<PAGE>
EXHIBIT 10.3
------------
musicmusicmusic, inc.
1999 EQUITY INCENTIVE PLAN
1. PURPOSES AND EFFECTIVE DATE.
(a) ELIGIBLE STOCK INCENTIVE PLAN RECIPIENTS. The persons eligible to
receive benefit under the 1999 Equity Incentive Plan (the "Plan") are the
employees, directors and consultants of musicmusicmusic, inc. (the "Company")
and its affiliates.
(b) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide an
opportunity to eligible recipients to benefit from increases in value of the
Common Stock through the granting of the following Stock Awards: (i) Incentive
Stock Options, (ii) Nonqualified Stock Options, (iii) stock bonuses and (iv)
rights to acquire restricted stock (hereinafter "Stock Awards").
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, 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.
(d) EFFECTIVE DATE OF PLAN. The Plan shall become effective as determined
by the Board, but no Stock Award shall be exercised (or, in the case of a stock
bonus, shall be granted) unless and until the Plan has been approved by the
stockholders of the Company, which approval shall be within twelve (12) months
after the date the Plan is adopted by the Board.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CAUSE" means an individual's misconduct, including but not limited
to: (1) conviction of any felony or any crime involving moral turpitude or
dishonesty, (2) participation in a fraud or act of dishonesty against the
Company or an Affiliate, (3) conduct that, based upon a good faith and
reasonable factual investigation and determination by the Board, demonstrates
the individual's gross unfitness to serve as an employee or (4) intentional,
material violation of any contract with the Company or an affiliate or any
statutory duty to the Company or an Affiliate that is not corrected within
thirty (30) days after written notice thereof. "Disability" (as hereinafter
defined) shall not constitute "Cause."
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
1
<PAGE>
(e) "COMMITTEE" means a Committee appointed by the Board in accordance
with Section 3(c). (f) "COMMON STOCK" means the common stock, par value $.0001
per share, of the Company.
(g) "COMPANY" means musicmusicmusic, inc., a Delaware corporation.
(h) "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors of the Company who are not compensated by the Company for their
services as Directors or Directors of the Company who are paid a director's fee
by the Company for their services as Directors.
(i) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.
(j) "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.
(k) "DIRECTOR" means a member of the Board of Directors of the Company.
(l) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(m) "EMPLOYEE" means any person employed by the Company or an Affiliate.
However, the term "Employee" shall not include (i) Consultants, (ii) Directors
of the Company or an Affiliate who are not compensated by for their services as
Directors or (iii) Directors of the Company or an Affiliate who are paid a
director's fee for their services as Directors.
(n) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
2
<PAGE>
(o) "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 securities exchange or any
quotation system (including, but not limited to the Neuer Markt, 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 by
such source as the Board deems reliable.
(ii) In the absence of such markets for the Common Stock or prior to
the Listing Date, the Fair Market Value shall be determined in good faith by the
Board.
(p) "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.
(q) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system.
(r) "NON-EMPLOYEE DIRECTOR" means a Director of the Company who either (i)
is not a current Employee or Officer of the Company or a subsidiary, does not
receive compensation (directly or indirectly) from the Company 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 of the Exchange Act.
(s) "NONQUALIFIED STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(t) "OFFICER" means (i) before the Listing Date, any person designated by
the Company as an officer and (ii) on and after the Listing Date, 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.
(u) "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option granted pursuant to the Plan.
3
<PAGE>
(v) "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.
(w) "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.
(x) "OUTSIDE DIRECTOR" means a Director of the Company who either (i) is
not a current employee of the Company 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 Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company 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.
(y) "PARTICIPANT" means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding Stock
Award.
(z) "PLAN" means this 1999 Equity Incentive Plan.
(aa) "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.
(bb) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(cc) "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
(dd) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(ee) "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 of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
Section 3(c).
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
4
<PAGE>
(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; what type or combination of types of Stock Award shall
be granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; and the number of shares with respect
to which a Stock Award shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards 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 Stock Award 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 a Stock Award as provided in Section
12.
(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.
(i) GENERAL. The Board may delegate administration of the Plan
to a Committee or Committees of one or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. 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 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 or
subcommittee), 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.
(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY TRADED.
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.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARES RESERVED. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the shares that may be issued pursuant to
Stock Awards shall not exceed in the aggregate four hundred forty thousand
(440,000) shares of Common Stock.
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in
5
<PAGE>
full (or vested in the case of Restricted Stock), the stock not acquired under
such Stock Award shall revert to and again become available for issuance under
the Plan. If any Common Stock acquired pursuant to the exercise of an Option
shall for any reason be repurchased by the Company under an unvested share
repurchase option provided under the Plan, the stock repurchased by the Company
under such repurchase option may revert to and again become available for
issuance under the Plan.
