Document:

Exhibit 10.5

CompuMed, Inc.

5777 W. Century Blvd., Suite 1285

Los Angeles, CA 90045

 Tel:  (310) 258-5000             Fax:  (310)

645-5880

 

                                                                                                                                                Date                                

 

 

Dear

                                :

 

                                I am pleased to inform you that on

                            ,

CompuMed, Inc. (the “Company”) granted you a non-qualified stock option (the

“Option”) under the Company’s 2002 Stock Option Plan (the “Plan”), to purchase

                                  (                          )

shares (the “Shares”) of the Company’s Common Stock at the price of 

$               

($             )  per Share, subject to adjustment as set

forth in Section 6(i) of the Plan.  The

exercise price is the fair market value of a share of Common Stock on the date

of grant as determined in accordance with the Plan.  A copy of the Plan is attached hereto and incorporated herein by

this reference.  Capitalized terms used,

but not otherwise defined, herein have the meanings ascribed to such terms in

the Plan.  If there is any conflict

between the terms of this letter and the Plan, the terms in the Plan shall

apply.

 

                                The

purpose of the Plan is to encourage ownership of the Common Stock of the

Company by eligible key employees, directors and officers providing service to

the Company and its subsidiaries and to provide increased incentive for such

employees and other persons to render services to the Company and its

subsidiaries in the future and to exert maximum effort for the success of the

business of the Company and its subsidiaries.

 

                                Subject

to compliance with the terms and conditions of this letter and the Plan, you

will become entitled to exercise the Option with respect to the number of

Shares indicated and as of the dates indicated, below:

 

	

  Date Option Becomes Exercisable

  	

   

  	

  Number of Shares

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

The Option may be exercised in whole or in part at any

time after the date it becomes exercisable, but the Option may not be exercised

after ten years (10) from the date of grant, and may terminate earlier as set

forth herein or in the Plan.

 

                                Subject

to the provisions of the Plan and this letter, the Option may be exercised by

written notice to the Company from the person or persons entitled to exercise

the Option, stating the number of shares with respect to which it is being

exercised and accompanied by payment of the purchase price.  The purchase price shall be paid by

certified check payable to the order of the Company.  A form of the notice of exercise is attached hereto.  Please note that, although you must return a

signed copy of this letter in order to validate your Option, that act does not

constitute the exercise of the Option nor does it in any way obligate you to

exercise the Option.

 

                                You

may not assign or otherwise transfer the Option except pursuant to a will or by

the laws of descent and distribution.

 

                Notwithstanding

any provision of this Plan or this Agreement, the Committee is authorized to

take such action as it determines to be necessary or advisable, and fair and

equitable to Optionees, with respect to Options held by Optionees in the event

of a sale or transfer of all or substantially all of the Company’s assets, or

merger or consolidation (other than a merger or consolidation in which the

Company is the 

 

 

surviving corporation and no shares are converted into

or exchanged for securities, cash or any other thing of value).  Such action may include (but is not limited

to) the following:

 

                                                                (A)          Accelerating the exercisability of any

Option to permit its exercise in full during such period as the Committee in

its sole discretion shall prescribe following the public announcement or a sale

or transfer of assets or merger or consolidation.

 

                                                                (B)           Permitting an Optionee, at any time

during such period as the Committee in its sole discretion shall prescribe

following the consummation of such a merger, consolidation or sale or transfer

of assets, to surrender any Option (or any portion thereof) to the Company for

cancellation.

 

                                                                (C)           Requiring any Optionee, at any time

following the consummation of such a merger, consolidation or sale or transfer

of assets, if required by the terms of the agreements relating thereto, to

surrender any Option (or any portion thereof) to the Company in return for a

substitute Option which is issued by the corporation surviving such merger or

consolidation or the Committee, in it sole discretion, determines to have a

value to the Optionee substantially equivalent to the value to the Optionee of

the Option (or portion thereof) so surrendered.

