SONICWALL, INC.
1998 STOCK OPTION PLAN
Adopted July 23, 1998; as Amended August 24, 1999
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
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attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentives to Employees, Non-Employee
Directors and Consultants of SONICWALL, INC. ('the Company') and its
Subsidiaries, and to promote the success of the Company's business. Options
granted hereunder may be either Incentive Stock Options or Nonstatutory Stock
Options at the discretion of the Committee.
2. Definitions. As used herein, and in any Option granted hereunder, the
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following definitions shall apply:
(a) 'Board' shall mean the Board of Directors of the Company.
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(b) 'Code' shall mean the Internal Revenue Code of 1986, as amended.
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(c) 'Common Stock' shall mean the Common Stock of the Company.
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(d) 'Company' shall mean SonicWALL, Inc., a California corporation.
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(e) 'Committee' shall mean the Committee appointed by the Board in
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accordance with paragraph (a) of Section 4 of the Plan. If the Board does not
appoint or ceases to maintain a Committee, the term 'Committee' shall refer to
the Board.
(f) 'Consultant' shall mean any independent contractor retained to perform
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bona fide consulting services for the Company or any Subsidiary (other than
services in connection with the offer or sale of securities in a capital-raising
transaction) and who is compensated for such services.
(g) 'Continuous Employment' shall mean the absence of any interruption or
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termination of service as an Employee or Non-Employee Director by the Company or
any Subsidiary. Continuous Employment shall not be considered interrupted
during any period of sick leave, military leave or any other leave of absence
approved by the Board or in the case of transfers between locations of the
Company or between the Company and any Parent, Subsidiary or successor of the
Company.
(h) 'Covered Employee' shall mean any individual whose compensation is
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subject to the limitations on tax deductibility provided by Section 162(m) of
the Code and any Treasury Regulations promulgated thereunder in effect at the
close of the taxable year of the Company in which an Option has been granted to
such individual.
(i) 'Employee' shall mean any person, including officers (whether or not
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they are directors), employed by the Company or any Subsidiary. 'Employee does
not include any individual who provides services to the Company or any
Subsidiary as an independent contractor whether or not such individual is
reclassified as a common law employee, unless the Company or a Subsidiary
withholds or is required to withhold U.S. Federal employment taxes for such
individual pursuant to Section 3402 of the Code.
(j) 'Exchange Act' shall mean the Securities Exchange Act of 1934, as
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amended.
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(k) 'Incentive Stock Option' shall mean any option granted under this Plan
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and any other option granted to an Employee in accordance with the provisions of
Section 422 of the Code, and the regulations promulgated thereunder.
(1) 'Non-Employee Director' shall mean any director of the Company or any
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Subsidiary who (i) is not employed by the Company or such Subsidiary; (ii) does
not receive compensation, either directly or indirectly, from the Company or a
parent or Subsidiary for services rendered as a consultant or in any capacity
other than as a director, except for an amount that does not exceed the dollar
amount for which disclosure would be required pursuant to Item 404(a) of
Regulation S-K; (iii) does not possess an interest in any other transaction for
which disclosure would be required pursuant to Item 404(a) of Regulation S-K;
and (iv) is not engaged in a business relationship for which disclosure would be
required pursuant to Item 404 (b) of Regulation S-K.
(m) 'Nonstatutory Stock Option' shall mean an option granted under the Plan
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that is subject to the provisions of Section 1.83-7 of the Treasury Regulations
promulgated under Section 83 of the Code.
(n) 'Option' shall mean a stock option granted pursuant to the Plan.
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(o) 'Option Agreement' shall mean a written agreement between the Company
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and the Optionee regarding the grant and exercise of Options to purchase Shares
and the terms and conditions thereof as determined by the Committee pursuant to
the Plan.
(p) 'Optionee' shall mean an Employee, NonEmployee Director or Consultant
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who receives an Option.
(q) 'Outside Director' shall mean a director of the Company who qualifies
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as an outside director as such term is used in Section 162(m) of the Code and
defined in any applicable Treasury Regulations promulgated thereunder.
(r) 'Parent' shall mean a 'parent corporation,' whether now or hereafter
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existing, as defined by Section 424(e) of the Code.
(s) 'Plan' shall mean this 1998 Stock Option Plan.
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(t) 'Registration Date' shall mean the effective date of the first
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registration statement filed by the Company pursuant to Section 12 of the
Exchange Act with respect to any class of the Company's equity securities.
