NANO-PROPRIETARY,
INC. AMENDED AND RESTATED 2002 EQUITY COMPENSATION PLAN
ARTICLE
I - GENERAL PROVISIONS
1.1
The
Plan is designed
for the benefit of the Company to secure and retain the services of Eligible
Participants. The Board believes the Plan will promote and increase
personal interests in the welfare of the Company by, and provide incentive
to,
those who are primarily responsible not only for its regular operations but
also
for shaping and carrying out the long-range plans of the Company and ordering
its continued growth and financial success.
1.2
Awards
under the Plan
may be made to Participants in the form of (i) Incentive Stock Options; (ii)
Nonqualified Stock Options; or (iii) Stock Awards.
1.3
The
Plan
shall be effective March 17, 2002 (the “Effective Date”).
1.4
The
Plan
amendment is effective December 12, 2007 (the “Amendment Date”)
ARTICLE
II - DEFINITIONS
Except
where the context otherwise
indicates, the following definitions apply:
2.1 “Act”
means the Securities Exchange Act of 1934, as now in effect or as hereafter
amended. All citations to sections of the Act or rules there under
are to such sections or rules as they may from time to time be amended or
renumbered.
2.2 “Agreement”
means the written agreement between the Company and the Participant evidencing
each Award granted to a Participant under the Plan.
2.3 “Award”
means an award granted to a Participant under the Plan of a Stock Option
or a
Stock Award.
2.4 “Board”
means the Board of Directors of Nano-Proprietary, Inc.
2.5 “Code”
means the Internal Revenue Code of 1986, as now in effect or as hereafter
amended. All citations to sections of the Code are to such sections
as they may from time to time be amended or renumbered.
2.6 “Committee”
means the Compensation Committee of the Board of Directors of Nano-Proprietary,
Inc. or such other committee consisting of two or more members as may be
appointed by the Board to administer this Plan pursuant to Article
III.
2.7 “Company”
means Nano-Proprietary, Inc., a Texas corporation, and its successors and
assigns. The term “Company” shall include any company during any period that it
is a “parent corporation” or a “subsidiary corporation” of the Company within
the meaning of Code section 424(d). With respect to all purposes of
the Plan, including, but not limited to, the establishment, amendment,
termination, operation and administration of the Plan, Nano-Proprietary,
Inc.
shall be authorized to act on behalf of all other entities included within
the
definition of “Company.”
2.8 “Disability,”
with respect to any Incentive Stock Option, means disability as determined
under
section 22(e)(3) of the Code, and, with respect to any other Award, means
(i)
with respect to a Participant who is eligible to participate in the Company’s
program of long-term disability insurance, if any, a condition with respect
to
which the Participant is entitled to commence benefits under such program
of
long-term disability insurance, and (ii) with respect to any Participant
(including a Participant who is eligible to participate in the Company’s program
of long-term disability insurance, if any), a disability as determined under
procedures established by the Committee or in any Award.
2.9 “Eligible
Participant” means an active full-time employee of the Company (including
officers), as shall be determined by the Committee, as well as any other
person,
including members of the Board and consultants who provide services to the
Company, subject to limitations as may be provided by the Code, the Act or
the
Committee, as shall be determined by the Committee.
2.10 “Fair
Market Value” means the fair market value of a share of Stock, as determined in
good faith by the Committee; provided, however, that
(a) if
the Stock is listed on a national securities exchange, Fair Market Value
on a
date shall be the closing sale price reported for the Stock on such exchange
on
such date if at least 100 shares of Stock were sold on such date or, if fewer
than 100 shares of stock were sold on such date, then Fair Market Value on
such
date shall be the closing sale price reported for the Stock on such exchange
on
the last prior date on which at least 100 shares were sold, all as reported
in
The Wall Street Journal
or such other source as the Committee deems
reliable; and
(b) if
the Stock is not listed on a national securities exchange but is admitted
to
quotation on the National Association of Securities Dealers Automated Quotation
System or other comparable quotation system, Fair Market Value on a date
shall
be the last sale price reported for the Stock on such system on such date
if at
least 100 shares of Stock were sold on such date or, if fewer than 100 shares
of
Stock were sold on such date, then Fair Market Value on such date shall be
the
average of the high bid and low asked prices reported for the Stock on such
system on such date or, if no shares of Stock were sold on such date, then
Fair
Market Value on such date shall be the last sale price reported for the Stock
on
such system on the last date on which at least 100 shares of Stock were sold,
all as reported in
The Wall Street Journal
or such other source as the
Committee deems reliable; and
(c) If
the Stock is not traded on a national securities exchange or reported by
a
national quotation system, if any broker-dealer makes a market for the Stock,
then the Fair Market Value of the Stock on a date shall be the average of
the
highest and lowest quoted selling prices of the Stock in such market on such
date if at least 100 shares of Stock were sold on such date or, if fewer
than
100 shares of Stock were sold on such date, then Fair Market Value on such
date
shall be the average of the high bid and low asked prices for the Stock in
such
market on such date or, if no prices are quoted on such date, then Fair Market
Value on such date shall be the average of the highest and lowest quoted
selling
prices of the Stock in such market on the last date on which at least 100
shares
of Stock were sold.