 

                Subject

to any such action which the Committee may take, in the event of any merger,

consolidation or sale or transfer of assets referred to above, upon any

exercise thereafter of an Option, and Optionee shall, at no additional cost

other than payment of the exercise price of the Option, be entitled to receive

in lieu of Shares, (1) the number and class of Shares or other security, or (2)

the amount of cash, or (3) property, or (4) a combination of the foregoing, to

which the Optionee would have been entitled pursuant to the terms of such

merger, consolidation or sale or transfer of assets, if immediately prior

thereto the Optionee had been the holder of record of the number of Shares for

which such Option shall be so exercised.

 

                The

Option may not be exercised unless, at the time of such exercise, you are, and

have been continuously since the date of grant, a director of the Company,

except that to the extent the Option is vested at the time of termination:  (i) the Option may be exercised within the

period of three (3) months after the date you cease to be a director of the

Company; (ii) in the event of your death while a director of the Company, the

Option may be exercised by the person to whom it is transferred by will or the

laws of descent and distribution within the period of one (1) year after the

date of death; and (iii) in the event of your disability (as defined in the

Plan) while a director of the Company, the Option may be exercised within the

period of one year after the date you cease to be such a director because of

such disability.  The unvested portion

of the Option shall terminate immediately upon termination of your directorship

for any reason.

 

                                You

should consult with your personal tax advisor with respect to your personal tax

consequences arising from the exercise of the Option and the sale of the

Shares.

 

                                This

letter constitutes a Stock Option Agreement between you and the Company.  In the event of any discrepancy between the

terms of this Stock Option Agreement and the Plan, the terms of the Plan shall

govern.

 

                                Please

indicate your agreement to the terms and conditions set forth in this letter

and the Plan by signing the accompanying copy of this letter and returning it

to the Company, Attention:  Corporate

Secretary, by not later than                        .  No part of this Option is exercisable until

a signed copy of this letter has been received by the Company.

 

                                Please

contact me if you have any questions regarding your Option or the Plan or if

you desire further information prior to exercise.

	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Very truly yours,

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  COMPUMED, INC.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  By:

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  President and CEO

  

 

 

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                                The

undersigned hereby acknowledges receipt of the foregoing letter and a copy of the

Plan, and agrees to be bound by all of the terms and conditions set forth

therein.

 

	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Date

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Signature

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Social Security Number

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Address:   

  Street Apt.#

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  City              

  State             Zip Code

  	

   

  	

   

  

 

 

3Exhibit

10.1

 

ZORAN CORPORATION

 

1993 STOCK OPTION

PLAN

 

(As Amended

Through April 21, 2002)

 

 

1.        Purposes of the Plan.  The purposes of this Stock Option Plan are

to attract and retain the best available personnel for positions of substantial

responsibility, to provide additional incentives to Employees, Non-Employee

Directors and Consultants of the Company and its Subsidiaries, and to promote

the success of the Company’s business. 

Options granted hereunder may be either Incentive Stock Options or

Nonstatutory Stock Options at the discretion of the Committee.

 

2.        Definitions.  As used herein, and in any Option granted

hereunder, the following definitions shall apply:

 

(a)           “Board” shall mean the Board

of Directors of the Company.

 

(b)           “Code” shall mean the Internal

Revenue Code of 1986, as amended, and any applicable regulations promulgated

thereunder.

 

(c)           “Common Stock” shall mean the

Common Stock of the Company.

 

(d)           “Company” shall mean Zoran

Corporation, a Delaware corporation.

 

(e)           “Committee” shall mean the

Committee appointed by the Board in accordance with paragraph (a) of

Section 4 of the Plan.  If the

Board does not appoint or ceases to maintain a Committee, the term “Committee”

shall refer to the Board.

 

(f)            “Consultant” shall mean any

independent contractor retained to perform services for the Company.