(c) SOURCE OF SHARES. The shares subject to the Plan may be unissued
shares or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive 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 the Option is not exercisable after
the expiration of five (5) years from the date of grant.
(c) MAXIMUM GRANTS. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, no employee shall be eligible to be granted
Options covering more than one hundred thousand (100,000) shares of the Common
Stock during any calendar year.
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 Nonqualified 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. Subject to the provisions of Section 5(b) regarding Ten Percent
Stockholders, no Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the provisions
of Section 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.
6
<PAGE>
(c) 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 Nonqualified Stock Option) by (1) delivery to the
Company of shares of Common Stock, (2) according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other shares of Common Stock) with the Participant or (3)
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 addition,
subsequent to the Listing Date, Options may be exercised through cashless
exercise procedures which are, from time to time, deemed acceptable by the Board
of Directors, and the Board of Directors may authorize that the purchase price
payable upon exercise of an Option may be paid by having Shares withheld that
otherwise would be acquired upon such exercise. Any Shares transferred to the
Company (or withheld upon exercise) as payment of the purchase price under an
Option shall be valued at their Fair Market Value as of the close of business on
the day preceding the date of exercise of such Option. No fractional shares (or
cash in lieu thereof) shall be issued upon exercise of an Option and the number
of shares that may be purchased upon exercise shall be rounded to the nearest
number of whole shares.
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 applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(d) 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
Section 6(d), 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.
(e) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonqualified Stock
Option granted prior to the Listing Date 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. A Nonqualified Stock
Option granted on or after the Listing Date shall be transferable to the extent
provided in the Option Agreement. If the Nonqualified Stock Option does not
provide for transferability, then the Nonqualified 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 Section 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.
7
<PAGE>
(f) 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 Section 6(f) are subject to any Option provisions governing
the minimum number of shares as to which an Option may be exercised.
(g) MINIMUM VESTING PRIOR TO THE LISTING DATE. Notwithstanding the
foregoing Section 6(g), Options granted prior to the Listing Date shall provide
for vesting of the total number of shares at a rate of at least twenty percent
(20%) per year over five (5) years from the date the Option was granted, subject
to reasonable conditions such as continued employment. However, in the case of
such Options granted to Officers, Directors or Consultants, the Option may
become fully exercisable, subject to reasonable conditions such as continued
employment, at any time or during any period established by the Company.
(h) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder's Continuous Service (or
such longer or shorter period specified in the Option Agreement, which, for
Options granted prior to the Listing Date, shall not be less than thirty (30)
days, unless such termination is for Cause), or (ii) the expiration of the term
of the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate.
(i) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (other than upon the Optionholder's death or
Disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in Section 6(a) or (ii) the expiration of a period of
three (3) months after the termination of the Optionholder's Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements.
(j) DISABILITY OF OPTIONHOLDER. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement, which, for Options granted prior to the Listing Date, shall
not be less than six (6) months) or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
8
<PAGE>
(k) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise the Option as of the date of death) by the
Optionholder's estate, by a person who acquired the right to exercise the Option
by bequest or inheritance or by a person designated to exercise the option upon
the Optionholder's death pursuant to Section 6(e) or 6(f), but only within the
period ending on the earlier of (1) the date eighteen (18) months following the
date of death (or such longer or shorter period specified in the Option
Agreement, which, for Options granted prior to the Listing Date, shall not be
less than six (6) months) or (2) the expiration of the term of such Option as
set forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.
(l) 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.
Subject to the "repurchase limitation" in Section 10(g), 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.
(m) RIGHT OF REPURCHASE. Subject to the "repurchase limitation" in Section
10(g), the Option may, but need not, include a provision whereby the Company may
elect, prior to the Listing Date, to repurchase all or any part of the vested
shares acquired by the Optionholder pursuant to the exercise of the Option.
(n) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares exercised pursuant to the
Option. Except as expressly provided in this Section 6(n), such right of first
refusal shall otherwise comply with any applicable provisions of the Bylaws of
the Company.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:
(i) CONSIDERATION. A stock bonus shall be awarded in
consideration for past services actually rendered to the Company for its
benefit.
9
<PAGE>
(ii) VESTING. Subject to the "repurchase limitation" in Section
10(g), shares of Common Stock awarded under the stock bonus agreement may, but
need not, be subject to a share repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board.
(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject to
the "repurchase limitation" in Section 10(g), in the event a Participant's
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.
