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EXHIBIT 99.2
AUDIO EXPLOSION, INC.
1998 STOCK OPTION PLAN
I. PURPOSES OF THE PLAN. THIS PLAN WAS FORMERLY NAMED THE AUDIOX, INC. 1998
STOCK OPTION PLAN. THE PURPOSES OF THIS 1998 STOCK OPTION PLAN ARE TO
ATTRACT AND RETAIN THE BEST AVAILABLE PERSONNEL FOR POSITIONS OF
SUBSTANTIAL RESPONSIBILITY, TO PROVIDE ADDITIONAL INCENTIVE TO EMPLOYEES
AND CONSULTANTS OF THE COMPANY AND ITS SUBSIDIARIES AND TO PROMOTE THE
SUCCESS OF THE COMPANY'S BUSINESS. OPTIONS GRANTED UNDER THE PLAN MAY BE
INCENTIVE STOCK OPTIONS (AS DEFINED UNDER SECTION 422 OF THE CODE) OR
NONSTATUTORY STOCK OPTIONS, AS DETERMINED BY THE ADMINISTRATOR AT THE
TIME OF GRANT OF AN OPTION AND SUBJECT TO THE APPLICABLE PROVISIONS OF
SECTION 422 OF THE CODE, AS AMENDED, AND THE REGULATIONS PROMULGATED
THEREUNDER.
II. DEFINITIONS. AS USED HEREIN, THE FOLLOWING DEFINITIONS SHALL APPLY:
A. "ADMINISTRATOR" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
B. "BOARD" means the Board of Directors of the Company.
C. "CODE" means the Internal Revenue Code of 1986, as amended.
D. "COMMITTEE" means the Committee appointed by the Board of
Directors in accordance with Section 4(a) and (b) of the Plan.
E. "COMMON STOCK" means the Common Stock of the Company.
F. "COMPANY" means Audio Explosion, Inc., a California corporation.
G. "CONSULTANT" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render
services and is compensated for such services, and any director
of the Company whether compensated for such services or not.
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H. "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the
absence of any interruption or termination of service as an
Employee or Consultant. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of:
(i) sick leave; (ii) military leave; (iii) any other leave of
absence approved by the Administrator, provided that such leave
is for a period of not more than 90 days, unless reemployment
upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy
adopted from time to time; or (iv) in the case of transfers
between locations of the Company or between the Company, its
Subsidiaries or their respective successors. For purposes of
this Plan, a change in status from an Employee to a Consultant
or from a Consultant to an Employee will not constitute an
interruption of Continuous Status as an Employee or Consultant.
I. "EMPLOYEE" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the
Company, with the status of employment determined based upon
such minimum number of hours or periods worked as shall be
determined by the Administrator in its discretion, subject to
any requirements of the Code. The payment of a director's fee to
a director shall not be sufficient to constitute "employment" of
such director by the Company.
J. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
K. "FAIR MARKET VALUE" means, as of any date, the fair market value
of Common Stock determined as follows:
1. If the Common Stock is listed on any established stock
exchange or a national market system including without
limitation the National Market of the National
Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, its Fair Market Value shall
be the closing sales price for such stock (or the
closing bid, if no sales were reported), as quoted on
such system or exchange, or the exchange with the
greatest volume of trading in Common Stock for the last
market trading day prior to the time of determination,
as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
2. If the Common Stock is quoted on the Nasdaq System (but
not on the National Market thereof) or regularly quoted
by a recognized securities dealer but selling prices are
not reported, its Fair Market Value shall be the mean
between the high bid and low asked prices for the Common
Stock for the last market trading day prior to the time
of determination, as reported in The Wall Street Journal
or such other source as the Administrator deems
reliable; or
3. In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined
in good faith by the Administrator.
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L. "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of
the Code, as designated in the applicable written Option
Agreement.
M. "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option, as designated in the
applicable written Option Agreement.
N. "OPTION" means a stock option granted pursuant to the Plan.
O. "OPTION AGREEMENT" means a written agreement between an Optionee
and the Company reflecting the terms of an Option granted under
the Plan and includes any documents attached to such Option
Agreement, including, but not limited to, a notice of stock
option grant and a form of exercise notice.
