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INTERNAP NETWORK SERVICES CORPORATION
1998 STOCK OPTION/STOCK ISSUANCE PLAN
AMENDED AND RESTATED SEPTEMBER 20, 2000
ARTICLE I
GENERAL PROVISIONS
SECTION 1. PURPOSE
This 1998 Stock Option/Stock Issuance Plan is intended to
promote the interests of InterNAP Network Services Corp. (the
"Corporation") by providing eligible individuals who are responsible for the
management, growth and financial success of the Corporation or who otherwise
render valuable services to the Corporation with the opportunity to acquire a
proprietary interest, or increase their proprietary interest, in the
Corporation and thereby encourage them to remain in the service of the
Corporation.
Capitalized terms used herein shall have the meanings
ascribed to such terms in Section 6 of this Article I.
SECTION 2. STRUCTURE OF THE PLAN
The Plan shall be divided into two separate components: the
Option Grant Program specified in Article II and the Stock Issuance Program
specified in Article III. The provisions of Articles I, IV and V of the Plan
shall apply to both the Option Grant Program and the Stock Issuance Program
and shall accordingly govern the interests of all individuals in the Plan.
SECTION 3. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Board. The Board at any
time may appoint a Committee and delegate to such Committee some or all of
the administrative powers allocated to the Board pursuant to the provisions
of the Plan. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time. The Board at any time may terminate the functions of the Committee and
reassume all powers and authority previously delegated to the Committee.
(b) The Plan Administrator (either the Board or the Committee, to the
extent the Committee is at the time responsible for the administration of the
Plan) shall have full power and authority (subject to the provisions of the
Plan) to establish such rules and regulations as it may deem appropriate for
the proper plan administration and to make such determinations under, and
issue such interpretations of, the Plan and any outstanding option grants or
share issuances as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest
in the Plan or any outstanding option or share issuance.
(c) At such time as the Common Stock is publicly traded, in the
discretion of the Board, a Committee may consist solely of two or more
Outside Directors, in accordance with Section 162(m) of the Code, and/or
solely of two or more Non-Employee Directors, in accordance with Rule 16b-3.
Within the scope of such authority, the Board or the Committee may (1)
delegate to a committee of one or more members of the Board who are not
Outside Directors the authority to grant Stock Awards to eligible persons who
are either (a) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Stock
Award or (b) not persons with respect to whom the Corporation wishes to
comply with Section 162(m) of the Code and/or) (2) delegate to a committee of
one or more members of the Board who are not Non-Employee Directors the
authority to grant Stock Awards to eligible persons who are not then subject
to Section 16 of the Exchange Act.
SECTION 4. OPTION GRANTS AND SHARE ISSUANCES
(a) The persons eligible to receive option grants pursuant to the
Option Grant Program (each an "Optionee") and/or share issuances under the
Stock Issuance Program (each a "Participant") are limited to the following:
(1) key employees (including officers and directors) of the
Corporation (or its Parent or Subsidiary corporations, if any) who render
services that contribute to the success and growth of the Corporation (or its
Parent or Subsidiary corporations), or that reasonably may be anticipated to
contribute to the future success and growth of the Corporation (or its Parent
or Subsidiary corporations);
(2) the non-employee members of the Board or the non-employee
members of the board of directors of any Parent or Subsidiary corporations;
and
(3) those consultants or independent contractors who provide
valuable services to the Corporation (or its Parent or Subsidiary
corporations, if any).
(b) The Plan Administrator shall have full authority to determine:
(i) with respect to the option grants made under the Plan, which eligible
individuals are to receive option grants, the number of shares to be covered
by each such grant, the status of the granted option as either an Incentive
Option or a Non-Statutory Option, the time or times at which each granted
option is to become exercisable and the maximum term for which the option may
remain outstanding, and (ii) with respect to share issuances under the Stock
Issuance Program, the number of shares to be issued to each Participant, the
vesting schedule (if any) to be applicable to the issued shares, and the
consideration to be paid by the individual for such shares.
(c) The Plan Administrator shall have the absolute discretion either
to grant options in accordance with Article II of the Plan or to effect share
issuances in accordance with Article III of the Plan.
SECTION 5. STOCK SUBJECT TO THE PLAN
(a) The stock issuable under the Plan shall be shares of the
Corporation's authorized but unissued or reacquired Common Stock (the "Common
Stock"). The
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maximum number of shares that may be issued over the term of the Plan shall
not exceed four million thirty-five thousand (4,035,000) shares of Common
Stock. The total number of shares issuable under the Plan shall be subject to
adjustment from time to time in accordance with the provisions of Section
5(c).
(b) Shares subject to (i) the portion of one or more outstanding
options that are not exercised or surrendered prior to expiration or
termination and (ii) outstanding options canceled in accordance with the
cancellation-regrant provisions of Section 5 of Article II will be available
for subsequent option grants or stock issuances under the Plan. Shares issued
under either the Option Grant Program or the Stock Issuance Program (whether
as vested or unvested shares) that are repurchased by the Corporation shall
not be available for subsequent option grants or stock issuances under the
Plan.