 

(g)           “Continuous Service” shall

mean the absence of any interruption or termination of service with the

Company, a successor of the Company or any Parent or Subsidiary, whether in the

capacity of an Employee, a Non-Employee Director, or a Consultant.  Continuous Service shall not be considered

interrupted (i) during any period of sick leave, military leave or any other

leave of absence approved by the Board, (ii) in the case of transfers between

locations of the Company or between the Company and any Parent, Subsidiary or

successor of the Company, or (iii) merely as a result of a change in the

capacity in which the Optionee renders such service provided that no

interruption or termination of the Optionee’s service occurs.

 

(h)           “Employee” shall mean any

person, including officers (whether or not they are directors), employed by the

Company or any Subsidiary.

 

 

(i)            “Exchange Act” shall mean the

Securities Exchange Act of 1934, as amended.

 

(j)            “Incentive Stock Option”

shall mean any option granted under this Plan and any other option granted to

an Employee in accordance with the provisions of Section 422 of the Code,

and the regulations promulgated thereunder.

 

(k)           “Non-Employee Director” shall

mean any director of the Company or any Subsidiary who is not employed by the

Company or such Subsidiary.

 

(l)            “Nonstatutory Stock Option”

shall mean an Option granted under the Plan that is subject to the provisions

of Section 1.83-7 of the Treasury Regulations promulgated under

Section 83 of the Code.

 

(m)          “Option” shall mean a stock

option granted pursuant to the Plan.

 

(n)           “Option Agreement” shall mean

a written agreement between the Company and the Optionee regarding the grant

and exercise of Options to purchase Shares and the terms and conditions thereof

as determined by the Committee pursuant to the Plan.

 

(o)           “Optioned Shares” shall mean

the Common Stock subject to an Option.

 

(p)           “Optionee” shall mean an

Employee, Non-­Employee Director or Consultant who receives an Option.

 

(q)           “Parent” shall mean a “parent

corporation,” whether now or hereafter existing, as defined by

Section 424(e) of the Code.

 

(r)            “Plan” shall mean this 1993

Stock Option Plan.

 

(s)           “Registration Date” shall mean

the effective date of the first registration statement filed by the Company

pursuant to Section 12(g) of the Exchange Act with respect to any class of

the Company’s equity securities.

 

(t)            “Section 162(m)” means

Section 162(m) of the Code.

 

(u)           “Securities Act” shall mean

the Securities Act of 1933, as amended.

 

(v)           “Share” shall mean a share of

the Common Stock subject to an Option, as adjusted in accordance with

Section 11 of the Plan.

 

(w)          “Subsidiary” shall mean a

“subsidiary corporation,” whether now or hereafter existing, as defined in

Section 424(f) of the Code.

 

3.        Stock Subject to the

Plan.  Subject to the provisions of

Section 11 of the Plan, the maximum aggregate number of Shares which may be

issued under the Plan shall be five million one hundred seventy thousand (5,170,000).  If an Option expires or becomes

unexercisable for any reason without having been exercised in full, the Shares

which were subject to the Option

 

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but as to which the Option was not exercised shall, unless the Plan

shall have been terminated, become available for other Option grants under the

Plan.

 

The Company intends that

as long as it is not subject to the reporting requirements of Section 13

or 15(d) of the Exchange Act and is not an investment company registered or

required to be registered under the Investment Company Act of 1940, all offers

and sales of Options and Shares issuable upon exercise of any Option shall be

exempt from registration under the provisions of Section 5 of the Securities

Act, and the Plan shall be administered in such a manner so as to preserve such

exemption.  The Company intends that the

Plan shall constitute a written compensatory benefit plan within the meaning of

Rule 701(b) of 17 CFR Section 230.701 promulgated by the

Securities and Exchange Commission pursuant to such Act.  The Committee shall designate which Options

granted under the Plan by the Company are intended to be granted in reliance on

Rule 701.

 

4.        Administration of the

Plan.

