2001 Incentive Compensation Plan - Synaptics Inc.
SYNAPTICS INCORPORATED
-------------------
AMENDED AND RESTATED
2001 INCENTIVE COMPENSATION PLAN
(AS AMENDED THROUGH SEPTEMBER 19, 2001)
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SYNAPTICS INCORPORATED
-------------------
AMENDED AND RESTATED
2001 INCENTIVE COMPENSATION PLAN
(AS AMENDED THROUGH SEPTEMBER 19, 2001)
1. Purpose..............................................................................1
2. Definitions..........................................................................1
3. Administration.......................................................................5
(a) Authority of the Committee..................................................5
(b) Manner of Exercise of Committee Authority...................................6
(c) Limitation of Liability.....................................................6
4. Stock Subject to Plan................................................................6
(a) Limitation on Overall Number of Shares Subject to Awards....................6
(b) Limitation on Number of Incentive Stock Option Shares.......................7
(c) Application of Limitations..................................................7
5. Eligibility; Per-Person Award Limitations............................................7
6. Specific Terms of Awards.............................................................7
(a) General.....................................................................7
(b) Options.....................................................................8
(c) Stock Appreciation Rights..................................................10
(d) Restricted Stock...........................................................11
(e) Deferred Stock.............................................................12
(f) Bonus Stock and Awards in Lieu of Obligations..............................13
(g) Dividend Equivalents.......................................................13
(h) Other Stock-Based Awards...................................................13
7. Performance and Annual Incentive Awards.............................................14
(a) Performance Conditions.....................................................14
(b) Performance Awards Granted to Designated Covered Employees.................14
(c) Annual Incentive Awards Granted to Designated Covered Employees............15
(d) Written Determinations.....................................................16
(e) Status of Section 7(b) and Section 7(c) Awards Under Code
Section 162(m).............................................................17
8. Certain Provisions Applicable to Awards or Sales....................................17
(a) Stand-Alone, Additional, Tandem, and Substitute Awards.....................17
(b) Term of Awards.............................................................17
(c) Purchase Prices............................................................18
(d) Form and Timing of Payment Under Awards; Deferrals.........................18
(e) Exemptions from Section 16(b) Liability....................................18
9. Change in Control...................................................................19
(a) Effect of "Change in Control.".............................................19
(b) Definition of "Change in Control...........................................19
(c) Definition of "Change in Control Price."...................................20
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10. General Provisions..................................................................20
(a) Compliance With Legal and Other Requirements...............................20
(b) Limits on Transferability; Beneficiaries...................................21
(c) Adjustments................................................................22
(d) Taxes......................................................................23
(e) Changes to the Plan and Awards.............................................23
(f) Reporting of Financial Information.........................................24
(g) Limitation on Rights Conferred Under Plan..................................24
(h) Unfunded Status of Awards; Creation of Trusts..............................24
(i) Nonexclusivity of the Plan.................................................24
(j) Payments in the Event of Forfeitures; Fractional Shares....................25
(k) Governing Law..............................................................25
(l) Plan Effective Date and Stockholder Approval; Termination of Plan..........25
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SYNAPTICS INCORPORATED
AMENDED AND RESTATED
2001 INCENTIVE COMPENSATION PLAN
(AS AMENDED THROUGH SEPTEMBER 19, 2001)
1. Purpose. The purpose of this AMENDED AND RESTATED 2001 INCENTIVE
COMPENSATION PLAN (the "Plan") is to assist SYNAPTICS INCORPORATED, a California
corporation (the "Company") and its Related Entities in attracting, motivating,
retaining and rewarding high-quality executives and other Employees, officers,
Directors and independent Contractors by enabling such persons to acquire or
increase a proprietary interest in the Company in order to strengthen the
mutuality of interests between such persons and the Company's shareholders, and
providing such persons with annual and long term performance incentives to
expend their maximum efforts in the creation of shareholder value. In the event
that the Company is or becomes a Publicly Held Corporation (as hereinafter
defined), the Plan is intended to qualify certain compensation awarded under the
Plan for tax deductibility under Section 162(m) of the Code (as hereafter
defined) to the extent deemed appropriate by the Committee (or any successor
committee) of the Board of Directors of the Company.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.
(a) "Annual Incentive Award" means a conditional right granted
to a Participant under Section 8(c) hereof to receive a cash payment, Stock or
other Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.
(b) "Award" means any Option, Stock Appreciation Right
(including Limited Stock Appreciation Right), Restricted Stock, Deferred Stock,
Stock granted as a bonus or in lieu of another award, Dividend Equivalent, Other
Stock-Based Award, Performance Award or Annual Incentive Award, together with
any other right or interest, granted to a Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts
which have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(d) "Beneficial Owner", "Beneficially Owning" and "Beneficial
Ownership" shall have the meanings ascribed to such terms in Rule 13d3 under the
Exchange Act and any successor to such Rule.
(e) "Board" means the Company's Board of Directors.
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(f) "Cause" shall, with respect to any Participant, have the
equivalent meaning (or the same meaning as "cause" or "for cause") set forth in
any employment agreement between the Participant and the Company or a Related
Entity or, in the absence of any such agreement, such term shall mean (i) the
failure by the Participant to perform his or her duties as assigned by the
Company (or a Related Entity) in a reasonable manner, (ii) any violation or
breach by the Participant of his or her employment agreement with the Company
(or a Related Entity), if any, (iii) any violation or breach by the Participant
of his or her non-competition and/or non-disclosure agreement with the Company
(or a Related Entity), if any, (iv) any act by the Participant of dishonesty or
bad faith with respect to the Company (or a Related Entity), (v) chronic
addiction to alcohol, drugs or other similar substances affecting the
Participant's work performance, or (vi) the commission by the Participant of any
act, misdemeanor, or crime reflecting unfavorably upon the Participant or the
Company. The good faith determination by the Committee of whether the
Participant's Continuous Service was terminated by the Company for "Cause" shall
be final and binding for all purposes hereunder.
(g) "Change in Control" means a Change in Control as defined
with related terms in Section 9 of the Plan.
(h) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.
(i) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, including regulations thereunder and successor provisions and
regulations thereto.
(j) "Committee" means a committee designated by the Board to
administer the Plan; provided, however, that the Committee shall consist of at
least two directors, and, in the event the Company is or becomes a Publicly Held
Corporation (as hereinafter defined), each member of which shall be (i) a
"non-employee director" within the meaning of Rule 16b-3 under the Exchange Act,
unless administration of the Plan by "non-employee directors" is not then
required in order for exemptions under Rule 16b-3 to apply to transactions under
the Plan, and (ii) an "outside director" within the meaning of Section 162(m) of
the Code, unless administration of the Plan by "outside directors" is not then
required in order to qualify for tax deductibility under Section 162(m) of the
Code.
(k) "Consultant" means any person (other than an Employee or a
Director, solely with respect to rendering services in such person's capacity as
a director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.
(l) "Continuous Service" means uninterrupted provision of
services to the Company in any capacity of Employee, Director, or Consultant.
Continuous Service shall not be considered to be interrupted in the case of (i)
any approved leave of absence, (ii) transfers among the Company, any Related
Entities, or any successor entities, in any capacity of Employee Director, or
Consultant, or (iii) any change in status as long as the individual remains in
the service of the Company or a Related Entity in any capacity of Employee,
Director, or Consultant
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(except as otherwise provided in the Option Agreement). An approved leave of
absence shall include sick leave, military leave, or any other authorized
personal leave.
(m) "Corporate Transaction" means a Corporate Transaction as
defined in Section 9(b)(i) of the Plan.
(n) "Covered Employee" means an Eligible Person who is a
Covered Employee as specified in Section 7(e) of the Plan.
(o) "Deferred Stock" means a right, granted to a Participant
under Section 6(e) hereof, to receive Stock, cash or a combination thereof at
the end of a specified deferral period.
(p) "Director" means a member of the Board or the board of
directors of any Related Entity.
(q) "Disability" means a permanent and total disability
(within the meaning of Section 22(e) of the Code), as determined by a medical
doctor satisfactory to the Committee.
(r) "Dividend Equivalent" means a right, granted to a
Participant under Section 6(g) hereof, to receive cash, Stock, other Awards or
other property equal in value to dividends paid with respect to a specified
number of shares of Stock, or other periodic payments.
(s) "Effective Date" means the effective date of the Plan,
which shall be March 7, 2001.
(t) "Eligible Person" means each Executive Officer of the
Company (as defined under the Exchange Act) and other officers, Directors and
Employees of the Company or of any Related Entity, and independent contractors
with the Company or any Related Entity. The foregoing notwithstanding, only
employees of the Company, the Parent, or any Subsidiary shall be Eligible
Persons for purposes of receiving any Incentive Stock Options. An Employee on
leave of absence may be considered as still in the employ of the Company or a
Related Entity for purposes of eligibility for participation in the Plan.
(u) "Employee" means any person, including an officer or
Director, who is an employee of the Company or any Related Entity. The Payment
of a director's fee by the Company or a Related Entity shall not be sufficient
to constitute "employment" by the Company.
(v) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(w) "Executive Officer" means an executive officer of the
Company as defined under the Exchange Act.
(x) "Fair Market Value" means the fair market value of Stock,
Awards or other property as determined by the Committee or the Board, or under
procedures established by the Committee or the Board. Unless otherwise
determined by the Committee or the Board, the Fair Market Value of Stock as of
any given date after which the Company is a Publicly Held
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Corporation shall be the closing sale price per share reported on a consolidated
basis for stock listed on the principal stock exchange or market on which Stock
is traded on the date as of which such value is being determined or, if there is
no sale on that date, then on the last previous day on which a sale was
reported.
(y) "Good Reason" shall, with respect to any Participant, have
the equivalent meaning (or the same meaning as "good reason" or "for good
reason") set forth in any employment agreement between the Participant and the
Company or a Related Entity or, in the absence of any such agreement, such term
shall mean (i) the assignment to the Participant of any duties inconsistent in
any respect with the Participant's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as assigned
by the Company (or a Related Entity), or any other action by the Company (or a
Related Entity) which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company (or a Related Entity) promptly after receipt of notice
thereof given by the Participant; (ii) any failure by the Company (or a Related
Entity) to comply with its obligations to the Participant as agreed upon, other
than an isolated, insubstantial and inadvertent failure not occurring in bad
faith and which is remedied by the Company (or a Related Entity) promptly after
receipt of notice thereof given by the Participant; (iii) the Company's (or
Related Entity's) requiring the Participant to be based at any office or
location outside of fifty miles from the location of employment as of the date
of Award, except for travel reasonably required in the performance of the
Participant's responsibilities; (iv) any purported termination by the Company
(or a Related Entity) of the Participant's Continuous Service otherwise than for
Cause as defined in Section 2(f), or by reason of the Participant's Disability
as defined in Section 2(o), prior to the Expiration Date. For purposes of this
Section 2(v), any good faith determination of "Good Reason" made by the Company
shall be conclusive.
(z) "Incentive Stock Option" means any Option intended to be
designated as an incentive stock option within the meaning of Section 422 of the
Code or any successor provision thereto.
(aa) "Incumbent Board" means the Incumbent Board as defined in
Section 9(b)(ii) of the Plan.
(bb) "Limited Stock Appreciation Right" means a right granted
to a Participant under Section 6(c) hereof.
(cc) "Option" means a right granted to a Participant under
Section 6(b) hereof, to purchase Stock or other Awards at a specified price
during specified time periods.
(dd) "Optionee" means a person to whom an Option or Incentive
Stock Option is granted under this Plan or any person who succeeds to the rights
of such person under this Plan.
(ee) "Other Stock-Based Awards" means Awards granted to a
Participant under Section 6(h) hereof.
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(ff) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(gg) "Participant" means a person who has been granted an
Award under the Plan which remains outstanding, including a person who is no
longer an Eligible Person.
(hh) "Performance Award" means a right, granted to an Eligible
Person under Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee or the Board.
(ii) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.
(jj) "Publicly Held Corporation" shall mean a publicly held
corporation as that term is used under Section 162(m)(2) of the Code.
(kk) "Restricted Stock" means Stock granted to a Participant
under Section 6(d) hereof, that is subject to certain restrictions and to a risk
of forfeiture.
(ll) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and
Rule 16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
(mm) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.
(nn) "Stock Appreciation Right" means a right granted to a
Participant under Section 6(c) hereof.