2.11 “Incentive
Stock Option” means a Stock Option granted to an Eligible Participant under
Article IV of the Plan.
2.12 “Nonqualified
Stock Option” means a Stock Option granted to an Eligible Participant under
Article V of the Plan.
2.13 “Option
Grant Date” means, as to any Stock Option, the latest of:
(a)
the
date on which the Committee takes action to grant the Stock Option to the
Participant;
(b)
the
date the Participant receiving the Stock Option becomes an employee of the
Company, to the extent employment status is a condition of the grant or a
requirement of the Code or the Act; or
(c)
such
other date (later than the dates described in (a) and (b) above) as the
Committee may designate.
2.14 “Participant”
means an Eligible Participant to whom an Award has been granted and who has
entered into an Agreement evidencing the Award.
2.15 “Plan”
means the Nano-Proprietary, Inc. Amended and Restated 2002 Equity Compensation
Plan, as amended from time to time.
2.16 “Retirement”
means retirement from active employment with the Company, as determined by
the
Committee.
2.17 “Stock”
means the common stock of Nano-Proprietary, Inc., as may be adjusted pursuant
to
the provisions of Plan Section 3.10.
2.18 “Stock
Award” means an Award of Stock granted in payment of compensation, as provided
in Article VIII of the Plan.
2.19 “Stock
Option” means an Incentive Stock Option or a Nonqualified Stock
Option. Stock Options granted under the Plan shall be designated as
either Incentive Stock Options or Nonqualified Stock Options, and in the
absence
of such designation shall be treated as Nonqualified Stock Options.
2.20 “Termination
of Employment” means the discontinuance of employment of a Participant with the
Company for any reason or, if the Participant is a non-employee member of
the
Board, the termination of the Participant’s directorship, or, if the Participant
is a consultant to the Company, the termination of the Participant’s
relationship as a consultant. The determination of whether a Participant
has
incurred a Termination of Employment shall be made by the Committee in its
discretion. In determining whether a Termination of Employment has
occurred, the Committee may provide that service as a consultant or service
with
a business enterprise in which the Company has a significant ownership interest
shall be treated as employment with the Company. With respect to any
Incentive Stock Option, employment shall be interpreted in a manner consistent
with section 422 of the Code. A Participant shall not be deemed to have incurred
a Termination of Employment if the Participant is on military leave, sick
leave,
or other bona fide leave of absence approved by the Company of 90 days or
fewer
(or any longer period during which the Participant is guaranteed reemployment
by
statute or contract.) In the event a Participant’s leave of absence
exceeds this period, he will be deemed to have incurred a Termination of
Employment on the day following the expiration date of such
period.
ARTICLE
III - ADMINISTRATION
3.1 This
Plan shall be administered by the Compensation Committee of the Board of
Directors of Nano-Proprietary, Inc. The Committee, in its discretion, may
delegate to one or more of its members such of its powers as it deems
appropriate. The Committee also may limit the power of any member to
the extent necessary to comply with rule 16b-3 under the Act, Code section
162(m) or any other law or for any other purpose. Members of the
Committee shall be appointed originally, and as vacancies occur, by the Board,
to serve at the pleasure of the Board. The Board may serve as the
Committee, if by the terms of the Plan all Board members are otherwise eligible
to serve on the Committee.
3.2 The
Committee shall meet at such times and places as it determines. A
majority of its members shall constitute a quorum, and the decision of a
majority of those present at any meeting at which a quorum is present shall
constitute the decision of the Committee. A memorandum signed by all
of its members shall constitute the decision of the Committee without necessity,
in such event, for holding an actual meeting.
3.3 The
Committee shall have the exclusive right to interpret, construe and administer
the Plan, to select the persons who are eligible to receive an Award, and
to act
in all matters pertaining to the granting of an Award and the contents of
the
Agreement evidencing the Award, including without limitation, the determination
of the number of Stock Options subject to an Award and the form, terms,
conditions and duration of each Award, and any amendment thereof consistent
with
the provisions of the Plan. All acts, determinations and decisions of
the Committee made or taken pursuant to grants of authority under the Plan
or
with respect to any questions arising in connection with the administration
and
interpretation of the Plan, including the severability of any and all of
the
provisions thereof, shall be conclusive, final and binding upon all
Participants, Eligible Participants and their estates and
beneficiaries.
