NETWORK PERIPHERALS INC.
1997 STOCK PLAN
(As Amended Through March 1, 2000)
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 Establishment. The Network Peripherals Inc. 1997 Stock Plan (the
"Plan") is hereby established effective as of February 18, 1997 (the "Effective
Date").
1.2 Purpose. The purpose of the Plan is to advance the interests of
the Participating Company Group and its stockholders by providing an incentive
to attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.
1.3 Term of Plan. The Plan shall continue in effect until the earlier
of its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all restrictions on
such shares under the terms of the Plan and the agreements evidencing Awards
granted under the Plan have lapsed. However, all Incentive Stock Options shall
be granted, if at all, within ten (10) years from the earlier of the date the
Plan is adopted by the Board or the date the Plan is duly approved by the
stockholders of the Company.
2. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(a) "Award" means an Option or Restricted Stock.
(b) "Board" means the Board of Directors of the Company. If one
or more Committees have been appointed by the Board to administer the Plan,
"Board" also means such Committee(s).
(c) "Code" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.
(d) "Committee" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. Unless the powers of the Committee
have been specifically limited, the Committee shall have all of the powers of
the Board granted herein, including, without limitation, the power to amend or
terminate the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.
(e) "Company" means Network Peripherals Inc., a Delaware
corporation, or any successor corporation thereto.
<PAGE>
(f) "Consultant" means any person, including an advisor, engaged
by a Participating Company to render services other than as an Employee or a
Director.
(g) "Director" means a member of the Board or of the board of
directors of any other Participating Company.
(h) "Disability" means the permanent and total disability of the
Participant within the meaning of Section 22(e)(3) of the Code.
(i) "Employee" means any person treated as an employee (including
an officer or a Director who is also treated as an employee) in the records of a
Participating Company; provided, however, that neither service as a Director nor
payment of a director's fee shall be sufficient to constitute employment for
purposes of the Plan.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means, as of any date, the value of a
share of Stock or other property as determined by the Board, in its sole
discretion, or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein, subject to the following:
(i) If, on such date, there is a public market for the
Stock, the Fair Market Value of a share of Stock shall be the closing sale price
of a share of Stock (or the mean of the closing bid and asked prices of a share
of Stock if the Stock is so quoted instead) as quoted on the Nasdaq National
Market, the Nasdaq Small-Cap Market or such other national or regional
securities exchange or market system constituting the primary market for the
Stock, as reported in the Wall Street Journal or such other source as the
Company deems reliable. If the relevant date does not fall on a day on which the
Stock has traded on such securities exchange or market system, the date on which
the Fair Market Value shall be established shall be the last day on which the
Stock was so traded prior to the relevant date, or such other appropriate day as
shall be determined by the Board, in its sole discretion.
(ii) If, on such date, there is no public market for the
Stock, the Fair Market Value of a share of Stock shall be as determined by the
Board without regard to any restriction other than a restriction which, by its
terms, will never lapse.
(l) "Incentive Stock Option" means an Option intended to be (as
set forth in the Option Agreement) and which qualifies as an incentive stock
option within the meaning of Section 422(b) of the Code.
(m) "Insider" means an officer or a Director of the Company or
any other person whose transactions in Stock are subject to Section 16 of the
Exchange Act.
(n) "Nonstatutory Stock Option" means an Option not intended to
be (as set forth in the Option Agreement) or which does not qualify as an
Incentive Stock Option.
<PAGE>
(o) "Option" means a right granted under Section 6 to purchase
Stock (subject to adjustment as provided in Section 4.2) pursuant to the terms
and conditions of the Plan. An Option may be either an Incentive Stock Option or
a Nonstatutory Stock Option.
(p) "Option Agreement" means a written agreement between the
Company and an Optionee setting forth the terms, conditions and restrictions of
the Option granted to the Optionee and any shares acquired upon the exercise
thereof.
(q) "Optionee" means a person who has been granted one or more
Options.
(r) "Parent Corporation" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(s) "Participant" means a person who has been granted one or more
Awards.
(t) "Participating Company" means the Company or any Parent
Corporation or Subsidiary Corporation.
(u) "Participating Company Group" means, at any point in time,
all corporations collectively which are then Participating Companies.
(v) "Restricted Stock" means Stock (subject to adjustment as
provided in Section 4.2) granted or sold to a Participant pursuant to Section 7
and the terms and conditions of the Plan.