(oo) "Subsidiary" means a "subsidiary corporation" whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered
by the Committee; provided, however, that except as otherwise expressly provided
in this Plan or, during the period that the Company is a Publicly Held
Corporation, in order to comply with Code Section 162(m) or Rule 16b-3 under the
Exchange Act, the Board may exercise any power or authority granted to the
Committee under this Plan. The Committee or the Board shall have full and final
authority, in each case subject to and consistent with the provisions of the
Plan, to select Eligible Persons to become Participants, grant Awards, determine
the type, number and other terms and conditions of, and all other matters
relating to, Awards, prescribe Award agreements (which need not be identical for
each Participant) and rules and regulations for the administration of the Plan,
construe and interpret the Plan and Award agreements and correct defects, supply
omissions or reconcile inconsistencies therein, and to make all other decisions
and determinations as the Committee or the Board may deem necessary or advisable
for the
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administration of the Plan. In exercising any discretion granted to the
Committee or the Board under the Plan or pursuant to any Award, the Committee or
the Board shall not be required to follow past practices, act in a manner
consistent with past practices, or treat any Eligible Person in a manner
consistent with the treatment of other Eligible Persons.
(b) Manner of Exercise of Committee Authority. In the event
that the Company is or becomes a Publicly Held Corporation, the Committee, and
not the Board, shall exercise sole and exclusive discretion on any matter
relating to a Participant then subject to Section 16 of the Exchange Act with
respect to the Company to the extent necessary in order that transactions by
such Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any
action of the Committee or the Board shall be final, conclusive and binding on
all persons, including the Company, its Related Entities, Participants,
Beneficiaries, transferees under Section 10(b) hereof or other persons claiming
rights from or through a Participant, and shareholders. The express grant of any
specific power to the Committee or the Board, and the taking of any action by
the Committee or the Board, shall not be construed as limiting any power or
authority of the Committee or the Board. The Committee or the Board may delegate
to officers or managers of the Company or any Related Entity, or committees
thereof, the authority, subject to such terms as the Committee or the Board
shall determine, (i) to perform administrative functions, (ii) with respect to
Participants not subject to Section 16 of the Exchange Act, to perform such
other functions as the Committee or the Board may determine, and (iii) with
respect to Participants subject to Section 16, to perform such other functions
of the Committee or the Board as the Committee or the Board may determine to the
extent performance of such functions will not result in the loss of an exemption
under Rule 16b-3 otherwise available for transactions by such persons, in each
case to the extent permitted under applicable law and subject to the
requirements set forth in Section 7(d). The Committee or the Board may appoint
agents to assist it in administering the Plan.
(c) Limitation of Liability. The Committee and the Board, and
each member thereof, shall be entitled to, in good faith, rely or act upon any
report or other information furnished to him or her by any Executive Officer,
other officer or Employee, the Company's independent auditors, Consultants or
any other agents assisting in the administration of the Plan. Members of the
Committee and the Board, and any officer or Employee acting at the direction or
on behalf of the Committee or the Board, shall not be personally liable for any
action or determination taken or made in good faith with respect to the Plan,
and shall, to the extent permitted by law, be fully indemnified and protected by
the Company with respect to any such action or determination.
4. Stock Subject to Plan.
(a) Limitation on Overall Number of Shares Subject to Awards.
Subject to adjustment as provided in Section 10(c) hereof, the total number of
shares of Stock reserved and available for delivery in connection with Awards
under the Plan shall be the sum of (i) 1,000,000, plus (ii) the number of shares
with respect to Awards previously granted under the Plan that terminate without
being exercised, expire, are forfeited or canceled, and the number of shares of
Stock that are surrendered in payment of any Awards or any tax withholding with
regard thereto. In the event an Initial Public Offering ("IPO") of the shares of
the Company's
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Stock occurs, the overall number of shares of the Company's Stock subject to
Awards shall be further increased by 6% of the total number of shares of the
Company's Stock outstanding immediately following the IPO, plus, on the first
day of each subsequent calendar quarter, an additional 1.5% of the total number
of shares of the Company's Stock outstanding on that day, provided, however,
that at no time shall the number of shares of the Company's Stock subject to
Awards exceed 30% of the then outstanding shares of the Company's Stock
(counting convertible preferred and convertible senior common shares as if
converted), unless a greater percentage is approved by a vote of at least
two-thirds of the securities entitled to vote, or a determination is made by
counsel for the Company that such restriction is not required by applicable
federal or state securities laws under the circumstances. Any shares of Stock
delivered under the Plan may consist, in whole or in part, of authorized and
unissued shares or treasury shares.
(b) Limitation on Number of Incentive Stock Option Shares.
Subject to adjustment as provided in Section 10(c) hereof, the number of shares
of Stock which may be issued pursuant to Incentive Stock Options shall be the
lesser of (i) the number of Shares that may be subject to Awards under Section
4(a), or (ii) 15,000,000.
(c) Application of Limitations. The limitation contained in
this Section 4 shall apply not only to Awards that are settleable by the
delivery of shares of Stock but also to Awards relating to shares of Stock but
settleable only in cash (such as cash-only Stock Appreciation Rights). The
Committee or the Board may adopt reasonable counting procedures to ensure
appropriate counting, avoid double counting (as, for example, in the case of
tandem or substitute awards) and make adjustments if the number of shares of
Stock actually delivered differs from the number of shares previously counted in
connection with an Award.
5. Eligibility; Per-Person Award Limitations. Awards may be granted
under the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than 1,000,000 shares of Stock, subject to adjustment as
provided in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f),
6(g), 6(h), 7(b) and 7(c). In addition, the maximum amount that may be earned as
an Annual Incentive Award or other cash Award in any fiscal year by any one
Participant shall be $2,000,000, and the maximum amount that may be earned as a
Performance Award or other cash Award in respect of a performance period by any
one Participant shall be $5,000,000.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee or the Board may impose
on any Award or the exercise thereof, at the date of grant or thereafter
(subject to Section 10(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee or the Board
shall determine, including terms requiring forfeiture of Awards in the event of
termination of Continuous Service by the Participant and terms permitting a
Participant to make elections relating to his or her Award. The Committee or the
Board shall retain full power and discretion to accelerate, waive or modify, at
any time, any term or condition of an Award that is not mandatory under the
Plan. Except in cases in which the Committee or the Board is authorized to
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require other forms of consideration under the Plan, or to the extent other
forms of consideration must be paid to satisfy the requirements of California
law, no consideration other than services may be required for the grant (but not
the exercise) of any Award.
(b) Options. The Committee and the Board each is authorized to
grant Options to Participants on the following terms and conditions:
(i) Stock Option Agreement. Each grant of an Option
under the Plan shall be evidenced by a Stock Option Agreement.
Such Stock Option Agreement shall be subject to all applicable
terms and conditions of the Plan and may be subject to any
other terms and conditions which are not inconsistent with the
Plan and which the Committee or the Board deems appropriate
for inclusion in a Stock Option Agreement. The provisions of
the various Stock Option Agreements entered into under the
Plan need not be identical.
(ii) Number of Shares. Each Stock Option Agreement
shall specify the number of shares of Stock that are subject
to the Option and shall provide for the adjustment of such
number in accordance with Section 10(c) hereof. The Stock
Option Agreement shall also specify whether the Stock Option
is an Incentive Stock Option or a Non-Qualified Stock Option.
(iii) Exercise Price.
(A) In General. Each Stock Option Agreement
shall state the price at which shares of Stock subject to the
Option may be purchased (the "Exercise Price"), which shall
be, with respect to Incentive Stock Options, not less than
100% of the Fair Market Value of the Stock on the date of
grant. In the case of Non-Qualified Stock Options, the
Exercise Price shall be determined in the sole discretion of
the Committee or the Board; provided, however, that the
Exercise Price shall be no less than 85% of the Fair Market
Value of the shares of Stock on the date of grant of the
Non-Qualified Stock Option.
(B) Ten Percent Shareholder. If an
individual owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of
stock of the Company or any Related Entity, any Option granted
to such individual must comply with the following: (1) the
Exercise Price of a Non-Qualified Stock Option must be at
least 110% of the Fair Market Value of a share of Stock on the
date of grant, or (2) in the case of an Incentive Stock
Option, the Exercise Price must be at least 110% of the Fair
Market Value of a share of Stock on the date of grant and such
Incentive Stock Option by its terms is not exercisable after
the expiration of five years from the date of grant.
(C) Non-Applicability. The Exercise Price
restriction applicable to Non-Qualified Stock Options required
by Sections 6(b)(iii)(A) and 6(b)(iii)(B) shall be inoperative
if (1) the offer and sale of the shares of Stock to be issued
upon payment of the Exercise Price have been registered under
a then
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currently effective registration statement under applicable
federal or state securities laws, or (2) a determination is
made by counsel for the Company that such Exercise Price
restrictions are not required in the circumstances under
applicable federal or state securities laws.
(iv) Time and Method of Exercise. The Committee or
the Board shall determine the time or times at which or the
circumstances under which an Option may be exercised in whole
or in part (including based on achievement of performance
goals and/or future service requirements), provided that in
the case of an Optionee who is not an officer, Director, or
Consultant of the Company or a Related Entity, his or her
Options shall become exercisable at least as rapidly as 20%
per year, over a 5 year period commencing on the date of the
grant, unless a determination is made by counsel for the
Company that such vesting requirements are not required in the
circumstances under applicable federal or state securities
laws. The Board or the Committee may also determine the time
or times at which Options shall cease to be or become
exercisable following termination of Continuous Service or
upon other conditions; provided, however, if the Optionee's
Continuous Service is terminated for any reason other than
Cause, that portion of the Option that is exercisable as of
the date of termination shall remain exercisable for at least
6 months from the date of termination if by reason of death or
Disability, and for at least 30 days from the date of
termination if by reason other than the Optionee's death or
Disability. The Board or the Committee may determine the
methods by which such exercise price may be paid or deemed to
be paid (including in the discretion of the Committee or the
Board a cashless exercise procedure), the form of such
payment, including, without limitation, cash, Stock, other
Awards or awards granted under other plans of the Company or a
Related Entity, or other property (including notes or other
contractual obligations of Participants to make payment on a
deferred basis), and the methods by or forms in which Stock
will be delivered or deemed to be delivered to Participants.
(v) Incentive Stock Options. The terms of any
Incentive Stock Option granted under the Plan shall comply in
all respects with the provisions of Section 422 of the Code.
Anything in the Plan to the contrary notwithstanding, no term
of the Plan relating to Incentive Stock Options (including any
Stock Appreciation Rights in tandem therewith) shall be
interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be exercised, so as to
disqualify either the Plan or any Incentive Stock Option under
Section 422 of the Code, unless the Participant has first
requested the change that will result in such
disqualification. Thus, if and to the extent required to
comply with Section 422 of the Code, Options granted as
Incentive Stock Options shall be subject to the following
special terms and conditions:
(A) the Option shall not be exercisable more
than ten years after the date such Incentive Stock Option is
granted; provided, however, that if a Participant owns or is
deemed to own (by reason of the attribution rules of Section
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424(d) of the Code) more than 10% of the combined voting power
of all classes of stock of the Company or any Parent
Corporation and the Incentive Stock Option is granted to such
Participant, the term of the Incentive Stock Option shall be
(to the extent required by the Code at the time of the grant)
for no more than five years from the date of grant; and
(B) The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is
granted) of the shares of stock with respect to which
Incentive Stock Options granted under the Plan and all other
option plans of the Company or its Parent Corporation during
any calendar year exercisable for the first time by the
Participant during any calendar year shall not (to the extent
required by the Code at the time of the grant) exceed
$100,000.
(vi) Repurchase Rights. The Committee and the Board
shall have the discretion to grant Options which are
exercisable for unvested shares of Common Stock. Should the
Optionee's Continuous Service cease while holding such
unvested shares, the Company shall have the right to
repurchase, at the exercise price paid per share, any or all
of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure
for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Committee or the
Board and set forth in the document evidencing such repurchase
right.
(c) Stock Appreciation Rights. The Committee and the Board
each is authorized to grant Stock Appreciation Rights to Participants on the
following terms and conditions:
(i) Right to Payment. A Stock Appreciation Right
shall confer on the Participant to whom it is granted a right
to receive, upon exercise thereof, the excess of (A) the Fair
Market Value of one share of stock on the date of exercise
(or, in the case of a "Limited Stock Appreciation Right" that
may be exercised only in the event of a Change in Control, the
Fair Market Value determined by reference to the Change in
Control Price, as defined under Section 9(c) hereof), over (B)
the grant price of the Stock Appreciation Right as determined
by the Committee or the Board. The grant price of a Stock
Appreciation Right shall not be less than the Fair Market
Value of a share of Stock on the date of grant except as
provided under Section 8(a) hereof.