(iv) TRANSFERABILITY. For a stock bonus award made before the
Listing Date, rights to acquire shares under the stock bonus agreement shall not
be transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Participant only by the
Participant. For a stock bonus award made on or after the Listing Date, rights
to acquire shares under the stock bonus agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the stock
bonus agreement, as the Board shall determine in its discretion, so long as
stock awarded under the stock bonus agreement remains subject to the terms of
the stock bonus agreement.
(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) PURCHASE PRICE. Subject to the provisions of Section 5(b)
regarding Ten Percent Stockholders, the purchase price under each restricted
stock purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement, but not less than
eighty-five percent (85%) of the stock's Fair Market Value on the date such
award is made or at the time the purchase is consummated.
(ii) CONSIDERATION. The purchase price of stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other arrangement with the Participant; or (iii) in any
other form of legal consideration that may be acceptable to the Board in its
discretion; provided, however, that at any time that the Company is incorporated
in Delaware, then payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.
(iii) VESTING. Subject to the "repurchase limitation" in Section
10(g), shares of Common Stock acquired under the restricted stock purchase
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.
10
<PAGE>
(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject to
the "repurchase limitation" in Section 10(g), in the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the restricted stock
purchase agreement.
(v) TRANSFERABILITY. For a restricted stock award made before
the Listing Date, rights to acquire shares under the restricted stock purchase
agreement shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. For a restricted stock award made on or after the
Listing Date, rights to acquire shares under the restricted stock purchase
agreement shall be transferable by the Participant only upon such terms and
conditions as are set forth in the restricted stock purchase agreement, as the
Board shall determine in its discretion, so long as stock awarded under the
restricted stock purchase agreement remains subject to the terms of the
restricted stock purchase agreement.
8. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) SECURITIES LAW UNDERTAKINGS AND LIMITATIONS. The Company undertakes to
seek from each regulatory commission or agency having jurisdiction over the Plan
such authority as may be required to grant Stock Awards and/or to issue and sell
shares of Common Stock upon exercise of the Stock Awards, including, without
limitation, on the Neuer Markt and such other stock exchanges as the Company may
from time to time determine are in the best interests of the Plan and the
Company. Notwithstanding the foregoing, the Company undertaking hereunder shall
not require the Company to register under the Securities Act the Plan, any Stock
Award or any stock issued or issuable pursuant to any such Stock Award. If,
after reasonable efforts, the Company is unable to obtain from any 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 Stock Awards unless and until such authority is obtained. The Company shall
have no liability for failure to issue and sell stock or other securities upon
exercise of Stock Awards in the event the Company does not obtain from relevant
regulatory commissions and/or agencies the authority which the Board of
Directors, in its sole discretion, deems necessary for the lawful issuance and
sale of stock or other securities under the Plan.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
11
<PAGE>
10. MISCELLANEOUS.
(a) 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.
(b) STOCKHOLDER RIGHTS. No Participant 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 Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant or other holder of Stock Awards any right to continue to serve
the Company or an Affiliate in the capacity in effect at the time the Stock
Award was granted or shall affect the right of the Company or an Affiliate to
terminate (i) the employment of an Employee with or 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 Nonqualified Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant'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 Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring the stock
subject to the Stock Award for the Participant'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 (iii) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (iv) 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
12
<PAGE>
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 a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant 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 participant as a result of the exercise or acquisition
of stock under the Stock Award; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
(g) REPURCHASE LIMITATION. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the time
of repurchase or at not less than the original purchase price.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the stock subject
to the Plan, or subject to any Stock Award, 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
Section 4(a) and the maximum number of securities subject to award to any person
pursuant to Section 5(c), and the outstanding Stock Awards will be appropriately
adjusted in the class(es) and number of securities and price per share of stock
subject to such outstanding Stock Awards. The Board, the determination of which
shall be final, binding and conclusive, shall make such adjustments. (The
conversion of any convertible securities of the Company shall not be treated as
a transaction "without receipt of consideration" by the Company.)
(b) DISSOLUTION OR LIQUIDATION. In the event of a dissolution or
liquidation of the Company other than in an Acquisition (as defined below), then
such Stock Awards shall be terminated if not exercised (if applicable) prior to
such event, unless such outstanding Stock Awards are assumed by a subsequent
purchaser.
(c) CHANGE IN CONTROL.
(i) For the purposes of this Section 11, "Acquisition" shall
mean (i) the acquisition (by means of purchase, merger or otherwise) by any
person or any two or more persons acting as a partnership, syndicate or other
group for the purpose of acquiring, holding or disposing of such securities of
Beneficial Ownership (as such term is defined in the Exchange Act) of fifty
percent
13
<PAGE>
(50%) or more of the sum of the amount of the capital stock of the Company then
outstanding, plus any capital stock of the Company which may be issued pursuant
to the conversion or exercise of all outstanding options, rights or warrants; or
(ii) the sale of all or substantially all of the assets of the Company.