(w) "Restricted Stock Agreement" means a written agreement
between the Company and a Participant setting forth the terms, conditions and
restrictions applying to the Restricted Stock acquired by the Participant.
(x) "Rule 16b-3" means Rule 16b 3 under the Exchange Act, as
amended from time to time, or any successor rule or regulation.
(y) "Section 162(m)" means Section 162(m) of the Code, as amended
by the Revenue Reconciliation Act of 1993 (P.L. 103-66), and any regulations
promulgated thereunder.
(z) "Securities Act" means the Securities Act of 1933, as
amended.
(aa) "Service" means a Participant's employment or service with
the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. The Participant's Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders Service to the Participating Company Group or a change in the
Participating Company for which the Participant renders such Service, provided
that there is no interruption or termination of the Participant's Service.
Furthermore, a Participant's Service with the Participating Company Group shall
not be deemed to have
<PAGE>
terminated if the Participant takes any military leave, sick leave, or other
bona fide leave of absence approved by the Company; provided, however, that if
any such leave exceeds ninety (90) days, on the ninety-first (91st) day of such
leave the Participant's Service shall be deemed to have terminated unless the
Participant's right to return to Service with the Participating Company Group is
guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company or required by law, a leave of absence shall
not be treated as Service for purposes of determining vesting under the
Participant's Option Agreement or Restricted Stock Agreement. The Participant's
Service shall be deemed to have terminated either upon an actual termination of
Service or upon the corporation for which the Participant performs Service
ceasing to be a Participating Company. Subject to the foregoing, the Company, in
its sole discretion, shall determine whether the Participant's Service has
terminated and the effective date of such termination.
(bb) "Stock" means the common stock of the Company, as adjusted
from time to time in accordance with Section 4.2.
(cc) "Subsidiary Corporation" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
(dd) "Ten Percent Stockholder" means a Participant who, at the
time an Award is granted to the Participant, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of a
Participating Company within the meaning of Section 422(b)(6) of the Code.
2.2 Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.
3. ADMINISTRATION.
3.1 Administration by the Board. The Plan shall be administered by the
Board. All questions of interpretation of the Plan or of any Award shall be
determined by the Board, and such determinations shall be final and binding upon
all persons having an interest in the Plan or such Award. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, determination or election which
is the responsibility of or which is allocated to the Company herein, provided
the officer has apparent authority with respect to such matter, right,
obligation, determination or election.
3.2 Administration with Respect to Insiders. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b 3.
<PAGE>
3.3 Powers of the Board. In addition to any other powers set forth in
the Plan and subject to the provisions of the Plan, the Board shall have the
full and final power and authority, in its sole discretion:
(a) to determine the persons to whom, and the time or times at
which, Awards shall be granted and the number of shares of Stock to be subject
to each Award;
(b) to determine whether an Award will be an Incentive Stock
Option, a Nonstatutory Stock Option, or Restricted Stock;
(c) to determine the Fair Market Value of shares of Stock or
other property;
(d) to determine the terms, conditions and restrictions
applicable to each Award (which need not be identical) and any shares acquired
pursuant to the Plan, including, without limitation, (i) the exercise or
purchase price, if any, applicable to each Award, (ii) the method of payment for
shares purchased under the Plan, (iii) the method for satisfaction of any tax
withholding obligation arising in connection with the Award or such shares,
including by the withholding or delivery of shares of stock, (iv) the timing,
terms and conditions of the exercisability of each Option or the vesting of any
shares acquired pursuant to the Plan, (v) the time of the expiration of the
Award, (vi) the effect of the Participant's termination of Service with the
Participating Company Group on any of the foregoing, and (vii) all other terms,
conditions and restrictions applicable to the Award or such shares not
inconsistent with the terms of the Plan;
(e) to approve one or more forms of Option Agreement and
Restricted Stock Agreement;
(f) to amend, modify, extend, or renew, or grant a new Award in
substitution for, any Award or to waive any restrictions or conditions
applicable to any Award or any shares acquired under the Plan;
(g) to accelerate, continue, extend or defer the exercisability
of any Option or the vesting of any shares acquired under the Plan, including
with respect to the period following a Participant's termination of Service with
the Participating Company Group;
(h) to delegate to any proper officer of the Company the
authority to grant one or more Awards, without further approval of the Board, to
any person eligible pursuant to Section 5, other than a person who, at the time
of such grant, is an Insider; provided, however, that (i) such Awards shall not
be granted to any one person within any fiscal year of the Company for more than
50,000 shares in the aggregate, (ii) the exercise or purchase price per share of
Stock shall be equal to the Fair Market Value per share of the Stock on the
effective date of grant, and (iii) each such Award shall be subject to the terms
and conditions of the appropriate standard form of Option Agreement or
Restricted Stock Agreement approved by the Board and shall conform to the
provisions of the Plan and such other guidelines as shall be established from
time to time by the Board;
<PAGE>
(i) to prescribe, amend or rescind rules, guidelines and policies
relating to the Plan, or to adopt supplements to, or alternative versions of,
the Plan, including, without limitation, as the Board deems necessary or
desirable to comply with the laws of, or to accommodate the tax policy or custom
of, foreign jurisdictions whose citizens may be granted Awards; and
(j) to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option Agreement or Restricted Stock Agreement
and to make all other determinations and take such other actions with respect to
the Plan or any Award as the Board may deem advisable to the extent consistent
with the Plan and applicable law.