(ii) Other Terms. The Committee or the Board shall
determine at the date of grant or thereafter, the time or
times at which and the circumstances under which a Stock
Appreciation Right may be exercised in whole or in part
(including based on achievement of performance goals and/or
future service requirements), the time or times at which Stock
Appreciation Rights shall cease to be or become exercisable
following termination of Continuous Service or upon other
conditions, the method of exercise, method of settlement, form
of consideration payable in settlement, method by or forms in
which Stock will be delivered or deemed to be
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delivered to Participants, whether or not a Stock Appreciation
Right shall be in tandem or in combination with any other
Award, and any other terms and conditions of any Stock
Appreciation Right. Limited Stock Appreciation Rights that may
only be exercised in connection with a Change in Control or
other event as specified by the Committee or the Board, may be
granted on such terms, not inconsistent with this Section
6(c), as the Committee or the Board may determine. Stock
Appreciation Rights and Limited Stock Appreciation Rights may
be either freestanding or in tandem with other Awards.
(d) Restricted Stock. The Committee and the Board each is
authorized to grant Restricted Stock to Participants on the following terms and
conditions:
(i) Grant and Restrictions. Restricted Stock shall be
subject to such restrictions on transferability, risk of
forfeiture and other restrictions, if any, as the Committee or
the Board may impose, or as otherwise provided in this Plan.
The restrictions may lapse separately or in combination at
such times, under such circumstances (including based on
achievement of performance goals and/or future service
requirements), in such installments or otherwise, as the
Committee or the Board may determine at the date of grant or
thereafter. Except to the extent restricted under the terms of
the Plan and any Award agreement relating to the Restricted
Stock, a Participant granted Restricted Stock shall have all
of the rights of a shareholder, including the right to vote
the Restricted Stock and the right to receive dividends
thereon (subject to any mandatory reinvestment or other
requirement imposed by the Committee or the Board). During the
restricted period applicable to the Restricted Stock, subject
to Section 10(b) below, the Restricted Stock may not be sold,
transferred, pledged, hypothecated, margined or otherwise
encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by
the Committee or the Board at the time of the Award, upon
termination of a Participant's Continuous Service during the
applicable restriction period, the Participant's Restricted
Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided that the
Committee or the Board may provide, by rule or regulation or
in any Award agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to
Restricted Stock shall be waived in whole or in part in the
event of terminations resulting from specified causes, and the
Committee or the Board may in other cases waive in whole or in
part the forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock
granted under the Plan may be evidenced in such manner as the
Committee or the Board shall determine. If certificates
representing Restricted Stock are registered in the name of
the Participant, the Committee or the Board may require that
such certificates bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such
Restricted Stock, that the Company retain physical possession
of the
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certificates, and that the Participant deliver a stock power
to the Company, endorsed in blank, relating to the Restricted
Stock.
(iv) Dividends and Splits. As a condition to the
grant of an Award of Restricted Stock, the Committee or the
Board may require that any cash dividends paid on a share of
Restricted Stock be automatically reinvested in additional
shares of Restricted Stock or applied to the purchase of
additional Awards under the Plan. Unless otherwise determined
by the Committee or the Board, Stock distributed in connection
with a Stock split or Stock dividend, and other property
distributed as a dividend, shall be subject to restrictions
and a risk of forfeiture to the same extent as the Restricted
Stock with respect to which such Stock or other property has
been distributed.
(e) Deferred Stock. The Committee and the Board each is
authorized to grant Deferred Stock to Participants, which are rights to receive
Stock, cash, or a combination thereof at the end of a specified deferral period,
subject to the following terms and conditions:
(i) Award and Restrictions. Satisfaction of an Award
of Deferred Stock shall occur upon expiration of the deferral
period specified for such Deferred Stock by the Committee or
the Board (or, if permitted by the Committee or the Board, as
elected by the Participant). In addition, Deferred Stock shall
be subject to such restrictions (which may include a risk of
forfeiture) as the Committee or the Board may impose, if any,
which restrictions may lapse at the expiration of the deferral
period or at earlier specified times (including based on
achievement of performance goals and/or future service
requirements), separately or in combination, in installments
or otherwise, as the Committee or the Board may determine.
Deferred Stock may be satisfied by delivery of Stock, cash
equal to the Fair Market Value of the specified number of
shares of Stock covered by the Deferred Stock, or a
combination thereof, as determined by the Committee or the
Board at the date of grant or thereafter. Prior to
satisfaction of an Award of Deferred Stock, an Award of
Deferred Stock carries no voting or dividend or other rights
associated with share ownership.
(ii) Forfeiture. Except as otherwise determined by
the Committee or the Board, upon termination of a
Participant's Continuous Service during the applicable
deferral period thereof to which forfeiture conditions apply
(as provided in the Award agreement evidencing the Deferred
Stock), the Participant's Deferred Stock that is at that time
subject to deferral (other than a deferral at the election of
the Participant) shall be forfeited; provided that the
Committee or the Board may provide, by rule or regulation or
in any Award agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to
Deferred Stock shall be waived in whole or in part in the
event of terminations resulting from specified causes, and the
Committee or the Board may in other cases waive in whole or in
part the forfeiture of Deferred Stock.
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(iii) Dividend Equivalents. Unless otherwise
determined by the Committee or the Board at date of grant, any
Dividend Equivalents that are granted with respect to any
Award of Deferred Stock shall be either (A) paid with respect
to such Deferred Stock at the dividend payment date in cash or
in shares of unrestricted Stock having a Fair Market Value
equal to the amount of such dividends, or (B) deferred with
respect to such Deferred Stock and the amount or value thereof
automatically deemed reinvested in additional Deferred Stock,
other Awards or other investment vehicles, as the Committee or
the Board shall determine or permit the Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The
Committee and the Board each is authorized to grant Stock as a bonus, or to
grant Stock or other Awards in lieu of Company obligations to pay cash or
deliver other property under the Plan or under other plans or compensatory
arrangements, provided that, in the case of Participants subject to Section 16
of the Exchange Act, the amount of such grants remains within the discretion of
the Committee to the extent necessary to ensure that acquisitions of Stock or
other Awards are exempt from liability under Section 16(b) of the Exchange Act.
Stock or Awards granted hereunder shall be subject to such other terms as shall
be determined by the Committee or the Board.
(g) Dividend Equivalents. The Committee and the Board each is
authorized to grant Dividend Equivalents to a Participant entitling the
Participant to receive cash, Stock, other Awards, or other property equal in
value to dividends paid with respect to a specified number of shares of Stock,
or other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award. The Committee or the
Board may provide that Dividend Equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional Stock, Awards,
or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee or the Board may
specify.
(h) Other Stock-Based Awards. The Committee and the Board each
is authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock,
as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee or the Board, and
Awards valued by reference to the book value of Stock or the value of securities
of or the performance of specified Related Entities or business units. The
Committee or the Board shall determine the terms and conditions of such Awards.
Stock delivered pursuant to an Award in the nature of a purchase right granted
under this Section 6(h) shall be purchased for such consideration (including
without limitation loans from the Company or a Related Entity), paid for at such
times, by such methods, and in such forms, including, without limitation, cash,
Stock, other Awards or other property, as the Committee or the Board shall
determine. The Committee and the Board shall have the discretion to grant such
other Awards which are exercisable for unvested shares of Common Stock. Should
the Optionee's Continuous Service cease while holding such unvested shares, the
Company shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested
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<PAGE>
shares. The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Committee or the
Board and set forth in the document evidencing such repurchase right. Cash
awards, as an element of or supplement to any other Award under the Plan, may
also be granted pursuant to this Section 6(h).
7. Performance and Annual Incentive Awards.
(a) Performance Conditions. The right of a Participant to
exercise or receive a grant or settlement of any Award, and the timing thereof,
may be subject to such performance conditions as may be specified by the
Committee or the Board. The Committee or the Board may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions, and may exercise its discretion to
reduce the amounts payable under any Award subject to performance conditions,
except as limited under Sections 7(b) and 7(c) hereof in the case of a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m). At such times as the Company is a Publicly Held Corporation, if
and to the extent required under Code Section 162(m), any power or authority
relating to a Performance Award or Annual Incentive Award intended to qualify
under Code Section 162(m), shall be exercised by the Committee and not the
Board.
(b) Performance Awards Granted to Designated Covered
Employees. If and to the extent that the Committee determines that a Performance
Award to be granted to an Eligible Person who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Performance Award shall be contingent upon achievement of
pre-established performance goals and other terms set forth in this Section
7(b).
(i) Performance Goals Generally. The performance
goals for such Performance Awards shall consist of one or more
business criteria and a targeted level or levels of
performance with respect to each of such criteria, as
specified by the Committee consistent with this Section 7(b).
Performance goals shall be objective and shall otherwise meet
the requirements of Code Section 162(m) and regulations
thereunder including the requirement that the level or levels
of performance targeted by the Committee result in the
achievement of performance goals being "substantially
uncertain." The Committee may determine that such Performance
Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of
the performance goals must be achieved as a condition to
grant, exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to
any one Participant or to different Participants.
(ii) Business Criteria. One or more of the following
business criteria for the Company, on a consolidated basis,
and/or specified Related Entities or business units of the
Company (except with respect to the total shareholder return
and earnings per share criteria), shall be used exclusively by
the Committee in establishing performance goals for such
Performance Awards: (1) total
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<PAGE>
shareholder return; (2) such total shareholder return as
compared to total return (on a comparable basis) of a publicly
available index such as, but not limited to, the Standard &
Poor's 500 Stock Index or the S&P Specialty Retailer Index;
(3) net income; (4) pretax earnings; (5) earnings before
interest expense, taxes, depreciation and amortization; (6)
pretax operating earnings after interest expense and before
bonuses, service fees, and extraordinary or special items; (7)
operating margin; (8) earnings per share; (9) return on
equity; (10) return on capital; (11) return on investment;
(12) operating earnings; (13) working capital or inventory;
and (14) ratio of debt to shareholders' equity. One or more of
the foregoing business criteria shall also be exclusively used
in establishing performance goals for Annual Incentive Awards
granted to a Covered Employee under Section 7(c) hereof that
are intended to qualify as "performance-based compensation
under Code Section 162(m).
(iii) Performance Period; Timing For Establishing
Performance Goals. Achievement of performance goals in respect
of such Performance Awards shall be measured over a
performance period of up to ten years, as specified by the
Committee. Performance goals shall be established not later
than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date
as may be required or permitted for "performance-based
compensation" under Code Section 162(m).
(iv) Performance Award Pool. The Committee may
establish a Performance Award pool, which shall be an unfunded
pool, for purposes of measuring Company performance in
connection with Performance Awards. The amount of such
Performance Award pool shall be based upon the achievement of
a performance goal or goals based on one or more of the
business criteria set forth in Section 7(b)(ii) hereof during
the given performance period, as specified by the Committee in
accordance with Section 7(b)(iii) hereof. The Committee may
specify the amount of the Performance Award pool as a
percentage of any of such business criteria, a percentage
thereof in excess of a threshold amount, or as another amount
which need not bear a strictly mathematical relationship to
such business criteria.
(v) Settlement of Performance Awards; Other Terms.
Settlement of such Performance Awards shall be in cash, Stock,
other Awards or other property, in the discretion of the
Committee. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with
such Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall be paid
or forfeited in the event of termination of Continuous Service
by the Participant prior to the end of a performance period or
settlement of Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered
Employees. The Committee may, within its discretion, grant one or more Annual
Incentive Awards to any Eligible Person, subject to the terms and conditions set
forth in this Section 7(c).
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(vi) Annual Incentive Award Pool. The Committee may
establish an Annual Incentive Award pool, which shall be an
unfunded pool, for purposes of measuring Company performance
in connection with Annual Incentive Awards. In the case of
Annual Incentive Awards intended to qualify as
"performance-based compensation" for purposes of Code Section
162(m), the amount of such Annual Incentive Award pool shall
be based upon the achievement of a performance goal or goals
based on one or more of the business criteria set forth in
Section 7(b)(ii) hereof during the given performance period,
as specified by the Committee in accordance with Section
7(b)(iii) hereof. The Committee may specify the amount of the
Annual Incentive Award pool as a percentage of any such
business criteria, a percentage thereof in excess of a
threshold amount, or as another amount which need not bear a
strictly mathematical relationship to such business criteria.
