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EXHIBIT 10.1
LEAP WIRELESS INTERNATIONAL, INC.
2000 STOCK OPTION PLAN
ADOPTED: AUGUST 4, 2000
EFFECTIVE: AUGUST 4, 2000
APPROVED BY STOCKHOLDERS: SEPTEMBER 28, 2000
TERMINATION DATE: AUGUST 3, 2010
1. PURPOSES.
(a) ELIGIBLE OPTION RECIPIENTS. The persons eligible to receive Options are
the Employees, Directors and Consultants of the Company and its Affiliates.
(b) AVAILABLE OPTIONS. The purpose of the Plan is to provide a means by
which eligible recipients of Options may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of the following
Options: (i) Incentive Stock Options, and (ii) Nonstatutory Stock Options.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain the
services of the group of persons eligible to receive Options, to secure and
retain the services of new members of this group and to provide incentives for
such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any person that is a "parent" or "subsidiary" of the
Company, as those terms are defined under Rule 405 of Regulation C promulgated
under the Securities Act.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance with
subsection 3(d).
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means Leap Wireless International, Inc., a Delaware
corporation.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for such services; provided that (i) such person renders bona fide
services to the Company or an Affiliate, (ii) the services rendered by such
person are not in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly promote or
maintain a market for the Company's securities, and (iii) such person is a
natural person who has contracted directly with the Company to render such
services. However, the term "Consultant" shall not include Directors of the
Company who either are not compensated by the Company for their services as
Directors or who are merely paid a fee by the Company for their services as
Directors.
(h) "CONTINUOUS SERVICE" means that the Optionholder's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
terminated. The Optionholder's Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionholder
renders service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which the Optionholder renders such
service, provided that the Optionholder's service is continuous. For example, an
Optionholder's change in status from an Employee to a Consultant or a Director
with no intervening period of time during which the Optionholder is not an
Employee, Director or Consultant will not constitute a termination of Continuous
Service.
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(i) "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" Means a member of the Board of Directors of the Company.
(k) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the
Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the
greatest volume of trading in the Common Stock) on the last market trading
day prior to the day of determination, as reported in NASDAQONLINE(TM), the
official Internet Service of NASDAQ or such other source as the Board deems
reliable.
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "NON-EMPLOYEE DIRECTOR" means a Director of the Company who is a
"non-employee director" for purposes of Rule 16b-3 promulgated under the
Exchange Act.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(r) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(u) "OPTIONHOLDER" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(v) "OUTSIDE DIRECTOR" means a Director of the Company who is an "outside
director" for purposes of Section 162(m) of the Code.
(w) "PLAN" means this Leap Wireless International, Inc. 2000 Stock Option
Plan.
(x) "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.
(y) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(z) "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any Affiliate.
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3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board will administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(d).
(b) POWERS OF BOARD. The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible under
the Plan shall be granted Options; when and how each Option shall be
granted; what type or combination of types of Option shall be granted; the
provisions of each Option granted (which need not be identical), including
the time or times when a person shall be permitted to receive stock
pursuant to an Option; and the number of shares with respect to which an
Option shall be granted to each such person.
(ii) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement,
in a manner and to the extent it shall deem necessary or expedient to make
the Plan fully effective.
(iii) To amend the Plan or an Option as provided in Section 11.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) DELEGATION TO COMMITTEE. The Board may delegate administration of the
Plan to a committee composed of not fewer than two (2) members (the
"Committee"), all of the members of which Committee shall be, in the discretion
of the Board, Non-Employee Directors and/or Outside Directors. If administration
is delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee of two (2) or more Outside
Directors any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Notwithstanding anything in this Section 3 to the
contrary, the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant Options to eligible persons who (1)
are not then subject to Section 16 of the Exchange Act and/or (2) are either (i)
not then Covered Employees and are not expected to be Covered Employees at the
time of recognition of income resulting from such Option, or (ii) not persons
with respect to whom the Company wishes to comply with the exception for
qualified performance-based compensation under Section 162(m) of the Code.
(d) The chief executive officer of the Company, or the Board, in that
party's sole discretion, may determine whether Continuous Service shall be
considered terminated in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave. The
term of each Option may be extended at the discretion of the party approving the
leave of absence (not to extend beyond ten (10) years from the date of original
grant) for the period of any such approved leave of absence.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 10 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Options shall not exceed in the aggregate Two Million Two Hundred Fifty Thousand
(2,250,000) shares of Common Stock.
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the shares not acquired under such Option shall revert to and
again become available for issuance under the Plan.
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(c) SOURCE OF SHARES. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC OPTIONS. Incentive Stock Options may be
granted only to employees of the Company, or its parent or subsidiary
corporations within the meaning of Section 422(b) of the Code, or any successor
provision. Nonstatutory Stock Options may be granted to Employees, Directors and
Consultants.