3.4 The
Committee may adopt such rules, regulations and procedures of general
application for the administration of this Plan, as it deems
appropriate.
3.5 Subject
to adjustment as provided in Plan Section 3.10, the aggregate number of shares
of Stock which are available for issuance pursuant to Awards under the Plan
shall be Ten Million (10,000,000) shares of Stock. Such shares of
Stock shall be made available from authorized and unissued
shares. If, for any reason, any shares of Stock awarded or subject to
purchase under the Plan are not delivered or purchased, or are reacquired
by the
Company, for reasons including, but not limited to, a forfeiture of Restricted
Stock or termination, expiration or cancellation of a Stock Option, such
shares
of Stock shall not be charged against the aggregate number of shares of Stock
available for issuance pursuant to Awards under the Plan and shall again
be
available for issuance pursuant to Award under the Plan. If the
exercise price and/or withholding obligation under a Stock Option is satisfied
by tendering shares of Stock to the Company (either by actual delivery or
attestation), only the number of shares of Stock issued net of the share
of
Stock so tendered shall be deemed delivered for purposes of determining the
maximum number of shares of Stock available for issuance under the
Plan.
3.6 Each
Award granted under the Plan shall be evidenced by a written Award
Agreement. Each Award Agreement shall be subject to and incorporate,
by reference or otherwise, the applicable terms and conditions of the Plan,
and
any other terms and conditions, not inconsistent with the Plan, as may be
imposed by the Committee.
3.7 The
Company shall not be required to issue or deliver any certificates for shares
of
Stock prior to:
(a) the
listing of such shares on any stock exchange on which the Stock may then
be
listed; and
(b) the
completion of any registration or qualification of such shares of Stock under
any federal or state law, or any ruling or regulation of any government body
which the Company shall, in its discretion, determine to be necessary or
advisable.
The
Company will from time to time, as is necessary to accomplish the purposes
of
this Plan, seek to obtain from any regulatory agency having jurisdiction
any
requisite authority in order to issue and sell shares of Stock
hereunder. The inability of the Company to obtain from any regulatory
agency having jurisdiction the authority deemed by the Company’s counsel to be
necessary to the lawful issuance and sale of any shares of the Stock hereunder
shall relieve the Company of any liability in respect of the nonissuance
or sale
of the Stock as to which the requisite authority shall not have been
obtained.
3.8 All
certificates for shares of Stock delivered under the Plan shall also be subject
to such stop-transfer orders and other restrictions as the Committee may
deem
advisable under the rules, regulations, and other requirements of the Securities
and Exchange Commission, any stock exchange upon which the Stock is then
listed
and any applicable federal or state laws, and the Committee may cause a legend
or legends to be placed on any such certificates to make appropriate reference
to such restrictions. In making such determination, the Committee may
rely upon an opinion of counsel for the Company.
3.9 Except
as provided otherwise in the Plan or in an Award Agreement, no Participant
awarded a Stock Option or Stock Award shall have any right as a shareholder
with
respect to any shares of Stock covered by his or her Stock Option or Stock
Award
prior to the date of issuance to him or her of a certificate or certificates
for
such shares of Stock.
3.10 If
any reorganization, recapitalization, reclassification, stock split, stock
dividend, or consolidation of shares of Stock, merger or consolidation or
separation, including a spin-off, of the Company or sale or other disposition
by
the Company of all or a portion of its assets, any other change in the Company’s
corporate structure, or any distribution to shareholders other than a cash
dividend results in the outstanding shares of Stock, or any securities exchanged
therefore or received in their place, being exchanged for a different number
or
class of shares of Stock or other securities of the Company, or for shares
of
Stock or other securities of any other corporation; or new, different or
additional shares or other securities of the Company or of any other corporation
being received by the holders of outstanding shares of Stock, then the Committee
may make equitable adjustments in:
(a) the
limitation on the aggregate number of shares of Stock that may be awarded
as set
forth in Plan Section 3.5;
(b) the
number of shares and class of Stock that may be subject to an Award, and
which
have not been issued or transferred under an outstanding Award;
(c) the
purchase price to be paid per share of Stock under outstanding Stock Options;
and
(d) the
terms, conditions or restrictions of any Award and Award Agreement, including
the price payable for the acquisition of Stock;
provided,
however, that all adjustments made as the result of the foregoing in respect
of
each Incentive Stock Option shall be made so that such Stock Option shall
continue to be an incentive stock option within the meaning of Code section
422,
unless the Committee takes affirmative action to treat such Stock Option
instead
as a Nonqualified Stock Option.
