EXHIBIT 10.51
NETWORK COMPUTING DEVICES, INC.
INCENTIVE STOCK OPTION AGREEMENT
Network Computing Devices, Inc. has granted to the individual (the
"OPTIONEE") named in the NOTICE OF GRANT OF STOCK OPTIONS (the "NOTICE") to
which this Incentive Stock Option Agreement is attached an option to purchase
certain shares of Stock upon the terms and conditions set forth in this Option
Agreement (the "OPTION") and the Notice. The Option has been granted pursuant to
the Network Computing Devices, Inc. 1999 Stock Option Plan (the "PLAN"). By
signing the Notice, the Optionee represents that the Optionee is familiar with
the terms and provisions of this Option Agreement and accepts the Option subject
to all of the terms and provisions hereof. The Optionee agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement or the Plan.
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Whenever used herein, the following terms
shall have their respective meanings set forth below:
(a) "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" shall also mean such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
(c) "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 in the Plan, 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.
(d) "COMPANY" means Network Computing Devices, Inc., a
Delaware corporation, or any successor corporation thereto.
(e) "CONSULTANT" means any person, including an
advisor, engaged by a Participating Company to render services other than as
an Employee or a Director.
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(f) "DATE OF OPTION GRANT" means the effective date of
grant as set forth in the Notice.
(g) "DIRECTOR" means a member of the Board.
(h) "DISABILITY" means the permanent and total
disability of the Optionee 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 and who is an employee for purposes of
Section 422 of the Code; provided, however, that neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
employment for this purpose.
(j) "EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended.
(k) "EXERCISE PRICE" means the purchase price per
share of Stock as set forth in the Notice and as adjusted from time to time
pursuant to Section 9.
(l) "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 discretion, or by the Company, in its discretion, if such determination
is expressly allocated to the Company herein, subject to the following:
(i) If, on such date, the Stock is listed on
a national or regional securities exchange or market system, the Fair Market
Value of a share of Stock shall be the closing 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
SmallCap 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 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.
(m) "NUMBER OF OPTION SHARES" means the total number
of shares of Stock subject to the Option as set forth in the Notice and as
adjusted from time to time pursuant to Section 9.
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(n) "OPTION EXPIRATION DATE" means the date five (5)
years after the Date of Option Grant.
(o) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(p) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation.
(q) "PARTICIPATING COMPANY GROUP" means, at any point
in time, all corporations collectively which are then Participating Companies.
(r) "SECURITIES ACT" means the Securities Act of 1933,
as amended.
(s) "SERVICE" means the Optionee's employment or
service with the Participating Company Group, whether in the capacity of an
Employee, a Director or a Consultant. The Optionee's Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Optionee renders Service to the Participating Company Group or a change
in the Participating Company for which the Optionee renders such Service,
provided that there is no interruption or termination of the Optionee's
Service. Furthermore, the Optionee's Service with the Participating Company
Group shall not be deemed to have terminated if the Optionee 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 one hundred eighty-first (181st) day following the commencement
of such leave any Incentive Stock Option held by the Optionee shall cease to
be treated as an Incentive Stock Option and instead shall be treated
thereafter as a Nonstatutory Stock Option unless the Optionee'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 the Optionee's Vested Shares.
The Optionee's Service shall be deemed to have terminated either upon an
actual termination of Service or upon the corporation for which the Optionee
performs Service ceasing to be a Participating Company. Subject to the
foregoing, the Company, in its sole discretion, shall determine whether the
Optionee's Service has terminated and the effective date of such termination.
(t) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 9.
(u) "SUBSIDIARY CORPORATION" means any present or
future "subsidiary corporation" of the Company, as defined in Section 424(f)
of the Code.
(v) "VESTED SHARES" means that portion of the Number
of Option Shares which have vested in accordance with vesting schedule set
forth in the Notice. Provided that the Optionee's Service has not terminated
prior to the relevant date, an initial installment of shares will become
Vested Shares on the initial "Full Vest" date set forth in the Notice, and
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thereafter the remaining shares will become Vested Shares in substantially
equal installments at the periodic rate set forth in the Notice, with the
last such installment vesting on the last "Full Vest" date set forth in the
Notice.
1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. 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.
2. TAX STATUS OF OPTION.
2.1 TAX STATUS OF OPTION. This Option is intended to be an
incentive stock option within the meaning of Section 422(b) of the Code, but
the Company does not represent or warrant that this Option qualifies as such.
