Document:

exv10w3c

 

EXHIBIT 10.3c

ASPECT COMMUNICATIONS CORPORATION

RETAINER COMPENSATION PLAN

FOR BOARD OF DIRECTORS

EFFECTIVE JULY 1, 1998

(Amended as of June 6, 2004)

1. Purpose of Plan.

     The purposes of this Plan are to attract and retain the best available
personnel for service as non-employee directors of Aspect Communications
Corporation (the “Company”), to encourage ownership of Company Stock by
non-employee directors, to provide financial incentive as a result of Company
performance to the non-employee directors of the Company who own Company stock
and to encourage their continued service on the Board of Directors of the
Company (the “Board”).

2. Term of Plan.

     The term of the Plan shall be ten (10) years with the initial one (1) year
period commencing on July 1, 1998 and ending on June 30, 1999 unless earlier
terminated by the Board (the “Term”), with any adjustments in the Plan and the
terms hereunder as may be approved by the Board over such term. The Plan
relates to the retainer fee payable to the members of the Board during each
one-year period commencing on July 1 of each year from 1998 through 2007.

3. Annual Retainer.

     A non-employee director shall be eligible for the annual retainer (the
“Annual Retainer”), any then-applicable retainer payments related to
participation on one or more Board committees (the “Committee Retainer”) and
any other specially designated retainers payable by the Company (a “Special
Retainer,” and together with the Annual Retainer and the Committee Retainer,
the “Retainer”), in each case payable quarterly under this Plan if he or she
was serving as a director or, as applicable, as a member of a Board committee
for which retainer payments are made, or otherwise is eligible to receive a
Special Retainer, on the first trading day after the end of each fiscal quarter
during the time that the Retainer Plan is in effect. The Retainer will be paid
as soon as practical thereafter. The dollar amount of the Retainer shall be
determined by the Board over the Term of the Plan in accordance with the
authority granted to the Board under the Company’s Bylaws.

4. Payment of Retainer in Shares in Lieu of Cash Compensation.

     With respect to the quarterly payments of the Retainer payable under this
Plan, each director, at his or her election, has the right to elect to accept
payment in fully vested shares of the Company’s Common Stock equal to 50 or 100
percent of the Retainer. Each director must make this election for each
respective one (1) year period of the Plan on or before the date of the Annual
Meeting of the Company’s shareholders preceding the beginning of the next
succeeding one-year period. The election shall be made on the form attached as
Exhibit A hereto. An individual who first becomes a non-employee director after
the effective date of the Plan shall make the election for his or her initial
period of service on the Board on or before the date on which he or she first
commences service as a director. To the extent that a director becomes eligible
for payment of an additional type of Retainer (e.g., by being appointed to a
new Board committee during the course of such year) during the course of a Plan
year as to which an election under this Section 4 is already

 

 

in place, such election shall apply to any additional Retainer payable during
the remainder of such year in the same manner as set forth in the election
already made with respect to that year.

     The number of shares issued each quarter will equal the dollar amount of
the Retainer to be taken in shares, divided by 100 percent of the market value
of the shares on the first trading day after the end of each fiscal quarter for
which the Retainer is due (such date, the “Payment Date”); provided however
that to the extent shareholder approval of any amendment to the Plan is
required before payment of all or any portion of the quarterly Retainer payment
can be made hereunder, then the applicable Payment Date with respect to such
payment shall be the date of such shareholder approval. The market value shall
be determined to be the closing sale price of the shares on the Payment Date as
such price is reported by the Nasdaq National Market (or, if not so reported,
as otherwise reported by the National Association of Securities Dealers
Automated Quotation System), or in the event the Common Stock is listed on a
stock exchange, the market value shall be the closing sale price on such
exchange on the payment date. No fractional shares will be issued. The number
of shares issued will be rounded down to the nearest number of whole shares.

     In addition, in the event that the total number of shares reserved for
issuance hereunder shall be insufficient to allow the Company to issue the full
number of shares of Common Stock otherwise required pursuant to existing
elections made by participating directors to receive the Retainer in shares of
Common Stock, then the Company shall make a pro rata allocation among
participating directors of the shares of Common Stock available for issuance on
such date or dates upon which it would otherwise be required to issue such
shares and pay the remainder of the amount owed with respect to the Retainers
in cash (unless and until additional shares become available for grant
hereunder).

     The shares will be issued in accordance with the instructions provided by
the director on the form attached as Exhibit A hereto.

     The sale or other transfer of the shares purchased by a director with a
part or all of his/her Retainer will be restricted for a period of six months
after the date of purchase. Notwithstanding the above, a director will be
allowed to transfer such shares within the restricted period to a family trust
established by the director or to a member of the director’s immediate family,
provided, however, that any such transferee shall be subject to the same six
month restriction on sale or subsequent transfer of the shares.