 

(a)           Procedure.  The Plan shall be administered by the

Board.  The Board may appoint one or

more Committees to administer the Plan, subject to such terms and conditions as

the Board may prescribe.  Once appointed,

the Committee shall continue to serve until otherwise directed by the

Board.  From time to time, the Board may

increase the size of the 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 the

Committee and, thereafter, directly administer the Plan.

 

Members of the Board or

Committee who are either eligible for Options or have been granted Options may

vote on any matters affecting the administration of the Plan or the grant of

options pursuant to the Plan, except that no such member shall act upon the

granting of an Option to himself, but any such member may be counted in

determining the existence of a quorum at any meeting of the Board or the

Committee during which action is taken with respect to the granting of an

Option to him or her.

 

The Committee shall meet

at such times and places and upon such notice as the chairperson

determines.  A majority of the Committee

shall constitute a quorum.  Any acts by

the Committee may be taken at any meeting at which a quorum is present and

shall be by majority vote of those members entitled to vote.  Additionally, any acts reduced to writing or

approved in writing by all of the members of the Committee shall be valid acts

of the Committee.

 

(b)           Procedure After Registration Date.  Notwithstanding subsection (a) above,

after the date of registration of the Company’s Common Stock on a national

securities exchange or the Registration Date, the Board shall take all action

necessary to administer the Plan in accordance with the then effective

provisions of Rule 16b-3 promulgated under the Exchange Act, provided that

any amendment to the Plan required for compliance with such provisions shall be

made consistent with the provisions of Section 13 of the Plan, and said

regulations.

 

(c)           Powers of the Committee.  Subject to the provisions of the Plan, the

Committee shall have the authority: 

(i) to determine, upon review of relevant information, the fair

market value of the Common Stock; (ii) to determine the exercise price of

Options to be

 

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granted, the Employees, Directors or Consultants to whom and the time

or times at which Options shall be granted, and the number of Shares to be

represented by each Option; (iii) to interpret the Plan; (iv) to

prescribe, amend and rescind rules and regulations relating to the Plan;

(v) to determine the terms and provisions of each Option granted under the

Plan (which need not be identical) and, with the consent of the holder thereof,

to modify or amend any Option; (vi) to authorize any person to execute on

behalf of the Company any instrument required to effectuate the grant of an

Option previously granted by the Committee; (vii) to accelerate or (with

the consent of the Optionee) defer an exercise date of any Option, subject to

the provisions of Section 9(a) of the Plan; (viii) to determine

whether Options granted under the Plan will be Incentive Stock Options or

Nonstatutory Stock Options; (ix) to make all other determinations deemed

necessary or advisable for the administration of the Plan; and (x) to

designate which options granted under the Plan will be issued in reliance on

Rule 701.

 

(d)           Effect of Committee’s Decision.  All decisions, determinations and

interpretations of the Committee shall be final and binding on all potential or

actual Optionees, any other holder of an Option or other equity security of the

Company and all other persons.

 

5.        Eligibility and Option

Limitations.

 

(a)           Persons Eligible for Options.  Options under the Plan may be granted only

to Employees, Non-Employee Directors or Consultants whom the Committee, in its

sole discretion, may designate from time to time.  For purposes of the foregoing sentence, “Employees,”

“Non-Employee Directors” and “Consultants” shall include prospective Employees,

prospective Non-Employee Directors and prospective Consultants to whom Options

are granted in connection with written offers of employment or other service

relationship.  Incentive Stock Options

may be granted only to Employees.  Any

person who is not an Employee on the effective date of grant of an Option to

such person may be granted only a Nonstatutory Stock Option.  An Employee who has been granted an Option,

if he or she is otherwise eligible, may be granted an additional Option or

Options.  However, the aggregate fair

market value (determined in accordance with the provisions of Section 8(a)

of the Plan) of the Shares subject to one or more Incentive Stock Options

grants that are exercisable for the first time by an Optionee during any

calendar year (under all stock option plans of the Company and its Parents and

Subsidiaries) shall not exceed $100,000 (determined as of the grant date).

