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EXHIBIT 10.17
SILICON GRAPHICS, INC.
AMENDED AND RESTATED 1996 SUPPLEMENTAL NON-
EXECUTIVE EQUITY INCENTIVE PLAN
1. PURPOSE OF THE PLAN. The purpose of the Silicon Graphics, Inc.
1996 Supplemental Non-Executive Equity Incentive Plan (the "Plan") is to
promote the long-term success of Silicon Graphics, Inc. (the "Company") by
providing supplemental equity incentives to non-executives of the Company to
address special circumstances identified from time to time by the
Compensation and Human Resources Committee, which could without limitation
include special retention programs addressing exceptional competitive
pressures in the market for technical personnel, special recognition programs
for outstanding performance, and other circumstances outside of the normal
course.
2. ELIGIBILITY. Stock Awards ("Rights") and nonstatutory stock
options ("Options") may be granted to Eligible Employees. If otherwise
eligible, an Employee who has been granted an Option or Right may be granted
additional Options or Rights.
3. STOCK SUBJECT TO THE PLAN.
(a) Subject to Section 11 of the Plan, the maximum aggregate
number of shares of Common Stock of the Company ("shares") that may be issued
pursuant to Options and Rights granted to participants under the Plan shall
be 17,500,000 shares*. If shares issued pursuant to a Stock Award are
forfeited or otherwise reacquired by the Company, or if an Option or Right
expires or becomes unexercisable without having been exercised in full, the
reacquired or unpurchased shares, respectively, that were subject thereto
shall become available for future grant or sale under the Plan (unless the
Plan has terminated).
(b) Any shares issued under the Plan may consist in whole or in
part of authorized and unissued shares or of treasury shares, and no
fractional shares shall be issued under the Plan. Cash may be paid in lieu
of any fractional shares in settlement of awards under the Plan.
4. PLAN ADMINISTRATION.
(a) COMMITTEE. The Compensation and Human Resources Committee
(the "Committee") appointed by the Board of Directors of the Company (the
"Board") shall be responsible for administering the Plan. The Committee
shall have full and exclusive power to interpret the Plan and to adopt such
rules,
* The number of shares authorized for issuance was increased by 7,000,000
shares through an amendment approved by the Board of Directors in July 2000.
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regulations and guidelines for carrying out the Plan as it may deem necessary
or proper. This power includes, but is not limited to, selecting award
recipients, establishing all award terms and conditions and adopting
modifications, amendments and procedures, including subplans and the like as
may be necessary to comply with provisions of the laws and applicable
regulatory rulings of countries in which the Company operates in order to
assure the viability of awards granted under the Plan and to enable
participants employed in such countries to receive advantages and benefits
under the Plan and such laws and rulings.
(b) EFFECT OF COMMITTEE'S DECISION. The Committee's decisions,
determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Rights.
5. DURATION OF THE PLAN. The Plan shall remain in effect until
terminated by the Board.
6. AWARDS. The Committee shall determine the type or types of
award(s) to be made to each participant. Awards may be granted singly, in
combination or in tandem. Awards also may be made in combination or in
tandem with, in replacement of, as alternatives to, or as the payment form
for grants or rights under any other employee or compensation plan of the
Company, including the plan of any acquired entity. The types of awards that
may be granted under the Plan are Options and Stock Awards.
7. OPTIONS.
(a) OPTIONS; NUMBER OF SHARES. The Committee, in its
discretion, may grant Options to eligible participants. Each Option shall be
evidenced by a Notice of Grant that shall specify the number of shares to
which it pertains and be in such form and contain such provisions as the
Committee shall from time to time deem appropriate. Without limiting the
foregoing, the Committee may at any time authorize the Company, with the
consent of the respective recipients, to issue new Options or Rights in
exchange for the surrender and cancellation of outstanding Options or Rights.
Option agreements shall contain the following terms and conditions:
(i) EXERCISE PRICE. The per share exercise price for the
shares issuable pursuant to an Option shall be such price as is determined by
the Committee.
(ii) WAITING PERIOD AND EXERCISE DATES. At the time an
Option is granted, the Committee shall determine the terms and conditions to
be satisfied before shares may be purchased, including the dates on which
shares subject to the Option may first be purchased. The Committee may
specify than an Option may not be exercised until the completion of a service
period specified at the time of grant. (Any such period is referred to
herein as the "waiting period.") At the time an
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Option is granted, the Committee shall fix the period within which the Option
may be exercised, which shall not be earlier than the end of the waiting
period, if any.