     Shares of the Company’s Common Stock to be issued to directors shall be
issued out of the Company’s authorized but unissued shares. The number of
shares reserved for this purpose shall be 260,000 shares, to be increased
proportionately in the event of stock dividends or stock splits (or other
similar adjustments) or to be decreased proportionately in the event of a
combination of shares. The Board of Directors may increase or decrease the
number of shares reserved for this purpose, subject to approval of the
Company’s shareholders as set forth below.

5. Cash Incentive for Payment in Shares.

     As an inducement to a director to elect to accept payment of all or a
portion of his or her Retainer in shares of the Company’s Common Stock so as to
increase a director’s ownership of Company stock and to help defray a
director’s tax liability with respect to the issuance of the shares, the
Company will pay a cash incentive to the directors electing payment in shares
equal to 20 percent of the Retainer. This incentive will be paid quarterly, in
cash, at the time the quarterly installment of the Retainer is payable in
shares. The cash incentive will be paid only with respect to issued shares and,
in the event of a share shortfall as described in Section 4 above, to the
extent that the share portion of a Retainer is instead paid in cash, the cash
incentive will not be paid with respect to any portion of the Retainer that is
paid in cash.

 

 

6. Policy on Purchase and Sale of Shares.

     As indicated above, the sale or other transfer of shares acquired in lieu
of payment of all or part of the Retainer is restricted for a period of six (6)
months after the shares are issued. Under current law, a director’s acquisition
of shares in lieu of the cash payment of a retainer qualifies for an exemption
under Rule 16b-3(d)(i) of the Securities Exchange Act of 1934 and, therefore,
is not a “purchase” for purposes of Section 16(b) of that Act. Accordingly, it
will not be a violation of Section 16(b) if a director sells shares of Company
stock (regardless of the price at which such other shares are sold) within six
(6) months before or six (6) months after the director acquires shares pursuant
to this Plan. These laws are subject to change. The Company will amend the Plan
as necessary to comply with any changes in the law. A director shall be
required to comply with applicable law.

     For a complete statement of the Company’s policy with respect to the
purchase and sale of Company shares, directors are referred to the full
statement of policy, which the Company has distributed separately to each of
them.

7. Administration and Interpretation.

     This Plan will be administered and interpreted by the Board of Directors.
Issues arising under this Plan will be decided by the Board of Directors and
its decision will be final and binding on the Company and the directors. All
stock issuances shall be automatic and in accordance with the election filed by
a director. No person shall have any discretion to select which non-employee
directors can participate or to determine the number of shares to be issued to
a director, except as otherwise set forth in this Plan with respect to an
individual director’s election to accept payment of his or her Retainer in
shares of the Company’s Common Stock.

8. Board Approval.

     The terms of this Compensation Plan shall become effective upon adoption
by the Board of Directors and shall continue in effect as set forth in Section
2.

9. Shareholder Approval.

     Continuance of the Plan shall be subject to approval by the shareholders
of the Company. Such shareholder approval shall be obtained in the degree and
manner required under applicable state and federal law and the rules of any
stock exchange upon which the Common Stock is listed. No shares may be issued
under this Plan until such approval is obtained.exv10w5

 

EXHIBIT 10.5

ASPECT COMMUNICATIONS CORPORATION

1999 EQUITY INCENTIVE PLAN

(as amended April 7, 2003, and approved by shareholders on May 22, 2003)

     1. Purposes of the Plan. The purposes of this Equity Incentive Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and
Consultants of the Company and to promote the success of the Company’s
business. Options granted under the Plan may be either Incentive Stock Options
(as defined under Section 422 of the Code) or Nonstatutory Stock Options, as
determined by the Administrator at the time of grant of an Option and subject
to the applicable provisions of Section 422 of the Code and the regulations
promulgated thereunder. Stock Awards may also be granted under the Plan.

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

          (a) “Administrator” means the Board or its Committee appointed pursuant to
Section 4 of the Plan.

          (b) “Affiliate” means an entity other than a Subsidiary (as defined below)
in which the Company owns an equity interest or which, together with the
Company, is under common control of a third person or entity.

          (c) “Applicable Laws” means the legal requirements relating to the
administration of equity compensation plans under applicable U.S. state
corporate laws, U.S. federal and applicable state securities laws, the Code,
any Stock Exchange rules or regulations and the applicable laws of any other
country or jurisdiction where Options are granted under the Plan, as such laws,
rules, regulations and requirements shall be in place from time to time.

          (d) “Award” means any Option or Stock Award that the Administrator grants
under the Plan.