(vii) Potential Annual Incentive Awards. Not later
than the end of the 90th day of each fiscal year, or at such
other date as may be required or permitted in the case of
Awards intended to be "performance-based compensation" under
Code Section 162(m), the Committee shall determine the
Eligible Persons who will potentially receive Annual Incentive
Awards, and the amounts potentially payable thereunder, for
that fiscal year, either out of an Annual Incentive Award pool
established by such date under Section 7(c)(i) hereof or as
individual Annual Incentive Awards. In the case of individual
Annual Incentive Awards intended to qualify under Code Section
162(m), the amount potentially payable shall be based upon the
achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 7(b)(ii)
hereof in the given performance year, as specified by the
Committee; in other cases, such amount shall be based on such
criteria as shall be established by the Committee. In all
cases, the maximum Annual Incentive Award of any Participant
shall be subject to the limitation set forth in Section 5
hereof.
(viii) Payout of Annual Incentive Awards. After the
end of each fiscal year, the Committee shall determine the
amount, if any, of (A) the Annual Incentive Award pool, and
the maximum amount of potential Annual Incentive Award payable
to each Participant in the Annual Incentive Award pool, or (B)
the amount of potential Annual Incentive Award otherwise
payable to each Participant. The Committee may, in its
discretion, determine that the amount payable to any
Participant as an Annual Incentive Award shall be reduced from
the amount of his or her potential Annual Incentive Award,
including a determination to make no Award whatsoever. The
Committee shall specify the circumstances in which an Annual
Incentive Award shall be paid or forfeited in the event of
termination of Continuous Service by the Participant prior to
the end of a fiscal year or settlement of such Annual
Incentive Award.
(d) Written Determinations. All determinations by the
Committee as to the establishment of performance goals, the amount of any
Performance Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to
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Performance Awards under Section 7(b), and the amount of any Annual Incentive
Award pool or potential individual Annual Incentive Awards and the amount of
final Annual Incentive Awards under Section 7(c), shall be made in writing in
the case of any Award intended to qualify under Code Section 162(m). The
Committee may not delegate any responsibility relating to such Performance
Awards or Annual Incentive Awards if and to the extent required to comply with
Code Section 162(m).
(e) Status of Section 7(b) and Section 7(c) Awards Under Code
Section 162(m). It is the intent of the Company that Performance Awards and
Annual Incentive Awards under Section 7(b) and 7(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees within the
meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 7(b), (c), (d) and (e), including
the definitions of Covered Employee and other terms used therein, shall be
interpreted in a manner consistent with Code Section 162(m) and regulations
thereunder. The foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given Participant will be a Covered Employee
with respect to a fiscal year that has not yet been completed, the term Covered
Employee as used herein shall mean only a person designated by the Committee, at
the time of grant of Performance Awards or an Annual Incentive Award, as likely
to be a Covered Employee with respect to that fiscal year. If any provision of
the Plan or any agreement relating to such Performance Awards or Annual
Incentive Awards does not comply or is inconsistent with the requirements of
Code Section 162(m) or regulations thereunder, such provision shall be construed
or deemed amended to the extent necessary to conform to such requirements.
8. Certain Provisions Applicable to Awards or Sales.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards.
Awards granted under the Plan may, in the discretion of the Committee or the
Board, be granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted under another
plan of the Company, any Related Entity, or any business entity to be acquired
by the Company or a Related Entity, or any other right of a Participant to
receive payment from the Company or any Related Entity. Such additional, tandem,
and substitute or exchange Awards may be granted at any time. If an Award is
granted in substitution or exchange for another Award or award, the Committee or
the Board shall require the surrender of such other Award or award in
consideration for the grant of the new Award. In addition, Awards may be granted
in lieu of cash compensation, including in lieu of cash amounts payable under
other plans of the Company or any Related Entity, in which the value of Stock
subject to the Award is equivalent in value to the cash compensation (for
example, Deferred Stock or Restricted Stock), or in which the exercise price,
grant price or purchase price of the Award in the nature of a right that may be
exercised is equal to the Fair Market Value of the underlying Stock minus the
value of the cash compensation surrendered (for example, Options granted with an
exercise price "discounted" by the amount of the cash compensation surrendered).
(b) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee or the Board; provided that in no
event shall the term of any
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Option or Stock Appreciation Right exceed a period of ten years (or such shorter
term as may be required in respect of an Incentive Stock Option under Section
422 of the Code).
(c) Purchase Prices.
(i) In General. In the case of an Award under this
Plan, other than an Option, which grants an Employee,
Director, or Consultant of the Company the right to purchase
Stock, the Board or the Committee shall have discretion to set
the purchase price, provided that in no event shall the
purchase price per share of Stock be less than 85% of the Fair
Market Value of such share on the date of the Award or the
date of the purchase, and in the case of an Award made to an
Employee who owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of
Stock of the Company, the Parent Corporation or a Subsidiary,
the purchase price of such Stock shall be no less than 100% of
the Fair Market Value of the Stock on the date of such award
or the date of the purchase.
(ii) Non-Applicability of Restrictions. The Purchase
Price restrictions contained in Section 8(c)(i) applicable to
Awards under this Plan, other than Options, which grant an
Employee, Director, or Consultant of the Company the right to
purchase Stock, shall be inoperative if (A) the offer and sale
of the shares of Stock to be issued upon payment of the
Exercise Price have been registered under a then currently
effective registration statement under applicable federal or
state securities laws, or (B) a determination is made by
counsel for the Company that such Exercise Price restrictions
are not required in the circumstances under applicable federal
or state securities laws.
(d) Form and Timing of Payment Under Awards; Deferrals.
Subject to the terms of the Plan and any applicable Award agreement, payments to
be made by the Company or a Related Entity upon the exercise of an Option or
other Award or settlement of an Award may be made in such forms as the Committee
or the Board shall determine, including, without limitation, cash, other Awards
or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such settlement,
in the discretion of the Committee or the Board or upon occurrence of one or
more specified events (in addition to a Change in Control). Installment or
deferred payments may be required by the Committee or the Board (subject to
Section 10(e) of the Plan) or permitted at the election of the Participant on
terms and conditions established by the Committee or the Board. Payments may
include, without limitation, provisions for the payment or crediting of a
reasonable interest rate on installment or deferred payments or the grant or
crediting of Dividend Equivalents or other amounts in respect of installment or
deferred payments denominated in Stock.
(e) Exemptions from Section 16(b) Liability. If and to the
extent that the Company is or becomes a Publicly Held Corporation, it is the
intent of the Company that this Plan comply in all respects with applicable
provisions of Rule 16b-3 or Rule 16a-1(c)(3) to the
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<PAGE>
extent necessary to ensure that neither the grant of any Awards to nor other
transaction by a Participant who is subject to Section 16 of the Exchange Act is
subject to liability under Section 16(b) thereof (except for transactions
acknowledged in writing to be non-exempt by such Participant). Accordingly, if
any provision of this Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any such
transaction, such provision will be construed or deemed amended to the extent
necessary to conform to the applicable requirements of Rule 16b-3 or Rule
16a-1(c)(3) so that such Participant shall avoid liability under Section 16(b).
In addition, the purchase price of any Award conferring a right to purchase
Stock shall be not less than any specified percentage of the Fair Market Value
of Stock at the date of grant of the Award then required in order to comply with
Rule 16b-3.
9. Change in Control.
(a) Effect of "Change in Control." If and to the extent
provided in the Award, in the event of a "Change in Control," as defined in
Section 9(b):
(i) The Committee may, within its discretion,
accelerate the vesting and exercisability of any Award
carrying a right to exercise that was not previously vested
and exercisable as of the time of the Change in Control,
subject to applicable restrictions set forth in Section 10(a)
hereof;
(ii) The Committee may, within its discretion,
accelerate the exercisability of any limited Stock
Appreciation Rights (and other Stock Appreciation Rights if so
provided by their terms) and provide for the settlement of
such Stock Appreciation Rights for amounts, in cash,
determined by reference to the Change in Control Price;
(iii) The Committee may, within its discretion, lapse
the restrictions, deferral of settlement, and forfeiture
conditions applicable to any other Award granted under the
Plan and such Awards may be deemed fully vested as of the time
of the Change in Control, except to the extent of any waiver
by the Participant and subject to applicable restrictions set
forth in Section 10(a) hereof; and
(iv) With respect to any such outstanding Award
subject to achievement of performance goals and conditions
under the Plan, the Committee may, within its discretion, deem
such performance goals and other conditions as having been met
as of the date of the Change in Control.
(b) Definition of "Change in Control." A "Change in Control"
shall be deemed to have occurred upon:
(i) Approval by the shareholders of the Company of a
reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case,
with respect to which persons who were the shareholders of the
Company immediately prior to such reorganization, merger or
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consolidation or other transaction do not, immediately
thereafter, own more than 50% of the combined voting power
entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding
voting securities, or a liquidation or dissolution of the
Company or the sale of all or substantially all of the assets
of the Company (unless such reorganization, merger,
consolidation or other corporate transaction, liquidation,
dissolution or sale (any such event being referred to as a
"Corporate Transaction") is subsequently abandoned);
(ii) Individuals who, as of the date on which the
Award is granted, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a majority of the
Board, provided that any person becoming a director subsequent
to the date on which the Award was granted whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office
is in connection with an actual or threatened election contest
relating to the election of the Directors of the Company)
shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or
(iii) the acquisition (other than from the Company)
by any person, entity or "group", within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act,
of more than 50% of either the then outstanding shares of the
Company's Common Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote
generally in the election of directors (hereinafter referred
to as the ownership of a "Controlling Interest") excluding,
for this purpose, any acquisitions by (1) the Company or a
Related Entity, (2) any person, entity or "group" that as of
the date on which the Award is granted owns beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Securities Exchange Act) of a Controlling Interest or (3)
any employee benefit plan of the Company or a Related Entity.
(c) Definition of "Change in Control Price." The "Change in
Control Price" means an amount in cash equal to the higher of (i) the amount of
cash and fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any Corporate Transaction triggering the
Change in Control under Section 9(b)(i) hereof or any liquidation of shares
following a sale of substantially all of the assets of the Company, or (ii) the
highest Fair Market Value per share at any time during the 60-day period
preceding and the 60-day period following the Change in Control.
10. General Provisions.
(a) Compliance With Legal and Other Requirements. The Company
may, to the extent deemed necessary or advisable by the Committee or the Board,
postpone the issuance or delivery of Stock or payment of other benefits under
any Award until completion of such
20
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registration or qualification of such Stock or other required action under any
federal or state law, rule or regulation, listing or other required action with
respect to any stock exchange or automated quotation system upon which the Stock
or other Company securities are listed or quoted, or compliance with any other
obligation of the Company, as the Committee or the Board, may consider
appropriate, and may require any Participant to make such representations,
furnish such information and comply with or be subject to such other conditions
as it may consider appropriate in connection with the issuance or delivery of
Stock or payment of other benefits in compliance with applicable laws, rules,
and regulations, listing requirements, or other obligations. The foregoing
notwithstanding, in connection with a Change in Control, the Company shall take
or cause to be taken no action, and shall undertake or permit to arise no legal
or contractual obligation, that results or would result in any postponement of
the issuance or delivery of Stock or payment of benefits under any Award or the
imposition of any other conditions on such issuance, delivery or payment, to the
extent that such postponement or other condition would represent a greater
burden on a Participant than existed on the 90th day preceding the Change in
Control.
(b) Limits on Transferability; Beneficiaries.
(i) General. Except as provided herein, a Participant
may not assign, sell, transfer, or otherwise encumber or
subject to any lien any Award or other right or interest
granted under this Plan, in whole or in part, including any
Award or right which constitutes a derivative security as
generally defined in Rule 16a1(c) under the Exchange Act,
other than by will or by operation of the laws of descent and
distribution, and such Awards or rights that may be
exercisable shall be exercised during the lifetime of the
Participant only by the Participant or his or her guardian or
legal representative.
(ii) Permitted Transfer of Option. The Committee or
Board, in its sole discretion, may permit the transfer of an
Option (but not an Incentive Stock Option, or any other right
to purchase Stock other than an Option) as follows: (A) by
gift to a member of the Participant's Immediate Family or (B)
by transfer by instrument to a trust providing that the Option
is to be passed to beneficiaries upon death of the Optionee.