(u) 'Section 162(m) Effective Date' shall mean the first date as of which
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the limitations on the tax deductibility of certain compensation provided by
Section 162(m) of the Code and any Treasury Regulations promulgated thereunder
are applicable to Options granted under the Plan.
(v) 'Securities Act' shall mean the Securities Act of 1933, as amended.
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(w) 'Share' shall mean a share of the Common Stock of the Company subject
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to an Option, as adjusted in accordance with Section 11 of the Plan.
(x) 'Subsidiary' shall mean a 'subsidiary corporation,' whether now or
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hereafter existing, as defined in Section 424(f) of the Code.
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3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
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the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 2,179,162 Shares of Common Stock, plus an automatic annual
increase on the first day of each of the Company's fiscal year beginning in
2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007 and 2008 equal to the lesser of
(i) 1,000,000 Shares; (ii) four percent (4%) of the Shares outstanding on the
last day of the immediately preceding fiscal year or (iii) such lesser number of
Shares as is determined by the Board. The Shares may be authorized but unissued
or reacquired shares of Common Stock. If an Option expires or becomes
unexercisable for any reason without having been exercised in full, the Shares
which were subject to the Option but as to which the Option was not exercised
shall become available for other Option grants under the Plan, unless the Plan
shall have been terminated. In addition, any shares of Common Stock which are
retained by the Company upon exercise of an Option in order to satisfy the
exercise or purchase price for such Option or any withholding taxes due with
respect to such exercise shall be treated as not issued and shall continue to be
available under the Plan. Shares repurchased by the Company pursuant to any
repurchase right which the Company may have shall be available for future grant
as nonstatutory stock options under the Plan.
The Company intends that as long as it is not subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act and is not an investment
company registered or required to be registered under the Investment Company Act
of 1940, all offers and sales of Options and Shares issuable upon exercise of
any Option shall be exempt from registration under the provisions of Section 5
of the Securities Act, and the Plan shall be administered in such a manner so as
to preserve such exemption. The Company intends that the Plan shall constitute a
written compensatory benefit plan within the meaning of Rule 701(b) of 17 CFR
Section 230.701 promulgated by the Securities and Exchange Commission pursuant
to such Act or any successor rule. Unless otherwise specified Options granted
under the Plan are intended to be granted in reliance on Rule 701 whenever
applicable.
4. Administration of the Plan.
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(a) Procedure. The Plan shall be administered by the Board. The Board may
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appoint a Committee consisting of not less than two (2) members of the Board to
administer the Plan, subject to such terms and conditions as the Board may
prescribe. Once appointed, the Committee shall continue to serve until otherwise
directed by the Board. From time to time, the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and, thereafter,
directly administer the Plan.
Members of the Board or Committee who are either eligible for Options or
have been granted Options may vote on any matters affecting the administration
of the Plan or the grant of Options pursuant to the Plan, except that no such
member shall act upon the granting of an Option to himself, but any such member
may be counted in determining the existence of a quorum at any meeting of the
Board or the Committee during which action is taken with respect to the granting
of an Option to him or her.
The Committee shall meet at such times and places and upon such notice as
the chairperson determines. A majority of the Committee shall constitute a
quorum. Any acts by the Committee may be taken at any meeting at which a quorum
is present and shall be by majority
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vote of those members entitled to vote. Additionally, any acts reduced to
writing or approved in writing by all of the members of the Committee shall be
valid acts of the Committee.
(b) Procedure After Registration Date. Notwithstanding subsection (a)
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above, after the date of registration of the Company's Common Stock on a
national securities exchange or the Registration Date, the Plan shall be
administered either by: (i) the full Board; or (ii) a Committee of two (2) or
more directors, each of whom is a Non-Employee Director. After such date, the
Board shall take all action necessary to administer the Plan in accordance with
the then effective provisions of Rule 16b-3 promulgated under the Exchange Act,
provided that any amendment to the Plan required for compliance with such
provisions shall be made consistent with the provisions of Section 13 of the
Plan, and said regulations.
(c) Procedure After Section 162(m) Effective Date. Notwithstanding
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subsections (a) and (b) above, after the Section 162(m) Effective Date the Plan
and all Option grants shall be administered and approved by a Committee
comprised solely of two or more Outside Directors.