The Optionee should consult with the Optionee's own tax advisor regarding the
tax effects of this Option and the requirements necessary to obtain favorable
income tax treatment under Section 422 of the Code, including, but not
limited to, holding period requirements. (NOTE TO OPTIONEE: If the Option is
exercised more than three (3) months after the date on which you cease to be
an Employee (other than by reason of your death or permanent and total
disability as defined in Section 22(e)(3) of the Code), the Option will be
treated as a nonstatutory stock option and not as an incentive stock option
to the extent required by Section 422 of the Code.)
2.2 FAIR MARKET VALUE LIMITATION. To the extent that the Option
(together with all incentive stock options granted to the Optionee under all
stock option plans of the Participating Company Group, including the Plan)
becomes exercisable for the first time during any calendar year for shares
having a Fair Market Value greater than One Hundred Thousand Dollars
($100,000), the portion of such options which exceeds such amount will be
treated as nonstatutory stock options. For purposes of this Section 2.2,
options designated as incentive stock options are taken into account in the
order in which they were granted, and the Fair Market Value of stock is
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 2.2, such different limitation shall be deemed
incorporated herein effective as of the date required or permitted by such
amendment to the Code. If the 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 2.2, 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. (NOTE TO
OPTIONEE: If the aggregate Exercise Price of the Option (that is, the
Exercise Price multiplied by the Number of Option Shares) plus the aggregate
exercise price of any other incentive stock options you hold (whether granted
pursuant to the Plan or any other stock option plan of the Participating
Company Group) is greater than $100,000, you should contact the Chief
Financial Officer of the Company to ascertain whether the entire Option
qualifies as an incentive stock option.)
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3. ADMINISTRATION.
All questions of interpretation concerning this Option
Agreement shall be determined by the Board. All determinations by the Board
shall be final and binding upon all persons having an interest in the Option.
Any officer of a Participating Company shall have the authority to act on
behalf of the Company with respect to any matter, right, obligation, 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, or election.
4. EXERCISE OF THE OPTION.
4.1 RIGHT TO EXERCISE. Except as otherwise provided herein, the
Option shall be exercisable prior to the termination of the Option (as
provided in Section 6) in an amount not to exceed that portion of the Number
of Option Shares which have become Vested Shares less the number of shares
previously acquired upon exercise of the Option. Notwithstanding the
foregoing, the Option may not be exercised as to less than ten (10) shares at
any one time or, if less, the number of shares then remaining exercisable
pursuant to the Option. In no event shall the Option be exercisable for more
shares than the Number of Option Shares.
4.2 METHOD OF EXERCISE. Exercise of the Option shall be by
written notice to the Company which must state the election to exercise the
Option, the number of whole shares of Stock for which the Option is being
exercised and such other representations and agreements as to the Optionee's
investment intent with respect to such shares as may be required pursuant to
the provisions of this Option Agreement. The written notice must be signed by
the Optionee and must be delivered to the Chief Financial Officer of the
Company, or other authorized representative of the Participating Company
Group, prior to the termination of the Option as set forth in Section 6,
accompanied by full payment of the aggregate Exercise Price for the number of
shares of Stock being purchased and the tax withholding obligations, if any,
as provided in Section 4.4. The Option shall be deemed to be exercised upon
receipt by the Company of such written notice, the aggregate Exercise Price,
and tax withholding obligations, if any.
4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the aggregate Exercise Price for the
number of shares of Stock for which the Option is being exercised shall be
made (i) in cash or cash equivalent, (ii) by tender to the Company of whole
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 aggregate Exercise Price, (iii) by means of a Cashless Exercise, as
defined in Section 4.3(b)(ii), or (iv) by any combination of the foregoing.
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(b) LIMITATIONS ON FORMS OF CONSIDERATION.
(i) TENDER OF STOCK. Notwithstanding the
foregoing, the 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. The 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.
(ii) CASHLESS EXERCISE. A "CASHLESS
EXERCISE" means the assignment in a form acceptable to the Company of the
proceeds of a sale or loan with respect to some or all of the shares of Stock
acquired upon the exercise of the Option pursuant to a program or procedure
approved by the Company (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). The Company
reserves, at any and all times, the right, in the Company's sole and absolute
discretion, to decline to approve or terminate any such program or procedure.
4.4 TAX WITHHOLDING. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign
tax withholding obligations of the Participating Company Group, if any, which
arise in connection with the Option, including, without limitation,
obligations arising upon (i) the exercise, in whole or in part, of the
Option, (ii) the transfer, in whole or in part, of any shares acquired upon
exercise of the Option, (iii) the operation of any law or regulation
providing for the imputation of interest, or (iv) the lapsing of any
restriction with respect to any shares acquired upon exercise of the Option.