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

          (f) “Change of Control” means (1) a sale of all or substantially all of
the Company’s assets, or (2) any merger, consolidation or other business
combination transaction of the Company with or into another corporation, entity
or person, other than a transaction in which the holders of at least a majority
of the shares of voting capital stock of the Company outstanding immediately
prior to such transaction continue to hold (either by such shares remaining
outstanding or by their being converted into shares of voting capital stock of
the surviving entity) a majority of the total voting power represented by the
shares of voting capital stock of the Company (or the surviving entity)
outstanding immediately after such transaction, or (3) the direct or indirect
acquisition (including by way of a tender or exchange offer) by any person, or
persons acting as a group, of beneficial ownership or a right to acquire
beneficial ownership of shares representing a majority of the voting power of
the then outstanding shares of capital stock of the Company.

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

          (h) “Committee” means one or more committees or subcommittees appointed by
the Board to administer the Plan in accordance with Section 4 below.

          (i) “Common Stock” means the Common Stock of the Company.

          (j) “Company” means Aspect Communications Corporation, a California
corporation.

          (k) “Consultant” means any person, including an advisor, who is engaged by
the Company or any Parent or Subsidiary to render services and is compensated
for such services.

          (l) “Continuous Service Status” means the absence of any interruption or
termination of service as an Employee or Consultant to the Company or a Parent,
Subsidiary or Affiliate. Continuous Service Status shall not be considered
interrupted in the case of (i) sick leave; (ii) military leave; (iii) any other
leave of absence approved by the Administrator, provided that such leave is for
a period of not more than 90 days, unless reemployment upon the expiration of
such leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (iv) in the case of
transfers

 

 

between locations of the Company or between the Company, its Parent(s),
Subsidiaries, Affiliates or their respective successors. For purposes of this
Plan, a change in status from an Employee to a Consultant or from a Consultant
to an Employee will not constitute a termination of Continuous Service Status.

          (m) “Corporate Transaction” means a sale of all or substantially all of
the Company’s assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation.

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

          (o) “Employee” means any person (including, if appropriate, any Named
Executive, Officer or Director) employed by the Company or any Parent or
Subsidiary of the Company. The payment by the Company of a director’s fee to a
Director shall not be sufficient to constitute “employment” of such Director by
the Company.

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

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

               (i) If the Common Stock is listed on any established stock exchange or a
national market system including without limitation the National Market of the
National Association of Securities Dealers, Inc. Automated Quotation (“Nasdaq”)
System, its Fair Market Value shall be the closing sales price for such stock
as quoted on such system on the date of determination (if for a given day no
sales were reported, the closing sales price on the last preceding trading date
from which such quotation exists shall be used), as such price is reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

               (ii) If the Common Stock is quoted on the Nasdaq System (but not on the
National Market thereof) or regularly quoted by a recognized securities dealer
but selling prices are not reported, its Fair Market Value shall be the mean
between the bid and asked prices for the Common Stock or;

               (iii) In the absence of an established market for the Common Stock, the
Fair Market Value thereof shall be determined in good faith by the
Administrator.

          (r) “Incentive Stock Option” means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written Option Agreement.

          (s) “Named Executive” means any individual who, on the last day of the
Company’s fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four most highly compensated officers of
the Company (other than the chief executive officer). Such officer status shall
be determined pursuant to the executive compensation disclosure rules under the
Exchange Act.

          (t) “Nonstatutory Stock Option” means an Option not intended to qualify as
an Incentive Stock Option, as designated in the applicable Option Agreement.

          (u) “Officer” means a person who is an officer of the Company within the
meaning of Section 16(a) of the Exchange Act and the rules and regulations
promulgated thereunder.

          (v) “Option” means a stock option granted pursuant to the Plan.

          (w) “Option Agreement” means a written document, the form(s) of which
shall be approved from time to time by the Administrator, reflecting the terms
of an Option granted under the Plan and includes any documents attached to or
incorporated into such Option Agreement, including, but not limited to, a
notice of stock option grant and a form of exercise notice.

          (x) “Optioned Stock” means the Common Stock subject to an Option.

          (y) “Optionee” means an Employee or Consultant who receives an Option.

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

          (aa) “Participant” means any holder of one or more Options or Stock
Awards, or the Shares issuable or issued upon exercise of such Options or Stock
Awards, granted under the Plan.

 

 

          (bb) “Plan” means this 1999 Equity Incentive Plan, as amended from time to
time.

          (cc) “Reporting Person” means an Officer, Director or greater than 10%
shareholder of the Company within the meaning of Rule 16a-2 of the Exchange
Act, who is required to file reports pursuant to Rule 16a-3 of the Exchange
Act.

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

          (ee) “Share” means a share of the Common Stock, as adjusted in accordance
with Section 14 of the Plan.

          (ff) “Stock Awards” means rights to acquire or be issued Shares of Common
Stock granted pursuant to Section 11 below.

          (gg) “Stock
Award Agreement” means a written document, the form(s) of
which shall be approved from time to time by the Administrator, reflecting the
terms, conditions and restrictions applicable a Stock Award granted under the
Plan and includes any documents attached to or incorporated into such Stock
Award Agreement.