3.11 In
addition to such other rights of indemnification as they may have as directors
or as members of the Committee, the members of the Committee shall be
indemnified by the Company against reasonable expenses, including attorney’s
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 Award granted there under,
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 or settlement in any such action, suit
or
proceeding, except as to matters as to which the Committee member has been
negligent or engaged in misconduct in the performance of his duties; provided,
that within 60 days after institution of any such action, suit or proceeding,
a
Committee member shall in writing offer the Company the opportunity, at its
own
expense, to handle and defend the same.
3.12 The
Committee may require each person purchasing shares of Stock pursuant to
a Stock
Option or other Award under the Plan to represent to and agree with the Company
in writing that he is acquiring the shares of Stock without a view to
distribution thereof. The certificates for such shares of Stock may
include any legend that the Committee deems appropriate to reflect any
restrictions on transfer.
3.13 The
Committee shall be authorized to make adjustments in performance based criteria
or in the terms and conditions of other Awards in recognition of unusual
or
nonrecurring events affecting the Company or its financial statements or
changes
in applicable laws, regulations or accounting principles. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award Agreement in the manner and to the
extent
it shall deem desirable to carry it into effect. In the event the
Company shall assume outstanding employee benefit awards or the right or
obligation to make future such awards in connection with the acquisition
of
another corporation or business entity, the Committee may, in its discretion,
make such adjustments in the terms of Awards under the Plan as it shall deem
appropriate.
3.14 All
outstanding Awards to any Participant may be canceled if (a) the Participant,
without the consent of the Committee, while employed by the Company or after
termination of such employment, becomes associated with, employed by, renders
services to, or owns any interest in, other than any insubstantial interest,
as
determined by the Committee, any business that is in competition with the
Company or with any business in which the Company has a substantial interest
as
determined by the Committee; or (b) is terminated for cause as determined
by the
Committee.
3.15 In
connection with any underwritten public offering by the Company of its equity
securities pursuant to an effective registration statement filed under the
Securities Act of 1933, a Participant shall not sell, make any short sale
of,
loan, hypothecate, pledge, grant any option for the purchase of, or otherwise
dispose or transfer for value or otherwise agree to engage in any of the
foregoing transactions with respect to, any Stock acquired under the Plan
without the prior written consent of the Company or its
underwriters. Such restriction (the “Market Stand-Off”) shall be in
effect for such period of time from and after the effective date of the final
prospectus for the offering as may be requested by the Company or such
underwriters. In no event, however, shall such period exceed the
period for which securities owned by the Chief Executive Officer of the Company
are subject to the same restrictions. Any new, substituted or
additional securities that are by reason of any recapitalization or
reorganization distributed with respect to Stock acquired under the Plan
shall
be immediately subject to the Market Stand-Off, to the same extent the Stock
acquired under the Plan is at such time covered by such
provisions. In order to enforce the Market Stand-Off, the Company may
impose stop-transfer restrictions with respect to the Stock acquired under
the
Plan until the end of the applicable stand-off period.
ARTICLE
IV - INCENTIVE STOCK OPTIONS
4.1 Each
provision of this Article IV and of each Incentive Stock Option granted under
the Plan shall be construed in accordance with the provisions of Code section
422, and any provision hereof that cannot be so construed shall be
disregarded.
4.2 Incentive
Stock Options shall be granted only to Eligible Participants who are in the
active employment of the Company, and to individuals to whom grants are
conditioned upon active employment, each of whom may be granted one or more
such
Incentive Stock Options for a reason related to his employment at such time
or
times determined by the Committee following the Effective Date through the
date
which is ten (10) years following the Effective Date, subject to the following
conditions:
(a) The
Incentive Stock Option exercise price per share of Stock shall be set in
the
Agreement, but shall not be less than 100% of the Fair Market Value of the
Stock
on the Option Grant Date. If the Eligible Participant owns more than
10% of the outstanding Stock (as determined pursuant to Code section 424(d))
on
the Option Grant Date, the Incentive Stock Option exercise price per share
shall
not be less than 110% of the Fair Market Value of the Stock on the Option
Grant
Date; provided, however, that if an Incentive Stock Option is granted to
such an
Eligible Participant at an exercise price per share that is less than 110%
of
Fair Market Value of the stock on the Option Grant Date, such Option shall
be
deemed a Nonqualified Stock Option.
(b) The
Incentive Stock Option may be exercised in whole or in part from time to
time
within ten (10) years from the Option Grant Date (five (5) years if the Eligible
Participant owns more than 10% of the Stock on the Option Grant Date), or
such
shorter period as may be specified by the Committee in the Award; provided,
that
in any event, the Incentive Stock Option and related Stock Right shall lapse
and
cease to be exercisable upon a Termination of Employment or within such period
following a Termination of Employment as shall have been specified in the
Incentive Stock Option Award Agreement, which period shall in no event exceed
three months unless:
(i) employment
shall have terminated as a result of death or Disability, in which event
such
period shall not exceed one year after the date of death or Disability;
or
(ii) death
shall have occurred following a Termination of Employment and while the
Incentive Stock Option or Stock Right was still exercisable, in which event
such
period shall not exceed one year after the date of death; provided, further,
that such period following a Termination of Employment shall in no event
extend
the original exercise period of the Incentive Stock Option.