The Optionee is cautioned that the Option is not exercisable unless the tax
withholding obligations of the Participating Company Group are satisfied.
Accordingly, the Optionee may not be able to exercise the Option when desired
even though the Option is vested, and the Company shall have no obligation to
issue a certificate for such shares.
4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares
as to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.
The grant of the Option and the issuance of shares of Stock upon exercise of
the Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise 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, the
Option may not be exercised unless (i) a registration
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statement under the Securities Act shall at the time of exercise of the
Option be in effect with respect to the shares issuable upon exercise of the
Option or (ii) in the opinion of legal counsel to the Company, the shares
issuable upon exercise of the Option may be issued in accordance with the
terms of an applicable exemption from the registration requirements of the
Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE
EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE
OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED. Questions concerning this restriction should be directed to
the Chief Financial Officer of the Company. 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 subject to the Option 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
exercise of the Option, the Company may require the Optionee to satisfy any
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.
4.7 FRACTIONAL SHARES. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION.
The Option may be exercised during the lifetime of the Optionee
only by the Optionee or the Optionee's guardian or legal representative and
may not be assigned or transferred in any manner except by will or by the
laws of descent and distribution. Following the death of the Optionee, the
Option, to the extent provided in Section 7, may be exercised by the
Optionee's legal representative or by any person empowered to do so under the
deceased Optionee's will or under the then applicable laws of descent and
distribution.
6. TERMINATION OF THE OPTION.
The Option shall terminate and may no longer be exercised on
the first to occur of (a) the Option Expiration Date, (b) the last date for
exercising the Option following termination of the Optionee's Service as
described in Section 7, or (c) a Change in Control to the extent provided in
Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABILITY.
(a) 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
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the expiration of three (3) months after the date on which the Optionee's
Service terminated, but in any event no later than the Option Expiration Date.
(b) 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 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.
(c) TERMINATION AFTER A CHANGE IN CONTROL. If the
Optionee's Service with the Participating Company Group ceases as a result of
Termination After a Change in Control (as defined below), the (i) 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 after the date on which the Optionee's Service terminated, but in
any event no later than the Option Expiration Date, and (ii) the Option shall
become immediately exercisable and vested in full as of the date on which the
Optionee's Service terminated. Notwithstanding the foregoing, if it is
determined that the provisions or operation of this Section 7.1(c) would
preclude treatment of a Change in Control as a "pooling-of-interests" for
accounting purposes and provided further that in the absence of the preceding
sentence such Change in Control would be treated as a "pooling-of-interests"
for accounting purposes, then this Section 7.1(c) shall be void AB INITIO,
and the vesting and exercisability of the Option shall be determined under
any other applicable provision of the Option Agreement.
(d) OTHER TERMINATION OF SERVICE. If the Optionee's
Service with the Participating Company Group terminates for any reason,
except Disability, death or Termination After a Change in Control, 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 other longer period of time as determined by
the Board, in its discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.
7.2 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods
set forth in Section 7.1 is prevented by the provisions of Section 4.6, the
Option shall remain exercisable until thirty (30) days 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.
7.3 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods
set forth in Section 7.1 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
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(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.
7.4 CERTAIN DEFINITIONS.
(a) "TERMINATION AFTER A CHANGE IN CONTROL" shall mean
either of the following events occurring within twelve (12) months after a
Change in Control:
(i) termination by the Participating Company
Group of the Optionee's Service with the Participating Company Group for any
reason other than for Cause (as defined below); or
(ii) the Optionee's resignation for Good
Reason (as defined below) from all capacities in which the Optionee is then
rendering Service to the Participating Company Group within a reasonable
period of time following the event constituting Good Reason.
Notwithstanding any provision herein to the contrary, Termination After a Change
in Control shall not include any termination of the Optionee's Service with the
Participating Company Group which (1) is for Cause (as defined below); (2) is a
result of the Optionee's death or disability; (3) is a result of the Optionee's
voluntary termination of Service other than for Good Reason; or (4) occurs prior
to the effectiveness of a Change in Control.