(c) If any change is made in the Common Stock subject to the Plan, or
subject to any Stock Award, without the receipt of consideration by the
Corporation (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares,
change in corporate structure or other transaction not involving the receipt
of consideration by the Corporation), the Plan will be appropriately adjusted
in the class(es) and maximum number of securities subject to the Plan
pursuant to Article I, Section 5(a) and the maximum number of securities
subject to award to any person pursuant to subsection 5(e), and the
outstanding Stock Awards will be appropriately adjusted in the class(es) and
number of securities and price per share of Common Stock subject to such
outstanding Stock Awards. The Board shall make such adjustments, and its
determination shall be final, binding and conclusive. (The conversion of any
convertible securities of the Corporation shall not be treated as a
transaction "without receipt of consideration" by the Corporation.)
(d) Common Stock issuable under the Plan, whether under the Option
Grant Program or the Stock Issuance Program, may be subject to such
restrictions on transfer, repurchase rights or other restrictions as may be
determined by the Plan Administrator.
(e) Subject to the provisions of Article I, Section 5(c) relating to
adjustments upon changes in the shares of Common Stock, no Employee shall be
eligible to be granted options covering more than two million (2,000,000)
shares of Common Stock during any calendar year.
SECTION 6. DEFINITIONS
The following definitions shall apply to the respective
capitalized terms used herein:
BOARD means the Board of Directors of InterNAP Network Services
Corp.
CAUSE shall have such meaning as is defined in the Participant's
employment or consulting agreement with a Paticipating Company. If the
Participant does not have an employment or consulting agreement with a
Paticipating Company, or if such agreement does not define the term "Cause,"
then the term "Cause" shall mean: (i) misconduct or dishonesty that
materially adversely affects a Paticipating Company, including without
limitation (A) an act
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materially in conflict with the financial interests of a Paticipating
Company, (B) an act that could damage the reputation or customer relations of
a Paticipating Company, (C) an act that could subject a Paticipating Company
to liability, (D) an act constituting sexual harassment or other violation of
the civil rights of coworkers, (E) failure to obey any lawful instruction of
the Board or any officer of a Paticipating Company and (F) failure to comply
with, or perform any duty required under, the terms of any confidentiality,
inventions or non-competition agreement the Participant may have with a
Paticipating Company, or (ii) acts constituting the unauthorized disclosure
of any of the trade secrets or confidential information of a Paticipating
Company, unfair competition with a Paticipating Company or the inducement of
any customer of a Paticipating Company to breach any contract with a
Paticipating Company. The right to exercise any Option shall be suspended
automatically during the pendency of any investigation by the Board or its
designee, and/or any negotiations by the Board or its designee and the
Participant, regarding any actual or alleged act or omission by the
Participant of the type described in this section.
CHANGE IN CONTROL means the transaction described in Article V,
Section (b), which is referred to as a Change in Control or Corporate
transaction.
CODE means the Internal Revenue Code of 1986, as amended.
COMMITTEE means either the Compensation Committee of the Board or
another committee comprised of two or more members thereof and appointed
pursuant to the Plan to function as the Plan Administrator.
CORPORATION means InterNAP Network Services Corp., a Washington
corporation.
CORPORATE TRANSACTION means the transaction described in Article
V, Section (b), which is referred to as a Change in Control or Corporate
Transaction.
COVERED EMPLOYEE means the chief executive officer and the four
(4) other highest compensated officers of the Corporation for whom total
compensation is required to be reported to shareholders under the Exchange
Act, as determined for purposes of Section 162(m) of the Code.
EMPLOYEE means an individual who is in the employ of the
Corporation or one or more Parent or Subsidiary corporations. An optionee
shall be considered to be an Employee for so long as such individual remains
in the employ of the Corporation or one or more Parent or Subsidiary
corporations, subject to the control and direction of the employer entity as
to both the work to be performed and the manner and method of performance.
EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
EXERCISE DATE shall be the date on which written notice of the
exercise of an outstanding option under the Plan is delivered to the
Corporation. Such exercise shall be effected pursuant to a stock purchase
agreement incorporating any repurchase rights or first refusal rights
retained by the Corporation with respect to the Common Stock purchased under
the option.
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FAIR MARKET VALUE of a share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(a) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question on
the stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock. If there is no reported sale of Common Stock on
such exchange on the date in question, then the Fair Market Value shall be
the closing selling price on the exchange on the last preceding date for
which such quotation exists.
(b) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded in the over-the-counter market,
the Fair Market Value shall be the mean between the highest bid and the
lowest asked prices (or if such information is available the closing selling
price) per share of Common Stock on the date in question in the
over-the-counter market, as such prices are reported by the National
Association of Securities Dealers through its NASDAQ National Market System
or any successor system. If there are no reported bid and asked prices (or
closing selling price) for the Common Stock on the date in question, then the
mean between the highest bid and lowest asked prices (or closing selling
price) on the last preceding date for which such quotations exist shall be
determinative of Fair Market Value.