          (hh) “Stock Exchange” means any stock exchange or consolidated stock price
reporting system on which prices for the Common Stock are quoted at any given
time.

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

          (jj) “Ten Percent Holder” means a person who owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary.

     3. Stock Subject to the Plan. Subject to the provisions of Section 14 of
the Plan, the maximum aggregate number of Shares that may be sold or issued
under the Plan is 6,450,000 Shares of Common Stock; provided however that no
more than 500,000 Shares may be sold or issued pursuant to Stock Awards granted
pursuant to Section 11 below. The Shares may be authorized, but unissued, or
reacquired Common Stock.

     If an Award should expire or become unexercisable for any reason without
having been exercised or the Shares subject thereto otherwise having been
issued in full, the unpurchased or unissued Shares that were subject thereto
shall, unless the Plan has been terminated, become available for future grant
under the Plan. In addition, any Shares of Common Stock that are retained by
the Company upon exercise of an Award in order to satisfy the exercise price
for such Award, or to satisfy any withholding taxes due with respect to such
exercise or issuance, shall be treated as not issued and shall continue to be
available under the Plan. Shares issued under the Plan and later repurchased by
the Company pursuant to any repurchase right that the Company may have shall
not be available for future grant under the Plan.

     4. Administration of the Plan.

          (a) General. The Plan shall be administered by the Board or a Committee,
or a combination thereof, as determined by the Board; provided however that
Plan shall be administered in a way that complies with the Applicable Laws. The
Plan may be administered by different administrative bodies with respect to
different classes of Optionees and, if permitted by the Applicable Laws, the
Board may authorize one or more officers (who may (but need not) be Officers)
to grant Options to Employees and Consultants.

          (b) Administration with respect to Reporting Persons. With respect to
Options granted to Reporting Persons and Named Executives, the Plan may (but
need not) be administered so as to permit such Options to qualify for the
exemption set forth in Rule 16b-3 and to qualify as performance-based
compensation under Section 162(m) of the Code.

          (c) Committee Composition. If a Committee has been appointed pursuant to
this Section 4, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of any Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies (however caused) and remove all members of a Committee
and thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws and, in the case of a Committee administering the Plan pursuant
to Section 4(b) above, to the extent permitted or required by Rule 16b-3 and
Section 162(m) of the Code.

          (d) Powers of the Administrator. Subject to the provisions of the Plan and
in the case of a Committee, the specific

 

 

duties delegated by the Board to such Committee, the Administrator shall
have the authority, in its discretion:

               (i) to determine the Fair Market Value of the Common Stock, in accordance
with Section 2(q) of the Plan;

               (ii) to select the Employees and Consultants to whom Awards may from time
to time be granted;

               (iii) to determine whether and to what extent Awards are granted;

               (iv) to determine the number of shares of Common Stock to be covered by
each such Award granted;

               (v) to approve forms of Option Agreement or Stock Award Agreement for use
under the Plan;

               (vi) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Award granted hereunder, which terms and conditions
include but are not limited to the exercise or purchase price, the time or
times when an Award may be exercised (which may be based on performance
criteria), the vesting and/or exercisability schedule, any vesting acceleration
or waiver of forfeiture restrictions, and any restriction or limitation
regarding any Award or Shares issued or issuable upon exercise of such Award,
based in each case on such factors as the Administrator, in its sole
discretion, shall determine;

               (vii) to determine when and under what circumstances an Option may be
settled in cash under Section 10(g) instead of Common Stock;

               (viii) to make any amendments or adjustments to any Award that the
Administrator determines, in its discretion and under the authority granted to
it under the Plan, to be necessary or advisable, provided however that no
amendment or adjustment to an Award that would materially and adversely affect
the rights of any Participant shall be made without the prior written consent
of the Participant;

               (ix) to construe and interpret the terms of the Plan and awards granted
under the Plan; and

               (x) in order to fulfill the purposes of the Plan and without amending the
Plan, to modify grants of Awards to Participants who are foreign nationals or
employed outside of the United States in order to recognize differences in
local law, tax policies or customs.

          (e) Effect of Administrator’s Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all
Participants.

     5. Eligibility.

          (a) Recipients of Grants. Incentive Stock Options may be granted only to
Employees. Nonstatutory Stock Options and Stock Awards may be granted to
Employees and Consultants. An Employee or Consultant who has been granted an
Award may, if he or she is otherwise eligible, be granted an additional Award
or Awards.

          (b) Type of Option. Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Shares with respect to which Incentive Stock Options are
exercisable for the first time by an Optionee during any calendar year (under
all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such
excess Options shall be treated as Nonstatutory Stock Options. For purposes of
this Section 5(b), Incentive Stock Options shall be taken into account in the
order in which they were granted, and the Fair Market Value of the Shares shall
be determined as of the time the Option with respect to such Shares is granted.