 

(b)           Section 162(m) Grant Limit.  Subject to adjustment as provided in Section

11, no Employee shall be granted one or more Options within any fiscal year of

the Company which in the aggregate are for the purchase of more than five

hundred thousand (500,000) Shares (the “Section 162(m) Grant Limit”).  An Option which is canceled in the same

fiscal year of the Company in which it was granted shall continue to be counted

against the Section 162(m) Grant Limit for such period.

 

(c)           No Right to Continuing Employment.  Neither the establishment nor the operation

of the Plan shall confer upon any Optionee or any other person any right with

respect to continuation of employment or other service with the Company or any

Subsidiary, nor shall the Plan interfere in any way with the right of the

Optionee or the right of the Company (or any Parent or Subsidiary) to terminate

such employment or service at any time.

 

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(d)           Option Repricing.  No Option shall be repriced without the

approval of a majority of the shares of Common Stock present or represented by

proxy and voting at a meeting of the stockholders of the Company at which a

quorum representing a majority of all outstanding shares of Common Stock is

present or represented by proxy.

 

6.        Term of Plan.  The Plan shall become effective upon its

adoption by the Board or its approval by vote of the holders of the outstanding

shares of the Company entitled to vote on the adoption of the Plan (in

accordance with the provisions of Section 18 hereof), whichever is earlier.  It shall continue in effect for a term of

ten (10) years unless sooner terminated under Section 13 of the Plan.

 

7.        Term of Option.  Unless the Committee determines otherwise,

the term of each Option granted under the Plan shall be ten (10) years from the

date of grant.  The term of the Option

shall be set forth in the Option Agreement. 

No Incentive Stock Option shall be exercisable after the expiration of

ten (10) years from the date such Option is granted, and no Incentive Stock

Option granted to any Employee who, at the date such Option is granted, owns

(within the meaning of Section 424(d) of the Code) more than ten percent

(10%) of the total combined voting power of all classes of stock of the Company

or any Parent or subsidiary shall be exercisable after the expiration of five

(5) years from the date such Option is granted.

 

8.        Option Price and

Consideration.

 

(a)           Option Price.  Except as provided in subsection (b)

below, the option price for the Shares to be issued pursuant to any Option

shall be such price as is determined by the Committee, which shall in no event

be less than: (i) in the case of Incentive Stock Options, the fair market

value of such Shares on the date the Option is granted; or (ii) in the

case of Nonstatutory Stock Options, 85% of such fair market value.  Fair market value of the Common Stock shall

be determined by the Committee, using such criteria as it deems relevant;

provided, however, that if there is a public market for the Common Stock, the

fair market value per Share shall be the average of the last reported bid and

asked prices of the Common Stock on the date of grant, as reported in The

Wall Street Journal (or, if not so reported, as otherwise reported by the

NASDAQ System) or, in the event the Common Stock is listed on a national

securities exchange (within the meaning of Section 6 of the Exchange Act)

or on the NASDAQ National Market System (or any successor national market

system), the fair market value per Share shall be the closing price on such

exchange on the date of grant of the Option, as reported in The Wall Street

Journal.

 

(b)           Ten Percent Shareholders.  No Option shall be granted to any Employee

who, at the date such Option is granted, owns (within the meaning of

Section 424(d) of the Code) more than ten percent (10%) of the total

combined voting power of all classes of stock of the Company or any Parent or

Subsidiary, unless the option price for the Shares to be issued pursuant to

such Option is at least equal to 110% of the fair market value of such Shares

on the grant date determined by the Committee in the manner set forth in

subsection (a) above.