For purposes of this Section 10(b)(ii), "Immediate Family"
shall mean the Optionee's spouse (including a former spouse
subject to terms of a domestic relations order); child,
stepchild, grandchild, child-in-law; parent, stepparent,
grandparent, parent-in-law; sibling and sibling-in-law, and
shall include adoptive relationships. If a determination is
made by counsel for the Company that the restrictions
contained in this Section 10(b)(ii) are not required by
applicable federal or state securities laws under the
circumstances, then the Committee or Board, in its sole
discretion, may permit the transfer of Awards (other than
Incentive Stock Options and Stock Appreciation Rights in
tandem therewith) to one or more Beneficiaries or other
transferees during the lifetime of the Participant, which may
be exercised by such transferees in accordance with the terms
of such Award, but only if and to the extent permitted by the
Committee or the Board pursuant to the express terms of an
Award agreement (subject to any terms and conditions which the
Committee or the Board may impose thereon, and
21
<PAGE>
further subject to any prohibitions and restrictions on such
transfers pursuant to Rule 16b-3). A Beneficiary, transferee,
or other person claiming any rights under the Plan from or
through any Participant shall be subject to all terms and
conditions of the Plan and any Award agreement applicable to
such Participant, except as otherwise determined by the
Committee or the Board, and to any additional terms and
conditions deemed necessary or appropriate by the Committee or
the Board.
(c) Adjustments.
(i) Adjustments to Awards. In the event that any
dividend or other distribution (whether in the form of cash,
Stock, or other property), recapitalization, forward or
reverse split, reorganization, merger, consolidation,
spin-off, combination, repurchase, share exchange,
liquidation, dissolution or other similar corporate
transaction or event affects the Stock and/or such other
securities of the Company or any other issuer such that a
substitution, exchange, or adjustment is determined by the
Committee or the Board to be appropriate, then the Committee
or the Board shall, in such manner as it may deem equitable,
substitute, exchange, or adjust any or all of (A) the number
and kind of shares of Stock which may be delivered in
connection with Awards granted thereafter, (B) the number and
kind of shares of Stock by which annual per-person Award
limitations are measured under Section 5 hereof, (C) the
number and kind of shares of Stock subject to or deliverable
in respect of outstanding Awards, (E) the exercise price,
grant price or purchase price relating to any Award and/or
make provision for payment of cash or other property in
respect of any outstanding Award, and (F) any other aspect of
any Award that the Committee or the Board determines to be
appropriate.
(ii) Adjustments in Case of Certain Corporate
Transactions. In the event of a proposed sale of all or
substantially all of the Company's assets or any
reorganization, merger, consolidation, or other form of
corporate transaction in which the Company does not survive,
or in which the shares of Stock are exchanged for or converted
into securities issued by another entity, then the successor
or acquiring entity or an affiliate thereof may, with the
consent of the Committee or the Board, assume each outstanding
Option or substitute an equivalent option or right. If the
successor or acquiring entity or an affiliate thereof, does
not cause such an assumption or substitution, then each Option
shall terminate upon the consummation of sale, merger,
consolidation, or other corporate transaction. The Committee
or the Board shall give written notice of any proposed
transaction referred to in this Section 10(c)(ii) a reasonable
period of time prior to the closing date for such transaction
(which notice may be given either before or after the approval
of such transaction), in order that Optionees may have a
reasonable period of time prior to the closing date of such
transaction within which to exercise any Options that are then
exercisable (including any Options that may become exercisable
upon the closing date of such transaction).
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<PAGE>
An Optionee may condition his exercise of any Option upon the
consummation of the transaction.
(iii) Other Adjustments. In addition, the Committee
(and the Board if and only to the extent such authority is not
required to be exercised by the Committee to comply with Code
Section 162(m)) is authorized to make adjustments in the terms
and conditions of, and the criteria included in, Awards
(including Performance Awards and performance goals, and
Annual Incentive Awards and any Annual Incentive Award pool or
performance goals relating thereto) in recognition of unusual
or nonrecurring events (including, without limitation,
acquisitions and dispositions of businesses and assets)
affecting the Company, any Related Entity or any business
unit, or the financial statements of the Company or any
Related Entity, or in response to changes in applicable laws,
regulations, accounting principles, tax rates and regulations
or business conditions or in view of the Committee's
assessment of the business strategy of the Company, any
Related Entity or business unit thereof, performance of
comparable organizations, economic and business conditions,
personal performance of a Participant, and any other
circumstances deemed relevant; provided that no such
adjustment shall be authorized or made if and to the extent
that such authority or the making of such adjustment would
cause Options, Stock Appreciation Rights, Performance Awards
granted under Section 8(b) hereof or Annual Incentive Awards
granted under Section 8(c) hereof to Participants designated
by the Committee as Covered Employees and intended to qualify
as "performance-based compensation" under Code Section 162(m)
and the regulations thereunder to otherwise fail to qualify as
"performance-based compensation" under Code Section 162(m) and
regulations thereunder.
(d) Taxes. The Company and any Related Entity are authorized
to withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee or the Board may deem advisable to enable the Company
and Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.
(e) Changes to the Plan and Awards. The Board may amend,
alter, suspend, discontinue or terminate the Plan, or the Committee's authority
to grant Awards under the Plan, without the consent of shareholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's shareholders not later than the annual
meeting next following such Board action if such shareholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any stock
exchange or automated quotation system on which the Stock may then be listed or
quoted, and the Board may otherwise, in its discretion, determine to submit
other such
23
<PAGE>
changes to the Plan to shareholders for approval; provided that, without the
consent of an affected Participant, no such Board action may materially and
adversely affect the rights of such Participant under any previously granted and
outstanding Award. The Committee or the Board may waive any conditions or rights
under, or amend, alter, suspend, discontinue or terminate any Award theretofore
granted and any Award agreement relating thereto, except as otherwise provided
in the Plan; provided that, without the consent of an affected Participant, no
such Committee or the Board action may materially and adversely affect the
rights of such Participant under such Award. Notwithstanding anything in the
Plan to the contrary, if any right under this Plan would cause a transaction to
be ineligible for pooling of interest accounting that would, but for the right
hereunder, be eligible for such accounting treatment, the Committee or the Board
may modify or adjust the right so that pooling of interest accounting shall be
available, including the substitution of Stock having a Fair Market Value equal
to the cash otherwise payable hereunder for the right which caused the
transaction to be ineligible for pooling of interest accounting.
(f) Reporting of Financial Information. The Company shall
provide to the recipient of any Award under this Plan, no less frequently than
annually, the financial statements of the Company, until such time as a
determination is made by counsel for the Company that such reports are not
required by applicable federal or state securities laws under the circumstances.
(g) Limitation on Rights Conferred Under Plan. Neither the
Plan nor any action taken hereunder shall be construed as (i) giving any
Eligible Person or Participant the right to continue as an Eligible Person or
Participant or in the employ of the Company or a Related Entity; (ii)
interfering in any way with the right of the Company or a Related Entity to
terminate any Eligible Person's or Participant's Continuous Service at any time,
(iii) giving an Eligible Person or Participant any claim to be granted any Award
under the Plan or to be treated uniformly with other Participants and Employees,
or (iv) conferring on a Participant any of the rights of a shareholder of the
Company unless and until the Participant is duly issued or transferred shares of
Stock in accordance with the terms of an Award.
(h) Unfunded Status of Awards; Creation of Trusts. 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 or
obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee or the Board
may specify and in accordance with applicable law.
(i) Nonexclusivity of the Plan. Neither the adoption of the
Plan by the Board nor its submission to the shareholders of the Company for
approval shall be construed as creating
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<PAGE>
any limitations on the power of the Board or a committee thereof to adopt such
other incentive arrangements as it may deem desirable including incentive
arrangements and awards which do not qualify under Code Section 162(m).
(j) Payments in the Event of Forfeitures; Fractional Shares.
Unless otherwise determined by the Committee or the Board, in the event of a
forfeiture of an Award with respect to which a Participant paid cash or other
consideration, the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee or the Board shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(k) Governing Law. The validity, construction and effect of
the Plan, any rules and regulations under the Plan, and any Award agreement
shall be determined in accordance with the laws of the State of California
without giving effect to principles of conflicts of laws, and applicable federal
law.
(l) Plan Effective Date and Shareholder Approval; Termination
of Plan. The Plan shall become effective on the Effective Date, subject to
subsequent approval within 12 months of its adoption by the Board by
shareholders of the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code Sections 162(m) (if applicable)
and 422, Rule 16b-3 under the Exchange Act (if applicable), applicable NASDAQ
requirements, and other laws, regulations, and obligations of the Company
applicable to the Plan. Awards may be granted subject to shareholder approval,
but may not be exercised or otherwise settled in the event shareholder approval
is not obtained. The Plan shall terminate no later than 10 years from the date
the Plan is adopted by the Board or 10 years from the date the Plan is approved
by the Shareholders, whichever is earlier.
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<PAGE>
2001 Incentive Compensation Plan
SYNAPTICS INCORPORATED
INCENTIVE STOCK OPTION AGREEMENT
1. Grant of Option. SYNAPTICS INCORPORATED (the "Company") hereby
grants, as of _________________________, 20___ (the "Date of Grant"), to
____________________________________ (the "Optionee") an option (the "Option")
to purchase up to ________ shares of the Company's Common Stock, $_________ par
value per share (the "Shares"), at an exercise price per share equal to
$_________ . The Option shall be subject to the terms and conditions set forth
herein. The Option was issued pursuant to the Company's 2001 Incentive
Compensation Plan (the "Plan"), which is incorporated herein for all purposes.
The Option is an Incentive Stock Option, and not a nonqualified stock option.
The Optionee hereby acknowledges receipt of a copy of the Plan and agrees to be
bound by all of the terms and conditions hereof and thereof and all applicable
laws and regulations.
2. Definitions. Unless otherwise provided herein, terms used herein
that are defined in the Plan and not defined herein shall have the meanings
attributed thereto in the Plan.
3. Exercise Schedule. Except as otherwise provided in Sections 6 or 12
of this Agreement, or in the Plan, the Option is exercisable in installments as
provided below, which shall be cumulative. To the extent that the Option has
become exercisable with respect to a percentage of Shares as provided below, the
Option may thereafter be exercised by the Optionee, in whole or in part, at any
time or from time to time prior to the expiration of the Option as provided
herein. The following table indicates each date (the "Vesting Date") upon which
the Optionee shall be entitled to exercise the Option with respect to the
percentage of Shares granted as indicated beside the date, provided that the
Continuous Service of the Optionee continues through and on the applicable
Vesting Date:
Percentage of Shares Vesting Date
Except as otherwise specifically provided herein, there shall be no
proportionate or partial vesting in the periods prior to each Vesting Date, and
all vesting shall occur only on the appropriate Vesting Date. Upon the
termination of the Optionee's Continuous Service with the Company and its
Subsidiaries, any unvested portion of the Option shall terminate and be null and
void.
4. Method of Exercise. The vested portion of this Option shall be
exercisable in whole or in part in accordance with the exercise schedule set
forth in Section 3 hereof by written notice which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such Shares as may be required by the
Company pursuant to the provisions of the Plan. Such written notice shall be
signed by the Optionee and
<PAGE>
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price. This Option shall be deemed to be exercised after both (a) receipt by the
Company of such written notice accompanied by the exercise price and (b)
arrangements that are satisfactory to the Committee or the Board in its sole
discretion have been made for Optionee's payment to the Company of the amount,
if any, that is necessary to be withheld in accordance with applicable Federal
or state withholding requirements. No Shares will be issued pursuant to the
Option unless and until such issuance and such exercise shall comply with all
relevant provisions of applicable law, including the requirements of any stock
exchange upon which the Shares then may be traded.
5. Method of Payment. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Optionee: (a)
cash; (b) check; or (c) such other consideration or in such other manner as may
be determined by the Board or the Committee in its absolute discretion.
6. Termination of Option.
(a) Any unexercised portion of the Option shall automatically
and without notice terminate and become null and void at the time of the
earliest to occur of the following:
(i) three months after the date on which the
Optionee's Continuous Service is terminated other than by reason of (A) Cause,
which, solely for purposes of this Agreement, shall mean the termination of the
Optionee's Continuous Service by reason of the Optionee's willful misconduct or
gross negligence, (B) a mental or physical disability (within the meaning of
Internal Revenue Code Section 22(e)) of the Optionee as determined by a medical
doctor satisfactory to the Committee or the Board, or (C) the death of the
Optionee;
(ii) immediately upon the termination of the
Optionee's Continuous Service for Cause;
(iii) twelve months after the date on which the
Optionee's Continuous Service is terminated by reason of a mental or physical
disability (within the meaning of Section 22(e) of the Code) as determined by a
medical doctor satisfactory to the Committee or the Board;
(iv) (A) twelve months after the date of termination
of the Optionee's Continuous Service by reason of the death of the Optionee, or,
if later, (B) three months after the date on which the Optionee shall die if
such death shall occur during the one year period specified in Subsection
6(a)(iii) hereof; or
(v) the tenth anniversary of the date as of which the
Option is granted.