          (c) No Employment Rights. The Plan shall not confer upon any Participant
any right with respect to continuation of employment or consulting relationship
with the Company, nor shall it interfere in any way with his or her right or
the Company’s right to terminate his or her employment or consulting
relationship at any time, with or without cause.

     6. Term of Plan. The Plan shall become effective upon its adoption by the
Board. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 15 of the Plan.

     7. Term of Option. The term of each Option shall be the term stated in the
Option Agreement; provided however that the term of an Option shall be no more
than ten (10) years from the date of grant thereof or such shorter term as may
be provided in the Option Agreement and provided further that, in the case of
an Incentive Stock Option granted to a person who at the time of

 

 

such grant is a Ten Percent Holder, the term of such Incentive Stock
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.

     8. Limitation on Grants to Employees. Subject to adjustment as provided in
Section 14 below, the maximum number of Shares which may be subject to Options
granted to any one Employee under this Plan for any fiscal year of the Company
shall be 750,000; provided however that, in the case of Options granted to a
newly-hired Employee as an inducement to his or her entering into an employment
or other service arrangement with the Company or a Subsidiary or Parent, the
maximum number of Shares which may be subject to such Options shall be
1,000,000.

     9. Option Exercise Price and Consideration.

          (a) Exercise Price. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is determined
by the Administrator, but shall be subject to the following:

               (i) In the case of an Incentive Stock Option

                    (A) granted to an Employee who at the time of grant is a Ten Percent
Holder, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant; or

                    (B) granted to any other Employee, the per Share exercise price shall be
no less than 100% of the Fair Market Value per Share on the date of grant.

               (ii) In the case of a Nonstatutory Stock Option granted to any person, the
per share Exercise Price shall be no less than 100% of the Fair Market Value on
the date of grant.

               (iii) Notwithstanding the foregoing, Options may be granted with a per
Share exercise price other than as required above pursuant to merger or other
corporate transaction.

          (b) Permissible Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
be determined by the Administrator (and, in the case of an Incentive Stock
Option, shall be determined at the time of grant) and may consist entirely of
(1) cash, (2) check, (3) cancellation of indebtedness; (4) other Shares that
(i) in the case of Shares acquired upon exercise of an Option either have been
owned by the Optionee for more than six months on the date of surrender or were
not acquired, directly or indirectly, from the Company, and (ii) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which the Option is exercised, (5) if, as of the date of
exercise of an Option the Company then is permitting employees to engage in a
“same-day sale” cashless brokered exercise program involving one or more
brokers, through such a program that complies with the Applicable Laws
(including without limitation the requirements of Regulation T and other
applicable regulations promulgated by the Federal Reserve Board) and that
ensures prompt delivery to the company of the amount required to pay the
exercise price and any applicable withholding taxes, (6) any combination of the
foregoing methods of payment, or (7) such other consideration and method of
payment for the issuance of Shares to the extent permitted under the Applicable
Laws. In making its determination as to the type of consideration to accept,
the Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company and the Administrator may refuse to
accept a particular form of consideration at the time of any Option exercise
if, in its sole discretion, acceptance of such form of consideration is not in
the bests interests of the Company at such time.

     10. Exercise of Option.

          (a) Exercisability.

               (i) General. Any Option granted hereunder shall be exercisable at such
times and under such conditions as determined by the Administrator, consistent
with the terms of the Plan, and reflected in the Option Agreement, including
vesting requirements and/or performance criteria with respect to the Company
and/or the Optionee.

               (ii) Leave of Absence. The Administrator shall have the discretion to
determine whether and to what extent the vesting of Options shall be tolled
during any unpaid leave of absence; provided however that in the absence of
such determination, vesting of Options shall be tolled during any such unpaid
leave (unless otherwise required by the Applicable Laws). In the event of
military leave, vesting shall toll during any unpaid portion of such leave,
provided that, upon a Participant’s returning from military leave (under
conditions that would entitle him or her to protection upon such return under
the Uniform Services Employment and Reemployment Rights Act), he or she shall
be given vesting credit with respect to Options to the same extent as would
have applied had the Participant continued to provide services to the Company
throughout the leave on the same terms as

 

 

he or she was providing services immediately prior to such leave.

               (iii) Minimum Exercise Requirements. An Option may not be exercised for a
fraction of a Share. The Administrator may require that an Option be exercised
as to a minimum number of Shares, provided that such requirement shall not
prevent an Optionee from exercising the full number of Shares as to which the
Option is then exercisable.

               (iv) Procedures for and Results of Exercise. An Option shall be deemed to
be exercised when written notice of such exercise has been given to the Company
in accordance with the terms of the Option by the person entitled to exercise
the Option and full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment may, as authorized by
the Administrator, consist of any consideration and method of payment allowable
under Section 9(b) of the Plan.

     Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

               (v) Rights as Stockholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate promptly
upon exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 14 of the Plan.

          (b) Termination of Status as an Employee or Consultant. In the event of
termination of an Optionee’s Continuous Service Status for any reason other
than the Optionee’s death, disability or retirement, such Optionee may, but
only within ninety (90) days (or such other period of time, as is determined by
the Administrator, with such determination in the case of an Incentive Stock
Option being made at the time of grant of the Option) after the date of such
termination (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), exercise his or her Option
to the extent that he or she was vested in the Optioned Stock at the date of
such termination. To the extent that the Optionee was not vested in the
Optioned Stock at the date of such termination, or if the Optionee does not
exercise the Option to the extent so vested within the time specified above,
the Option shall terminate and the Optioned Stock underlying the unexercised
portion of the Option shall revert to the Plan. No termination shall be deemed
to occur and this Section 10(b) shall not apply if (i) the Optionee is a
Consultant who becomes an Employee, or (ii) the Optionee is an Employee who
becomes a Consultant.

          (c) Disability of Optionee. Notwithstanding Section 10(b) above, in the
event of termination of an Optionee’s Continuous Service Status as a result of
his or her total and permanent disability (as defined in Section 22(e)(3) of
the Code), such Optionee may, but only within twelve (12) months (or such other
period of time as is determined by the Administrator, with such determination
in the case of an Incentive Stock Option being made at the time of grant of the
Option) from the date of such termination (but in no event later than the date
of expiration of the term of such Option as set forth in the Option Agreement),
exercise the Option to the extent he or she was vested in the Optioned Stock at
the date of such termination. To the extent that the Optionee was not vested in
the Optioned Stock at the date of termination, or if the Optionee does not
exercise the Option to the extent so vested within the time specified above,
the Option shall terminate and the Optioned Stock underlying the unexercised
portion of the Option shall revert to the Plan.

          (d) Death of Optionee. Notwithstanding Section 10(b) above, in the event
of the death of an Optionee:

               (i) during the term of the Option where the Optionee is at the time of his
or her death an Employee or Consultant of the Company and only if the Optionee
shall have been in Continuous Service Status since the date of grant of the
Option, then the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of expiration
of the term of such Option as set forth in the Option Agreement) by the
Optionee’s estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent that the Optionee would have
vested in the Optioned Stock had the Optionee continued living and remained in
Continuous Status as an Employee or Consultant six (6) months after the date of
death, subject to the limitation set forth in Section 5(b); or

               (ii) within thirty (30) days (or such other period of time not exceeding
three (3) months as is determined by the Administrator, with such determination
in the case of an Incentive Stock Option being made at the time of grant of the
Option) after the termination of Continuous Service Status, the Option may be
exercised, at any time within twelve (12) months following the date of death
(but in no event later than the date of expiration of the term of such Option
as set forth in the Option Agreement), by the Optionee’s estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was vested in the Optioned Stock at the
date of termination.

 

 

          (e) Retirement of Optionee. Notwithstanding Section 10(b) above, in the
event of termination of an Optionee’s Continuous Service Status as a result of
his or her retirement after reaching the age of at least 62 years, such
Optionee may, but only within twelve (12) months (or such other period of time
as is determined by the Administrator, with such determination in the case of
an Incentive Stock Option being made at the time of grant of the Option) from
the date of such termination (but in no event later than the date of expiration
of the term of such Option as set forth in the Option Agreement), exercise the
Option to the extent he or she was vested in the Optioned Stock at the date of
such termination. To the extent that the Optionee was not vested in the
Optioned Stock at the date of termination, or if the Optionee does not exercise
the Option to the extent so vested within the time specified above, the Option
shall terminate and the Optioned Stock underlying the unexercised portion of
the Option shall revert to the Plan.

          (f) Extension of Exercise Period. The Administrator shall have full power
and authority to extend the period of time for which an Option is to remain
exercisable following termination of an Optionee’s Continuous Service Status
from the periods set forth in Sections 10(b), 10(c), 10(d) or 10(e) above or in
the Option Agreement to such greater time as the Board shall deem appropriate,
provided that in no event shall such Option be exercisable later than the date
of expiration of the term of such Option as set forth in the Option Agreement.

          (g) Buy-Out Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares an Option previously granted under the Plan
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time such offer is made.

     11. Stock Awards.

          (a) General Terms. Stock Awards shall be subject to the terms, conditions
and restrictions determined by the Administrator at the time the Stock Award is
granted. Such terms, conditions and restrictions may (but need not) include,
without limitation, conditions requiring the Participant to purchase the Shares
underlying the Stock Award at such price as is determined by the Administrator,
restrictions on transfer, vesting provisions, forfeiture provisions and
provisions permitting the Company to repurchase shares subject to the Stock
Award.