3.4 Committee Complying with Section 162(m). If a Participating
Company is a "publicly held corporation" within the meaning of Section 162(m),
the Board may establish a Committee of "outside directors" within the meaning of
Section 162(m) (a "Section 162(m) Committee") to approve the grant of any Award
which might reasonably be anticipated to result in the payment of employee
remuneration that would otherwise exceed the limit on employee remuneration
deductible for income tax purposes pursuant to Section 162(m).
4. SHARES SUBJECT TO PLAN.
4.1 Maximum Number of Shares Issuable. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be three million five hundred thousand
(3,500,000) and shall consist of authorized but unissued or reacquired shares of
Stock or any combination thereof. If an outstanding Award for any reason expires
or is terminated or canceled or shares of Stock acquired, subject to repurchase
or forfeiture, pursuant to an Award are repurchased by the Company or forfeited,
the shares of Stock allocable to the unexercised portion of such Award, or such
repurchased or forfeited shares of Stock, shall again be available for issuance
under the Plan.
4.2 Adjustments for Changes in Capital Structure. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number and class of shares subject
to the Plan and to any outstanding Awards, in the Section 162(m) Grant Limit set
forth in Section 4.3, and in the exercise or purchase price per share of any
outstanding but unexercised Awards. If a majority of the shares which are of the
same class as the shares that are subject to outstanding Awards are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change Event, as defined in Section 8.1) shares of another corporation
(the "New Shares"), the Board may unilaterally amend the outstanding Awards to
provide that such Awards are for New Shares. In the event of any such amendment,
the number of shares subject to outstanding Awards and the exercise or purchase
price per share of outstanding but unexercised Awards shall be adjusted in a
fair and equitable manner as determined by the Board, in its sole discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment
pursuant to this Section 4.2 shall be rounded up or down to the nearest whole
number, as determined by the Board, and in no event may the exercise or purchase
price of any Award be decreased to an amount less than the par value, if any, of
the stock subject to the Award. The adjustments determined by the Board pursuant
to this Section 4.2 shall be final, binding and conclusive.
<PAGE>
4.3 Section 162(m) Grant Limit. Subject to adjustment as provided in
Section 4.2, at any such time as a Participating Company is a "publicly held
corporation" within the meaning of Section 162(m), no Employee shall be granted
one or more Awards within any fiscal year of the Company which in the aggregate
are for more than five hundred thousand (500,000) shares; provided, however,
that the Company may make an additional one-time grant to any newly-hired
Employee of an Award for up to two hundred fifty thousand (250,000) shares (the
"Section 162(m) Grant Limit"). An Option which is canceled in the same fiscal
year of the Company in which it was granted shall continue to be counted against
the Section 162(m) Grant Limit for such period.
5. ELIGIBILITY. Awards may be granted only to Employees, Consultants, and
Directors. For purposes of the foregoing sentence, "Employees," "Consultants"
and "Directors" shall include prospective Employees, prospective Consultants and
prospective Directors to whom Awards, other than a Restricted Stock Bonus (as
defined in Section 7 below), may be granted in connection with written offers of
a Service relationship with the Participating Company Group. Eligible persons
may be granted more than one (1) Award.