 

(c)           Consideration.  The consideration to be paid for the

Optioned Shares shall be payment in cash or by check unless payment in some

other manner, including other shares of the Company’s Common Stock or such

other consideration and method of payment for the

 

5

 

issuance of Optioned Shares as may be permitted under Section 152

of the Delaware General Corporation Law, is authorized by the Committee at the

time of the grant of the Option.  Any

cash or other property received by the Company from the sale of Shares pursuant

to the Plan shall constitute part of the general assets of the Company.

 

9.        Exercise of Option.

 

(a)           Vesting Period.  Any Option granted hereunder shall be

exercisable at such times and under such conditions as determined by the

Committee and as shall be permissible under the terms of the Plan, which shall

be specified in the Option Agreement evidencing the Option.  Unless the Committee specifically determines

otherwise at the time of the grant of the option, each Option shall vest and

become exercisable, cumulatively, in four substantially equal installments on

each of the first four anniversaries of the date of the grant of the option,

subject to the Optionee’s Continuous Service. 

However, no Option granted to a prospective Employee, prospective

Non-Employee Director or prospective Consultant may become exercisable prior to

the date on which such person commences service.

 

(b)           Exercise Procedures.  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. 

An Option may not be exercised for fractional shares or for less than

ten (10) Shares.  As soon as practicable

following the exercise of an Option in the manner set forth above, the Company

shall issue or cause its transfer agent to issue stock certificates

representing the Shares purchased. 

Until the issuance of such stock certificates (as evidenced by the

appropriate entry on the books of the Company or of a duly authorized transfer

agent of the Company), no right to vote or receive dividends or any other

rights as a stockholder shall exist with respect to the Optioned Shares

notwithstanding the exercise of the Option. 

No adjustment will be made for a dividend or other rights for which the

record date is prior to the date of the transfer by the Optionee of the

consideration for the purchase of the Shares, except as provided in

Section 11 of the Plan.  After the

Registration Date, the exercise of an Option by any person subject to short-swing

trading liability under Section 16(b) of the Exchange Act shall be subject

to compliance with all applicable requirements of Rule 16b-3(d) or (e)

promulgated under the Exchange Act.

 

(c)           Death of Optionee.  In the event of the death during the Option

period of an Optionee who is at the time of his death, or was within the ninety

(90) day period immediately prior thereto, an Employee, Non-Employee Director

or Consultant, and who was in Continuous Service from the date of the grant of

the Option until the date of death or termination, the Option may be exercised,

at any time within one (1) year following the date of death, 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 of the accrued right to

exercise at the time of the termination or death, whichever comes first.

 

(d)           Disability of Optionee.  In the event of the permanent and total

disability during the Option period of an optionee who is at the time of such

disability, or was within the ninety (90) day period prior thereto, an

Employee, Non-Employee Director or Consultant, and who was in Continuous

Service from the date of the grant of the Option until the date of

 

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disability or termination, the Option may be exercised at any time

within one (1) year following the date of disability, but only to the extent of

the accrued right to exercise at the time of the termination or disability,

whichever comes first, subject to the condition that no option shall be

exercised after the expiration of the Option period.

 

(e)           Other Termination of Continuous

Service.  If the Continuous Service

of an Optionee shall cease for any reason other than permanent and total

disability or death, he or she may, but only within ninety (90) days (or such

other period of time as is determined by the Committee) after the date his or

her Continuous Service ceases, exercise his or her Option to the extent that he

or she was entitled to exercise it at the date of such termination of

Continuous Service, subject to the condition that no Option shall be

exercisable after the expiration of the Option period.

 

(f)            Exercise of Option With Stock

After Registration Date.  After the

Registration Date, the Committee may permit an Optionee to exercise an Option

by delivering shares of the Company’s Common Stock.  If the Optionee is so permitted, the option agreement covering

such Option may include provisions authorizing the Optionee to exercise the

Option, in whole or in part, by: (i) delivering whole shares of the

Company’s Common Stock previously owned by such Optionee (whether or not

acquired through the prior exercise of a stock option) having a fair market

value equal to the aggregate option price for the Optioned Shares issuable on

exercise of the Option; and/or (ii) directing the Company to withhold from

the Shares that would otherwise be issued upon exercise of the Option that

number of whole Shares having a fair market value equal to the aggregate option

price for the Optioned Shares issuable on exercise of the Option.  Shares of the Company’s Common Stock so

delivered or withheld shall be valued at their fair market value at the close

of the last business day immediately preceding the date of exercise of the

Option, as determined by the Committee, in accordance with the provisions of

Section 8(a) of the Plan.  Any balance

of the exercise price shall be paid in cash. 