(iii) FORM OF PAYMENT. 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 Committee and may consist entirely of:
(1) cash;
(2) check;
(3) promissory note;
(4) other shares that (1) 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, and (2) have a Fair Market Value on
the date of surrender not greater than the aggregate exercise price of the
shares as to which said Option shall be exercised;
(5) delivery of a properly executed exercise notice
together with such other documentation as the Committee 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;
(6) any combination of the foregoing methods of
payment; or
(7) such other consideration and method of payment
for the issuance of shares to the extent permitted by Applicable Laws.
(iv) OTHER PROVISIONS. Unless otherwise determined by the
Committee at the time of grant, each Option shall provide that in the event
of a change in control of the Company (as specified by the Committee), any
Optionee's Options will become exercisable in full if, within twenty-four
(24) months after a change in control of the Company, the Optionee's
employment is terminated without cause or the Optionee resigns due to certain
involuntary relocations or reductions in compensation, as specified by the
Committee. Each Option granted under the Plan may contain such other terms,
provisions and conditions not inconsistent with the Plan as may be determined
by the Committee.
(v) BUYOUT PROVISIONS. The Committee may at any time
offer to buy out for a payment in cash, promissory note or shares, an Option
previously granted, based on such terms and conditions as the Committee shall
establish and communicate to the Optionee at the time that such offer is made.
(b) METHOD OF EXERCISE.
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(i) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Committee and as shall be permissible under
the terms of the Plan.
An Option may not be exercised for a fraction of a share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms
of the Option by the person entitled to exercise the Option and full payment
for the shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Committee
and permitted by the Option Agreement, consist of any consideration and
method of payment allowable under subsection 7(a)(iii) 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 stockholder shall exist with respect to the Optioned
Stock, notwithstanding the 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 shall 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.
(ii) TERMINATION OF EMPLOYMENT RELATIONSHIP. In the event
an Optionee ceases to be an Employee (other than as a result of the
Optionee's death or Disability), the Optionee may exercise his or her Option,
but only within such period of time from the date of such termination as is
determined by the Committee and, unless determined otherwise by the
Committee, only to the extent that the Optionee 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). To the extent
that Optionee was not entitled to exercise an Option at the date of such
termination, and to the extent that the Optionee does not exercise such
Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(iii) DISABILITY OF OPTIONEE. In the event an Optionee
ceases to be an Employee as a result of the Optionee's Disability, the
Optionee may exercise his or her Option, but only within twelve (12) months
from the date of such termination, and, unless determined otherwise by the
Committee, only to the extent that the Optionee 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). To the extent
that Optionee was not entitled to exercise an Option at the date of such
termination, and to the extent that the Optionee does not exercise such
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Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(iv) DEATH OF OPTIONEE. In the event of an Optionee's
death, the Optionee's estate or a person who acquired the right to exercise
the deceased Optionee's Option by bequest or inheritance may exercise the
Option, but only within twelve (12) months following the date of death, and,
unless determined otherwise by the Committee, only to the extent that the
Optionee was entitled to exercise it at the date of death (but in no event
later than the expiration of the term of such Option as set forth in the
Option Agreement). To the extent that Optionee was not entitled to exercise
an Option at the date of death, and to the extent that the Optionee's estate
or a person who acquired the right to exercise such Option does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
8. STOCK AWARDS. All or part of any Stock Award may be subject to
conditions and restrictions established by the Committee, and set forth in
the award agreement, which will include, but are not limited to, achievement
of specific business objectives and other measurements of individual,
business unit or Company performance measured over a period of not less than
twelve (12) months.
9. DEFERRALS AND SETTLEMENTS. Payment of awards may be in the form
of cash, Common Stock, other awards or combinations thereof as the Committee
shall determine, and with such restrictions as it may impose. The Committee
also may require or permit participants to elect to defer the issuance of
shares or the settlement of awards in cash under such rules and procedures as
it may establish under the Plan. The Committee may also provide that
deferred settlements include the payment or crediting of interest on the
deferral amounts.