(d) Powers of the Committee. Subject to the provisions of the Plan, the
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Committee shall have the authority: (i) to determine, upon review of relevant
information, the fair market value of the Common Stock; (ii) to determine the
exercise price of Options to be granted, the Employees, Non-Employee Directors
or Consultants to whom and the time or times at which Options shall be granted,
and the number of Shares to be represented by each Option; (iii) to interpret
the Plan; (iv) to prescribe, amend and rescind rules and regulations relating to
the Plan; (v) to determine the terms and provisions of each Option granted under
the Plan (which need not be identical) and, with the consent of the holder
thereof, to modify or amend any Option; (vi) to authorize any person to execute
on behalf of the Company any instrument required to effectuate the grant of an
Option previously granted by the Committee; (vii) to defer an exercise date of
any Option (with the consent of the Optionee), subject to the provisions of
Section 9(a) of the Plan; (viii) to determine whether Options granted under the
Plan will be Incentive Stock Options or Nonstatutory Stock Options; and (ix) to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
(e) Acceleration of Vesting. In addition to its other powers, the Board
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(or the Committee), in its discretion, has the right to accelerate unvested
Options in connection with (i) any tender offer for a majority of the
outstanding shares of Common Stock by any person or entity; (ii) any proposed
sale or conveyance of all or substantially all of the property and assets of the
Company; or (iii) any proposed consolidation or merger of the Company with or
into any other corporation, unless the Company is the surviving corporation. In
the case of such accelerated vesting, the Company shall give written notice to
the holder of any Option that such Option may be exercised even though the
Option or portion thereof would not otherwise have been exercisable had the
foregoing event not occurred. In such event, the Company shall permit the
holder of any Option to exercise during the time period specified in the
Company's notice, which period shall not be less than ten days following the
date of notice. Upon consummation of a tender offer or proposed sale,
conveyance, consolidation or merger to which such notice shall relate, all
rights under said Option which shall not have been so exercised shall terminate
unless the agreement governing the transaction shall provide otherwise.
(f) Effect of Committee's Decision. All decisions, determinations and
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interpretations of the Committee shall be final and binding on all potential or
actual Optionee, any other holder of an Option or other equity security of the
Company and all other persons.
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5. Eligibility.
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(a) Persons Eligible for Options. Options under the Plan may be granted
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only to Employees, Non-Employee Directors or Consultants whom the Committee, in
its sole discretion, may designate from time to time. Incentive Stock Options
may be granted only to Employees. An Employee who has been granted an Option, if
he or she is otherwise eligible, may be granted an additional Option or Options.
However, the aggregate fair market value (determined in accordance with the
provisions of Section 8(a) of the Plan) of the Shares subject to one or more
Incentive Stock Options grants that are exercisable for the first time by an
Optionee during any calendar year (under all stock option plans of the Company
and its Parents and Subsidiaries) shall not exceed $100,000 (determined as of
the grant date). As of the Section 162(m) Effective Date, Options under the Plan
shall be granted to Covered Employees upon satisfaction of the conditions to
such grants provided pursuant to Section 162(m) and any Treasury Regulations
promulgated thereunder.
(b) No Right to Continuing Employment. Neither the establishment nor the
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operation of the Plan shall confer upon any Optionee or any other person any
right with respect to continuation of employment or other service with the
Company or any Subsidiary, nor shall the Plan interfere in any way with the
right of the Optionee or the right of the Company (or any Parent or Subsidiary)
to terminate such employment or service at any time.
6. Term of Plan. The Plan shall become effective upon its adoption by the
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Board or its approval by vote of the holders of the outstanding shares of the
Company entitled to vote on the adoption of the Plan (in accordance with the
provisions of Section 19 hereof), whichever is earlier. It shall continue in
effect for a term of ten (10) years unless sooner terminated under Section 13 of
the Plan.
7. Term of Option. Unless the Committee determines otherwise, the term of
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each Option granted under the Plan shall be ten (10) years from the date of
grant. The term of the Option shall be set forth in the Option Agreement. No
Incentive Stock Option shall be exercisable after the expiration of ten (10)
years from the date such Option is granted, provided that no Incentive Stock
Option granted to any Employee who, at the date such Option is granted, owns
(including by attribution under Section 424(d) of the Code) more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any Parent or Subsidiary shall be exercisable after the expiration of
five (5) years from the date such Option is granted.