Any shares delivered or withheld in accordance with this provision shall

not again become available for purposes of the Plan and for Options

subsequently granted thereunder.

 

(g)           Tax Withholding.  After the Registration Date, when an

Optionee is required to pay to the Company an amount with respect to tax

withholding obligations in connection with the exercise of an option granted

under the Plan, the optionee may elect prior to the date the amount of such

withholding tax is determined (the “Tax Date”) to make such payment, or such

increased payment as the Optionee elects to make up to the maximum federal,

state and local marginal tax rates, including any related FICA obligation,

applicable to the Optionee and the particular transaction, by:

(i) delivering cash; (ii) delivering part or all of the payment in

previously owned shares of Common Stock (whether or not acquired through the

prior exercise of an Option); and/or (iii) irrevocably directing the

Company to withhold from the Shares that would otherwise be issued upon

exercise of the Option that number of whole Shares having a fair market value equal

to the amount of tax required or elected to be withheld (a “Withholding

Election”).  If an Optionee’s Tax Date

is deferred beyond the date of exercise and the Optionee makes a Withholding

Election, the Optionee will initially receive the full amount of Optioned

Shares otherwise issuable upon exercise of the option, but will be

unconditionally obligated to surrender to the Company on the Tax Date the

number of Shares necessary to satisfy his or her minimum withholding

requirements, or such higher payment as he or she may have elected to make,

with adjustments to be made in cash after the Tax Date.

 

7

 

Any withholding of

Optioned Shares with respect to taxes arising in connection with the exercise

of an Option by any person subject to short-swing trading liability under

Section 16(b) of the Exchange Act shall satisfy the following conditions:

 

(i)            An advance election to withhold

Optioned Shares in settlement of a tax liability must satisfy the requirements

of Rule 16b-3(d)(1)(i), regarding participant-directed transactions;

 

(ii)           Absent such an election, the

withholding of Optioned Shares to settle a tax liability may occur only during

the quarterly window period described in Rule 16b-3(e);

 

(iii)          Absent an advance election or window­-period

withholding, the Optionee may deliver shares of Common Stock owned prior to the

exercise of an Option to settle a tax liability arising upon exercise of the

Option, in accordance with Rule 16b-3(f); or

 

(iv)          The delivery of previously acquired

shares of Common Stock (but not the withholding of newly acquired Shares) will

be allowed where an election under Section 83(b) of the Code accelerates

the Tax Date to a day that occurs less than six (6) months after the advance

election and is not within the quarterly window period described in

Rule 16b-3(e).

 

Any adverse consequences

incurred by an Optionee with respect to the use of shares of Common Stock to

pay any part of the option Price or of any tax in connection with the exercise

of an option, including without limitation any adverse tax consequences arising

as a result of a disqualifying disposition within the meaning of

Section 422 of the Code, shall be the sole responsibility of the Optionee.  Shares withheld in accordance with this

provision shall not again become available for purposes of the Plan and for

Options subsequently granted thereunder.

 

10.       Non-Transferability of

Options.  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 and distribution and may be exercised,

during the lifetime of the Optionee, only by the Optionee.