6. TERMS AND CONDITIONS OF OPTIONS.
Options shall be evidenced by Option Agreements specifying the
number of shares of Stock covered thereby, in such form as the Board shall from
time to time establish. Option Agreements may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
6.1 Limitations on Options.
(a) Option Grant Restrictions. Any person who is not an Employee
on the effective date of the grant of an Option to such person may be granted
only a Nonstatutory Stock Option. An Incentive Stock Option granted to a
prospective Employee upon the condition that such person become an Employee
shall be deemed granted effective on the date such person commences Service as
an Employee with a Participating Company, with an exercise price determined as
of such date in accordance with Section 6.2.
(b) Fair Market Value Limitation. To the extent that options
designated as Incentive Stock Options (granted under all stock option plans of
the Participating Company Group, including the Plan) become exercisable by an
Optionee for the first time during any calendar year for stock having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portion
of such options which exceeds such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section 6.1(b), options designated as Incentive
Stock Options shall be taken into account in the order in which they were
granted, and the Fair Market Value of stock shall be determined as of the time
the option with respect to such stock is granted. If the Code is amended to
provide for a different limitation from that set forth in this Section 6.1(b),
such different limitation shall be deemed incorporated herein effective as of
the
<PAGE>
date and with respect to such Options as required or permitted by such amendment
to the Code. If an Option is treated as an Incentive Stock Option in part and as
a Nonstatutory Stock Option in part by reason of the limitation set forth in
this Section 6.1(b), the Optionee may designate which portion of such Option the
Optionee is exercising. In the absence of such designation, the Optionee shall
be deemed to have exercised the Incentive Stock Option portion of the Option
first. Separate certificates representing each such portion shall be issued upon
the exercise of the Option.
6.2 Exercise Price. The exercise price for each Option shall be
established in the sole discretion of the Board; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty five percent (85%) of the Fair Market Value of a share
of Stock on the effective date of grant of the Option, and (c) no Incentive
Stock Option granted to a Ten Percent Stockholder shall have an exercise price
per share less than one hundred ten percent (110%) of the Fair Market Value of a
share of Stock on the effective date of grant of the Option. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) may be granted with an exercise price lower than the minimum exercise
price set forth above if such Option is granted pursuant to an assumption or
substitution for another option in a manner qualifying under the provisions of
Section 424(a) of the Code.
6.3 Exercise Period. Options shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the Board and
set forth in the Option Agreement evidencing such Option; provided, however,
that (a) no Incentive Stock Option shall be exercisable after the expiration of
ten (10) years after the effective date of grant of such Option, (b) no
Incentive Stock Option granted to a Ten Percent Stockholder shall be exercisable
after the expiration of five (5) years after the effective date of grant of such
Option, and (c) no Option granted to a prospective Employee, prospective
Consultant or prospective Director may become exercisable prior to the date on
which such person commences Service with a Participating Company. Except as
otherwise provided in this Section or by the Board in the grant of an Option,
any Option granted hereunder shall have a term of ten (10) years from the
effective date of grant of the Option.
6.4 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash, by check, or
cash equivalent, (ii) by tender to the Company of shares of Stock owned by the
Optionee having a Fair Market Value (as determined by the Company without regard
to any restrictions on transferability applicable to such stock by reason of
federal or state securities laws or agreements with an underwriter for the
Company) not less than the exercise price, (iii) by the assignment of the
proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System) (a
<PAGE>
"Cashless Exercise"), (iv) by the Optionee's promissory note in a form approved
by the Company, (v) by such other consideration as may be approved by the Board
from time to time to the extent permitted by applicable law, or (vi) by any
combination thereof. The Board may at any time or from time to time, by adoption
of or by amendment to the standard forms of Option Agreement described in
Section 6.7, or by other means, grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price or
which otherwise restrict one or more forms of consideration.
(b) Tender of Stock. Notwithstanding the foregoing, an Option may
not be exercised by tender to the Company of shares of Stock to the extent such
tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.
Unless otherwise provided by the Board, an Option may not be exercised by tender
to the Company of shares of Stock unless such shares either have been owned by
the Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.
(c) Cashless Exercise. The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise.