(b) TEN PERCENT STOCKHOLDERS. No Ten Percent Stockholder shall be eligible
for the grant of an Incentive Stock Option unless the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair Market Value of
the Common Stock at the date of grant and such Option is not exercisable after
the expiration of five (5) years from the date of grant.
(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, no Employee shall be eligible to
be granted in any calendar year Options covering more than One Million
(1,000,000) shares.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option. The provisions of separate Options
need not be identical, but each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each
of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted (five (5) years in the case of an Incentive
Stock Option granted to a Ten Percent Stockholder).
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the stock subject to the Option on the date the Option
is granted. Notwithstanding the foregoing, an Incentive Stock Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option
may be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(d) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) by delivery to the
Company of other Common Stock, according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Optionholder or in any other
form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any
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applicable provisions of the Code, of any amounts other than amounts stated to
be interest under the deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock Option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(e), the Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.
(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory Stock
Option shall be transferable to the extent provided in its Option Agreement. If
such Option Agreement does not provide for transferability, then the
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Optionholder only by the Optionholder. Notwithstanding the foregoing
provisions of this subsection 6(f), the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.
(g) VESTING GENERALLY. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
(h) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than due to the Optionholder's death or
Disability), the Optionholder may exercise his or her Option, but only within
such period of time as is determined by the Board, and only to the extent
provided in the Option Agreement and not inconsistent with the terms of the
Plan. In no event shall an Option be exercisable after the expiration of the
term of such Option as set forth in the Option Agreement. In the case of an
Incentive Stock Option, the Board shall determine such period of time (not to
exceed ninety (90) days from the date of termination) when the Option is
granted. If at the date of termination, the Optionholder is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of such Option shall revert to and again become available for issuance
pursuant to Options granted under the Plan to the extent provided under Section
4. If after termination, the Optionholder does not exercise his or her Option
within the time specified in the Option Agreement, such Option shall terminate,
and the shares covered by such Option shall revert to and again become available
for issuance pursuant to Options granted under the Plan to the extent provided
under Section 4.
(i) DISABILITY. In the event an Optionholder's Continuous Service
terminates as a result of the Optionholder's Disability, then: (i) the
Option may continue to vest and remain outstanding, if so provided in the
Option Agreement, or (ii) if the Option Agreement does not provide for such
continuation of the Option, then the Optionholder may exercise his or her
Option, but only within twelve (12) months from the date of such
termination (or such shorter period specified in the Option Agreement), and
only to the extent that the Optionholder was entitled to exercise it at the
date of such termination (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement). If, at the date
of termination, the Option does not continue under its original terms and
the Optionholder is not entitled to exercise his or her entire Option, the
shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance pursuant to Options granted under
the Plan. If, after termination, the Option does not continue under its
original terms and the Optionholder does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance pursuant to Options granted under the Plan to
the extent provided under Section 4.
(ii) DEATH. In the event an Optionholder's Continuous Service
terminates as a result of the Optionholder's death or due to the
Optionholder's Disability and such termination due to Disability is
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followed by the Optionholder's death, then: (A) the vesting of all unvested
shares may be accelerated as of the date of the death of the Optionholder,
if so provided in the Option Agreement, or (B) if the Option Agreement does
not provide for the acceleration of the vesting of all unvested shares,
then the Option may be exercised, at any time within twelve (12) months
following the date of death, or such shorter period specified in the Option
Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement), by the Optionholder's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionholder was entitled to
exercise the Option at the date of death. If the Option Agreement does not
provide for the acceleration of the vesting of all unvested shares and, at
the time of death, the Optionholder was not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of such
Option shall revert to and again become available for issuance pursuant to
Options granted under the Plan to the extent provided under Section 4. If,
after death, the Optionholder's estate or a person who acquired the right
to exercise the Option by bequest or inheritance does not exercise the
Option within the time specified herein, the Option shall terminate, and
the shares covered by such Option shall revert to and again become
available for issuance pursuant to Options granted under the Plan to the
extent provided under Section 4.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option. Any
unvested shares so purchased may be subject to an unvested share repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.
7. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Options, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such Options.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Options and to issue and sell shares of Common Stock
upon exercise of the Options; provided, however, that this undertaking shall not
require the Company to register under the Securities Act the Plan, any Option or
any stock issued or issuable pursuant to any such Option. If, after reasonable
efforts, the Company is unable to obtain from any such regulatory commission or
agency the authority which counsel for the Company deems necessary for the
lawful issuance and sale of stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell stock upon exercise of such
Options unless and until such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the
power to accelerate the time at which an Option may first be exercised or the
time during which an Option or any part thereof will vest in accordance with the
Plan, notwithstanding the provisions in the Option stating the time at which it
may first be exercised or the time during which it will vest.