(b) "CAUSE" shall mean any of the following: (i) the
Optionee's theft, dishonesty, or falsification of any Participating Company
documents or records; (ii) the Optionee's improper use or disclosure of a
Participating Company's confidential or proprietary information; (iii) any
action by the Optionee which has a detrimental effect on a Participating
Company's reputation or business; (iv) the Optionee's failure or inability to
perform any reasonable assigned duties after written notice from the
Participating Company Group of, and a reasonable opportunity to cure, such
failure or inability; (v) any material breach by the Optionee of any
employment agreement between the Optionee and the Participating Company
Group, which breach is not cured pursuant to the terms of such agreement; or
(vi) the Optionee's conviction (including any plea of guilty or nolo
contendere) of any criminal act which impairs the Optionee's ability to
perform his or her duties with the Participating Company Group.
(c) "GOOD REASON" shall mean any one or more of the
following:
(i) without the Optionee's express written
consent, the assignment to the Optionee of any duties, or any limitation of
the Optionee's responsibilities, substantially inconsistent with the
Optionee's positions, duties, responsibilities and status with a
Participating Company immediately prior to the date of the Change in Control;
(ii) without the Optionee's express written
consent, the relocation of the principal place of the Optionee's Service to a
location that is more than fifty
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(50) miles from the Optionee's principal place of Service immediately prior
to the date of the Change in Control, or the imposition of travel
requirements substantially more demanding of the Optionee than such travel
requirements existing immediately prior to the date of the Change in Control;
(iii) any failure by a Participating Company
to pay, or any material reduction by Participating Company of, (1) the
Optionee's base salary in effect immediately prior to the date of the Change
in Control (unless reductions comparable in amount and duration are
concurrently made for all other employees of the Participating Company Group
with responsibilities, organizational level and title comparable to the
Optionee's), or (2) the Optionee's bonus compensation, if any, in effect
immediately prior to the date of the Change in Control (subject to applicable
performance requirements with respect to the actual amount of bonus
compensation earned by the Optionee); or
(iv) any failure by a Participating Company
to (1) continue to provide the Optionee with the opportunity to participate,
on terms no less favorable than those in effect for the benefit of any
employee group which customarily includes a person holding the employment
position or a comparable position with the Participating Company then held by
the Optionee, in any benefit or compensation plans and programs, including,
but not limited to, the Participating Company's life, disability, health,
dental, medical, savings, profit sharing, stock purchase and retirement
plans, if any, in which the Optionee was participating immediately prior to
the date of the Change in Control, or their equivalent, or (2) provide the
Optionee with all other fringe benefits (or their equivalent) from time to
time in effect for the benefit of any employee group which customarily
includes a person holding the employment position or a comparable position
with the Participating Company then held by the Optionee.
8. CHANGE IN 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 "CHANGE IN 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
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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
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 CHANGE IN CONTROL ON OPTION. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), shall either assume the Company's rights and obligations under
the Option or substitute for the Option a substantially equivalent option for
the Acquiring Corporation's stock. In the event the Acquiring Corporation
elects not to assume the Company's rights and obligations under the Option or
substitute for the Option in connection with the Change in Control, and
provided that the Optionee's Service has not terminated prior to such date,
any unexercised portion of the Option shall be immediately exercisable and
vested in full as of the date ten (10) days prior to the date of the Change
in Control. Any exercise of the Option that was permissible solely by reason
of this Section 8.2 shall be conditioned upon the consummation of the Change
in Control. The Option shall terminate and cease to be outstanding effective
as of the date of the Change in Control to the extent that the Option is
neither assumed or substituted for by the Acquiring Corporation in connection
with the Change in Control nor exercised as of the date of the Change in
Control. Notwithstanding the foregoing, if the corporation the stock of which
is subject to the Option immediately prior to an Ownership Change Event
described in Section 8.1(a)(i) constituting a Change in Control is the
surviving or continuing corporation and immediately after such Ownership
Change Event less than fifty percent (50%) of the total combined voting power
of its voting stock is held by another corporation or by other corporations
that are members of an affiliated group within the meaning of Section 1504(a)
of the Code without regard to the provisions of Section 1504(b) of the Code,
the Option shall not terminate unless the Board otherwise provides in its
sole discretion.
8.3 FAIR MARKET VALUE LIMITATION. Should the exercisability of
this Option be accelerated in connection with a Change in Control in
accordance with Section 7.1(c) or 8.2, then to the extent that the aggregate
Fair Market Value of the shares of Stock with respect to which the Optionee
may exercise the Option for the first time during the calendar year of such
acceleration, when added to the aggregate Fair Market Value of the shares
subject to any other options designated as incentive stock options granted to
the Optionee under all stock option plans of the Participating Company Group
prior to the Date of Option Grant with respect to which such options are
exercisable for the first time during the same calendar year, exceeds One
Hundred Thousand Dollars ($100,000) (or such other limit, if any, imposed by
Section 422 of the Code), the portion of the Option which exceeds such amount
shall be treated as a nonstatutory stock option. For purposes of the
preceding sentence, 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 shares of stock shall be determined as of the time the option
with respect to such shares is granted.