(c) If the Common Stock is at the time neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-counter
market, or if the Plan Administrator determines that the valuation provisions
of subsections (a) and (b) above will not result in a true and accurate
valuation of the Common Stock, then the Fair Market Value shall be determined
by the Plan Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate under the circumstances.
INCENTIVE OPTION means an incentive stock option that satisfies
the requirements of Section 422 of the Code.
NON-EMPLOYEE DIRECTOR means a Director who either (i) is not a
current Employee or Officer of the Corporation or its parent or a subsidiary,
does not receive compensation (directly or indirectly) from the Corporation
or its parent or a subsidiary for services rendered as a consultant or in any
capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K
promulgated pursuant to the Securities Act ("Regulation S-K")), does not
possess an interest in any other transaction as to which disclosure would be
required under Item 404(a) of Regulation S-K and is not engaged in a business
relationship as to which disclosure would be required under Item 404(b) of
Regulation S-K; or (ii) is otherwise considered a "non-employee director" for
purposes of Rule 16b-3.
NON-STATUTORY OPTION means an option not intended to meet the
statutory requirements prescribed for an Incentive Option.
OFFICER means a person who is an officer of the Corporation
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
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OUTSIDE DIRECTOR means a Director who either (i) is not a current
employee of the Corporation or an "affiliated corporation" (within the
meaning of Treasury Regulations promulgated under Section 162(m) of the
Code), is not a former employee of the Corporation or an "affiliated
corporation" receiving compensation for prior services (other than benefits
under a tax qualified pension plan), was not an officer of the Corporation or
an "affiliated corporation" at any time and is not currently receiving direct
or indirect remuneration from the Corporation or an "affiliated corporation"
for services in any capacity other than as a Director or (ii) is otherwise
considered an "outside director" for purposes of Section 162(m) of the Code.
PARENT corporation means any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the
Corporation, provided each such corporation in the unbroken chain (other than
the Corporation) owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
PARTICIPATING COMPANY means the Corporation, a Parent, or a
Subsidiary.
PERMANENT DISABILITY means the inability of an individual to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expect to result in
death or which has lasted or can be expected to last for a continuous period
of not less than 12 months.
PLAN means this 1998 Stock Option/Stock Issuance Plan.
PLAN ADMINISTRATOR means the Board or the Committee, to the
extent the Committee is responsible for plan administration in accordance
with Article I, Section 3.
RULE 16b-3 means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
SECURITIES ACT means the Securities Act of 1933, as amended.
SERVICE means the performance of services for the Corporation or
one or more Parent or Subsidiary corporations by an individual in the
capacity of an Employee, a non-employee member of the board of directors or
an independent consultant or advisor, unless a different meaning is specified
in the option agreement evidencing the option grant, the purchase agreement
evidencing the purchased option shares or the issuance agreement evidencing
any direct stock issuance. An optionee shall be deemed to remain in Service
for so long as such individual renders services to the Corporation or any
Parent or Subsidiary corporation on a periodic basis in the capacity of an
Employee, a non-employee member of the board of directors or an independent
consultant or advisor.
STOCK AWARD means any right granted under the Plan including an
Incentive Stock Option, Non-Statutory Option or stock issuance.
STOCK AWARD AGREEMENT means any written agreement between the
Corporation and the holder of a Stock Award evidencing the terms and
conditions of the Stock Award. Each Stock Award Agreement shall be subject to
the terms and conditions of the Plan.
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SUBSIDIARY corporation means each corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each such corporation (other than the last corporation)
in the unbroken chain owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
TEN PERCENT SHAREHOLDER means the owner of stock (as determined
under Section 424(d) of the Code) possessing ten percent (10%) or more of the
total combined voting power of all classes of stock of the Corporation or any
Parent or Subsidiary corporation.
ARTICLE II
OPTION GRANT PROGRAM
SECTION 1. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized
by action of the Plan Administrator and, at the discretion of the Plan
Administrator, may be either Incentive Options or Non-Statutory Options. Each
granted option shall be evidenced by one or more instruments in the form
approved by the Plan Administrator; provided, that each such instrument shall
comply with and incorporate the terms and conditions specified below. In
addition, each instrument evidencing an Incentive Option shall be subject to
the applicable provisions of Section 2 of this Article II.
(a) OPTION PRICE.
(1) The option price per share shall be fixed by the Plan
Administrator.
(2) The option price shall become immediately due upon exercise
of the option, and subject to the provisions of Article IV, Section 2, shall
be payable in cash or check drawn to the Corporation's order. Should the
Corporation's outstanding Common Stock be registered under Section 12(g) of
the Securities Exchange Act of 1934, as amended (the "1934 Act") at the time
the option is exercised, then the option price may also be paid as follows:
(A) in shares of Common Stock held by the optionee for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date; or
(B) through a special sale and remittance procedure pursuant
to which the Optionee is to (i) provide irrevocable written instructions
to a designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds,
an amount sufficient to cover the aggregate option price payable for the
purchased shares plus all applicable Federal and State income and
employment taxes required to be withheld by the Corporation by reason of
such purchase and (ii) concurrently provide written directives to the
Corporation to deliver the certificates for the
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purchased shares directly to such brokerage firm in order to effect the
sale transaction.