(b) To the extent not previously exercised, (i) the Option
shall terminate immediately in the event of (1) the liquidation or dissolution
of the Company, or (2) any reorganization, merger, consolidation or other form
of corporate transaction in which the Company does not survive or the shares of
Stock are converted into or exchanged for securities issued by another entity,
unless the successor or acquiring entity, or an affiliate of such successor or
acquiring entity, assumes the Option or substitutes an equivalent option or
right pursuant to
2
<PAGE>
Section 10(c) of the Plan, and (ii) the Committee or the Board in its sole
discretion may by written notice ("cancellation notice") cancel, effective upon
the consummation of any corporate transaction described in Subsection 9(b)(i) of
the Plan in which the Company does survive, the Option (or portion thereof) that
remains unexercised on such date. The Committee or the Board shall give written
notice of any proposed transaction referred to in this Section 6(b) a reasonable
period of time prior to the closing date for such transaction (which notice may
be given either before or after approval of such transaction), in order that the
Optionee may have a reasonable period of time prior to the closing date of such
transaction within which to exercise the Option if and to the extent that it
then is exercisable (including any portion of the Option that may become
exercisable upon the closing date of such transaction). The Optionee may
condition his exercise of the Option upon the consummation of a transaction
referred to in this Section 6(b).
7. Restrictions While Stock is Not Registered.
(a) Restricted Shares. Any shares of Stock acquired upon
exercise of the Option specified in Section 1 and (i) all shares of the
Company's capital stock received as a dividend or other distribution upon such
shares, and (ii) all shares of capital stock or other securities of the Company
into which such shares may be changed or for which such shares shall be
exchanged, whether through reorganization, recapitalization, stock split-ups or
the like, shall be subject to the provisions of this Section 7 at all times, and
only at those times, that shares of the Company's Common Stock are not
registered under the Securities Exchange Act of 1934, as amended (such times
during which the Stock is not so registered sometimes hereinafter being referred
to as the "Restricted Period") and are during the Restricted Period hereinafter
referred to as "Restricted Shares."
(b) No Sale or Pledge of Restricted Shares. Except as
otherwise provided herein, Optionee agrees and covenants that during the
Restricted Period he or she will not sell, pledge, encumber or otherwise
transfer or dispose of, and will not permit to be sold, encumbered, attached or
otherwise disposed of or transferred in any manner, either voluntarily or by
operation of law (all hereinafter collectively referred to as "transfers"), all
or any portion of the Restricted Shares or any interest therein except in
accordance with and subject to the terms of this Section 7.
3
<PAGE>
(c) Voluntary Transfer Repurchase Option. If Optionee desires
to effect a voluntary transfer of any of the Restricted Shares during the
Restricted Period, Optionee shall first give written notice to the Company of
such intent to transfer (the "Offer Notice") specifying (i) the number of the
Restricted Shares (the "Offered Shares") and the date of the proposed transfer
(which shall not be less than thirty (30) days after the giving of the Offer
Notice), (ii) the name, address, and principal business of the proposed
transferee (the "Transferee"), and (iii) the price and other terms and
conditions of the proposed transfer of the Offered Shares to the Transferee. The
Offer Notice by Optionee shall constitute an offer to sell all, but not less
than all, of the Offered Shares, at the price and on the terms specified in such
Offer Notice, to the Company and/or its designated purchaser. If the Company
desires to accept Optionee's offer to sell, either for itself or on behalf of
its designated purchaser, the Company shall signify such acceptance by written
notice to Optionee within thirty (30) days following the giving of the Option
Notice. Failing such acceptance, Optionee's offer shall lapse on the
thirty-first day following the giving of the Option Notice. With such written
acceptance, the Company shall designate a day not later than ten days following
the date of giving its notice of acceptance on which the Company or its
designated purchaser shall deliver the purchase price of the Offered Shares (in
the same form as provided in the Offer Notice) and Optionee shall deliver to the
Company or its designated Purchaser, as applicable, all certificates evidencing
the Offered Shares endorsed in blank for transfer or with separate stock powers
endorsed in blank for transfer. Payment of the purchase price may, at the
discretion of the Company, include cancellation of all or a part of any
outstanding indebtedness of Optionee to the Company. Upon the lapse without
acceptance by the Company of Optionee's offer to sell the Offered Shares,
Optionee shall be free to transfer the Offered Shares not purchased by the
Company or the designated purchaser to the Transferee (and no one else), for a
price and on terms and conditions which are no more favorable to the Transferee
than those set forth in the Offer Notice, for a period of thirty days
thereafter, but after such period the restrictions of this Section 7 shall again
apply to the Restricted Shares. The Offered Shares so transferred by Optionee to
the Transferee shall continue to be subject to all of the terms and conditions
of this Section 7 and the Company shall have the right to require, as a
condition of such transfer, that the Transferee execute an agreement
substantially in the form and content of the provisions of this Section 7, as
well as any shareholders agreement required by the Company.
(d) Involuntary Transfer Repurchase Option. Whenever, during
the Restricted Period, Optionee has any notice or knowledge of any attempted,
pending, or consummated involuntary transfer or lien or charge upon any of the
Restricted Shares, whether by operation of law or otherwise (including divorce),
Optionee shall give immediate written notice thereof to the Company. Whenever
the Company has any other notice or knowledge of any such attempted, impending,
or consummated involuntary transfer, lien, or charge, it shall give written
notice thereof to the Optionee. In either case, Optionee agrees to disclose
forthwith to the Company all pertinent information in his possession relating
thereto. If during the Restricted Period any of the
4
<PAGE>
Restricted Shares are subjected to any such involuntary transfer, lien, or
charge, the Company and its designated purchaser shall at all times have the
immediate and continuing option to purchase such of the Restricted Shares upon
notice by the Company to Optionee or other record holder at a price and on terms
determined according to Section 7(f) below, and any of the Restricted Shares so
purchased by the Company or its designated purchaser shall in every case be free
and clear of such transfer, lien, or charge.
(e) Excepted Transfers. The provisions of Sections 7(b) and
(c) shall not apply to transfers by Optionee to his or her spouse, lineal
descendants or trustee of trusts for their benefit, provided, however, that
during the Restricted Period Optionee shall continue to be subject to all of the
terms and provisions of this Section 7 with respect to any remaining present or
future interest whatsoever he or she may have in the transferred Restricted
Shares, and, further provided that during the Restricted Period any shares
transferred pursuant to this subsection (e) shall continue to be treated as
Restricted Shares and the transferee of any such Restricted Shares shall
likewise be subject to all such terms and conditions of this Section 7 as though
such transferee were a party hereto.
(f) Repurchase Price. For purposes of Section 7(d) hereof, the
per share purchase price of Restricted Shares shall be an amount equal to the
fair market value of such share, determined by the Board as of any date
determined by the Board that is not more than one year prior to the date of the
event giving rise to the Company's right to purchase such Restricted Shares. The
Company shall notify Optionee or his or her executor of the price so determined
within 30 days after receipt of notice of the involuntary transfer, lien or
charge. Any determination of fair market value made by the Board shall be
binding and conclusive on all parties unless shown to have been made in an
arbitrary and capricious manner. The purchase price shall, at the option of the
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<PAGE>
Company, be payable in cash or in the form of the Company's promissory note
payable in up to two equal annual installments commencing on the date of the
acquisition by the Company (the "Restricted Share Acquisition Date") of the
Restricted Shares, together with interest on the unpaid balance thereof at the
rate equal to the prime rate of interest as quoted in the Wall Street Journal on
the Restricted Share Acquisition Date.
(g) Legends. The certificate or certificates representing any
Shares acquired pursuant to the exercise of an Option prior to the last day of
the Restricted Period shall bear the following legends (as well as any legends
required by applicable state and federal corporate and securities laws):
(A) "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN
THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH."
(B) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST
REFUSAL AND REPURCHASE OPTIONS HELD BY THE ISSUER OR ITS
ASSIGNEE(S) AS SET FORTH IN AN INCENTIVE STOCK OPTION
AGREEMENT DATED ______________________, AS MAY BE AMENDED FROM
TIME TO TIME, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL
OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS, RIGHT OF
FIRST REFUSAL AND REPURCHASE RIGHTS ARE BINDING ON TRANSFEREES
OF THESE SHARES."
8. Transferability. The Option is not transferable otherwise than by
will or the laws of descent and distribution, and during the lifetime of the
Optionee the Option shall be exercisable only by the Optionee. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
9. No Rights of Stockholders. Neither the Optionee nor any personal
representative (or beneficiary) shall be, or shall have any of the rights and
privileges of, a stockholder of the
6
<PAGE>
Company with respect to any shares of Stock purchasable or issuable upon the
exercise of the Option, in whole or in part, prior to the date of exercise of
the Option.
10. Market Stand-Off Agreement. In the event of an initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, the
Optionee agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any shares of Stock (other than those
included in the registration) acquired pursuant to the exercise of the Option,
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed 180 days) from the effective
date of such registration as may be requested by the Company or such managing
underwriters.
11. Optionee's Representations. In the event the Company's issuance of
the shares of Stock purchasable pursuant to the exercise of this Option has not
been registered under the Securities Act of 1933, as amended, at the time this
Option is exercised, Optionee shall, if required by the Company, concurrently
with the exercise of all or any portion of this Option, deliver to the Company
his Investment Representation Statement in the form attached to this Agreement
as Exhibit A or in such other form as the Company may request.
12. Acceleration of Exercisability of Option. This Option [shall]
[shall not] become immediately fully exercisable in the event that, prior to the
termination of the Option pursuant to Section 6 hereof, (a) there is a "Change
in Control", as defined in Section 9(b) of the Plan, that occurs while the
Optionee is employed by the Company or any of its subsidiaries, (b) the
Committee or the Board exercises its discretion to provide a cancellation notice
with respect to the Option pursuant to Section 6(b)(ii) hereof, or (c) the
Option is terminated pursuant to Section 6(b)(i) hereof.
13. No Right to Continued Employment. Neither the Option nor this
Agreement shall confer upon the Optionee any right to continued employment or
service with the Company.
14. Law Governing. This Agreement shall be governed in accordance with
and governed by the internal laws of the State of California.
15. Incentive Stock Option Treatment. The terms of this Option shall be
interpreted in a manner consistent with the intent of the Company and the
Optionee that the Option qualify as an Incentive Stock Option under Section 422
of the Code. If any provision of the Plan or this Agreement shall be
impermissible in order for the Option to qualify as an Incentive Stock Option,
then the Option shall be construed and enforced as if such provision had never
been included in the Plan or the Option. If and to the extent that the number of
Options granted pursuant to this Agreement exceeds the limitations contained in
Section 4(b) of the Plan or the value of Shares with respect to which this
Option may qualify as an Incentive Stock Option, this Option shall be a
Non-Qualified Stock Option.
16. Interpretation / Provisions of Plan Control. This Agreement is
subject to all the terms, conditions and provisions of the Plan, including,
without limitation, the amendment provisions thereof, and to such rules,
regulations and interpretations relating to the Plan adopted by the Committee or
the Board as may be in effect from time to time. If and to the extent that this
7
<PAGE>
Agreement conflicts or is inconsistent with the terms, conditions and provisions
of the Plan, the Plan shall control, and this Agreement shall be deemed to be
modified accordingly. The Optionee accepts the Option subject to all the terms
and provisions of the Plan and this Agreement. The undersigned Optionee hereby
accepts as binding, conclusive and final all decisions or interpretations of the
Committee or the Board upon any questions arising under the Plan and this
Agreement.
17. Notices. Any notice under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally or when
deposited in the United States mail, registered, postage prepaid, and addressed,
in the case of the Company, to the Company's Secretary at:
Synaptics Incorporated
2381 Bering Drive
San Jose, California 95131
or if the Company should move its principal office, to such principal office,
and, in the case of the Optionee, to the Optionee's last permanent address as
shown on the Company's records, subject to the right of either party to
designate some other address at any time hereafter in a notice satisfying the
requirements of this Section.
18. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT
A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of Option. There will be no regular federal
income tax liability upon the exercise of the Option, although the excess, if
any, of the fair market value of the Shares on the date of exercise over the
exercise price will be treated as an adjustment to the alternative minimum tax
for federal tax purposes and may subject the Optionee to the alternative minimum
tax in the year of exercise.