10. TRANSFERABILITY OF OPTIONS AND RIGHTS. Unless otherwise
determined by the Committee to the contrary, Options and Rights 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, during the lifetime of the Optionee only by the Optionee. The
Committee may, in the manner established by the Committee, provide for the
transfer, without payment of consideration, of an Option or Right by the
Optionee to any member of the Optionee's immediate family or to a trust or
partnership whose beneficiaries are members of the Optionee's immediate
family. In such case, the Option or Right will be exercisable only by such
transferee. Following transfer, any such Options or Rights shall continue to
be subject to the same terms and conditions as were applicable immediately
prior to the transfer. For purposes of this Section, an Optionee's
"immediate family" shall mean the Optionee's spouse, children and
grandchildren.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER,
ASSET SALE OR CHANGE OF CONTROL.
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(a) CHANGES IN CAPITALIZATION. Subject to any required action
by the stockholders of the Company, the number of shares of Common Stock
covered by each outstanding Option and Right, and the number of shares of
Common Stock that have been authorized for issuance under the Plan but as to
which no Options or Rights have yet been granted or which have been returned
to the Plan upon cancellation or expiration of an Option or Right, as well as
the price per share of Common Stock covered by each such outstanding Option
or Right, 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 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 or
Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option or
Right has not been previously exercised, it will terminate immediately prior
to the consummation of such proposed action. The Committee may, in the
exercise of its sole discretion in such instances, declare that any Option or
Right shall terminate as of a date fixed by the Committee and give each
Optionee the right to exercise his or her Option or Right as to all or any
part of the Optioned Stock, including shares as to which the Option or Right
would not otherwise be exercisable.
(c) MERGER OR ASSET SALE. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Right shall be assumed
or an equivalent Option or Right substituted by the successor corporation or
a Parent or Subsidiary of the successor corporation. In the event that the
successor corporation does not agree to assume the Option or to substitute an
equivalent option, the Committee may, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise the
Option or Right as to all or a portion of the Optioned Stock, including
shares as to which it would not otherwise be exercisable. If the Committee
makes an Option or Right exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Committee shall notify the
Optionee that the Option or Right shall be exercisable for such period as the
Committee may designate, and the Option or Right will terminate upon the
expiration of such period. For the purposes of this Section 11(c), the
Option or Right shall be considered assumed if, immediately following the
merger or sale of assets, the Option or Right confers the right to receive,
for each share of Optioned Stock subject to the Option or Right immediately
prior to the merger or sale of assets, the consideration (either stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of Common
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Stock for each share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares); provided,
however, that if such consideration received in the merger or sale of assets
was not solely common stock of the successor corporation or its parent, the
Committee may, with the consent of the successor corporation and the
Optionee, provide for the consideration to be received upon the exercise of
the Option or Right, for each share of Optioned Stock subject to the Option
or Right, to be solely common stock of the successor corporation or its
parent equal in Fair Market Value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
12. DATE OF GRANT. The date of grant of an Option or Right shall
be, for all purposes, the date on which the Committee makes the determination
granting such Option or Right, or such other later date as is determined by
the Committee. Notice of the determination shall be provided to each
Optionee within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time
amend, alter, suspend or terminate the Plan.
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of
any Optionee, unless mutually agreed otherwise between the Optionee and the
Company, which agreement must be in writing and signed by the Optionee and
the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to
the exercise of an Option or Right unless the exercise of such Option or
Right and the issuance and delivery of such shares 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, Applicable Laws, and the requirements of any stock exchange or
quotation system upon which the shares may then be listed or quoted, and
shall be further subject to the approval of counsel for the Company with
respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise
of an Option or Right, the Company may require the person exercising such
Option or Right to represent and warrant at the time of any such exercise
that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required.
15. LIABILITY OF COMPANY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by
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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.
16. 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.
17. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "APPLICABLE LAWS" means all applicable law, including
without limitation, the Code, Delaware General Corporation Law, and
applicable federal and state securities laws.
(b) "COMMON STOCK" means the Common Stock of the Company.
(c) "COMPANY" means Silicon Graphics, Inc., and any entity that
is directly or indirectly controlled by the Company, or any entity in which
the Company has a significant equity interest, as determined by the Committee.
(d) "DISABILITY" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(e) "ELIGIBLE EMPLOYEE" means an Employee who is not a
vice-president or more senior Employee.
(f) "EMPLOYEE" means any person employed by the Company.
(g) "FAIR MARKET VALUE" means, as of any date, the closing
price for a share of Common Stock as reported daily in The Wall Street
Journal or a similar readily available public source. If no sales of shares
were made on such date, the closing price of a share as reported for the
preceding day on which sale of shares were made shall be used.