(b) TERM AND EXERCISE OF OPTIONS. Each option granted under the Plan
shall be exercisable at such time or times, during such period, and for such
number of shares as shall be determined by the Plan Administrator and set
forth in the notice of grant and stock option agreement evidencing such
option. No option granted under the Plan, however, shall have a term in
excess of ten (10) years from the grant date. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not
be assignable or transferable by the Optionee otherwise than by will or by
the laws of descent and distribution following the Optionee's death.
(c) TERMINATION OF SERVICE.
(1) Should the Optionee cease to remain in Service for any
reason (including death or Permanent Disability) while holding one or more
outstanding options under the Plan, then except to the extent otherwise
provided pursuant to Section 6 of this Article II, each such option shall
remain exercisable for the limited period of time (not to exceed twelve (12)
months after the date of such cessation of Service) specified by the Plan
Administrator in the option agreement. In no event, however, shall any such
option be exercisable after the specified expiration date of the option term.
During such limited period of exercisability, the option may not be exercised
for more than that number of shares (if any) for which such option is
exercisable on the date of the Optionee's cessation of Service. Upon the
expiration of such period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be exercisable.
(2) Any option granted to an Optionee under the Plan and
exercisable in whole or in part on the date of the Optionee's death may be
subsequently exercised by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant
to the Optionee's will or in accordance with the laws of descent and
distribution. The maximum number of shares for which such option may be
exercised shall be limited to the number of shares (if any) for which the
option is exercisable on the date of the Optionee's cessation of Service. Any
such exercise of the option must be effected prior to the EARLIER of the
first anniversary of the date of the Optionee's death or the specified
expiration date of the option term. Upon the occurrence of either such event,
the option shall terminate and cease to be exercisable.
(3) Notwithstanding subsections (1) and (2) above, the Plan
Administrator shall have discretion, exercisable either at the time the
option is granted or at the time the Optionee ceases Service, to allow one or
more outstanding options held by the Optionee to be exercised, during the
limited period of exercisability following the Optionee's cessation of
Service, not only with respect to the number of shares for which the option
is exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more subsequent installments of purchasable shares for
which the option otherwise would have become exercisable had such cessation
of Service not occurred.
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(4) Notwithstanding any provision of this Article II or any
other provision of this Plan to the contrary, any options granted under this
Plan shall terminate as of the date the Optionee ceases to be in the Service
of the Corporation if the Optionee was terminated for "cause" or could have
been terminated for "cause." If the Optionee has an employment or consulting
agreement with the Corporation, the term "cause" shall have the meaning given
that term in such employment or consulting agreement. If the Optionee does
not have an employment or consulting agreement with the Corporation, or if
such agreement does not define the term "cause," the term "cause" shall mean:
(A) misconduct or dishonesty that materially adversely affects the
Corporation, including without limitation (i) an act materially in conflict
with the financial interests of the Corporation, (ii) an act that could
damage the reputation or customer relations of the Corporation, (iii) an act
that could subject the Corporation to liability, (iv) an act constituting
sexual harassment or other violation of the civil rights of coworkers, (v)
failure to obey any lawful instruction of the Board or any officer of the
Corporation and (vi) failure to comply with, or perform any duty required
under, the terms of any confidentiality, inventions or non-competition
agreement the Optionee may have with the Corporation, or (B) acts
constituting the unauthorized disclosure of any of the trade secrets or
confidential information of the Corporation, unfair competition with the
Corporation or the inducement of any customer of the Corporation to breach
any contract with the Corporation. The right to exercise any option shall be
suspended automatically during the pendency of any investigation by the Board
or its designee, and/or any negotiations by the Board or its designee and the
Optionee, regarding any actual or alleged act or omission by the Optionee of
the type described in this section.
(d) SHAREHOLDER RIGHTS. An Optionee shall have none of the rights of a
shareholder with respect to any shares covered by the option until such
Optionee shall have exercised the option and paid the option price.
(e) REPURCHASE RIGHTS. The shares of Common Stock issued under the
Plan shall be subject to certain repurchase rights of the Corporation in
accordance with the following provisions:
(1) (A) The Plan Administrator shall have the discretion to
authorize the issuance of unvested shares of Common Stock under the Plan.
Should the optionee cease Service or should the Corporation consummate a
Corporate Transaction while the optionee is holding such unvested shares, the
Corporation shall have the right to repurchase, at the option price paid per
share, all or (at the discretion of the Corporation and with the consent of
the Optionee) any portion of those such shares. The terms and conditions upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in an
instrument evidencing such right.