(b) Disposition of Shares. If Shares transferred pursuant to
the Option are held for at least one year after exercise and are disposed of at
least two years after the date of grant, any gain realized on disposition of the
Shares will also be treated as long-term capital gain for federal income tax
purposes. If Shares purchased under an Option are disposed of within such
one-year period or within two years after the Date of Grant, any gain realized
on such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the difference between the exercise price and the
lesser of (1) the fair market value of the Shares on the date of exercise, or
(2) the sale price of the Shares.
(c) Notice of Disqualifying Disposition of Option Shares. If
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
the Option on or before the later of (1) the date two years after the date of
grant, (2) the date one year after the date of exercise, the Optionee shall
immediately notify the Company in writing of such disposition. Optionee agrees
8
<PAGE>
that Optionee may be subject to the income tax withholding by the Company on the
compensation income recognized by the Optionee from the early disposition by
payment in cash or out of the current earnings paid to the Optionee.
If and to the extent that the number of Options granted hereunder
exceeds the limitations contained in Section 4(b) of the Plan or the value of
Shares with respect to which this Option may qualify as an Incentive Stock
Option, this Option shall be a Non-Qualified Stock Option. The holder of a
Non-Qualified Stock Option will be treated as having received compensation
income (taxable at ordinary income tax rates) at the time the Option is
exercised equal to the excess, if any, of the fair market value of the shares of
Stock on the date of exercise over the exercise price. If the shares of Stock
transferred pursuant to the Non-Qualified Stock Option are held for at least one
year after the Option is exercised, any gain realized on disposition of the
shares of Stock will be treated as long-term capital gain for federal income tax
purposes.
The foregoing discussion assumes that, and only is applicable if, the
fair market value of the Shares as of the date on which the Option is granted is
not less than the exercise price. The Company believes that it has made a good
faith effort to determine the fair market value of the Shares and does not
believe that the exercise price is less than the fair market value of the Shares
on the Date of Grant. No assurances can be given, however, that the Internal
Revenue Service would not take a contrary position, or that the Internal Revenue
Service would not treat the Option as an Incentive Stock Option for some other
reason. If the exercise price is determined to be less than the fair market
value of a Share on the Date of Grant, then the Option may be taxable as a
Non-Qualified Stock Option. It is also possible that if the fair market value is
determined to be significantly greater than the exercise price, the Internal
Revenue Service may take the position that the Option is not in effect a stock
option but should be treated as a restricted stock for tax purposes. The
Optionee should consult with his or her own tax advisors as to whether any
action should be taken to minimize these risks.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the ________ day of ______________, 20____.
COMPANY:
SYNAPTICS INCORPORATED, A
CALIFORNIA CORPORATION
By:
------------------------------------
Name:
Title:
Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option, and fully
understands all provisions of the Option.
9
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Dated: OPTIONEE:
-------------------------------
By:
--------------------------------
Name:
10
<PAGE>
EXHIBIT A
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
COMPANY :
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act").
(b) I understand that the Company's issuance of the Securities has not
been registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of my investment intent as expressed herein. In this connection, I
understand that, in the view of the Securities and Exchange Commission (the
"SEC"), the statutory basis for such exemption may be unavailable if my
representation was predicated solely upon a present intention to hold these
Securities for the minimum capital gains period specified under tax statutes,
for a deferred sale, for or until an increase or decrease in the market price of
the Securities, or for a period of one year or any other fixed period in the
future.
(c) I further understand that the Securities must be held indefinitely
unless the transfer is subsequently registered under the Securities Act or
unless an exemption from registration is otherwise available. Moreover, I
understand that the Company is under no obligation to register any transfer of
the Securities. In addition, I understand that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless registered or such registration is not required in the opinion
of counsel for the Company.
(d) I am familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of issuance of the Securities, such issuance will be exempt from
11
<PAGE>
registration under the Securities Act. In the event the Company later becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter the securities exempt under
Rule 701 may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including among other things: (1) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, and the amount of securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), if applicable. Notwithstanding this paragraph (d), I acknowledge
and agree to the restrictions set forth in paragraph (e) hereof.
In the event that the Company does not qualify under Rule 701 at the
time of issuance of the Securities, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
among other things: (1) the availability of certain public information about the
Company, (2) the resale occurring not less than one year after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than two years, (3) the sale being made through
a broker in an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities Exchange Act
of 1934) and the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if applicable.
(e) I further understand that in the event all of the applicable
requirements of Rule 144 or Rule 701 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 and
Rule 701 are not exclusive, the Staff of the SEC has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 or Rule 701 will
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk.
Signature of Purchaser:
-------------------------------------
Date:
-------------------------
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2001 Incentive Compensation Plan
SYNAPTICS INCORPORATED
NON-QUALIFIED STOCK OPTION AGREEMENT
1. Grant of Option. SYNAPTICS INCORPORATED (the "Company") hereby
grants, as of the _________ day of _________________, 20____ ("Date of Grant"),
to ________________________________________ (the "Optionee") an option (the
"Option") to purchase up to _________ shares of the Company's Common Stock,
$_______ par value per share (the "Shares"), at an exercise price per share
equal to $_______. The Option shall be subject to the terms and conditions set
forth herein. The Option was issued pursuant to the Company's 2001 Incentive
Compensation Plan (the "Plan"), which is incorporated herein for all purposes.
The Option is a nonqualified stock option, and not an Incentive Stock Option.
The Optionee hereby acknowledges receipt of a copy of the Plan and agrees to be
bound by all of the terms and conditions hereof and thereof and all applicable
laws and regulations.
2. Definitions. Unless otherwise provided herein, terms used herein
that are defined in the Plan and not defined herein shall have the meanings
attributed thereto in the Plan.
3. Exercise Schedule. Except as otherwise provided in Sections 6 or 9
of this Agreement, or in the Plan, the Option is exercisable in installments as
provided below, which shall be cumulative. To the extent that the Option has
become exercisable with respect to a percentage of Shares as provided below, the
Option may thereafter be exercised by the Optionee, in whole or in part, at any
time or from time to time prior to the expiration of the Option as provided
herein. The following table indicates each date (the "Vesting Date") upon which
the Optionee shall be entitled to exercise the Option with respect to the
percentage of Shares granted as indicated beside the date, provided that the
Continuous Service of the Optionee continues through and on the applicable
Vesting Date:
Percentage of Shares Vesting Date
-------------------- ------------
Except as otherwise specifically provided herein, there shall be no
proportionate or partial vesting in the periods prior to each Vesting Date, and
all vesting shall occur only on the appropriate Vesting Date. Upon the
termination of an Optionee's Continuous Service, any unvested portion of the
Option shall terminate and be null and void.
4. Method of Exercise. The vested portion of this Option shall be
exercisable in whole or in part in accordance with the exercise schedule set
forth in Section 3 hereof by written notice which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such Shares as may be required by the
Company pursuant to the provisions of the Plan. Such written notice shall be
signed by the Optionee and shall be delivered in person or by certified mail to
the Secretary of the Company. The written
<PAGE>
notice shall be accompanied by payment of the exercise price. This Option shall
be deemed to be exercised after both (a) receipt by the Company of such written
notice accompanied by the exercise price and (b) arrangements that are
satisfactory to the Committee or the Board in its sole discretion have been made
for Optionee's payment to the Company of the amount that is necessary to be
withheld in accordance with applicable Federal or state withholding
requirements. No Shares will be issued pursuant to the Option unless and until
such issuance and such exercise shall comply with all relevant provisions of
applicable law, including the requirements of any stock exchange upon which the
Shares then may be traded.
5. Method of Payment. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Optionee: (a)
cash; (b) check; or (c) such other consideration or in such other manner as may
be determined by the Board or the Committee in its absolute discretion.
6. Termination of Option.
(a) Any unexercised portion of the Option shall automatically
and without notice terminate and become null and void at the time of the
earliest to occur of:
(i) three months after the date on which the
Optionee's Continuous Service is terminated other than by reason of (A) Cause,
which, solely for purposes of this Plan, shall mean the termination of the
Optionee's Continuous Service by reason of the Optionee's willful misconduct or
gross negligence, (B) a mental or physical disability (within the meaning of
Internal Revenue Code Section 22(e)) of the Optionee as determined by a medical
doctor satisfactory to the Committee or the Board, or (C) the death of the
Optionee;
(ii) immediately upon the termination of the
Optionee's Continuous Service for Cause;
(iii) twelve months after the date on which the
Optionee's Continuous Service is terminated by reason of a mental or physical
disability (within the meaning of Section 22(e) of the Code) as determined by a
medical doctor satisfactory to the Committee or the Board;
(iv) (A) twelve months after the date of termination
of the Optionee's Continuous Service by reason of the death of the Optionee, or
, if later, (B) three months after the date on which the Optionee shall die if
such death shall occur during the one year period specified in Subsection
6(a)(iii) hereof; or
(v) the tenth anniversary of the date as of which the
Option is granted.
(b) To the extent not previously exercised, (i) the Option
shall terminate immediately in the event of (1) the liquidation or dissolution
of the Company, or (2) any reorganization, merger, consolidation or other form
of corporate transaction in which the Company does not survive or the shares of
Stock are converted into or exchanged for securities issued by another entity,
unless the successor or acquiring entity, or an affiliate of such successor or
acquiring entity, assumes the Option or substitutes an equivalent option or
right pursuant to Section 10(c) of the Plan, and (ii) the Committee or the Board
in its sole discretion may by
2
<PAGE>
written notice ("cancellation notice") cancel, effective upon the consummation
of any corporate transaction described in Subsection 9(b)(i) of the Plan in
which the Company does survive, the Option (or portion thereof) that remains
unexercised on such date. The Committee or the Board shall give written notice
of any proposed transaction referred to in this Section 6(b) a reasonable period
of time prior to the closing date for such transaction (which notice may be
given either before or after approval of such transaction), in order that the
Optionee may have a reasonable period of time prior to the closing date of such
transaction within which to exercise the Option if and to the extent that it
then is exercisable (including any portion of the Option that may become
exercisable upon the closing date of such transaction). The Optionee may
condition his exercise of the Option upon the consummation of a transaction
referred to in this Section 6(b).
7. Restrictions While Stock is Not Registered.
(a) Restricted Shares. Any shares of Stock acquired upon
exercise of the Option specified in Section 1 and (i) all shares of the
Company's capital stock received as a dividend or other distribution upon such
shares, and (ii) all shares of capital stock or other securities of the Company
into which such shares may be changed or for which such shares shall be
exchanged, whether through reorganization, recapitalization, stock split-ups or
the like, shall be subject to the provisions of this Section 7 at all times, and
only at those times, that shares of the Company's Common Stock are not
registered under the Securities Exchange Act of 1934, as amended (such times
during which the Stock is not so registered sometimes hereinafter being referred
to as the "Restricted Period") and are during the Restricted Period hereinafter
referred to as "Restricted Shares."
(b) No Sale or Pledge of Restricted Shares. Except as
otherwise provided herein, Optionee agrees and covenants that during the
Restricted Period he or she will not sell, pledge, encumber or otherwise
transfer or dispose of, and will not permit to be sold, encumbered, attached or
otherwise disposed of or transferred in any manner, either voluntarily or by
operation of law (all hereinafter collectively referred to as "transfers"), all
or any portion of the Restricted Shares or any interest therein except in
accordance with and subject to the terms of this Section 7.
3
<PAGE>
(c) Voluntary Transfer Repurchase Option. If Optionee desires
to effect a voluntary transfer of any of the Restricted Shares during the
Restricted Period, Optionee shall first give written notice to the Company of
such intent to transfer (the "Offer Notice") specifying (i) the number of the
Restricted Shares (the "Offered Shares") and the date of the proposed transfer
(which shall not be less than thirty (30) days after the giving of the Offer
Notice), (ii) the name, address, and principal business of the proposed
transferee (the "Transferee"), and (iii) the price and other terms and
conditions of the proposed transfer of the Offered Shares to the Transferee. The
Offer Notice by Optionee shall constitute an offer to sell all, but not less
than all, of the Offered Shares, at the price and on the terms specified in such
Offer Notice, to the Company and/or its designated purchaser. If the Company
desires to accept Optionee's offer to sell, either for itself or on behalf of
its designated purchaser, the Company shall signify such acceptance by written
notice to Optionee within thirty (30) days following the giving of the Option
Notice. Failing such acceptance, Optionee's offer shall lapse on the
thirty-first day following the giving of the Option Notice. With such written
acceptance, the Company shall designate a day not later than ten days following
the date of giving its notice of acceptance on which the Company or its
designated purchaser shall deliver the purchase price of the Offered Shares (in
the same form as provided in the Offer Notice) and Optionee shall deliver to the
Company or its designated Purchaser, as applicable, all certificates evidencing
the Offered Shares endorsed in blank for transfer or with separate stock powers
endorsed in blank for transfer. Payment of the purchase price may, at the
discretion of the Company, include cancellation of all or a part of any
outstanding indebtedness of Optionee to the Company. Upon the lapse without
acceptance by the Company of Optionee's offer to sell the Offered Shares,
Optionee shall be free to transfer the Offered Shares not purchased by the
Company or the designated purchaser to the Transferee (and no one else), for a
price and on terms and conditions which are no more favorable to the Transferee
than those set forth in the Offer Notice, for a period of thirty days
thereafter, but after such period the restrictions of this Section 7 shall again
apply to the Restricted Shares. The Offered Shares so transferred by Optionee to
the Transferee shall continue to be subject to all of the terms and conditions
of this Section 7 and the Company shall have the right to require, as a
condition of such transfer, that the Transferee execute an agreement
substantially in the form and content of the provisions of this Section 7, as
well as any shareholders agreement required by the Company.