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9. 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, Exercise Price and class of shares of stock subject to the
Option. If a majority of the shares which are of the same class as the shares
that are subject to the Option are exchanged for, converted into, or
otherwise become (whether or not pursuant to an Ownership Change Event)
shares of another corporation (the "NEW SHARES"), the Board may unilaterally
amend the Option to provide that the Option is exercisable for New Shares. In
the event of any such amendment, the Number of Option Shares and the Exercise
Price 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 9 shall be
rounded up or down to the nearest whole number, as determined by the Board,
and in no event may the Exercise Price be decreased to an amount less than
the par value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 9 shall be final, binding
and conclusive.
10. RIGHTS AS A STOCKHOLDER, EMPLOYEE OR CONSULTANT.
The Optionee shall have no rights as a stockholder with respect
to any shares covered by the Option until the date of the issuance of a
certificate for the shares for which the Option has been exercised (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). No adjustment shall be made for
dividends, distributions or other rights for which the record date is prior
to the date such certificate is issued, except as provided in Section 9. If
the Optionee is an Employee, the Optionee understands and acknowledges that,
except as otherwise provided in a separate, written employment agreement
between a Participating Company and the Optionee, the Optionee's employment
is "at will" and is for no specified term. Nothing in this Option Agreement
shall confer upon the Optionee, whether an Employee or Consultant, any right
to continue in the Service of a Participating Company or interfere in any way
with any right of the Participating Company Group to terminate the Optionee's
Service as an Employee or Consultant, as the case may be, at any time.
11. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION.
The Optionee shall dispose of the shares acquired pursuant to
the Option only in accordance with the provisions of this Option Agreement.
In addition, the Optionee shall promptly notify the Chief Financial Officer
of the Company if the Optionee disposes of any of the shares acquired
pursuant to the Option within one (1) year after the date of the Optionee
exercises all or part of the Option or within two (2) years after the Date of
Option Grant. Until such time as the Optionee disposes of such shares in a
manner consistent with the provisions of this Option Agreement, unless
otherwise expressly authorized by the Company, the Optionee shall hold all
shares acquired pursuant to the Option in the Optionee's name (and not in the
name of any nominee) for the one-year period immediately after the exercise
of the Option and the
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two-year period immediately after Date of Option Grant. At any time during
the one-year or two-year periods set forth above, the Company may place a
legend on any certificate representing shares acquired pursuant to the Option
requesting the transfer agent for the Company's stock to notify the Company
of any such transfers. The obligation of the Optionee to notify the Company
of any such transfer shall continue notwithstanding that a legend has been
placed on the certificate pursuant to the preceding sentence.
12. LEGENDS.
The Company may at any time place legends referencing any
applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry
out the provisions of this Section.
13. MISCELLANEOUS PROVISIONS.
13.1 BINDING EFFECT. Subject to the restrictions on transfer
set forth herein, this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
13.2 TERMINATION OR AMENDMENT. The Board may terminate or amend
the Plan or the Option at any time; provided, however, that except as
provided in Section 8.2 in connection with a Change in Control, no such
termination or amendment may adversely affect the Option or any unexercised
portion hereof without the consent of the Optionee unless such termination or
amendment is necessary to comply with any applicable law or government
regulation or is required to enable the Option to qualify as an incentive
stock option. No amendment or addition to this Option Agreement shall be
effective unless in writing.
13.3 NOTICES. Any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given (except to the
extent that this Option Agreement provides for effectiveness only upon actual
receipt of such notice) upon personal delivery or upon deposit in the United
States Post Office, by registered or certified mail, with postage and fees
prepaid, addressed to the other party at the address of such party as set
forth in the Notice or at such other address as such party may designate in
writing from time to time to the other party.
13.4 INTEGRATED AGREEMENT. This Option Agreement and the Notice
constitute the entire understanding and agreement of the Optionee and the
Participating Company Group with respect to the subject matter contained
herein and therein, and there are no agreements, understandings,
restrictions, representations, or warranties among the Optionee and the
Participating Company Group with respect to such subject matter other than
those as set forth or provided for herein or therein. To the extent
contemplated herein, the provisions of this Option Agreement shall survive
any exercise of the Option and shall remain in full force and effect.
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13.5 APPLICABLE LAW. This Option Agreement shall be governed by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
the State of California.
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