8. Exercise Price and Consideration.
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(a) Exercise Price. Except as provided in subsections (b) and (c) below,
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the exercise price for the Shares to be issued pursuant to any Option shall be
such price as is determined by the Committee, which shall in no event be less
than: (i) in the case of Incentive Stock Options, the fair market value of such
Shares on the date the Option is granted; or (ii) in the case of Nonstatutory
Stock Options, eighty five percent (85%) of such fair market value; provided
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that, in the case of any Optionee owning stock possessing more than ten percent
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(10%) of the total combined voting power of all classes of stock of the Company
or any Parent or Subsidiary of the Company, the exercise price shall be one
hundred ten percent (110%) of fair market value on the date the Option is
granted. Fair market value of the Common Stock shall be determined by the
Committee, using such criteria as it deems relevant; provided, however, that if
there is a public
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market for the Common Stock, the fair market value per Share shall be the
average of the last reported bid and asked prices of the Common Stock on the
date of grant, as reported in The Wall Street Journal (or, if not so reported,
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as otherwise reported by the National Association of Securities Dealers
Automated Quotation (NASDAQ) System) or, in the event the Common Stock is listed
on a national securities exchange (within the meaning of Section 6 of the
Exchange Act) or on the NASDAQ National Market System (or any successor national
market system), the fair market value per Share shall be the closing price on
such exchange on the date of grant of the Option, as reported in The Wall
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Street Journal.
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(b) Ten Percent Shareholders. No Incentive Stock Option shall be granted
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to any Employee who, at the date such Option is granted, owns (within the
meaning of Section 424(d) of the Code) more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, unless the exercise price for the Shares to be issued pursuant to
such Option is at least equal to one hundred ten percent (110%) of the fair
market value of such Shares on the grant date determined by the Committee in the
manner set forth in subsection (a) above.
(c) Section 162(m) Limitations. After the Section 162(m) Effective Date,
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the Option Price of any Option granted to a Covered Employee shall be at least
equal to the fair market value of the Shares as of the date of grant as
determined in the manner set forth in subsection (a) above.
(d) Consideration. The consideration to be paid for the Shares to be
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issued upon exercise of an Option, including the method of payment shall be
determined by the Committee (and, in the case of an Incentive Stock Option,
shall be determined at the time of grant) and may consist entirely of (1) cash,
(2) check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender or such other period as may be required
to avoid a charge to the Company's earnings, and (y) have a fair market value on
the date of surrender equal to the aggregate exercise price of the date of
surrender equal to the aggregate price of the Shares as to which such Option
shall be exercised, (5) authorization for the Company to retain from the total
number of Shares as to which the Option is exercised that number of Shares
having a fair market value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed exercise notice together with such other documentation as
the Committee and the broker, if applicable, shall require to effect an exercise
of the Option and delivery to the Company of the sale or loan proceeds required
to pay the exercise price and any applicable income or employment taxes, (7)
delivery of an irrevocable subscription agreement for the Shares that
irrevocably obligates the option holder to take and pay for the Shares not more
than twelve (12) months after the date of delivery of the subscription
agreement, (8) any combination of the foregoing methods of payment, or (9) such
other consideration and method of payment for the issuance of Shares to the
extent permitted under applicable laws. In making its determination as to the
type of consideration to accept, the Committee shall consider if acceptance of
such consideration may be reasonably expected to benefit the Company.
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9. Exercise of Option.
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(a) Vesting Period. Any Option granted hereunder shall be exercisable at
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such times and under such conditions as determined by the Committee and as shall
be permissible under the terms of the Plan, which shall be specified in the
Option Agreement evidencing the Option. Options granted under the Plan shall
vest at a rate of at least twenty percent (20%) per year.
(b) Exercise Procedures. An Option shall be deemed to be exercised when
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written notice of such exercise has been given to the Company in accordance with
the terms of the option agreement evidencing the Option, and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. After the Registration Date, in lieu of delivery of a cash payment
for the purchase price of the Shares with respect to which the Option is
exercised, the Optionee may deliver to the Company a sell order to a broker for
the Shares being purchased and an agreement to pay (or have the broker remit
payment for) the purchase price for the Shares being purchased on or before the
settlement date for the sale of such shares to the broker.
Pursuant to the terms of the Option Agreement, the Committee may require
that any Option may be exercised only upon the execution of a Restricted Stock
Purchase Agreement which gives the Company a right of first refusal in the
Option Shares at the per share price at which the Option Shares are proposed to
be transferred. The right of first refusal shall terminate at such time as a
public market exists for the Company's Common Stock or the Company dissolves or
is a party to a merger, reorganization, consolidation, exchange of stock or sale
of assets in which it is not the surviving entity. The Restricted Stock Purchase
Agreement shall contain such provisions as the Committee may approve in its sole
discretion.