(d) Involuntary Transfer Repurchase Option. Whenever, during
the Restricted Period, Optionee has any notice or knowledge of any attempted,
pending, or consummated involuntary transfer or lien or charge upon any of the
Restricted Shares, whether by operation of law or otherwise (including divorce),
Optionee shall give immediate written notice thereof to the Company. Whenever
the Company has any other notice or knowledge of any such attempted, impending,
or consummated involuntary transfer, lien, or charge, it shall give written
notice thereof to the Optionee. In either case, Optionee agrees to disclose
forthwith to the Company all pertinent information in his possession relating
thereto. If during the Restricted Period any of the
4
<PAGE>
Restricted Shares are subjected to any such involuntary transfer, lien, or
charge, the Company and its designated purchaser shall at all times have the
immediate and continuing option to purchase such of the Restricted Shares upon
notice by the Company to Optionee or other record holder at a price and on terms
determined according to Section 7(f) below, and any of the Restricted Shares so
purchased by the Company or its designated purchaser shall in every case be free
and clear of such transfer, lien, or charge.
(e) Excepted Transfers. The provisions of Sections 7(b) and
(c) shall not apply to transfers by Optionee to his or her spouse, lineal
descendants or trustee of trusts for their benefit, provided, however, that
during the Restricted Period Optionee shall continue to be subject to all of the
terms and provisions of this Section 7 with respect to any remaining present or
future interest whatsoever he or she may have in the transferred Restricted
Shares, and, further provided that during the Restricted Period any shares
transferred pursuant to this subsection (e) shall continue to be treated as
Restricted Shares and the transferee of any such Restricted Shares shall
likewise be subject to all such terms and conditions of this Section 7 as though
such transferee were a party hereto.
(f) Repurchase Price. For purposes of Section 7(d) hereof, the
per share purchase price of Restricted Shares shall be an amount equal to the
fair market value of such share, determined by the Board as of any date
determined by the Board that is not more than one year prior to the date of the
event giving rise to the Company's right to purchase such Restricted Shares. The
Company shall notify Optionee or his or her executor of the price so determined
within 30 days after receipt of notice of the involuntary transfer, lien or
charge. Any determination of fair market value made by the Board shall be
binding and conclusive on all parties unless shown to have been made in an
arbitrary and capricious manner. The purchase price shall, at the option of the
5
<PAGE>
Company, be payable in cash or in the form of the Company's promissory note
payable in up to two equal annual installments commencing on the date of the
acquisition by the Company (the "Restricted Share Acquisition Date") of the
Restricted Shares, together with interest on the unpaid balance thereof at the
rate equal to the prime rate of interest as quoted in the Wall Street Journal on
the Restricted Share Acquisition Date.
(g) Legends. The certificate or certificates representing any
Shares acquired pursuant to the exercise of an Option prior to the last day of
the Restricted Period shall bear the following legends (as well as any legends
required by applicable state and federal corporate and securities laws):
(A) "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN
THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH."
(B) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST
REFUSAL AND REPURCHASE OPTIONS HELD BY THE ISSUER OR ITS
ASSIGNEE(S) AS SET FORTH IN A STOCK OPTION AGREEMENT DATED
__________________, AS MAY BE AMENDED FROM TIME TO TIME, A
COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE
ISSUER. SUCH TRANSFER RESTRICTIONS, RIGHT OF FIRST REFUSAL AND
REPURCHASE RIGHTS ARE BINDING ON TRANSFEREES OF THESE SHARES."
8. Transferability
(a) General. Except as provided herein, a Participant may not
assign, sell, transfer, or otherwise encumber or subject to any lien any Award
or other right or interest granted under this Plan, in whole or in part,
including any Award or right which constitutes a derivative security as
generally defined in Rule 16a-1(c) under the Exchange Act, other than by will or
by operation of the laws of descent and distribution, and such Awards or rights
that may
6
<PAGE>
be exercisable shall be exercised during the lifetime of the Participant only by
the Participant or his or her guardian or legal representative.
(b) Permitted Transfer of Option. The Committee or Board, in
its sole discretion, may permit the transfer of an Option granted under this
Agreement as follows: (A) by gift to a member of the Participant's Immediate
Family or (B) by transfer by instrument to a trust providing that the Option is
to be passed to beneficiaries upon death of the Optionee. For purposes of this
Section 8(b), "Immediate Family" shall mean the Optionee's spouse (including a
former spouse subject to terms of a domestic relations order); child, stepchild,
grandchild, child-in-law; parent, stepparent, grandparent, parent-in-law;
sibling and sibling-in-law, and shall include adoptive relationships. If a
determination is made by counsel for the Company that the restrictions contained
in this Section 8(b) are not required by applicable federal or state securities
laws under the circumstances, then the Committee or Board, in its sole
discretion, may permit the transfer of Options granted under this Agreement to
one or more Beneficiaries or other transferees during the lifetime of the
Participant, which may be exercised by such transferees in accordance with the
terms of this Agreement, but only if and to the extent permitted by the
Committee or the Board pursuant to the express terms of this Agreement (subject
to any terms and conditions which the Committee or the Board may impose thereon,
and further subject to any prohibitions and restrictions on such transfers
pursuant to Rule 16b-3). A Beneficiary, transferee, or other person claiming any
rights under the Plan from or through any Participant shall be subject to all
terms and conditions of the Plan and any Award agreement applicable to such
Participant, except as otherwise determined by the Committee or the Board, and
to any additional terms and conditions deemed necessary or appropriate by the
Committee or the Board.
9. Acceleration of Exercisability of Option. This Option [shall] [shall
not] become immediately fully exercisable in the event that, prior to the
termination of the Option pursuant to Section 6 hereof, (a) there is a "Change
in Control", as defined in Section 9(b) of the Plan, that occurs while the
Optionee is employed by the Company or any of its subsidiaries, (b) the
Committee or the Board exercises its discretion to provide a cancellation notice
with respect to the Option pursuant to Section 6(b)(ii) hereof, or (c) the
Option is terminated pursuant to Section 6(b)(i) hereof.
10. No Rights of Stockholders. Neither the Optionee nor any personal
representative (or beneficiary) shall be, or shall have any of the rights and
privileges of, a stockholder of the Company with respect to any shares of Stock
purchasable or issuable upon the exercise of the Option, in whole or in part,
prior to the date of exercise of the Option.
11. Market Stand-Off Agreement. In the event of an initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, the
Optionee agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any shares of Stock (other than those
included in the registration) acquired pursuant to the exercise of the Option,
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed 180 days) from the effective
date of such registration as may be requested by the Company or such managing
underwriters.
7
<PAGE>
12. Optionee's Representations. In the event the Company's issuance of
the shares of Stock purchasable pursuant to the exercise of this Option has not
been registered under the Securities Act of 1933, as amended, at the time this
Option is exercised, Optionee shall, if required by the Company, concurrently
with the exercise of all or any portion of this Option, deliver to the Company
his Investment Representation Statement in the form attached to this Agreement
as Exhibit A or in such other form as the Company may request.
13. No Right to Continued Employment. Neither the Option nor this
Agreement shall confer upon the Optionee any right to continued employment or
service with the Company.
14. Law Governing. This Agreement shall be governed in accordance with
and governed by the internal laws of the State of California.
15. Interpretation / Provisions of Plan Control. This Agreement is
subject to all the terms, conditions and provisions of the Plan, including,
without limitation, the amendment provisions thereof, and to such rules,
regulations and interpretations relating to the Plan adopted by the Committee or
the Board as may be in effect from time to time. If and to the extent that this
Agreement conflicts or is inconsistent with the terms, conditions and provisions
of the Plan, the Plan shall control, and this Agreement shall be deemed to be
modified accordingly. The Optionee accepts the Option subject to all the terms
and provisions of the Plan and this Agreement. The undersigned Optionee hereby
accepts as binding, conclusive and final all decisions or interpretations of the
Committee or the Board upon any questions arising under the Plan and this
Agreement.
16. Notices. Any notice under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally or when
deposited in the United States mail, registered, postage prepaid, and addressed,
in the case of the Company, to the Company's Secretary at:
Synaptics Incorporated
2381 Bering Drive
San Jose, California 95131
or if the Company should move its principal office, to such principal office,
and, in the case of the Optionee, to the Optionee's last permanent address as
shown on the Company's records, subject to the right of either party to
designate some other address at any time hereafter in a notice satisfying the
requirements of this Section.
17. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT
A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of Option. There may be a regular federal income
tax liability upon the exercise of the Option. The Optionee will be treated as
having received compensation
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income (taxable at ordinary income tax rates) equal to the excess, if any, of
the fair market value of the Shares on the date of exercise over the exercise
price. If Optionee is an employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
(b) Disposition of Shares. If Shares are held for at least one
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
The foregoing discussion assumes that, and only is applicable if, the
fair market value of the Shares as of the date on which the Option is granted is
not significantly less than the exercise price. The Company believes that it has
made a good faith effort to determine the fair market value of the Shares and
does not believe that the exercise price is significantly less than the fair
market value of the Shares on the Date of Grant. No assurances can be given,
however, that the Internal Revenue Service would not take a contrary position.
It is possible that if the fair market value is determined to be significantly
greater than the exercise price, the Internal Revenue Service may take the
position that the Option is not in effect a stock option but should be treated
as a restricted stock for tax purposes. The Optionee should consult with his or
her own tax advisors as to whether any action should be taken to minimize these
risks.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the _______ day of ________________, 20_____.
COMPANY:
SYNAPTICS INCORPORATED, A
CALIFORNIA CORPORATION
By:
------------------------------------
Name:
Title:
Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option, and fully
understands all provisions of the Option.
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Dated: OPTIONEE:
-----------------------------
By:
-----------------------------------
Name:
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EXHIBIT A
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
COMPANY :
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act").
(b) I understand that the Company's issuance of the Securities has not
been registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of my investment intent as expressed herein. In this connection, I
understand that, in the view of the Securities and Exchange Commission (the
"SEC"), the statutory basis for such exemption may be unavailable if my
representation was predicated solely upon a present intention to hold these
Securities for the minimum capital gains period specified under tax statutes,
for a deferred sale, for or until an increase or decrease in the market price of
the Securities, or for a period of one year or any other fixed period in the
future.
(c) I further understand that the Securities must be held indefinitely
unless the transfer is subsequently registered under the Securities Act or
unless an exemption from registration is otherwise available. Moreover, I
understand that the Company is under no obligation to register any transfer of
the Securities. In addition, I understand that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless registered or such registration is not required in the opinion
of counsel for the Company.
(d) I am familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of issuance of the Securities, such issuance will be exempt from
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registration under the Securities Act. In the event the Company later becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter the securities exempt under
Rule 701 may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including among other things: (1) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, and the amount of securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), if applicable. Notwithstanding this paragraph (d), I acknowledge
and agree to the restrictions set forth in paragraph (e) hereof.
In the event that the Company does not qualify under Rule 701 at the
time of issuance of the Securities, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
among other things: (1) the availability of certain public information about the
Company, (2) the resale occurring not less than one year after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than two years, (3) the sale being made through
a broker in an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities Exchange Act
of 1934) and the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if applicable.
(e) I further understand that in the event all of the applicable
requirements of Rule 144 or Rule 701 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 and
Rule 701 are not exclusive, the Staff of the SEC has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 or Rule 701 will
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk.
Signature of Purchaser:
---------------------------------------
Date:
---------------------------
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