(B) The repurchase right shall be assignable to any
person or entity selected by the Corporation, including one or more of the
Corporation's shareholders. If the selected assignee is other than a Parent
or Subsidiary corporation, however, then the assignee must make a cash
payment to the Corporation, upon the assignment of the repurchase right, in
an amount equal to the amount by which the Fair Market Value of the unvested
shares at the time
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subject to the assigned right exceeds the aggregate repurchase price payable
for such unvested shares.
(C) Upon the occurrence of a Corporate Transaction, the
Plan Administrator may, at its sole discretion, (i) terminate all or any
outstanding repurchase rights under the Plan and thereby cause the shares
subject to such rights to vest immediately in full, (ii) arrange for all or
any of the repurchase rights to be assigned to the successor corporation (or
parent thereof) in connection with the Corporate Transaction or (iii)
exercise the Corporation's right to repurchase any unvested shares
contemporaneously with the consummation of the Corporate Transaction if such
right is provided in the instrument pursuant to which such unvested shares
were issued.
(2) Until such time as the Corporation's outstanding shares of
Common Stock are first registered under Section 12(g) of the 1934 Act, the
Corporation shall have the right of first refusal with respect to any
proposed sale or other disposition by the Optionee (or any successor in
interest by reason of purchase, gift or other mode of transfer) of any shares
of Common Stock issued under the Plan. Such right of first refusal shall be
exercisable by the Corporation (or its assignees) in accordance with the
terms and conditions established by the Plan Administrator and set forth in
the instrument evidencing such right.
SECTION 2. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to
all Incentive Options granted under the Plan. Incentive Options may be
granted only to individuals who are Employees. Options that are specifically
designated as Non-Statutory Options when issued under the Plan shall not be
subject to the following terms and conditions.
(a) OPTION PRICE. The option price per share of the Common Stock
subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the Fair Market Value of a share of Common Stock on the
grant date; PROVIDED, if the individual to whom the option is granted is at
the time a Ten Percent Shareholder, then the option price per share shall not
be less than one hundred ten percent (110%) of the Fair Market Value of the
Common Stock on the grant date.
(b) DOLLAR LIMITATION. The aggregate Fair Market Value
(determined as of the respective date or dates of grant) of the Common Stock
for which one or more options granted to any Employee under this Plan (or any
other option plan of the Corporation or any Parent or Subsidiary corporation)
may for the first time become exercisable as incentive stock options under
the Federal tax laws during any one calendar year shall not exceed the sum of
one hundred thousand dollars ($100,000). To the extent the Employee holds two
or more such options which become exercisable for the first time in the same
calendar year, the foregoing limitation on the exercisability thereof as
Incentive Options under the Federal tax laws shall be applied on the basis of
the order in which such options are granted.
(c) OPTION TERM FOR TEN PERCENT SHAREHOLDER. No option granted
to a Ten Percent Shareholder shall have a term in excess of five (5) years
from the grant date.
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Except as modified by the preceding provisions of this Section
2, all the provisions of the Plan shall be applicable to the Incentive
Options granted hereunder.
SECTION 3. CORPORATE TRANSACTION
(a) The exercisability as incentive stock options under the
Federal tax laws of any options accelerated in connection with the Corporate
Transaction shall remain subject to the applicable dollar limitation of
subsection 2(b) of this Article II.
(b) The grant of options under this Plan shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
SECTION 4. CANCELLATION AND NEW GRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected Optionees,
the cancellation of any or all outstanding options under the Plan and to
grant in substitution therefor new options under the Plan covering the same
or different numbers of shares of Common Stock but having, in the case of an
Incentive Option, an option price per share not less than one hundred percent
(100%) of such Fair Market Value per share of Common Stock on the new grant
date, or, in the case of a Ten Percent Shareholder, not less than one hundred
and ten percent (110%) of such Fair Market Value.
SECTION 5. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority to
extend (either at the time the option is granted or at any time that the
option remains outstanding) the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service, from the
limited period set forth in the option agreement, to such greater period of
time as the Plan Administrator may deem appropriate under the circumstances.
In no event, however, shall such option be exercisable after the specified
expiration date of the option term.
ARTICLE III
STOCK ISSUANCE PROGRAM
SECTION 1. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock shall be issuable under the Stock
Issuance Program through direct and immediate issuances without any
intervening stock option grants. Each such stock issuance shall be evidenced
by a Stock Issuance Agreement ("Issuance Agreement") that complies with the
terms and conditions of this Article III.
(a) ISSUE PRICE.
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(1) Shares may, in the absolute discretion of the Plan
Administrator, be issued for consideration with a value less than one-hundred
percent (100%) of the Fair Market Value of the issued shares.
(2) Shares shall be issued under the Plan for such
consideration as the Plan Administrator shall from time to time determine,
provided that in no event shall shares be issued for consideration other than:
(A) cash or check payable to the Corporation,
(B) a promissory note in favor of the Corporation, which
may be subject to cancellation by the Corporation in whole or in
part upon such terms and conditions as the Plan Administrator shall
specify, or
(C) services rendered.
(b) VESTING SCHEDULE.