(c) To
the extent the aggregate Fair Market Value, determined as of the Option Grant
Date, of the shares of Stock with respect to which incentive stock options
(determined without regard to this subsection) are first exercisable during
any
calendar year (under this Plan or any other plan of the Company and its parent
and subsidiary corporations (within the meaning of Code sections 424(e) and
424(f), respectively)), by Participant exceeds $100,000, such Incentive Stock
Options granted under the Plan shall be treated as Nonqualified Stock Options
granted under Article V.
(d) The
Committee may adopt any other terms and conditions which it determines should
be
imposed for the Incentive Stock Option to qualify under Code section 422,
as
well as any other terms and conditions not inconsistent with this Article
IV as
determined by the Committee.
(e) All
or any portion of the shares of Stock authorized for issuance pursuant to
Section 3.5 herein shall be available for issuance pursuant to Incentive
Stock
Options granted under this Plan.
4.3 To
the extent an Incentive Stock Option fails to meet the requirements of Code
section 422, it shall be deemed a Nonqualified Stock Option.
4.4 The
Committee may at any time offer to buy out for a payment in cash, Stock,
Deferred Stock or Restricted Stock an Incentive Stock Option previously granted,
based on such terms and conditions as the Committee shall establish and
communicate to the Participant at the time that such offer is made.
4.5 If
the Incentive Stock Option Award Agreement so provides, the Committee may
require that all or part of the shares of Stock to be issued upon the exercise
of an Incentive Stock Option shall take the form of Deferred or Restricted
Stock, which shall be valued on the date of exercise, as determined by the
Committee, on the basis of the Fair Market Value of such Deferred Stock or
Restricted Stock determined without regard to the deferral limitations and/or
forfeiture restrictions involved.
4.6 Any
Incentive Stock Option that fails to qualify under section 422 of the Code
shall
be treated as a Nonqualified Stock Option granted under Article V.
ARTICLE
V - NONQUALIFIED STOCK OPTIONS
5.1 Nonqualified
Stock Options may be granted to Eligible Participants to purchase shares
of
Stock at such time or times determined by the Committee, following the Effective
Date, subject to the terms and conditions set forth in this Article
V.
5.2 The
Nonqualified Stock Option exercise price per share of Stock shall be established
in the Agreement and may be more than, equal to or less than 100% of the
Fair
Market Value at the time of the grant, but may not be less than par value
of the
Stock.
5.3 A
Nonqualified Stock Option may be exercised in full or in part from time to
time
within such period as may be specified by the Committee in the Agreement;
provided, that, in any event, the Nonqualified Stock Option shall lapse and
cease to be exercisable 30 days after Termination of Employment for any
termination other than as a result of retirement, death, disability or a
change
in control of the Company, or within such period following a Termination
of
Employment as shall have been specified in the Nonqualified Stock Option
Award
Agreement, provided, that such period following a Termination of Employment
shall in no event extend the original exercise period of the Nonqualified
Stock
Option. The time period for which an option may be exercised following the
termination of employment may be extended at the discretion of the committee,
providing that in no circumstance may the period be extended past the original
expiration date of the option.
5.4
If
termination of employment is as a result of either death or disability, the
participant shall have one year from the date of termination of employment
to
exercise vested non qualified stock options. If termination of employment
is as
a result of retirement at normal retirement age and as approved by the
Committee, the participant shall have the lesser of:
(i)
Four
years from the date of such retirement, or
(ii)
The
remainder of the term of such option grants
to
exercise vested non-qualified options.
5.5 Options
granted under the plan shall be accelerated and become fully exercisable
upon a
Change in Control (as hereinafter defined) of the Company. For purposes of
this
plan, a “Change in Control” shall be conclusively deemed to have occurred if
(and only if) any of the following events shall have occurred:
(i)
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there
shall have occurred an event required to be reported in response
to Item
6(e) of Schedule 14A of Regulation 14A (or in response to any similar
item
on any similar schedule or form) promulgated under the Securities
Exchange
Act of 1934 (the “Exchange Act”), whether or not the Company is then
subject to such reporting
requirement.
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(ii)
|
Any
“person” (as such term is used in Section 13(d) and 14(d) of the Exchange
Act) shall have become the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities
of the
Company representing 20% or more of the combined voting power of
the
Company’s then outstanding voting securities without prior approval of
at
least two-thirds of the members of the Board in office immediately
prior
to such person’s attaining such
interest.