 

11.       Adjustments Upon Changes

in Capitalization.  Subject to any

required action by the shareholders of the Company, the number of shares

subject to the Plan, the Section 162(m) Grant Limit set forth in Section 5(b),

the number of Optioned Shares covered by each outstanding Option, and the per

share exercise price of each such Option, 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, recapitalization,

combination, reclassification, the payment of a stock dividend on the Common

Stock or any other increase or decrease in the number of such 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 Board,

whose determination in that respect shall be final, binding and

conclusive.  Except as expressly

provided herein, no issue by the Company of shares

 

8

 

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

Option.

 

The Committee may, if it

so determines in the exercise of its sole discretion, also make provision for

adjusting the number or class of securities covered by any Option, as well as

the price to be paid therefor, in the event that the Company effects one or

more reorganizations, recapitalizations, rights offerings, or other increases

or reductions of shares of its outstanding Common Stock, and in the event of

the Company being consolidated with or merged into any other corporation.

 

Unless otherwise

determined by the Board, upon the dissolution or liquidation of the Company the

Options granted under the Plan shall terminate and thereupon become null and

void.

 

Upon any merger or

consolidation, if the Company is not the surviving corporation, the Options

granted under the Plan shall either be assumed by the new entity or shall

terminate in accordance with the provisions of the preceding paragraph.

 

12.       Time of Granting Options.  Unless otherwise specified by the Committee,

the date of grant of an Option under the Plan shall be the date on which the

Committee makes the determination granting such Option.  Notice of the determination shall be given

to each Optionee to whom an Option is so granted within a reasonable time after

the date of such grant.

 

13.       Amendment and Termination

of the Plan.  The Board may amend or

terminate the Plan from time to time in such respects as the Board may deem

advisable, except that, without approval of the shareholders of the Company, no

such revision or amendment shall change the number of Shares subject to the

Plan or change the designation of the class of employees eligible to receive

Options.  Any such amendment or

termination of the Plan shall not affect Options already granted, and such

Options shall remain in full force and effect as if the Plan had not been

amended or terminated.

 

14.       Conditions Upon Issuance

of Shares.  Shares shall not be

issued with respect to an Option unless the exercise of such Option and the

issuance and delivery of such Shares pursuant thereto shall comply with all

relevant provisions of law, including, without limitation, the Securities Act,

the Exchange Act, the rules and regulations promulgated thereunder, and the

requirements of any stock exchange upon which the Shares may then be listed,

and shall be further subject to the approval of counsel for the Company with

respect to such compliance.  As a

condition to the exercise of an Option, the Company may require the person

exercising such Option to represent and warrant at the time of any such

exercise that the Shares are being purchased only for investment and without

any present intention to sell or distribute such Shares if, in the opinion of

counsel for the Company, such a representation is required by any of the

aforementioned relevant provisions of law.

 

15.       Reservation of Shares.  During the term of this Plan the Company

will at all times reserve and keep available the number of Shares as shall be

sufficient to satisfy the requirements of the Plan.  Inability of the Company to obtain from any regulatory body

having jurisdiction and

 

9

 

authority deemed by the Company’s 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 nonissuance or sale of such Shares as to which such

requisite authority shall not have been obtained.

 

16.       Information to Optionee.  During the term of any option granted under

the Plan, the Company shall provide or otherwise make available to each

Optionee a copy of its financial statements at least annually.

 

17.       Option Agreement.  Options granted under the Plan shall be

evidenced by Option Agreements.

 

18.       Shareholder Approval.  The Plan shall be subject to approval by the

shareholders of the Company within twelve (12) months before or after the Plan

is adopted. Any option granted before shareholder approval is obtained and any

exercise of such option must be rescinded if such shareholder approval is not

obtained within twelve (12) months after the Plan is adopted.  Shares issued upon the exercise of such

options shall not be counted in determining whether such approval is

obtained.  Shareholder approval of the

Plan and any amendments thereto requiring shareholder approval shall be by the

affirmative vote of the holders of a majority of the capital stock of the

Company present or represented and entitled to vote at a duly held meeting or

by the written consent of the holders of a majority of the outstanding capital

stock of the Company entitled to vote.

 

10

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