P. "OPTIONED STOCK" means the Common Stock subject to an Option.
Q. "OPTIONEE" means an Employee or Consultant who receives an
Option.
R. "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code, or any
successor provision.
S. "PLAN" means this 1998 Stock Option Plan.
T. "REPORTING PERSON" means an officer, director, or greater than
10% shareholder of the Company within the meaning of Rule 16a-2
under the Exchange Act, who is required to file reports pursuant
to Rule 16a-3 under the Exchange Act.
U. "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange
Act, as the same may be amended from time to time, or any
successor provision.
V. "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
W. "STOCK EXCHANGE" means any stock exchange or consolidated stock
price reporting system on which prices for the Common Stock are
quoted at any given time.
X. "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code, or
any successor provision.
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III. STOCK SUBJECT TO THE PLAN. SUBJECT TO THE PROVISIONS OF SECTION 11 OF
THE PLAN, THE MAXIMUM AGGREGATE NUMBER OF SHARES THAT MAY BE OPTIONED
AND SOLD UNDER THE PLAN IS 460,000 SHARES OF COMMON STOCK. THE SHARES
MAY BE AUTHORIZED, BUT UNISSUED, OR REACQUIRED COMMON STOCK. IF AN
OPTION SHOULD EXPIRE OR BECOME UNEXERCISABLE FOR ANY REASON WITHOUT
HAVING BEEN EXERCISED IN FULL, THE UNPURCHASED SHARES THAT WERE SUBJECT
THERETO SHALL, UNLESS THE PLAN SHALL HAVE BEEN TERMINATED, BECOME
AVAILABLE FOR FUTURE GRANT UNDER THE PLAN. IN ADDITION, ANY SHARES OF
COMMON STOCK WHICH ARE RETAINED BY THE COMPANY UPON EXERCISE OF AN
OPTION IN ORDER TO SATISFY THE EXERCISE OR PURCHASE PRICE FOR SUCH
OPTION OR ANY WITHHOLDING TAXES DUE WITH RESPECT TO SUCH EXERCISE SHALL
BE TREATED AS NOT ISSUED AND SHALL CONTINUE TO BE AVAILABLE UNDER THE
PLAN. SHARES REPURCHASED BY THE COMPANY PURSUANT TO ANY REPURCHASE RIGHT
WHICH THE COMPANY MAY HAVE SHALL NOT BE AVAILABLE FOR FUTURE GRANT UNDER
THE PLAN.
IV. ADMINISTRATION OF THE PLAN.
A. INITIAL PLAN PROCEDURE. Prior to the date, if any, upon which
the Company becomes subject to the Exchange Act, the Plan shall
be administered by the Board or a Committee appointed by the
Board.
B. PLAN PROCEDURE AFTER THE DATE, IF ANY, UPON WHICH THE COMPANY
BECOMES SUBJECT TO THE EXCHANGE ACT.
1. MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule
16b-3, grants under the Plan may be made by different
bodies with respect to directors, non-director officers
and Employees or Consultants who are not Reporting
Persons.
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2. ADMINISTRATION WITH RESPECT TO REPORTING PERSONS. With
respect to grants of Options to Employees who are
Reporting Persons, such grants shall be made by (A) the
Board if the Board may make grants to Reporting Persons
under the Plan in compliance with Rule 16b-3, or (B) a
Committee designated by the Board to make grants to
Reporting Persons under the Plan, which Committee shall
be constituted in such a manner as to permit grants
under the Plan to comply with Rule 16b-3. Once
appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size
of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new
members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee
and thereafter directly make grants to Reporting Persons
under the Plan, all to the extent permitted by Rule
16b-3.
3. ADMINISTRATION WITH RESPECT TO CONSULTANTS AND OTHER
EMPLOYEES. With respect to grants of Options to
Employees or Consultants who are not Reporting Persons,
the Plan shall be administered by (A) the Board or (B) a
Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the legal
requirements relating to the administration of Incentive
Stock Option plans, if any, of applicable corporate and
securities laws, of the Code and of any applicable Stock
Exchange (the "Applicable Laws"). Once appointed, such
Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members
in substitution therefor, fill vacancies, however
caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the
extent permitted by the Applicable Laws.
C. POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties
delegated by the Board to such Committee, and subject to the
approval of any relevant authorities, including the approval, if
required, of any Stock Exchange, the Administrator shall have
the authority, in its discretion:
1. to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(k) of the Plan;
2. to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;
3. to determine whether and to what extent Options are
granted hereunder;
4. to determine the number of shares of Common Stock to be
covered by each such Option granted hereunder;
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5. to approve forms of agreement for use under the Plan;
6. to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option granted
hereunder;
7. to determine whether and under what circumstances an
Option may be settled in cash under Section 9(f) instead
of Common Stock;
8. to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option shall have
declined since the date the Option was granted;
9. to construe and interpret the terms of the Plan and
Options granted under the Plan; and
10. in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options to
participants who are foreign nationals or employed
outside of the United States in order to recognize
differences in local law, tax policies or customs.
D. EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be
final and binding on all holders of Options.
V. ELIGIBILITY.
A. RECIPIENTS OF GRANTS. Nonstatutory Stock Options may be granted
to Employees and Consultants. Incentive Stock Options may be
granted only to Employees. An Employee or Consultant who has
been granted an Option may, if he or she is otherwise eligible,
be granted additional Options.
B. TYPE OF OPTION. Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonstatutory
Stock Option. However, notwithstanding such designations, to the
extent that the aggregate Fair Market Value of Shares with
respect to which Options designated as Incentive Stock Options
are exercisable for the first time by any Optionee during any
calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be
treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair
Market Value of the Shares subject to an Incentive Stock Option
shall be determined as of the date of the grant of such Option.
C. EMPLOYMENT RELATIONSHIP. The Plan shall not confer upon any
Optionee any right with respect to continuation of employment or
consulting relationship with the Company, nor shall it interfere
in any way with such Optionee's right or the Company's right to
terminate his or her employment or consulting relationship at
any time, with or without cause.
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VI. TERM OF PLAN. THE PLAN SHALL BECOME EFFECTIVE UPON THE EARLIER TO OCCUR
OF ITS ADOPTION BY THE BOARD OF DIRECTORS OR ITS APPROVAL BY THE
SHAREHOLDERS OF THE COMPANY AS DESCRIBED IN SECTION 18 OF THE PLAN. IT
SHALL CONTINUE IN EFFECT FOR A TERM OF TEN YEARS UNLESS SOONER
TERMINATED UNDER SECTION 14 OF THE PLAN.
VII. TERM OF OPTION. THE TERM OF EACH OPTION SHALL BE THE TERM STATED IN THE
OPTION AGREEMENT; PROVIDED, HOWEVER, THAT THE TERM SHALL BE NO MORE THAN
TEN YEARS FROM THE DATE OF GRANT THEREOF OR SUCH SHORTER TERM AS MAY BE
PROVIDED IN THE OPTION AGREEMENT. HOWEVER, IN THE CASE OF AN INCENTIVE
STOCK OPTION GRANTED TO AN OPTIONEE WHO, AT THE TIME THE OPTION IS
GRANTED, OWNS STOCK REPRESENTING MORE THAN 10% OF THE TOTAL COMBINED
VOTING POWER OF ALL CLASSES OF STOCK OF THE COMPANY OR ANY PARENT OR
SUBSIDIARY, THE TERM OF THE OPTION SHALL BE FIVE YEARS FROM THE DATE OF
GRANT THEREOF OR SUCH SHORTER TERM AS MAY BE PROVIDED IN THE OPTION
AGREEMENT.
VIII. OPTION EXERCISE PRICE AND CONSIDERATION.
A. The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is
determined by the Board and set forth in the applicable Option
Agreement, but shall be subject to the following:
1. In the case of an Incentive Stock Option that is:
a. granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock
representing more than 10% of the total combined
voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110%
of the Fair Market Value per Share on the date
of grant.
b. granted to any Employee, the per Share exercise
price shall be no less than 100% of the Fair
Market Value per Share on the date of grant.
2. In the case of a Nonstatutory Stock Option that is:
a. granted to a person who, at the time of the
grant of such Option, owns stock representing
more than 10% of the total combined voting power
of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise
price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant.
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b. granted to any person, the per Share exercise
price shall be no less than 85% of the Fair
Market Value per Share on the date of grant.