An Option may not be exercised for fractional shares. As soon as
practicable following the exercise of an Option in the manner set forth above,
the Company shall issue or cause its transfer agent to issue stock certificates
representing the Shares purchased. Until the issuance of such stock certificates
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Shares
notwithstanding the exercise of the Option. No adjustment will be made for a
dividend or other rights for which the record date is prior to the date of the
transfer by the Optionee of the consideration for the purchase of the Shares,
except as provided in Section 11 of the Plan. After the Registration Date, the
exercise of an Option by any person subject to short-swing trading liability
under Section 16(b) of the Exchange Act shall be subject to compliance with all
applicable requirements of Rule 16b-3 promulgated under the Exchange Act.
(c) Death of Optionee. In the event of the death during the Option period
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of an Optionee who is at the time of his death, or was within the ninety (90)-
day period immediately prior thereto, an Employee or Non-Employee Director, and
who was in Continuous Employment as such from the date of the grant of the
Option until the date of death or termination, the may be exercised, at any time
prior to the expiration of the Option period, by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent of the accrued right to exercise at the time of the
termination or death, whichever comes first.
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(d) Disability of Optionee. In the event of the permanent and total
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disability during the Option period of an Optionee who is at the time of such
disability, or was within the ninety (90)-day period prior thereto, an Employee
or Non-Employee Director, and who was in Continuous Employment as such from the
date of the grant of the Option until the date of disability or termination, the
Option may be exercised at any time within one (1) year following the date of
such permanent and total disability, but only to the extent of the accrued right
to exercise at the time of the termination or disability, whichever comes first,
subject to the condition that no Option shall be exercised after the expiration
of the Option period.
(e) Termination of Status as Employee, NonEmployee Director or Consultant.
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If an Optionee shall cease to be an Employee or Non-Employee Director for any
reason other than permanent and total disability or death, or if an Optionee
shall cease to be Consultant for any reason, the Optionee may, but only within
ninety (90) days (or such other period of time not less than thirty (30) days as
is determined by the Committee) after the date he or she ceases to be an
Employee or Non-Employee Director, exercise his or her Option to the extent that
he or she was entitled to exercise it at the date of such termination, subject
to the condition that no Option shall be exercisable after the expiration of the
Option period. No termination shall be deemed to occur and this Section 9(e)
shall not apply if (i) the Optionee is a Consultant who becomes an Employee; or
(ii) the Optionee is an Employee who becomes a Consultant.
(f) Tax Withholding. As a condition of the exercise of an Option granted
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under the Plan, the Optionee (or in the case of the Optionee's death, the person
exercising or receiving the Option) shall make such arrangements as a Committee
may require for the satisfaction of any applicable federal, state, local or
foreign withholding tax obligations that may arise in connection with the
exercise of an Option and the issuance of Shares. The Company shall not be
required to issue any Shares under the Plan until such obligations are
satisfied. In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to satisfy
such tax obligations from the next payroll payment otherwise payable after the
date of an exercise of the Option. After the Registration Date, when an Optionee
is required to pay to the Company an amount with respect to tax withholding
obligations in connection with the exercise of an Option granted under the Plan,
the Optionee may elect prior to the date the amount of such withholding tax is
determined (the 'Tax Date') to make such payment, or such increased payment as
the Optionee elects to make up to the maximum federal, state and local marginal
tax rates, including any related FICA obligation, applicable to the Optionee and
the particular transaction, by: (i) delivering cash; (ii) delivering part or all
of the payment in previously owned shares of Common Stock (whether or not
acquired through the prior exercise of an Option); and/or (iii) irrevocably
directing the Company to withhold from the Shares that would otherwise be issued
upon exercise of the Option that number of whole Shares having a fair market
value equal to the amount of tax required or elected to be withheld (a
'Withholding Election'). If an Optionee's Tax Date is deferred beyond the date
of exercise and the Optionee makes a Withholding Election, the Optionee will
initially receive the full amount of Optioned Shares otherwise issuable upon
exercise of the Option, but will be unconditionally obligated to surrender to
the Company on the Tax Date the number of Shares necessary to satisfy his or her
minimum withholding requirements, or such higher payment as he or she may have
elected to make, with adjustments to be made in cash after the Tax Date.
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Any withholding of Optioned Shares with respect to taxes arising in
connection with the exercise of an Option by any person subject to short-swing
trading liability under Section 16(b) of the Exchange Act shall satisfy the
requirements of Section 16b-3(e).
Any adverse consequences incurred by an Optionee with respect to the use of
shares of Common Stock to pay any part of the exercise price or of any tax in
connection with the exercise of an Option, including without limitation any
adverse tax consequences arising as a result of a disqualifying disposition
within the meaning of Section 422 of the Code shall be the sole responsibility
of the Optionee. Shares withheld in accordance with this provision shall not
again become available for purposes of the Plan and for Options subsequently
granted thereunder.