          (b) Stock Award Agreements. Each Stock Award granted under the Plan shall
be evidenced by a Stock Award Agreement between the recipient and the Company.
Such Agreement, and the Shares issued or to be issued pursuant to the Award,
shall be subject to all applicable terms of the Plan and of the Stock Award
Agreement. The provisions of the various Stock Award Agreements entered into
under the Plan need not be identical.

          (c) Vesting. If an Award is granted subject to forfeiture, vesting and/or
repurchase provisions or restrictions, the Administrator may, in its
discretion, accelerate in whole or in part the schedule governing such vesting
provisions or the lapsing of such restrictions or otherwise provide for the
waiver of any such provisions or restrictions under such circumstances and
subject to such conditions as it deems appropriate, consistent with the terms
of the Plan. The certificates evidencing Shares subject to such provisions and
restrictions, although issued in the name of the Participant, shall be held by
the Company or a third party designated by the Administrator in escrow to
enforce such provisions and restrictions.

          (d) Rights as a Stockholder. Once Shares are issued under the Plan
pursuant to a Stock Award, whether or not such Shares are subject to vesting
conditions or other forfeiture or repurchase provisions, the Participant shall
have the rights equivalent to those of a stockholder, and shall be a
stockholder when his or her ownership of the Shares is entered upon the records
of the duly authorized transfer agent of the Company. The holders of Shares
issued under a Stock Award shall have the same voting, dividend and other
rights as the Company’s other stockholders. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
Shares are issued.

     12. Taxes.

          (a) As a condition of the grant, vesting or exercise of an Award granted
under the Plan, the Participant (or in the case of a Participant’s death, the
person exercising the Award) shall make such arrangements as the Administrator
may require for the satisfaction of any applicable federal, state, local or
foreign withholding tax obligations that may arise in connection with the
exercise of Option and the issuance of Shares. The Company shall not be
required to issue any Shares under the Plan until such obligations are
satisfied.

          (b) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from the Employee’s compensation an amount sufficient to
satisfy such tax obligations from the next payroll payment otherwise payable
after the date of an exercise of the Award.

 

 

          (c) In the case of a Participant other than an Employee (or in the case of
an Employee where the next payroll payment is not sufficient to satisfy such
tax obligations, with respect to any remaining tax obligations), in the absence
of any other arrangement and to the extent permitted under the Applicable Laws,
the Participant shall be deemed to have elected to have the Company withhold
from the Shares to be issued upon exercise of the Award that number of Shares
having a Fair Market Value determined as of the applicable Tax Date (as defined
below) equal to the minimum statutory withholding rates for federal and state
tax purposes, including payroll taxes, applicable to the exercise. For purposes
of this Section 12, the Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be
determined under the Applicable Laws (the “Tax Date”).

          (d) If permitted by the Administrator, in its discretion, a Participant
may satisfy his or her tax withholding obligations upon exercise of an Award by
surrendering to the Company Shares that (i) in the case of Shares previously
acquired from the Company, have been owned by the Participant for more than six
(6) months on the date of surrender, and (ii) have a Fair Market Value
determined as of the applicable Tax Date on the date of surrender equal to the
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, applicable to the exercise.

          (e) Any election or deemed election by a Participant to have Shares
withheld to satisfy tax withholding obligations under Section 12(c) or (d)
above shall be irrevocable as to the particular Shares as to which the election
is made and shall be subject to the consent or disapproval of the
Administrator. Any election by a Participant under Section 12(d) above must be
made on or prior to the applicable Tax Date.

          (f) In the event an election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code because
no election is filed under Section 83(b) of the Code, the Participant shall
receive the full number of Shares with respect to which the Award is exercised
but such Participant shall be unconditionally obligated to tender back to the
Company the proper number of Shares on the applicable Tax Date.

     13. Non-Transferability of Awards. An Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution; provided that the Administrator
may in its discretion grant transferable Nonstatutory Stock Options or Stock
Awards pursuant to Option Agreements or Stock Award Agreements specifying (i)
the manner in which such Nonstatutory Stock Options or Stock Awards are
transferable and (ii) that any such transfer shall be subject to the Applicable
Laws. The designation of a beneficiary by an Optionee will not constitute a
transfer. An Option may be exercised, during the lifetime of the Optionee, only
by the Optionee or a transferee permitted by this Section 13.

     14. Adjustments Upon Changes in Capitalization, Corporate Transactions,
Change of Control and Certain Other Transactions.

          (a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares of Common Stock covered by
each outstanding Award, the numbers of Shares set forth in Section 3 above
(that is, both of the specific Share numbers set forth in the first sentence of
Section 3 above), the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Awards have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Award, and the maximum numbers of Shares of Common Stock for which Awards
may be granted to any Employee under Section 8 above (that is, both of the
specific Share number set forth in Section 8 above), as well as the price per
Share of Common Stock covered by each such outstanding Award, shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination, recapitalization or reclassification of the Common Stock
(including any change in the number of Shares of Common Stock effected in
connection with a change of domicile of the Company), or any other increase or
decrease in the number of issued Shares of Common Stock effected without
receipt of consideration by the Company; provided however that conversion of
any convertible securities of the Company shall not be deemed to have been
“effected without receipt of consideration.” Such adjustment shall be made by
the Administrator, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of Shares of Common Stock subject to an
Award.