(d) Payment by Promissory Note. No promissory note shall be
permitted if the exercise of an Option using a promissory note would be a
violation of any law. Any permitted promissory note shall be on such terms as
the Board shall determine at the time the Option is granted. The Board shall
have the authority to permit or require the Optionee to secure any promissory
note used to exercise an Option with the shares of Stock acquired upon the
exercise of the Option or with other collateral acceptable to the Company.
Unless otherwise provided by the Board, if the Company at any time is subject to
the regulations promulgated by the Board of Governors of the Federal Reserve
System or any other governmental entity affecting the extension of credit in
connection with the Company's securities, any promissory note shall comply with
such applicable regulations, and the Optionee shall pay the unpaid principal and
accrued interest, if any, to the extent necessary to comply with such applicable
regulations.
6.5 Tax Withholding. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value, as determined by the Company, equal to all
or any part of the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to such
Option or the shares acquired upon the exercise thereof. Alternatively or in
addition, in its sole discretion, the Company shall have the right to require
the Optionee, through payroll withholding, cash payment or otherwise, including
by means of a Cashless Exercise, to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon the exercise thereof. The Company
shall have no obligation to deliver shares of Stock or to release shares of
Stock from an escrow established pursuant to the Option Agreement until the
Participating Company Group's tax withholding obligations have been satisfied by
the Optionee.
<PAGE>
6.6 Effect of Termination of Service.
(a) Option Exercisability. Subject to earlier termination of the
Option as otherwise provided herein, an Option shall be exercisable after an
Optionee's termination of Service as follows:
(i) Disability. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months (or such longer period of time as determined by the
Board, in its sole discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the date of expiration of the
Option's term as set forth in the Option Agreement evidencing such Option (the
"Option Expiration Date").
(ii) Death. If the Optionee's Service with the Participating
Company Group is terminated because of the death of the Optionee, the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee's legal representative or
other person who acquired the right to exercise the Option by reason of the
Optionee's death at any time prior to the expiration of six (6) months (or such
longer period of time as determined by the Board, in its sole discretion) after
the date on which the Optionee's Service terminated, but in any event no later
than the Option Expiration Date. The Optionee's Service shall be deemed to have
terminated on account of death if the Optionee dies within three (3) months
after the Optionee's termination of Service.
(iii) Other Termination of Service. If the Optionee's
Service with the Participating Company Group terminates for any reason, except
Disability or death, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee's Service terminated, may be
exercised by the Optionee within thirty (30) days (or such longer period of time
as determined by the Board, in its sole discretion) after the date on which the
Optionee's Service terminated, but in any event no later than the Option
Expiration Date.
(b) Extension if Exercise Prevented by Law. Notwithstanding the
foregoing, if the exercise of an Option within the applicable time periods set
forth in Section 6.6(a) is prevented by the provisions of Section 10 below, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Expiration Date.
(c) Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 6.6(a) of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.
6.7 Standard Forms of Option Agreement. Unless otherwise provided by
the Board at the time the Option is granted, an Option designated as an
"Incentive Stock Option" or a "Nonstatutory Stock Option" shall comply with and
be subject to the terms and conditions set forth in the form of Incentive Stock
Option Agreement or Nonstatutory Stock Option Agreement, respectively, adopted
by the Board concurrently with its adoption of the Plan and as amended from time
to time. The Board shall have the authority from time to time to vary the terms
of any of the standard forms of Option Agreement described in this Section
either in connection with the grant or amendment of an individual Option or in
connection with the authorization of a new standard form or forms; provided,
however, that the terms and conditions of any such new, revised or amended
standard form or forms of Option Agreement are not inconsistent with the terms
of the Plan. Such authority shall include, but not by way of limitation, the
authority to grant Options which are immediately exercisable subject to the
Company's right to repurchase any unvested shares of Stock acquired by an
Optionee upon the exercise of an Option in the event such Optionee's employment
or service with the Participating Company Group is terminated for any reason,
with or without cause.
6.8 Nontransferability of Incentive Stock Options. During the lifetime
of the Optionee, an Option shall be exercisable only by the Optionee or the
Optionee's guardian or legal representative. No Option shall be assignable or
transferable by the Optionee, except by will or by the laws of descent and
distribution. Notwithstanding the foregoing, a Nonstatutory Stock Option shall
be assignable or transferable to the extent permitted by the Board and set forth
in the Option Agreement evidencing such Option.