B. The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be
determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of
grant) and may consist entirely of (1) cash, (2) check, (3)
promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the
Optionee for more than six months on the date of surrender or
such other period as may be required to avoid a charge to the
Company's earnings, and (y) have a Fair Market Value on the date
of surrender equal to the aggregate exercise price of the Shares
as to which such Option shall be exercised, (5) authorization
for the Company to retain from the total number of Shares as to
which the Option is exercised that number of Shares having a
Fair Market Value on the date of exercise equal to the exercise
price for the total number of Shares as to which the Option is
exercised, (6) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise
of the Option and delivery to the Company of the sale or loan
proceeds required to pay the exercise price and any applicable
income or employment taxes, (7) delivery of an irrevocable
subscription agreement for the Shares that irrevocably obligates
the option holder to take and pay for the Shares not more than
twelve months after the date of delivery of the subscription
agreement, (8) any combination of the foregoing methods of
payment, or (9) such other consideration and method of payment
for the issuance of Shares to the extent permitted under the
Applicable Laws. In making its determination as to the type of
consideration to accept, the Administrator shall consider if
acceptance of such consideration may be reasonably expected to
benefit the Company.
IX. EXERCISE OF OPTION.
A. PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under
such conditions as determined by the Administrator and reflected
in the Option Agreement, which may include vesting requirements
and/or performance criteria with respect to the Company and/or
the Optionee; provided, however, that such Option shall become
exercisable at the rate of at least 20% per year over five years
from the date the Option is granted. In the event that any of
the Shares issued upon exercise of an Option should be subject
to a right of repurchase in the Company's favor, such repurchase
right shall lapse at the rate of at least 20% per year over five
years from the date the Option is granted. Notwithstanding the
above, in the case of an Option granted to an officer, director
or Consultant of the Company or any Parent or Subsidiary of the
Company, the Option may become fully exercisable, or a
repurchase right, if any, in favor of the Company shall lapse,
at any time or during any period established by the
Administrator.
An Option may not be exercised for a fraction of a Share.
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An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
not withstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.
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B. TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. Subject to
Section 9(c) below, in the event of termination of an Optionee's
Continuous Status as an Employee or Consultant with the Company,
such Optionee may, but only within three months (or such other
period of time not less than 30 days as is determined by the
Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the
Option and not exceeding three months) after the date of such
termination (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement),
exercise his or her Option to the extent that the Optionee was
entitled to exercise it at the date of such termination. To the
extent that the Optionee was not entitled to exercise the Option
at the date of such termination, or if the Optionee does not
exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate. No termination
shall be deemed to occur and this Section 9(b) shall not apply
if (i) the Optionee is a Consultant who becomes an Employee, or
(ii) the Optionee is an Employee who becomes a Consultant.
C. DISABILITY OF OPTIONEE.
1. Notwithstanding Section 9(b) above, in the event of
termination of an Optionee's Continuous Status as an
Employee or Consultant as a result of his or her total
and permanent disability (within the meaning of Section
22(e)(3) of the Code), such Optionee may, but only
within twelve months from the date of such termination
(but in no event later than the expiration date of the
term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise
entitled to exercise it at the date of such termination.
To the extent that the Optionee was not entitled to
exercise the Option at the date of termination, or if
the Optionee does not exercise such Option to the extent
so entitled within the time specified herein, the Option
shall terminate.
2. In the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of a
disability which does not fall within the meaning of
total and permanent disability (as set forth in Section
22(e)(3) of the Code), such Optionee may, but only
within six months from the date of such termination (but
in no event later than the expiration date of the term
of such Option as set forth in the Option Agreement),
exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. However, to
the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option (within the
meaning of Section 422 of the Code) within three months
of the date of such termination, the Option will not
qualify for Incentive Stock Option treatment under the
Code. To the extent that the Optionee was not entitled
to exercise the Option at the date of termination, or if
the Optionee does not exercise such Option to the extent
so entitled within six months from the date of
termination, the Option shall terminate.
