Agreement (the “Option Agreement”) as follows:

	 	 	 	 	 
	Date of Grant:
	 	 	                    	 
	 
	 	 	 	 
	Number of Option Shares:
	 	 	                    	 
	 
	 	 	 	 
	Exercise Price per Share:
	 	$	                    	 

     2. Exercise of Option. I hereby elect to exercise the Option to purchase the
following number of Shares, all of which are Vested Shares in accordance with the Grant Notice and
the Option Agreement:

	 	 	 	 	 
	Total Shares Purchased:
	 	 	                    	 
	 
	 	 	 	 
	Total Exercise Price (Total Shares X Price per Share)
	 	$	                    	 

     3. Payments. I enclose payment in full of the total exercise price for the Shares in
the following form(s), as authorized by my Option Agreement:

	 	 	 	 	 
	TM Cash:
	 	$	                    	 
	 
	 	 	 	 
	TM Check:
	 	$	                    	 
	 
	 	 	 	 
	TM Tender of Company Stock:
	 	Contact Plan Administrator
	 
	 	 	 	 
	TM Net Exercise:
	 	Contact Plan Administrator

     4. Tax Withholding. I authorize payroll withholding and otherwise will make adequate
provision for the federal, state, local and foreign tax withholding obligations of the Company, if
any, in connection with the Option. I enclose payment in full of my withholding taxes, if any, as
follows:

(Contact Plan Administrator for amount of tax due.)

	 	 	 	 	 
	TM Cash:
	 	$	                    	 
	 
	 	 	 	 
	TM Check:
	 	$	                    	 
	 
	 	 	 	 
	TM Tender of Company Stock:
	 	Contact Plan Administrator
	 
	 	 	 	 
	TM Net Exercise:
	 	Contact Plan Administrator

 

 

     5. Participant Information.

	 	 	 	 	 
	 

	 	My address is:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

	 	 	 	 	 
	 

	 	       My Social Security Number is:	 	 
	 

	 	 	 	 

     6. Binding Effect. I agree that the Shares are being acquired in accordance with and
subject to the terms, provisions and conditions of the Grant Notice, the Option Agreement and the
Plan, to all of which I hereby expressly assent. This Agreement shall inure to the benefit of and
be binding upon my heirs, executors, administrators, successors and assigns.

	 	 	 
	 

	 	Very truly yours,
	 
	 	 
	 

	 	 
	 

	 	(Signature)

	 	 	 	 	 
	Receipt of the above is hereby acknowledged.	 	 
	 
	 	 	 	 
	SOLAR ENERTECH CORP.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 
	Dated:
	 	 	 	 
	 

	 	 

	 	 

2

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