(b) STOCKHOLDER RIGHTS. No Optionholder shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Option unless and until such Optionholder has satisfied all requirements
for exercise of the Option pursuant to its terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Option granted pursuant thereto shall confer upon any
Optionholder or other holder of Options any right to continue to serve the
Company or an Affiliate in the capacity in effect at the time the Option was
granted or shall affect the right of the Company or an Affiliate to terminate:
(i) the employment of an Employee with or
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without notice and with or without cause, (ii) the service of a Consultant
pursuant to the terms of such Consultant's agreement with the Company or an
Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require an Optionholder, as a
condition of exercising or acquiring stock under any Option, (i) to give written
assurances satisfactory to the Company as to the Optionholder's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (ii) to give written assurances satisfactory
to the Company stating that the Optionholder is acquiring the stock subject to
the Option for the Optionholder's own account and not with any present intention
of selling or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if (i)
the issuance of the shares upon the exercise or acquisition of stock under the
Option has been registered under a then currently effective registration
statement under the Securities Act or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of an
Option Agreement, the Optionholder may satisfy any tax withholding obligation
(whether imposed on the Company or its Affiliates) relating to the exercise or
acquisition of stock under an Option by any of the following means (in addition
to the Company's right to withhold from any compensation paid to the
Optionholder by the Company) or by a combination of such means: (i) tendering a
cash payment; (ii) authorizing the Company to withhold shares from the shares of
the Common Stock otherwise issuable to the Optionholder as a result of the
exercise or acquisition of stock under the Option; or (iii) delivering to the
Company owned and unencumbered shares of the Common Stock; provided that the
aggregate number of shares of Common Stock which may be so withheld or delivered
within six months after such shares are acquired by the Optionholder from the
Company shall be limited to the number of shares that have an aggregate Fair
Market Value on the date of withholding or delivery equal to the tax withholding
obligations determined based on the minimum statutory withholding rates for
federal and state income tax and payroll tax purposes that are applicable to
such supplemental taxable income.
(g) REPRICING PROHIBITED. Notwithstanding any provision in the Plan to the
contrary, no Option shall be amended to reduce the exercise price of such
Option, and no Option shall be granted in exchange for the cancellation or
surrender of an Option with a greater exercise price, other than in connection
with the adjustment of an Option, or the assumption or substitution of an Option
or other stock option, as a result of a transaction or other event pursuant to
Section 10 in which the excess of the aggregate Fair Market Value of the shares
subject to the Option over the aggregate exercise price of such shares
immediately after the adjustment, assumption or substitution is not more than
the excess of the aggregate Fair Market Value of the shares subject to the
Option or other stock option over the aggregate exercise price of such shares
immediately before such adjustment, assumption or substitution.
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10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the stock subject
to the Plan, or subject to any Option, without the receipt of consideration by
the Company (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 Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan pursuant to
subsection 4(a) and the maximum number of securities subject to award to any
person pursuant to subsection 5(c), and the outstanding Options will be
appropriately adjusted in the class(es) and number of securities and price per
share of stock subject to such outstanding Options. Such adjustments shall be
made by the Board, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a transaction "without receipt of consideration" by the
Company.)
(b) CHANGE IN CONTROL.
(i) In the event of: (1) the sale of all or substantially all of the
Company's assets, (2) a merger, consolidation or reorganization of the
Company with or into another corporation or other legal person, other than
a merger, consolidation or reorganization in which more than fifty percent
(50%) of the combined voting power of the then-outstanding securities of
the surviving entity (or if more than one entity survives the transaction,
the controlling entity) immediately after such a transaction are held in
the aggregate by holders of voting securities of the Company immediately
prior to such transaction, (3) the acquisition by any person (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) of
beneficial ownership (within the meaning of Rule 13d-3 or any successor
rule or regulation promulgated under the Exchange Act) of securities
representing fifty percent (50%) or more of the combined voting power of
the then-outstanding securities of the Company, or (4) during any period of
two (2) consecutive years, individuals who at the beginning of any such
period constitute the Directors of the Company (the "Incumbent Directors")
cease for any reason to constitute at least a majority thereof unless the
election or the nomination for election by the Company's stockholders of a
Director of the Company first elected during such period was approved by
the vote of at least two-thirds of the Incumbent Directors, whereupon such
Director shall also be classified as an Incumbent Director (collectively, a
"Change in Control"), then: (A) any surviving corporation shall assume any
Options outstanding under the Plan or shall substitute similar options for
those outstanding under the Plan (including an option to acquire the same
consideration paid to stockholders in the transaction described in this
subsection 10(b)(i)), or (B) such Options shall continue in full force and
effect. In the event any surviving corporation refuses to assume such
Options, or to substitute similar options for those outstanding under the
Plan, then, (x) with respect to Options held by Optionholders then
performing services as Employees, Directors or Consultants, the time at
which such Options may first be exercised in full shall be accelerated and
(y) any Options outstanding under the Plan shall terminate if not exercised
prior to such event. In the event of a dissolution or liquidation of the
Company, any Options outstanding under the Plan shall terminate if not
exercised prior to such event.