7. TERMS AND CONDITIONS OF RESTRICTED STOCK.
The Board may from time to time grant Restricted Stock Awards
which may be in the form of a stock bonus (a "Restricted Stock Bonus") or a
stock purchase right (a "Restricted Stock Purchase Right"). Restricted Stock
Awards shall be evidenced by Restricted Stock Agreements, specifying the number
of shares of Stock covered there, in such form as the Board shall from time to
time establish. Restricted Stock Agreements may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
7.1 Performance-Based Restricted Stock Awards. A Section 162(m)
Committee may, but need not, condition the grant of any Restricted Stock Award
(a "Performance Award") on the attainment, during a performance period
established by such Committee, of one or more performance goals pursuant to
procedures intended to qualify such Award as "performance-based compensation"
for purposes of Section 162(m). Any such performance goals shall be
preestablished in writing by the Section 162(m) Committee within the period
required by Section 162(m) and shall be based on one or more of the following
business criteria with respect to the Participating Company Group: revenue,
operating income, pre-tax profit, net income, gross margin, operating margin,
earnings per share, return on stockholder equity, return on capital, return on
assets, or the initial shipment of a new product. Such business criteria shall
have the same meaning as used in the Company's financial statements, or, if not
used in the Company's financial statements, the meaning pursuant to generally
accepted accounting principles or as used generally in the Company's industry.
Each performance goal
<PAGE>
shall be objectively determinable and may be an absolute measure or a relative
measure determined with reference to an index or other standard selected by the
Section 162(m) Committee. Prior to the issuance of Stock pursuant to a
Performance Award, the Section 162(m) Committee shall certify in writing the
attainment of the relevant performance goals. Neither the Board nor any
Committee thereof shall have the discretion to waive the attainment of any
performance goal or to increase the number of shares issuable pursuant to a
Performance Award in excess of the amount determined in accordance with the
objective formula established by the Section 62(m) Committee. However, if
provided in a Participant's Restricted Stock Agreement, the Section 62(m)
Committee shall have the authority to reduce the number of shares that would
otherwise become issuable to the Participant upon the attainment of the relevant
performance goals if, in the Section 162(m) Committee's sole judgment, such
reduction is appropriate; provided, however, that such reduction shall not
increase the number of shares issuable to another Participant.
7.2 Purchase Price. The purchase price under each Restricted Stock
Purchase Right shall be established by the Board. No monetary payment (other
than applicable tax withholding) shall be required as a condition of receiving a
Restricted Stock Bonus, the consideration for which shall be services actually
rendered to the Participating Company Group or for its benefit.
7.3 Purchase Period. A Restricted Stock Purchase Right shall be
exercisable within a period established by the Board, which shall in no event
exceed thirty (30) days from the effective date of the grant of the Restricted
Stock Purchase Right; provided, however, that no Restricted Stock Purchase Right
granted to a prospective Employee, prospective Consultant or prospective
Director may become exercisable prior to the date on which such person commences
Service with a Participating Company.
7.4 Payment of Purchase Price.
(a) Forms of Consideration Authorized. Except as otherwise
provided below, payment of the purchase price for the number of shares of Stock
being purchased pursuant to any Restricted Stock Purchase Right shall be made
(i) in cash, by check, or cash equivalent, (ii) by the Participant's promissory
note in a form approved by the Company, (iii) by such other consideration as may
be approved by the Board from time to time to the extent permitted by applicable
law, or (iv) by any combination thereof. The Board may at any time or from time
to time, by adoption of or by amendment to the standard form of Restricted Stock
Agreement described in Section 7.9, or by other means, grant Restricted Stock
Purchase Rights which do not permit all of the foregoing forms of consideration
to be used in payment of the purchase price or which otherwise restrict one or
more forms of consideration. Restricted Stock Bonuses shall be issued in
consideration for services actually rendered to the Participating Company Group
or for its benefit.
(b) Payment by Promissory Note. No promissory note shall be
permitted if the purchase of Restricted Stock using a promissory note would be a
violation of any law. Any permitted promissory note shall be on such terms as
the Board shall determine at the time the Restricted Stock Purchase Right is
granted. The Board shall have the authority to permit
<PAGE>
or require the Participant to secure any promissory note used to purchase
Restricted Stock with such shares or with other collateral acceptable to the
Company. Unless otherwise provided by the Board, if the Company at any time is
subject to the regulations promulgated by the Board of Governors of the Federal
Reserve System or any other governmental entity affecting the extension of
credit in connection with the Company's securities, any promissory note shall
comply with such applicable regulations, and the Participant shall pay the
unpaid principal and accrued interest, if any, to the extent necessary to comply
with such applicable regulations.