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(iii)
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The
company is party to a merger, consolidation, sale of assets, or
other
reorganization, or a proxy contest as a consequence of which members
of
the Board in office immediately prior to such transaction or event
constitute less than a majority of the Board
thereafter
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(iv)
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During
any period of two consecutive years, individuals who at the
beginning of such period constituted the Board (including for this
purpose
any new Director whose election or nomination for election by the
Company’s stockholders was approved by a vote of at least two-thirds of
the Directors then still in office who were Directors at the beginning
of
such period) cease for any reason to constitute at least a majority
of the
Board.
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5.4
The
Nonqualified Stock Option Award Agreement may include any other terms and
conditions not inconsistent with this Article V or Article VIII, as determined
by the Committee.
ARTICLE
VI – RESERVED
ARTICLE
VII - INCIDENTS OF STOCK OPTIONS
7.1 Each
Stock Option shall be granted subject to such terms and conditions, if any,
not
inconsistent with this Plan, as shall be determined by the Committee, including
any provisions as to continued employment as consideration for the grant
or
exercise of such Stock Option and any provisions that may be advisable to
comply
with applicable laws, regulations or rulings of any governmental
authority.
7.2 [Reserved]
7.3 Except
as provided below, a Stock Option shall not be transferable by the Participant
other than by will or by the laws of descent and distribution, or, to the
extent
otherwise allowed by applicable law, pursuant to a qualified domestic relations
order as defined by the Code or the Employee Retirement Income Security Act
of
1974, as amended, or the rules there under, and shall be exercisable during
the
lifetime of the Participant only by him or in the event of his death or
Disability, by his guardian or legal representative; provided, however, that
a
Nonqualified Stock Option may be transferred and exercised by the
transferee to the extent determined by the Committee to be consistent with
securities and other applicable laws, rules and regulations and with Company
policy. Notwithstanding any language herein or in any Agreement to
the contrary, any restrictions on transfer of a Stock Option in the Plan
or an
Agreement shall be void and of no effect if the Committee determines that
a
transfer can be made consistent with securities and other applicable laws,
rules
and regulations.
7.4 Shares
of Stock purchased upon exercise of a Stock Option shall be paid for at the
time
of exercise (or, in case of an exercise pursuant to a cashless exercise
mechanism described below, as soon as practicable after such exercise) in
cash.
The Committee may establish a cashless exercise mechanism by which a Participant
may pay the exercise price under a Stock Option by irrevocably authorizing
a
third party to sell shares of Stock (or a sufficient portion of the shares)
acquired upon exercise of the Stock Option and remit to the Company a sufficient
portion of the sales proceeds to pay the entire exercise price and/or any
tax
withholding resulting from such exercise. Without limiting the foregoing,
the
Committee may establish payment terms for the exercise of Stock Options which
permit the Participant pay for shares received pursuant to the plan through
a
payment plan approved by the committee.
7.5 No
cash dividends shall be paid on shares of Stock subject to unexercised Stock
Options. The Committee may at their discretion provide, however, that
a Participant to whom a Stock Option has been granted which is exercisable
in
whole or in part at a future time for shares of Stock shall be entitled to
receive an amount per share equal in value to the cash dividends, if any,
paid
per share on issued and outstanding Stock, as of the dividend record dates
occurring during the period between the date of the grant and the time each
such
share of Stock is delivered pursuant to exercise of such Stock Option or
Stock
Right. Such a decision by the committee is to be made on a case by
case basis and is not binding on either all options outstanding at the time
of
such dividend payment, or on future dividend payments. Such amounts (herein
called “dividend equivalents”) may, in the discretion of the Committee,
be:
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(a)
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paid
in cash or Stock either from time to time prior to, or at the time
of the
delivery of, such Stock, or upon expiration of the Stock Option
or Stock
Right if it shall not have been fully exercised;
or
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(b)
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converted
into contingently credited shares of Stock, with respect to which
dividend
equivalents may accrue, in such manner, at such value, and deliverable
at
such time or times, as may be determined by the
Committee.
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Such
Stock, whether delivered or contingently credited, shall be charged
against the limitations set forth in Plan Section
3.5.
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7.6 The
Committee, in its sole discretion, may authorize payment of interest equivalents
on dividend equivalents which are payable in cash at a future
time.
7.7 In
the event of Disability or death, the Committee, with the consent of the
Participant or his legal representative, may authorize payment, in cash or
in
Stock, or partly in cash and partly in Stock, as the Committee may direct,
of an
amount equal to the difference at the time between the Fair Market Value
of the
Stock subject to a Stock Option and the option price in consideration of
the
surrender of the Stock Option.