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D. DEATH OF OPTIONEE. In the event of the death of an Optionee
during the period of Continuous Status as an Employee or
Consultant since the date of grant of the Option, or within 30
days following termination of the Optionee's Continuous Status
as an Employee or Consultant, the Option may be exercised, at
any time within six months following the date of death (but in
no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), by such Optionee's
estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of death or, if
earlier, the date of termination of the Optionee's Continuous
Status as an Employee or Consultant. To the extent that the
Optionee was not entitled to exercise the Option at the date of
death or termination, as the case may be, or if the Optionee
does not exercise such Option to the extent so entitled within
the time specified herein, the Option shall terminate.
E. RULE 16B-3. Options granted to Reporting Persons shall comply
with Rule 16b-3 and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the
maximum exemption for Plan transactions.
X. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. AT THE
DISCRETION OF THE ADMINISTRATOR, OPTIONEES MAY SATISFY WITHHOLDING
OBLIGATIONS AS PROVIDED IN THIS PARAGRAPH. WHEN AN OPTIONEE INCURS TAX
LIABILITY IN CONNECTION WITH AN OPTION, WHICH TAX LIABILITY IS SUBJECT
TO TAX WITHHOLDING UNDER APPLICABLE TAX LAWS, AND THE OPTIONEE IS
OBLIGATED TO PAY THE COMPANY AN AMOUNT REQUIRED TO BE WITHHELD UNDER
APPLICABLE TAX LAWS, THE OPTIONEE MAY SATISFY THE WITHHOLDING TAX
OBLIGATION BY ONE OR SOME COMBINATION OF THE FOLLOWING METHODS: (A) BY
CASH OR CHECK PAYMENT, (B) OUT OF THE OPTIONEE'S CURRENT COMPENSATION,
(C) IF PERMITTED BY THE ADMINISTRATOR, IN ITS DISCRETION, BY
SURRENDERING TO THE COMPANY SHARES THAT (I) IN THE CASE OF SHARES
PREVIOUSLY ACQUIRED FROM THE COMPANY, HAVE BEEN OWNED BY THE OPTIONEE
FOR MORE THAN SIX MONTHS ON THE DATE OF SURRENDER, AND (II) HAVE A FAIR
MARKET VALUE ON THE DATE OF SURRENDER EQUAL TO OR LESS THAN THE
OPTIONEE'S MARGINAL TAX RATE TIMES THE ORDINARY INCOME RECOGNIZED, OR
(D) BY ELECTING TO HAVE THE COMPANY WITHHOLD FROM THE SHARES TO BE
ISSUED UPON EXERCISE OF THE OPTION, IF ANY, THAT NUMBER OF SHARES HAVING
A FAIR MARKET VALUE EQUAL TO THE AMOUNT REQUIRED TO BE WITHHELD. FOR
THIS PURPOSE, THE FAIR MARKET VALUE OF THE SHARES TO BE WITHHELD SHALL
BE DETERMINED ON THE DATE THAT THE AMOUNT OF TAX TO BE WITHHELD IS TO BE
DETERMINED (THE "TAX DATE").
Any surrender by a Reporting Person of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3.
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All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
A. the election must be made on or prior to the applicable Tax
Date;
B. once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is
made; and
C. all elections shall be subject to the consent or disapproval of
the Administrator.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
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XI. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN OTHER
TRANSACTIONS.
A. CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Company, the number of shares of Common
Stock covered by each outstanding Option, and the number of
shares of Common Stock that have been authorized for issuance
under the Plan but as to which no Options have yet been granted
or that have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination,
recapitalization or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible
securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment
shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of
Common Stock subject to an Option.
B. DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Board shall
notify the Optionee at least 15 days prior to such proposed
action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consummation of
such proposed action.
C. MERGER OR SALE OF ASSETS. In the event of a proposed sale of all
or substantially all of the Company's assets or a merger of the
Company with or into another corporation where the successor
corporation issues its securities to the Company's shareholders,
each outstanding Option shall be assumed or an equivalent option
or right shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the
successor corporation does not agree to assume the Option or to
substitute an equivalent option, in which case such Option shall
terminate upon the consummation of the merger or sale of assets.