(1) In the discretion of the Plan Administrator, the
interest of a Participant in the shares of Common Stock issued to such
Participant under the Plan may be fully and immediately vested upon issuance
or may vest in one or more installments in accordance with the vesting
provisions of subsection (b)(4) below. Except as otherwise provided in
subsection (b)(2), the Participant may not transfer any issued shares in
which such Participant does not have a vested interest. Accordingly, all
unvested shares issued under the Plan shall bear the restrictive legend
specified in Article IV, Section 1, until such legend is removed in
accordance with such section. Regardless of whether or not a Participant's
interest in such shares is vested, such Participant shall be entitled to
exercise all the rights of a shareholder with respect to the shares of Common
Stock issued to Participant hereunder, including the right to vote such
shares and to receive any cash dividends or other distributions paid or made
with respect to such shares. Any new, additional or different shares of stock
or other property (including money paid other than as a regular cash
dividend) that the holder of unvested Common Stock may have the right to
receive with respect to such unvested shares by reason of a stock dividend,
stock split, reclassification or other change affecting the outstanding
Common Stock as a class without the Corporation's receipt of consideration
therefor shall be issued subject to (i) the same vesting requirements under
subsection (b)(4) applicable to the unvested Common Stock and (ii) such
escrow arrangements as the Plan Administrator shall deem appropriate.
(2) As used in this Article III, the term "transfer" shall
include (without limitation) any sale, pledge, encumbrance, gift or other
disposition of such shares. A Participant shall have the right to make a gift
of unvested shares acquired under the Stock Issuance Program to Participant's
spouse, parents or issue or to a trust established for such spouse, parents
or issue, provided the donee of such shares delivers to the Corporation, at
the time of such donee's acquisition of the gifted shares, a written
agreement to be bound by all the provisions of the Plan and the Issuance
Agreement executed by the Participant.
(3) Should the Participant cease Service for any reason
while Participant's interest in the Common Stock remains unvested, then the
Corporation shall have the
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right to repurchase, at the original purchase price paid by the Participant,
all or (at the discretion of the Corporation and with the consent of the
Participant) any portion of the shares in which the Participant is not at the
time vested, and the Participant shall thereafter cease to have any further
shareholder rights with respect to the repurchased shares.
(4) Any shares of Common Stock issued under the Stock
Issuance Program that are not vested at the time of such issuance shall vest
in one or more installments thereafter. The elements of the vesting schedule,
specifically, the performance or service objectives to be completed or
achieved, the number of installments in which the shares are to vest, the
interval or intervals (if any) that are to lapse between installments and the
effect that death, Permanent Disability or other event designated by the Plan
Administrator is to have upon the vesting schedule, shall be determined by
the Plan Administrator and specified in the Issuance Agreement.
(5) In its discretion, the Plan Administrator may elect not
to exercise, in whole or in part, its repurchase rights with respect to any
unvested Common Stock or other assets that would otherwise at the time be
subject to repurchase pursuant to the provisions of subsection (b)(3) above.
Such an election shall result in the immediate vesting of the Participant's
interest in the shares of Common Stock as to which the election applies.
(6) No shares of Common Stock or other assets shall be
issued or delivered under this Plan unless and until, in the opinion of
counsel for the Corporation (or its successor in the event of any Corporate
Transaction), there shall have been compliance with all applicable
requirements of the securities exchange on which stock of the same class is
then listed and all other requirements of Federal and state law or of any
regulatory bodies having jurisdiction over such issuance and delivery.
(c) RIGHT OF FIRST REFUSAL. The Plan Administrator may also in
its discretion establish as a term and condition of the issuance of one or
more shares of Common Stock under the Stock Issuance Program that the
Corporation shall have a right of first refusal with respect to any proposed
disposition by the Participant (or any successor in interest by reason of
purchase, gift or other mode of transfer) of one or more shares of such
Common Stock. Such right of first refusal shall be exercisable by the
Corporation (or its assignees) in accordance with the terms and conditions
specified in the instrument evidencing such right.
ARTICLE IV
MISCELLANEOUS
SECTION 1. STOCK LEGEND. Each certificate representing shares of Common
Stock (or other securities) issued pursuant to the Plan may bear a
restrictive legend substantially as follows:
(1) "This certificate and the shares represented hereby may not be
sold, assigned, transferred, encumbered, or in any manner
disposed of except in conformity with the terms of written
agreements between the Corporation and the registered holder
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of the shares (or the predecessor in interest to the shares).
Upon written request, the Corporation will furnish without
charge a copy of such agreements to the holder hereof."
SECTION 2. LOANS
(a) The Plan Administrator, in its discretion, may assist any
Optionee or Participant (including an Optionee or Participant who is an
officer or director of the Corporation) in the exercise of one or more
options granted to such Optionee under the Article II Option Grant Program or
the purchase of one or more shares issued to such Participant under the
Article III Stock Issuance Program, including the satisfaction of any Federal
and State income and employment tax obligations arising therefrom, by
(1) authorizing the extension of a loan from the Corporation to
such Optionee or Participant, or
(2) permitting the Optionee or Participant to pay the option
price or purchase price for the purchased Common Stock in installments over a
period of years.