7.8 If
a Participant is required to pay to the Company an amount with respect to
income
and employment tax withholding obligations in connection with exercise of
a
Nonqualified Stock Option, and/or with respect to certain dispositions of
Stock
acquired upon the exercise of an Incentive Stock Option, the Committee, in
its
discretion and subject to such rules as it may adopt, may permit the Participant
to satisfy the obligation, in whole or in part, by surrendering shares of
Stock
which the Participant already owns or by making an irrevocable election that,
in
lieu of the issuance of Stock, a portion of the total Fair Market Value of
the
shares of Stock subject to the Nonqualified Stock Option or Stock Right and/or
with respect to certain dispositions of Stock acquired upon the exercise
of an
Incentive Stock Option, be surrendered for cash and that such cash payment
be
applied to the satisfaction of the withholding obligations. The
amount to be withheld shall not exceed the statutory minimum federal and
state
income and employment tax liability arising from the Stock Option exercise
transaction.
7.9 The
Committee may permit the voluntary surrender of all or a portion of any Stock
Option granted under the Plan to be conditioned upon the granting to the
Participant of a new Stock Option for the same or a different number of shares
of Stock as the Stock Option surrendered, or may require such surrender as
a
condition precedent to a grant of a new Stock Option to such
Participant. Subject to the provisions of the Plan, such new Stock
Option shall be exercisable at such price, during such period and on such
other
terms and conditions as are specified by the Committee at the time the new
Stock
Option is granted. Upon surrender, the Stock Options surrendered
shall be canceled and the shares of Stock previously subject to them shall
be
available for the grant of other Stock Options.
7.10 The
Committee may provide in any Stock Option Agreement entered into pursuant
to the
Plan, or by separate agreement, that if a Participant makes payment upon
the
exercise of any Stock Option granted hereunder in whole or in part through
the
surrender of shares of Stock, such Participant shall automatically receive
a new
Stock Option for the number of shares of Stock so surrendered by him at a
price
equal to the Fair Market Value of the shares of Stock at the time of surrender,
exercisable on the same basis and having the same terms as the underlying
Stock
Option or on such other basis as the Committee shall determine and provide
in
the Stock Option Agreement.
ARTICLE
VIII - STOCK AWARDS
8.1 A
Stock Award shall be granted only in payment of compensation that has been
earned or as compensation to be earned, including without limitation,
compensation awarded concurrently with or prior to the grant of the Stock
Award.
8.2 For
the purposes of this Plan, in determining the value of a Stock Award, all
shares
of Stock subject to such Stock Award shall be valued at not less than 100%
of
the Fair Market Value of such shares of Stock on the date such Stock Award
is
granted, regardless of whether or when such shares of Stock are issued or
transferred to the Participant and whether or not such shares of Stock are
subject to restrictions which affect their value.
8.3 Shares
of Stock subject to a Stock Award may be issued or transferred to the
Participant at the time the Stock Award is granted, or at any time subsequent
thereto, or in installments from time to time, as the Committee shall
determine. If any such issuance or transfer shall not be made to the
Participant at the time the Stock Award is granted, the Committee may provide
for payment to such Participant, either in cash or shares of Stock, from
time to
time or at the time or times such shares of Stock shall be issued or transferred
to such Participant, of amounts not exceeding the dividends which would have
been payable to such Participant in respect of such shares of Stock, as adjusted
under Section 3.10, if such shares of Stock had been issued or transferred
to
such Participant at the time such Stock Award was granted. Any
issuance payable in shares of Stock under the terms of a Stock Award, at
the
discretion of the Committee, may be paid in cash on each date on which delivery
of shares of Stock would otherwise have been made, in an amount equal to
the
Fair Market Value on such date of the shares of Stock which would otherwise
have
been delivered.
8.4 A
Stock Award shall be subject to such terms and conditions, including without
limitation, restrictions on the sale or other disposition of the Stock Award
or
of the shares of Stock issued or transferred pursuant to such Stock Award,
as
the Committee shall determine; provided, however, that upon the issuance
or
transfer of shares pursuant to a Stock Award, the Participant, with respect
to
such shares of Stock, shall be and become a shareholder of the Company fully
entitled to receive dividends, to vote to the extent, if any, such shares
possess voting rights and to exercise all other rights of a shareholder except
to the extent otherwise provided in the Stock Award. Each Stock Award
shall be evidenced by a written Award Agreement in such form as the Committee
shall determine.
ARTICLE
IX - AMENDMENT AND TERMINATION
9.1 The
Board at any time and from time to time, may amend or terminate the Plan.