10. Non-Transferability of Options. Options may not be sold, pledged,
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assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution, provided that, after the
Registration Date, the Committee may in its discretion grant transferable
Nonstatutory Stock Options pursuant to Option Agreements specifying (i) the
manner in which such Nonstatutory Stock Options are transferable and (ii) that
any such transfer shall be subject to the applicable laws. The designation of a
beneficiary by an Optionee will not constitute a transfer. Options may be
exercised or purchased during the lifetime of the Optionee, only by the
Optionee.
11. Adjustments Upon Changes in Capitalization. Subject to any required
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action by the shareholders of the Company, the number of Optioned Shares covered
by each outstanding Option, and the per share exercise price of each such
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, recapitalization, combination, reclassification, the payment of a
stock dividend on the Common Stock or any other increase or decrease in the
number of such shares of Common Stock effected without receipt of consideration
by the Company; provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been 'effected without receipt of
consideration'. Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option.
The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the number or class of securities
covered by any Option, as well as the price to be paid therefor, in the event
that the Company effects one or more reorganizations, recapitalizations, rights
offerings, or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
Unless otherwise determined by the Board, upon the dissolution or
liquidation of the Company the Options granted under the Plan shall terminate
and thereupon become null and void. The Optionee shall be given not less than
ten (10) days notice of such event and the opportunity to exercise each
outstanding Option before such event is effected.
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Upon any merger or consolidation, if the Company is not the surviving
corporation, the Options granted under the Plan shall either be assumed by the
new entity or shall terminate in accordance with the provisions of the preceding
paragraph.
12. Time of Granting Options. Unless otherwise specified by the
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Committee, the date of grant of an Option under the Plan shall be the date on
which the Committee makes the determination granting such Option; provided
however, that in the case of any Incentive Stock Option, the grant date shall be
the later of the date on which the Committee makes the determination granting
such Incentive Stock Option or the date of commencement of the Optionee's
employment relationship with the Company. Notice of the determination shall be
given to each Optionee to whom an Option is so granted within a reasonable time
after the date of such grant.
13. Amendment and Termination of the Plan. The Board may at any time
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amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with applicable laws,
the Company shall obtain shareholder approval of any Plan amendment in such a
manner and to such a degree required. No amendment or termination of the Plan
shall adversely affect Options already granted, unless mutually agreed otherwise
between the Optionee and the Board, which agreement must be in writing and
signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued with
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respect to an Option granted under the Plan unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act, the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance. As a condition to the exercise of an Option, the Company
may require the person exercising such Option to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned relevant provisions of law.
15. Reservation of Shares. During the term of this Plan the Company will
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at all times reserve and keep available the number of Shares as shall be
sufficient to satisfy the requirements of the Plan. Inability of the Company to
obtain from any regulatory body having jurisdiction and authority deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any Shares
hereunder shall relieve the Company of any liability in respect of the
nonissuance or sale of such Shares as to which such requisite authority shall
not have been obtained.
16. Information to Optionee. During the term of any Option granted under
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the Plan, the Company shall provide or otherwise make available to each Optionee
a copy of its financial statements at least annually.
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17. Option Agreement. Options granted under the Plan shall be evidenced
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by Option Agreements.
18. Indemnification of Board (or Committee, if applicable). In addition
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to such other rights of indemnification as they may have as directors or as
members of the Committee, the members of the Board (or the Committee, if
applicable) shall be indemnified by the Company against the reasonable expenses,
including attorneys, fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding except in relation to matters as of which it shall be
adjudged in such action, suit or proceeding that such Board (or Committee, if
applicable) member is liable for negligence or misconduct in the performance of
his duties; provided that within sixty days after institution of any such
action, suit or proceeding a Board (or Committee, if applicable) member shall in
writing offer the Company the opportunity, at its own expense, to handle and
defend the same.
19. Shareholder Approval. The Plan shall be subject to approval by the
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affirmative vote of the holders of a majority of the outstanding capital stock
of the Company entitled to vote within twelve (12) months before or after the
Plan is adopted. Any Option granted before shareholder approval is obtained must
be rescinded if shareholder approval is not obtained within twelve (12) months
before or after the Plan is adopted. Shares issued upon the exercise of such
Options shall not be counted in determining whether such approval is obtained.
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1998 Stock Option Plan - SonicWALL Inc.
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