7.5 Tax Withholding. The Company shall have the right to require the
Participant, through payroll withholding, cash payment or otherwise, to make
adequate provision for the federal, state, local and foreign taxes, if any,
required by law to be withheld by the Participating Company Group in connection
with a Restricted Stock Award or the shares acquired pursuant thereto. The
Company shall have no obligation to deliver shares of Stock or to release shares
of Stock from an escrow established pursuant to the Restricted Stock Agreement
until the Participating Company Group's tax withholding obligations have been
satisfied by the Participant.
7.6 Vesting and Restrictions on Transfer. Shares issued pursuant to
any Restricted Stock Award may be made subject to vesting conditioned upon the
satisfaction of such Service requirements, performance goals (which may, but
need not, be established and certified in accordance with the provisions of
Section 7.1), or other restrictions (the "Vesting Restrictions") as shall be
determined by the Board (or a Section 162(m) Committee, as the case may be) and
set forth in the Restricted Stock Agreement evidencing such Award. During such
period (the "Restriction Period") as shares acquired pursuant to a Restricted
Stock Award remain subject to Vesting Restrictions, such shares may not be sold,
exchanged, transferred, pledged, assigned or otherwise disposed of other than
pursuant to an Ownership Change Event or as provided in Section 7.10. Upon
request by the Company, each Participant shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder and
shall promptly present to the Company any and all certificates representing
shares of Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions.
7.7 Voting Rights; Dividends. Except as provided in this Section and
Section 7.6, during the Restriction Period applicable to shares of Restricted
Stock held by a Participant, the Participant shall have all of the rights of a
stockholder of the Company holding shares of Stock, including the right to vote
the shares of Restricted Stock and to receive all dividends and other
distributions paid with respect to such shares; provided, however, that if any
such dividends or distributions are paid in shares of Stock, such shares shall
be subject to the same Vesting Restrictions as the shares of Restricted Stock
with respect to which they were paid.
7.8 Effect of Termination of Service. If a Participant's Service with
the Participating Company Group terminates for any reason, whether voluntary or
involuntary (including the Participant's death or disability), (a) the Company
shall have the option to repurchase at the original purchase price paid by the
Participant shares of Restricted Stock acquired by the Participant pursuant to a
Restricted Stock Purchase Right and (b) the Participant shall forfeit to the
Company shares of Restricted Stock acquired by the Participant pursuant to a
<PAGE>
Restricted Stock Bonus which, in either case, remain subject to Vesting
Restrictions as of the date of the Participant's termination of Service. The
Company shall have the right to assign at any time any repurchase right it may
have, whether or not such right is then exercisable, to one or more persons as
may be selected by the Company.
7.9 Standard Forms of Restricted Stock Agreement. The Board shall have
the authority from time to time to approve one or more standard forms of
Restricted Stock Agreement and to vary the terms of any such standard forms
either in connection with the grant or amendment of an individual Restricted
Stock Award or in connection with the authorization of a new standard form or
forms; provided, however, that the terms and conditions of any such new, revised
or amended standard form or forms of Restricted Stock Agreement are not
inconsistent with the terms of the Plan.
7.10 Nontransferability of Restricted Stock Award Rights. Rights to
acquire shares of Stock pursuant to a Restricted Stock Award may not be assigned
or transferred in any manner except by will or the laws of descent and
distribution, and, during the lifetime of the Participant, shall be exercisable
only by the Participant.
8. TRANSFER OF CONTROL.
8.1 Definitions.
(a) An "Ownership Change Event" shall be deemed to have occurred
if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Company of more than
fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a
party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "Transfer of Control" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "Transaction")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "Transferee
Corporation(s)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the
<PAGE>
Transaction, own the Company or the Transferee Corporation(s), as the case may
be, either directly or through one or more subsidiary corporations. The Board
shall have the right to determine whether multiple sales or exchanges of the
voting stock of the Company or multiple Ownership Change Events are related, and
its determination shall be final, binding and conclusive.