To the
extent required by Code section 422 and/or the rules of the exchange upon
which
the Stock is traded, no amendment, without approval by the Company’s
shareholders, shall:
(a) alter
the group of persons eligible to participate in the Plan;
(b) except
as provided in Plan Section 3.5, increase the maximum number of
shares of Stock which are available for issuance pursuant to Awards granted
under the Plan;
(c) extend
the period during which Incentive Stock Options may be granted beyond the
date
which is ten (10) years following the Effective Date.
(d) limit
or restrict the powers of the Committee with respect to the administration
of
this Plan;
(e) change
the definition of an Eligible Participant for the purpose of Incentive Stock
Options or increase the limit or the value of shares of Stock for which an
Eligible Participant may be granted an Incentive Stock Option;
(f) materially
increase the benefits accruing to Participants under this Plan;
(g) materially
modify the requirements as to eligibility for participation in this Plan;
or
(h) change
any of the provisions of this Article IX.
9.2 No
amendment to or discontinuance of this Plan or any provision thereof by the
Board or the shareholders of the Company shall, without the written consent
of
the Participant, adversely affect, as shall be determined by the Committee,
any
Award previously granted to such Participant under this Plan; provided, however,
the Committee retains the right and power to treat any outstanding Incentive
Stock Option as a Nonqualified Stock Option in accordance with Plan Section
4.3.
9.3 Notwithstanding
anything herein to the contrary, if the right to receive or benefit from
any
Award, either alone or together with payments that a Participant has the
right
to receive from the Company, would constitute a “parachute payment” under Code
section 280G, all such payments may be reduced, in the discretion of the
Committee, to the largest amount that will avoid an excise tax to the
Participant under Code section 280G.
ARTICLE
X - MISCELLANEOUS PROVISIONS
10.1 Nothing
in the Plan or any Award granted under the Plan shall confer upon any
Participant any right to continue in the employ of the Company, or to serve
as a
director thereof, or interfere in any way with the right of the Company to
terminate his or her employment at any time. Unless agreed by the
Board, no Award granted under the Plan shall be deemed salary or compensation
for the purpose of computing benefits under any employee benefit plan or
other
arrangement of the Company for the benefit of its employees. No
Participant shall have any claim to an Award until it is actually granted
under
the Plan. To the extent that any person acquires a right to receive
payments from the Company under the Plan, such right shall, except as otherwise
provided by the Committee, be no greater than the right of an unsecured general
creditor of the Company. All payments to be made under the Plan shall
be paid from the general funds of the company, and no special or separate
fund
shall be established and no segregation of assets shall be made to assure
payment of such amounts, except as otherwise provided by the
Committee.
10.2 The
Committee may make such provisions and take such steps as it may deem necessary
or appropriate for the withholding of any taxes which the Company is required
by
any law or regulation of any governmental authority, whether federal, state
or
local, domestic or foreign, to withhold in connection with any Award or the
exercise thereof, including, but not limited to, withholding the payment
of all
or any portion of such Award or another Award under this Plan until the
Participant reimburses the Company for the amount the Company is required
to
withhold with respect to such taxes, or canceling any portion of such Award
or
another Award under this Plan in an amount sufficient to reimburse itself
for
the amount it is required to so withhold, or selling any property contingently
credited by the Company for the purpose of paying such Award or another Award
under this Plan in order to withhold or reimburse itself for the amount it
is
required to so withhold. The amount to be withheld shall not exceed
the statutory minimum federal and state income and employment tax liability
arising from the exercise transaction.
10.3 The
Plan and the grant of Awards shall be subject to all applicable federal and
state laws, rules, and regulations and to such approvals by any United States
government or regulatory agency as may be required.
10.4 The
terms of the Plan shall be binding upon the Company, and its successors and
assigns.
10.5 The
Plan is intended to constitute an “unfunded” plan for incentive and deferred
compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor
of the
Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created
under
the Plan to deliver shares of Stock or payments in lieu of or with respect
to
Awards under the Plan; provided, however, that, unless the Committee otherwise
determines with the consent of the affected Participant, the existence of
such
trusts or other arrangements is consistent with the “unfunded” status of the
Plan.
10.6 Each
Participant exercising an Award under the Plan agrees to give the Committee
prompt written notice of any election made by such Participant under Code
section 83(b) or any similar provision thereof.
10.7 If
any provision of this Plan or an Award Agreement is or becomes or is deemed
invalid, illegal or unenforceable in any jurisdiction, or would disqualify
the
Plan or any Award Agreement under any law deemed applicable by the Committee,
such provision shall be construed or deemed amended to conform to applicable
laws or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan
or
the Award Agreement, it shall be stricken and the remainder of the Plan or
the
Award Agreement shall remain in full force and effect.
IN
WITNESS WHEREOF, this Plan is
executed this the 12
th
day of
December ,
2007.
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NANO-PROPRIETARY,
INC
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By:________________________________
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Name:
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Title:
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