(h) "NOTICE OF GRANT" means a written notice evidencing certain
terms and conditions of an individual Option or Stock Award grant. The
Notice of Grant is part of the Option Agreement and the Stock Award Agreement.
(i) "OPTION" means a stock option granted pursuant to the Plan.
(j) "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of
the Plan.
(k) "OPTIONED STOCK" means the Common Stock subject to an
Option or Right.
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(l) "OPTIONEE" means an Employee who holds an outstanding
Option or Right.
(m) "STOCK AWARD" means an award made or denominated in shares
or equivalent in value to shares pursuant to Section 8 of the Plan.
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SILICON GRAPHICS, INC.
1996 SUPPLEMENTAL NON-EXECUTIVE EQUITY INCENTIVE PLAN
NON-STATUTORY STOCK OPTION GRANT AGREEMENT
Silicon Graphics, Inc., a Delaware corporation (the "Company"), has
granted to the Optionee named on the attached NOTICE OF GRANT OF STOCK OPTION
AND GRANT AGREEMENT (the "NOTICE") which is incorporated herein by reference,
an option to purchase the total number of shares of Common Stock and at the
price determined, both as set forth on the attached NOTICE, and in all
respects subject to the terms, definitions and provisions of the 1996
Supplemental Non-Executive Equity Incentive Plan (the "Plan") adopted by the
Company which is incorporated herein by reference. The terms defined in the
Plan shall have the same defined meanings herein.
By signing the NOTICE, Optionee acknowledges receipt of a copy of the
Plan, a copy of which is annexed hereto, and represents that he or she is
familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee further
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Board upon any questions arising under the Plan.
1. NATURE OF THE OPTION. This Option is a non-statutory option and
is not intended to qualify for any special tax benefits to the Optionee.
2. EXERCISE PRICE. The exercise price for each share of Common
Stock is as set forth in the attached NOTICE.
3. EXERCISE OF OPTION. This Option shall be exercisable during its
term in accordance with the provisions of Section 7 of the Plan as follows:
(a) RIGHT TO EXERCISE.
(i) Subject to subsection 3(a) (ii) and (iii), below, this
Option shall be exercisable cumulatively, to the extent of twenty percent
(20%) of the Shares subject to the Option on the anniversary ten (10) months
after the date of hire as set forth in the attached NOTICE; thereafter, the
Shares subject to the Option shall be exercisable to the extent of an
additional two percent (2%) of the Shares per month on each subsequent
anniversary date of the date of hire.
(ii) This Option may not be exercised for a fraction of a
share.
(iii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 7, 8, and 9 below.
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(b) METHOD OF EXERCISE. This Option shall be exercisable by
written notice. Such notice shall be in the form attached hereto as Exhibit
A. The notice shall be signed by the Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the exercise price. The Option
shall be deemed to be exercised upon receipt by the Company of such written
notice accompanied by the exercise price.
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed. Assuming such compliance, the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such shares.
4. OPTIONEE'S REPRESENTATIONS. In the event the shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, concurrently with the exercise of all or any portion of this
Option, deliver to the Company his or her Investment Representation Statement
in the form of Exhibit B, (available in Stock Administration) and shall read
the applicable rules of the Commissioner of Corporations attached to such
Investment Representation Statement.
5. METHOD OF PAYMENT. Payment of the exercise price shall be by any
of the following, or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of other Shares of Common Stock of the
Company of a value equal to the exercise price of the shares as to which the
Option is being exercised which, in the case of shares acquired previously
upon exercise of an option have been owned by the Optionee for more than six
(6) months on the date of surrender; or
(iv) delivery of a properly executed exercise notice together
with such other documentation as the Company 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.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if
the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule
under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation
G") as promulgated by the Federal Reserve Board. As a condition to the
exercise of this Option, the Company
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may require Optionee to make any representation and warranty to the Company
as may be required by any applicable law or regulation.
7. TERMINATION OF STATUS AS AN EMPLOYEE. If Optionee ceases to
serve as an Employee, he or she may, but only within three (3) months after
the date he or she ceases to be an Employee of the Company, exercise this
Option to the extent that he or she was entitled to exercise it at the date
of such termination. To the extent that he or she was not entitled to
exercise this Option at the date of such termination, or if he or she does
not exercise this Option within the time specified herein, the Option shall
terminate.
8. DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 7 above, if Optionee is unable to continue his or her employment
relationship with the Company as a result of his or her Disability, the
Optionee may, but only within twelve (12) months from the date of such
termination, exercise his or her Option to the extent he or she was entitled
to exercise the Option at the date of such termination. To the extent that
he or she was not entitled to exercise the Option at the date of termination,
or if he or she does not exercise such Option within the time specified
herein, the Option shall terminate.
9. DEATH OF OPTIONEE. In the event of the death of Optionee during
the term of this Option, the Option may be exercised, at any time within
twelve (12) months following the date of death, by 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
as of the date of death.
10. TRANSFERABILITY OF OPTION. Unless otherwise determined by the
Committee to the contrary, this Option may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or
by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of this Option shall be
binding upon the executors, administrators, heirs, successors and assigns of
the Optionee.
11. TERM OF OPTION. This Option may not be exercised more than ten
(10) years from the date of grant of this Option, and may be exercised during
such term only in accordance with the Plan and the terms of this Option.
12. TAXATION UPON EXERCISE OF OPTION. Optionee understands that,
upon exercise of this Option, he will recognize income for tax purposes in an
amount equal to the excess of the then fair market value of the shares over
the exercise price. The Company will be required to withhold tax from
Optionee's current compensation with respect to such income; to the extent
that Optionee's current compensation is insufficient to satisfy the
withholding tax liability, the Company may require the Optionee to make a
cash payment to cover such liability as a condition of exercise of this
Option. Upon a resale of such shares by the Optionee, any difference between
the sale price and the fair market value of the shares on the date of
exercise of the Option will be treated as capital gain or loss.
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13. ACCELERATION UPON CHANGE OF CONTROL. Notwithstanding provisions
of Section 3(a) with respect to option exercisability, in the event of a
Change of Control of the Company, this Option shall automatically become
exercisable in full if, within twenty-four (24) months after a Change of
Control Date, (i) the Optionee is involuntarily terminated by the Company or
any successor company (hereinafter, the "Employer") without Cause or (ii) the
Optionee voluntarily resigns from the Employer for Good Reason.
14. DEFINITIONS. For purposes of Section 13, the terms "Cause,"
"Change of Control," "Change of Control Date," and "Good Reason" shall have
the meanings set out below:
(a) "Cause" means the termination of employment of an Optionee
shall have taken place as a result of:
(i) an act or acts of dishonesty undertaken by such
Optionee and intended to result in gain or personal enrichment of the
Optionee, or
(ii) persistent failure to perform the duties and
obligations of such Optionee which is not remedied in a reasonable period of
time after receipt of written notice from the Employer, or
(iii) violation of confidentiality or proprietary
information obligations to or agreements entered into with the Employer, or
(iv) use, sale or distribution of illegal drugs on the
Employer's premises, or
(v) threatening, intimidating, or coercing or harassing
fellow employees, or
(vi) the conviction of such Optionee of a felony.
(b) "Change of Control" of the Company means:
(i) the acquisition by any Person (as such term is used in
Sections 13(d) and 14(d) of the 1934 Act) as Beneficial Owner (as such term
is used in Rule 13d-3 promulgated under the 1934 Act), directly or
indirectly, of fifty percent (50%) or more of the combined voting power of
the outstanding shares of capital stock of the Company's then outstanding
securities with respect to the election of the directors of the Board.
(ii) During any period of three (3) consecutive years
individuals who, at the beginning of such period, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board, provided that any person becoming a Director of the Board
subsequent to the
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date of this agreement whose election, or nomination for election by the
Company's shareholders, was approved by the vote of at least a majority of
the directors then comprising the Incumbent Board (other than an election or
nomination of any individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Board, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the 1934 Act) shall be, for these
purposes, considered as though such person were a member of the Incumbent
Board.
(c) "Change of Control Date" means the effective date of the
Change of Control or such date which the Board shall, by resolution, deem to
be the Change of Control Date.
(d) "Good Reason" for voluntary resignation means (i) the
Employer reduces by ten percent (10%) or more the Optionee's compensation at
the rate in effect immediately prior to the Change of Control or (ii) without
the Optionee's express written consent, the Employer requires the Optionee to
change the location of his or her job or office, so that he or she will be
based at a location more then fifty (50) miles from the location of his or
her job or office immediately prior to the Change of Control. For these
purposes, "Compensation" includes base salary, exclusive of bonus, incentive
compensation and shift differential, paid by the Employer as consideration
for the Optionee's service.