For purposes of this Section 11(c), an Option shall be
considered assumed, without limitation, if, at the time of
issuance of the stock or other consideration upon such merger or
sale of assets, each Optionee would be entitled to receive upon
exercise of an Option the same number and kind of shares of
stock or the same amount of property, cash or securities as the
Optionee would have been entitled to receive upon the occurrence
of such transaction if the Optionee had been, immediately prior
to such transaction, the holder of the number of Shares of
Common Stock covered by the Option at such time (after giving
effect to any adjustments in the number of Shares covered by the
Option as provided for in this Section 11).
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D. CERTAIN DISTRIBUTIONS. In the event of any distribution to the
Company's shareholders of securities of any other entity or
other assets (other than dividends payable in cash or stock of
the Company) without receipt of consideration by the Company,
the Administrator may, in its discretion, appropriately adjust
the price per share of Common Stock covered by each outstanding
Option to reflect the effect of such distribution.
E. ACCELERATION UPON TERMINATION WITHOUT CAUSE. In the event that
an Employee's employment with the Company is terminated without
Cause at, or within six (6) months following, a Change in
Control, then the Option held by such Employee shall vest with
respect to one hundred percent (100%) of the Option shares.
For purposes of this Section 11(e), a "Change in Control" shall mean any
one of the following events: (i) the consummation of a merger, consolidation,
sale of the Company's stock or other reorganization of the Company (other than a
reincorporation of the Company), if after giving effect to such merger,
consolidation or other reorganization of the Company, the stockholders of the
Company immediately prior to such merger, consolidation, sale or other
reorganization do not represent a majority in interest of the holders of voting
securities (on a fully diluted basis) with the ordinary voting power to elect
directors of the surviving or resulting entity after such merger, consolidation,
sale or other reorganization; or (ii) the sale of all or substantially all of
the assets of the Company to a third party.
For purposes of this Section 11(e), "Cause" shall mean termination of
Employee's employment for (i) conduct materially detrimental to the Company,
(ii) conviction or plea of nolo contendere to a felony, or (iii) any intentional
misconduct that the Company reasonably believes would make it impracticable for
Employee to discharge substantially all of Employee's duties.
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XII. NON-TRANSFERABILITY OF OPTIONS. OPTIONS MAY NOT BE SOLD, PLEDGED,
ASSIGNED, HYPOTHECATED, TRANSFERRED, OR DISPOSED OF IN ANY MANNER OTHER
THAN BY WILL OR BY THE LAWS OF DESCENT OR DISTRIBUTION AND MAY BE
EXERCISED OR PURCHASED DURING THE LIFETIME OF THE OPTIONEE ONLY BY THE
OPTIONEE.
XIII. TIME OF GRANTING OPTIONS. THE DATE OF GRANT OF AN OPTION SHALL, FOR ALL
PURPOSES, BE THE DATE ON WHICH THE ADMINISTRATOR MAKES THE DETERMINATION
GRANTING SUCH OPTION, OR SUCH OTHER DATE AS IS DETERMINED BY THE BOARD;
PROVIDED, HOWEVER, THAT IN THE CASE OF ANY INCENTIVE STOCK OPTION, THE
GRANT DATE SHALL BE THE LATER OF THE DATE ON WHICH THE ADMINISTRATOR
MAKES THE DETERMINATION GRANTING SUCH INCENTIVE STOCK OPTION OR THE DATE
OF COMMENCEMENT OF THE OPTIONEE'S EMPLOYMENT RELATIONSHIP WITH THE
COMPANY. NOTICE OF THE DETERMINATION SHALL BE GIVEN TO EACH EMPLOYEE OR
CONSULTANT TO WHOM AN OPTION IS SO GRANTED WITHIN A REASONABLE TIME
AFTER THE DATE OF SUCH GRANT.
XIV. AMENDMENT AND TERMINATION OF THE PLAN.
A. AUTHORITY TO AMEND OR TERMINATE. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment,
alteration, suspension or discontinuation shall be made that
would impair the rights of any Optionee under any grant
theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 or
with Section 422 of the Code (or any other applicable law or
regulation, including the requirements of any Stock Exchange),
the Company shall obtain shareholder approval of any Plan
amendment in such a manner and to such a degree as required.
B. EFFECT OF AMENDMENT OR TERMINATION. No amendment or termination
of the Plan shall adversely affect Options already granted,
unless mutually agreed otherwise between the Optionee and the
Board, which agreement must be in writing and signed by the
Optionee and the Company.