8.2 Effect of Transfer of Control on Awards. In the event of a
Transfer of Control, the Board, in its sole discretion, may provide that any
unexercisable or unvested portion of the outstanding Awards shall be immediately
exercisable and vested in full as of a date determined by the Board and/or may
arrange with the surviving, continuing, successor, or purchasing corporation or
parent corporation thereof, as the case may be (the "Acquiring Corporation"),
for the Acquiring Corporation to either assume the Company's rights and
obligations under outstanding Awards or substitute for outstanding Awards
substantially equivalent awards for the Acquiring Corporation's stock. For
purposes of this Section 8.2, an Award shall be deemed assumed if, following the
Transfer of Control, the Award confers the right to acquire in accordance with
its terms and conditions, for each share of Stock subject to the Award
immediately prior to the Transfer of Control, the consideration (whether stock,
cash or other securities or property) to which a holder of a share of Stock on
the effective date of the Transfer of Control was entitled. Any Awards which are
neither assumed or substituted for by the Acquiring Corporation in connection
with the Transfer of Control nor exercised as of the date of the Transfer of
Control shall terminate and cease to be outstanding effective as of the date of
the Transfer of Control. Notwithstanding the foregoing, shares acquired upon
exercise of an Award prior to the Transfer of Control and any consideration
received pursuant to the Transfer of Control with respect to such shares shall
continue to be subject to all applicable provisions of the Award Agreement
evidencing such Award except as otherwise provided in such Award Agreement or by
the Board.
9. PROVISION OF INFORMATION. Each Participant shall be given access to
information concerning the Company equivalent to that information generally made
available to the Company's common stockholders.
10. COMPLIANCE WITH SECURITIES LAW. The grant of Awards and the issuance of
shares of Stock pursuant to Awards shall be subject to compliance with all
applicable requirements of federal, state or foreign law with respect to such
securities. No shares may be issued pursuant an Award if such issuance would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, no Award may
be exercised or shares issued pursuant to an Award unless (a) a registration
statement under the Securities Act shall at the time of such exercise or
issuance be in effect with respect to the shares issuable pursuant to the Award
or (b) in the opinion of legal counsel to the Company, the shares issuable
pursuant to the Award may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act.
The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company's legal 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. As a
condition to the issuance of shares pursuant to any Award, the Company may
require the Participant to satisfy any
<PAGE>
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
11. INDEMNIFICATION. In addition to such other rights of indemnification as
they may have as members of the Board or officers or employees of the
Participating Company Group, members of the Board and any officers or employees
of the Participating Company Group to whom authority to act for the Board or the
Company is delegated shall be indemnified by the Company against all reasonable
expenses, including attorneys' fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan, or
any right granted hereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such person is liable
for gross negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such action, suit
or proceeding, such person shall offer to the Company, in writing, the
opportunity at its own expense to handle and defend the same.
12. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or amend the
Plan at any time. However, subject to changes in applicable law, regulations or
rules that would permit otherwise, without the approval of the Company's
stockholders, there shall be (a) no increase in the maximum aggregate number of
shares of Stock that may be issued under the Plan (except by operation of the
provisions of Section 4.2), (b) no change in the class of persons eligible to
receive Incentive Stock Options, and (c) no other amendment of the Plan that
would require approval of the Company's stockholders under any applicable law,
regulation or rule. In any event, no termination or amendment of the Plan may
adversely affect any then outstanding Award or any unexercised portion thereof,
without the consent of the Participant, unless such termination or amendment is
required to enable an Option designated as an Incentive Stock Option to qualify
as an Incentive Stock Option or is necessary to comply with any applicable law,
regulation or rule.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing sets forth the Network Peripherals Inc. 1997 Stock Plan, as
amended by the Board through March 1, 2000.
/s/ Wilson Cheung
Secretary
<PAGE>
PLAN HISTORY
February 18, 1997 Board adopts Plan, with an initial reserve of 1,500,000
shares.
April 24, 1997 Stockholders approve Plan, with an initial reserve of
1,500,000 shares.
March 24, 1998 Board approves 1,000,000 share reserve increase (from
1,500,000 to 2,500,000).
May 26, 1998 Stockholders approve 1,000,000 share reserve increase
(approved by Board on March 24, 1998).
March 1, 2000 Board approves an increase in reserve of 1,000,000 shares
(from 2,500,000 to 3,500,000 shares in total).
April 25, 2000 Stockholders approve an increase in reserve of 1,000,000
shares (approved by Board on March 1, 2000).