(b) The terms of any loan or installment method of payment (including
the interest rate and terms of repayment applicable thereto) shall be
established by the Plan Administrator. Loans or installment payments may be
granted with or without security or collateral; provided, that any loan made
to a consultant or other non-employee advisor must be secured by property
other than the purchased shares of Common Stock. In all events the maximum
credit available to each Optionee or Participant may not exceed the sum of
(i) the aggregate option price or purchase price payable for the purchased
shares (less the par value of such shares rounded up to the nearest whole
cent) plus (ii) any Federal and State income and employment tax liability
incurred by the Optionee or Participant in connection with such exercise or
purchase.
(c) The Plan Administrator, in its discretion, may determine that one
or more loans extended under the financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Board deems appropriate.
SECTION 3. AMENDMENT OF THE PLAN AND AWARDS
(a) The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects whatsoever; PROVIDED, that
no such amendment or modification shall adversely affect the rights and
obligations of an Optionee with respect to options at the time outstanding
under the Plan, nor adversely affect the rights of any Participant with
respect to Common Stock issued under the Plan prior to such action, unless
the Optionee or Participant consents to such amendment. In addition, the
Board shall not, without the approval of the Corporation's shareholders,
amend the Plan to (i) materially increase the maximum number of shares
issuable under the Plan (except for permissible adjustments under Article I,
Section 5(c)), (ii) materially increase the benefits accruing to individuals
who participate in the Plan, or (iii) materially modify the eligibility
requirements for participation in the Plan.
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(b) Options to purchase shares of Common Stock may be granted
under the Option Grant Program and shares of Common Stock may be issued under
the Stock Issuance Program, which in both instances are in excess of the
number of shares then available for issuance under the Plan, provided any
excess shares actually issued under the Option Grant Program or the Stock
Issuance Program are held in escrow until the Corporation's shareholders
approve an amendment that sufficiently increases the number of shares of
Common Stock available for issuance under the Plan. If such shareholder
approval is not obtained within twelve (12) months after the date the initial
excess stock option grants or direct stock issuances are made, then any
unexercised options representing such excess shall terminate and cease to be
exercisable and the Corporation shall promptly refund to the Optionees and
Participants the option or purchase price paid for any excess shares issued
under the Plan and held in escrow, together with interest (at the applicable
Short Term Federal Rate) thereon for the period the shares were held in
escrow.
SECTION 4. EFFECTIVE DATE AND TERM OF PLAN
(a) The Plan shall become effective when adopted by the Board,
but no option granted under the Plan shall become exercisable, and no shares
shall be issuable under the Stock Issuance Program, unless and until the Plan
shall have been approved by the Corporation's shareholders. If such
shareholder approval is not obtained within twelve (12) months after the date
of the Board's adoption of the Plan, then all options previously granted
under the Plan shall terminate, and no further options shall be granted and
no shares shall be issued under the Stock Issuance Program. Subject to such
limitation, the Plan Administrator may grant options under the Plan at any
time after the effective date and before the date fixed herein for
termination of the Plan.
(b) The Plan shall terminate upon the earlier of (i) ten years
after the adoption of the Plan or (ii) the date on which all shares available
for issuance under the Plan have been issued or canceled pursuant to the
exercise of options granted under Article II or the issuance of shares under
Article III. If the date of termination is determined under clause (i) above,
then no options outstanding on such date under Article II and no shares
issued and outstanding on such date under Article III shall be affected by
the termination of the Plan, and such securities shall thereafter continue to
have force and effect in accordance with the provisions of the stock option
agreements evidencing such Article II options and the stock purchase
agreements evidencing the issuance of such Article III shares.
SECTION 5. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the
issuance of shares of Common Stock under the Plan shall be used for general
corporate purposes.
SECTION 6. WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise
of any options granted under Article II or upon the purchase of any shares
issued under Article III shall be subject to the satisfaction of all
applicable Federal, state and local income and employment tax withholding
requirements.
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SECTION 7. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options
under the Option Grant Program, the issuance of any shares under the Stock
Issuance Program, and the issuance of Common Stock upon the exercise of the
option grants made hereunder shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options granted under it, and the
Common Stock issued pursuant to it.
SECTION 8. ACCELERATION OF EXERCISABILITY AND VESTING
The Board shall have the power to accelerate the time at which
a Stock Award may first be exercised or the time during which a Stock Award
or any part thereof will vest in accordance with the Plan, notwithstanding
the provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
ARTICLE V
CHANGE IN CONTROL OR CORPORATE TRANSACTIONS
(a) DISSOLUTION OR LIQUIDATION. In the event of a dissolution or
liquidation of the Corporation, then all outstanding Options shall terminate
immediately prior to such event.