          (b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, each outstanding Award shall terminate
immediately prior to the consummation of the transaction, unless otherwise
provided by the Administrator.

          (c) Corporate Transactions; Change of Control. In the event of a Corporate
Transaction, each outstanding Award shall be assumed or an equivalent award
shall be substituted by the successor corporation or a Parent or Subsidiary of
such successor corporation (such entity, the “Successor Corporation”), unless
the Successor Corporation does not agree to such

 

 

assumption or substitution, in which case such Awards shall terminate upon
the consummation of the transaction. Notwithstanding the preceding sentence, in
the event of a Change of Control, each outstanding Award shall be assumed or an
equivalent award substituted by the Successor Corporation, unless the Successor
Corporation does not agree to such assumption or substitution, in which case,
the vesting of each Award shall accelerate and each Award shall become
exercisable in full (including with respect to Shares as to which an Option
would not otherwise be vested and exercisable) prior to consummation of the
transaction at such time and on such conditions as the Administrator shall
determine. To the extent an Award is not exercised prior to consummation of a
Change of Control in which the vesting of Awards is being accelerated, such
Award shall terminate upon such consummation and the Administrator shall notify
the Participant of such fact at least five (5) days prior to the date on which
the Award terminates.

     For purposes of this Section 14(c), an Award shall be considered assumed,
without limitation, if, at the time of issuance of the stock or other
consideration upon a Corporate Transaction or a Change of Control, as the case
may be, each Participant would be entitled to receive upon exercise of the
Award the same number and kind of shares of stock or the same amount of
property, cash or securities as such holder would have been entitled to receive
upon the occurrence of the transaction if the holder had been, immediately
prior to such transaction, the holder of the number of Shares of Common Stock
covered by the Award at such time (after giving effect to any adjustments in
the number of Shares covered by the Award as provided for in this Section 14);
provided however that if the consideration received in the transaction is not
solely common stock of the Successor Corporation or its Parent, the
Administrator may, with the consent of the Successor Corporation, provide for
the consideration to be received upon exercise of the Award to be solely common
stock of the Successor Corporation or its Parent equal to the Fair Market Value
of the per Share consideration received by holders of Common Stock in the
transaction.

          (d) Certain Distributions. In the event of any distribution to the
Company’s shareholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Award to reflect the effect of such distribution.

     15. Time of Granting Awards. The date of grant of an Award shall, for all
purposes, be the date on which the Administrator makes the determination
granting such Award or such other date as is determined by the Administrator;
provided however that in the case of an Incentive Stock Option, the grant date
shall be the later of the date on which the Administrator makes the
determination granting such Incentive Stock Option or the date of commencement
of the Optionee’s employment relationship with the Company. Notice of the
determination shall be given to each Participant to whom an Award is so granted
within a reasonable time after the date of such grant.

     16. Amendment and Termination of the Plan.

          (a) Amendment and Termination. The Board may at any time amend, alter,
suspend, discontinue or terminate the Plan, but no amendment, alteration,
suspension, discontinuance or termination (other than an adjustment made
pursuant to Section 14(a) above) shall be made that would materially and
adversely affect the rights of any Participant under any outstanding grant,
without his or her consent. Notwithstanding the above, to the extent necessary
and desirable to comply with the Applicable Laws, the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to such as
degree as required.

          (b) Effect of Amendment or Termination. Any such amendment or termination
of the Plan shall not affect Awards already granted and such Awards shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Participant and the
Administrator, which agreement must be in writing and signed by the Participant
and the Company.

     17. Conditions Upon Issuance of Shares. Notwithstanding any other
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the Applicable Laws, with such compliance determined
by the Company in consultation with its legal counsel.

     As a condition to the exercise of an Award, the Company may require the
person exercising such Award to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by law.

     18. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

     19. Award Agreement. Awards shall be evidenced by Award agreements in such
form as the Administrator shall from time

 

 

to time approve.

     20. Shareholder Approval. If required by the Applicable Laws, continuance
of the Plan shall be subject to approval by the shareholders of the Company
within twelve (12) months before or after the date the Plan is adopted. To the
extent shareholder approval is required by the Applicable Laws and is not
obtained, all Awards issued under the Plan that are subject to such approval
shall become void. In addition, the Company shall obtain shareholder approval
prior to reducing the exercise price of any Award to the then current Fair
Market Value. Such shareholder approval shall be obtained in the manner and to
the degree required under the Applicable Laws.

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