(ii) In addition, with respect to any Optionholder who was providing
Continuous Service immediately prior to the consummation of the Change in
Control, any Options (including an option substituted for an Option) held
by such Optionholder shall immediately become fully vested and exercisable
(and any repurchase right by the Company with respect to shares acquired by
such person under an Option (or an option substituted for an Option) shall
lapse) if such Optionholder's Continuous Service is Involuntarily
Terminated Without Cause or Constructively Terminated within twenty-four
(24) months following the Change in Control. Notwithstanding the preceding
sentence, in the event all of the following occurs: (A) such contemplated
Change in Control would occur prior to the second anniversary of the
adoption of this Plan by the Board; (B) such potential acceleration of
vesting (and exercisability) would by itself result in a contemplated
Change in Control that would otherwise be eligible to be accounted for as a
"pooling of interests" accounting transaction to become ineligible for such
accounting treatment; and (C) the potential acquirer of the Company desires
to account for such contemplated Change in Control as a "pooling of
interests" transaction, then such acceleration shall not occur.
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Additionally, in the event that the restrictions upon acceleration provided
for in the immediately preceding sentence by itself would result in a
contemplated Change in Control to become ineligible to be accounted for as
a "pooling of interests" accounting transaction, then such restrictions
shall be deemed inoperative. Accounting issues shall be determined by the
Company's independent public accountants applying generally accepted
accounting principles.
(iii) "CONSTRUCTIVELY TERMINATED" shall mean the voluntary termination
of employment by an Optionholder after any of the following are undertaken
without the Optionholder's express written consent: (A) the assignment to
the Optionholder of any duties or responsibilities which result in a
material diminution or adverse change of the Optionholder's position,
status or circumstances of employment, but does not include a mere change
in title or reporting relationship; (B) reduction by the Company in the
Optionholder's base salary; (C) any failure by the Company to continue in
effect any benefit plan or arrangement, including incentive plans or plans
to receive securities of the Company, in which the Optionholder is
participating (hereinafter referred to as "Benefit Plans"), or the taking
of any action by the Company which would adversely affect the
Optionholder's participation in or reduce the Optionholder's benefits under
any Benefit Plans or deprive the Optionholder of any fringe benefit then
enjoyed by the Optionholder, provided, however, that the Optionholder's
termination is not deemed to be Constructively Terminated if the Company
offers a range of benefit plans and programs which, taken as a whole, are
comparable to the Benefit Plans; (D) a relocation of the Optionholder or
the Company's principal business offices to a location more than fifty (50)
miles from the location at which the Optionholder performs duties, except
for required travel by the Optionholder on the Company's business to an
extent substantially consistent with the Optionholder's business travel
obligations; (E) any breach by the Company of any material agreement
between the Optionholder and the Company concerning the Optionholder's
employment; or (F) any failure by the Company to obtain the assumption of
any material agreement between the Optionholder and the Company concerning
the Optionholder's employment by any successor or assign of the Company.
(iv) "INVOLUNTARILY TERMINATED WITHOUT CAUSE" shall mean dismissal or
discharge of an Optionholder for any reason other than Cause, death or
Disability.
(v) "CAUSE" shall mean any of the following: (A) an intentional act
which materially injures the Company; (B) an intentional refusal or failure
to follow lawful and reasonable directions of the Board or an individual to
whom the Optionholder reports (as appropriate); (C) a willful and habitual
neglect of duties; or (D) a conviction of a felony involving moral
turpitude which is reasonably likely to inflict or has inflicted material
injury on the Company.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 10 relating to
adjustments upon changes in stock, no amendment shall be effective unless timely
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit any
other amendment to the Plan for stockholder approval, including, but not limited
to, amendments to the Plan intended to satisfy the requirements of Section
162(m) of the Code and the regulations thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
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(d) NO IMPAIRMENT OF RIGHTS. Rights under any Option granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.
(e) AMENDMENT OF OPTIONS. The Board at any time, and from time to time, may
amend the terms of any one or more Options; provided, however, that the rights
under any Option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the Optionholder and (ii) the Optionholder
consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Options may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) NO IMPAIRMENT OF RIGHTS. Rights and obligations under any Option
granted while the Plan is in effect shall not be impaired by suspension or
termination of the Plan, except with the written consent of the Optionholder.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Option
shall be exercised unless and until the Plan has been approved by the
stockholders of the Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the Board.
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