(b) CERTAIN CHANGES IN CONTROL. In the event of (i) a sale, lease or
other disposition of all or substantially all of the assets of the
Corporation, (ii) a merger or consolidation in which the Corporation is not
the surviving corporation or (iii) a reverse merger in which the Corporation
is the surviving corporation but the shares of Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise
(collectively, a "Change in Control" or "Corporate Transaction"), then any
surviving corporation or acquiring corporation may assume or continue any
Stock Awards outstanding under the Plan or may substitute similar stock
awards (including an award to acquire the same consideration paid to the
shareholders in the transaction described in this paragraph) for those
outstanding under the Plan. In the event any surviving corporation or
acquiring corporation refuses to assume or continue such Stock Awards or to
substitute similar stock awards for those outstanding under the Plan, then
with respect to Stock Awards held by Participants whose Service has not
terminated, the vesting of such Stock Awards (and, if applicable, the time
during which such Stock Awards may be exercised) shall be accelerated in
full, and the Stock Awards shall terminate if not exercised (if applicable)
at or prior to such event. With respect to any other Stock Awards outstanding
under the Plan, such Stock Awards shall terminate if not exercised (if
applicable) prior to such event.
(c) TERMINATION OF SERVICE FOLLOWING A CHANGE IN CONTROL. Unless
otherwise specified in the applicable Stock Award Agreement, in the event of
the occurrence of a Change in Control and provided that a participant's Stock
Award remains in effect following such Change in Control or is assumed,
continued or substituted for any similar stock award in connection with the
Change in Control, then, if such participant's Service is terminated by the
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Corporation without Cause within thirteen (13) months following the effective
date of the Change in Control, all Stock Awards held by such participant (or
any substituted stock awards) shall, as of the date of such termination of
Service, vest in full and become fully exercisable (if applicable) to the
extent not previously vested or exercisable. Such Stock Awards shall remain
exercisable until they expire in accordance with their terms. For the
purposes of this section, Cause shall have the same meaning as is defined in
Article II, Section 1(c)(4).
(d) SECURITIES ACQUISITION. In the event of an acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d) of
the Exchange Act, or any comparable successor provisions (excluding any
employee benefit plan, or related trust, sponsored or maintained by the
Corporation or an Affiliate) of the beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act, or comparable successor
rule) of securities of the Corporation representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
Corporation's Board of Directors, then with respect to Stock Awards held by
Participants whose Service has not terminated, the vesting of such Stock
Awards (and, if applicable, the time during which such Stock Awards may be
exercised) shall be accelerated in full. Such Stock Awards shall remain
exercisable until they expire in accordance with their terms.
(e) PARACHUTE PAYMENTS. If any payment or benefit a Participant
would receive in connection with a Change in Control from the Corporation or
otherwise ("Payment") would (i) constitute a "parachute payment" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), and (ii) but for this sentence, be subject to the excise tax imposed
by Section 4999 of the Code (the "Excise Tax"), then such Payment shall be
reduced to the Reduced Amount. The "Reduced Amount" shall be either (x) the
largest portion of the Payment that would result in no portion of the Payment
being subject to the Excise Tax or (y) the largest portion, up to and
including the total, of the Payment, whichever amount, after taking into
account all applicable federal, state and local employment taxes, income
taxes, and the Excise Tax (all computed at the highest applicable marginal
rate), results in Participant's receipt, on an after-tax basis, of the
greater amount of the Payment notwithstanding that all or some portion of the
Payment may be subject to the Excise Tax. If a reduction in payments or
benefits constituting "parachute payments" is necessary so that the Payment
equals the Reduced Amount, reduction shall occur in the following order
unless the Participant elects in writing a different order (PROVIDED,
HOWEVER, that such election shall be subject to Corporation approval if made
on or after the effective date of the Change of Control): reduction of cash
payments; cancellation of accelerated vesting of stock awards; reduction of
employee benefits. In the event that acceleration of vesting of stock award
compensation is to be reduced, such acceleration of vesting shall be
cancelled in the reverse order of the date of grant of the Participant's
stock awards unless the Participant elects in writing a different order for
cancellation.
The accounting firm engaged by the Corporation for general audit
purposes as of the day prior to the effective date of the Change in Control
shall perform the foregoing calculations. If the accounting firm so engaged
by the Corporation is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the Corporation shall
appoint a nationally recognized accounting firm to make the determinations
required hereunder. The Corporation shall bear all expenses with respect to
the determinations by such accounting firm required to be made hereunder.
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The accounting firm engaged to make the determinations hereunder
shall provide its calculations, together with detailed supporting
documentation, to the Corporation and Participant within fifteen (15)
calendar days after the date on which Participant's right to a Payment arises
(if requested at that time by the Corporation or Participant) or at such
other time as requested by the Corporation or Participant. If the accounting
firm determines that no Excise Tax is payable with respect to a Payment,
either before or after the application of the Reduced Amount, it shall
furnish the Corporation and Participant with an opinion reasonably acceptable
to Participant that no Excise Tax will be imposed with respect to such
Payment. Any good faith determination of the accounting firm made hereunder
shall be final, binding and conclusive upon the Corporation and Participant.
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