Notwithstanding anything to the contrary, an Acquisition shall not include any
consolidation or merger effected exclusively to change the domicile of the
Company, and a person shall not be deemed to have made an acquisition of
Beneficial Ownership of Shares if such person: (a) acquires Beneficial Ownership
of such Shares directly from the Company; (b) assumes Beneficial Ownership of
more than the permitted percentage of Shares solely as a result of the
acquisition of Beneficial Ownership of Shares by the Company which, by reducing
the proportional Beneficial Ownership of Shares by other security holders,
increases the proportional Beneficial Ownership of Shares by such person; or (c)
is (1) the Company or any corporation or other person of which a majority of its
voting power or its equity securities or equity interest is owned directly or
indirectly by the Company (a "Controlled Entity") or is owned directly or
indirectly by the stockholders of the Company in the same proportion as their
Beneficial Ownership of Shares or (2) a trustee or other fiduciary holding
securities under one or more employee benefit plans or arrangements (or any
trust forming a part thereof) maintained by the Company or any Controlled
Entity.
(ii) In the event the Company undergoes an Acquisition; then:
any surviving corporation or acquiring corporation shall assume any Stock Awards
outstanding under the Plan or shall substitute similar stock awards (including
an award to acquire the same consideration paid to the stockholders in the
transaction described in this Section 11(c)) for those outstanding under the
Plan.
(iii) In the event any surviving corporation or acquiring
corporation in an Acquisition refuses to assume such Stock Awards or to
substitute similar stock awards for those outstanding under the Plan, then with
respect to (1) Stock Awards held by Participants whose Continuous Service has
not terminated prior to such event, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated and made fully exercisable at least thirty (30) days prior to the
closing of the Acquisition (and the Stock Awards terminated if not exercised
prior to the closing of such Acquisition), and (2) any other Stock Awards
outstanding under the Plan, such Stock Awards shall be terminated if not
exercised prior to the closing of the Acquisition.
(iv) In the event the Company undergoes an Acquisition and the
surviving corporation or acquiring corporation does assume such Stock Awards (or
substitutes similar stock awards for those outstanding under the Plan), then,
with respect to each Stock Award held by persons then performing services as
Employees or Directors, the vesting of each such Stock Award (and, if
applicable, the time during which such Stock Award may be exercised) shall be
accelerated and such Stock Award shall become fully vested and exercisable, if
any of the following events occurs within one (1) month before or eighteen (18)
months after the effective date of the Acquisition: (1) the service to the
Company or an affiliate of the Employee or Director holding such Stock Award is
terminated without Cause; (2) the Employee holding such Stock Award terminates
his or her service to the Company or an Affiliate due to the fact that the
principal place of the performance of the responsibilities and duties of the
Employee is changed to a location more than fifty (50) miles from such
Employee's existing work location without the
14
<PAGE>
Employee's express consent (not applicable to Directors); or (3) the Employee
holding such Stock Award terminates his or her service to the Company or
Affiliate due to the fact that there is a material reduction in such Employee's
responsibilities and duties without the Employee's express consent, provided,
however, that neither change under clauses (2) or (3) of the foregoing shall be
applicable to Directors.
(v) The acceleration of vesting provided for under this Section
11(c) may be limited in certain circumstances as follows. If any such
acceleration (the "Benefit") would (i) constitute a "parachute payment" within
the meaning of Section 280G of the Code and (ii) but for such acceleration, be
subject to the excise tax imposed by Section 4999 of the Code, then such Benefit
shall be reduced to the extent necessary so that no portion of the Benefit would
be subject to such excise tax, as determined in good faith by the Company;
provided, however, that if, in the absence of any such reduction (or after such
reduction), such Employee believes that the Benefit or any portion thereof (as
reduced, if applicable) would be subject to such excise tax, the Benefit shall
be reduced (or further reduced) to the extent determined by such Employee in his
or her discretion so that the excise tax would not apply. If, notwithstanding
any such reduction (or in the absence of such reduction), the Internal Revenue
Service ("IRS") determines that such Employee is liable for the excise tax as a
result of the Benefit, then such Employee shall be obligated to return to the
Company, within thirty (30) days of such determination by the IRS, a portion of
the Benefit sufficient such that none of the Benefit retained by such Employee
constitutes a "parachute payment" within the meaning of Section 280G of the Code
that is subject to the excise tax.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent such stockholder
approval is necessary to satisfy the requirements of Section 422 of the Code,
Rule 16b-3 or any interdealer quotation system or securities exchange listing
requirements.
(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit
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.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted before
15
<PAGE>
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. 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 Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.
16