XV. CONDITIONS UPON ISSUANCE OF SHARES. SHARES SHALL NOT BE ISSUED PURSUANT
TO THE EXERCISE OF AN OPTION UNLESS THE EXERCISE OF SUCH OPTION AND THE
ISSUANCE AND DELIVERY OF SUCH SHARES PURSUANT THERETO SHALL COMPLY WITH
ALL RELEVANT PROVISIONS OF LAW, INCLUDING, WITHOUT LIMITATION, THE
SECURITIES ACT OF 1933, AS AMENDED, THE EXCHANGE ACT, THE RULES AND
REGULATIONS PROMULGATED THEREUNDER, AND THE REQUIREMENTS OF ANY STOCK
EXCHANGE.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for
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investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is required
by law.
XVI. RESERVATION OF SHARES. THE COMPANY, DURING THE TERM OF THIS PLAN, WILL
AT ALL TIMES RESERVE AND KEEP AVAILABLE SUCH NUMBER OF SHARES AS SHALL
BE SUFFICIENT TO SATISFY THE REQUIREMENTS OF THE PLAN. THE INABILITY OF
THE COMPANY TO OBTAIN AUTHORITY FROM ANY REGULATORY BODY HAVING
JURISDICTION, WHICH AUTHORITY IS DEEMED BY THE COMPANY'S COUNSEL TO BE
NECESSARY TO THE LAWFUL ISSUANCE AND SALE OF ANY SHARES HEREUNDER, SHALL
RELIEVE THE COMPANY OF ANY LIABILITY IN RESPECT OF THE FAILURE TO ISSUE
OR SELL SUCH SHARES AS TO WHICH SUCH REQUISITE AUTHORITY SHALL NOT HAVE
BEEN OBTAINED.
XVII. OPTION AGREEMENTS. OPTIONS SHALL BE EVIDENCED BY OPTION AGREEMENTS IN
SUCH FORM(S) AS THE ADMINISTRATOR SHALL APPROVE FROM TIME TO TIME.
XVIII. SHAREHOLDER APPROVAL. CONTINUANCE OF THE PLAN SHALL BE SUBJECT TO
APPROVAL BY THE SHAREHOLDERS OF THE COMPANY WITHIN TWELVE MONTHS BEFORE
OR AFTER THE DATE THE PLAN IS ADOPTED. SUCH SHAREHOLDER APPROVAL SHALL
BE OBTAINED IN THE DEGREE AND MANNER REQUIRED UNDER APPLICABLE STATE AND
FEDERAL LAW AND THE RULES OF ANY STOCK EXCHANGE UPON WHICH THE COMMON
STOCK IS LISTED. ALL OPTIONS ISSUED UNDER THE PLAN SHALL BECOME VOID IN
THE EVENT SUCH APPROVAL IS NOT OBTAINED.
XIX. INFORMATION AND DOCUMENTS TO OPTIONEES. THE COMPANY SHALL PROVIDE
FINANCIAL STATEMENTS AT LEAST ANNUALLY TO EACH OPTIONEE DURING THE
PERIOD SUCH OPTIONEE HAS ONE OR MORE OPTIONS OUTSTANDING, AND IN THE
CASE OF AN INDIVIDUAL WHO ACQUIRED SHARES PURSUANT TO THE PLAN, DURING
THE PERIOD SUCH INDIVIDUAL OWNS SUCH SHARES. THE COMPANY SHALL NOT BE
REQUIRED TO PROVIDE SUCH INFORMATION IF THE ISSUANCE OF OPTIONS UNDER
THE PLAN IS LIMITED TO KEY EMPLOYEES WHOSE DUTIES IN CONNECTION WITH THE
COMPANY ASSURE THEIR ACCESS TO EQUIVALENT INFORMATION. IN ADDITION, AT
THE TIME OF ISSUANCE OF ANY SECURITIES UNDER THE PLAN, THE COMPANY SHALL
PROVIDE TO THE OPTIONEE A COPY OF THE PLAN AND ANY AGREEMENT(S) PURSUANT
TO WHICH SECURITIES GRANTED UNDER THE PLAN ARE ISSUED.
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