PANSOFT COMPANY LIMITED FORM OF STOCK OPTION AGREEMENT
PANSOFT
COMPANY LIMITED
FORM OF STOCK OPTION
AGREEMENT
RECITALS
A. The Board
has adopted the Plan for the purpose of retaining the services of selected
Employees, non-employee members of the Board or of the board of directors of any
Parent or Subsidiary and consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
B. Optionee
is to render valuable services to the Corporation (or a Parent or Subsidiary),
and this Agreement is executed pursuant to, and is intended to carry out the
purposes of, the Plan in connection with the Corporation’s grant of an option to
Optionee.
C. All
capitalized terms in this Agreement shall have the meaning assigned to them in
the attached Appendix.
NOW, THEREFORE, it is hereby
agreed as follows:
1. Grant of
Option. The Corporation hereby grants to Optionee, as of the
Grant Date, an option to purchase up to the number of Option Shares specified in
the Grant Notice. The Option Shares shall be purchasable from time to
time during the option term specified in Paragraph 3 at the Exercise
Price.
2. Shareholder
Approval. This
option shall not become exercisable with respect to any Option Shares unless
shareholder approval of the Plan is obtained on or before __________,
2009. In the event shareholder approval of the Plan is not obtained
on or before July 1, 2009, this option shall terminate and cease to be
outstanding.
3. Option
Term. This option shall have a maximum term of five (5)
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 6 or 7.
4. Limited
Transferability. This option shall be neither transferable nor
assignable by Optionee other than by will or by the laws of descent and
distribution following Optionee’s death and may be exercised, during Optionee’s
lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may, in connection
with the Optionee’s estate plan, be assigned in whole or in part during
Optionee’s lifetime to one or more members of the Optionee’s immediate family or
to a trust established for the exclusive benefit of Optionee and/or one or more
such family members. The assigned portion shall be exercisable only
by the person or persons who acquire a proprietary interest in the option
pursuant to such assignment. The terms applicable to the assigned
portion shall be the same as those in effect for this option immediately prior
to such assignment.
5. Dates of
Exercise. Subject to Paragraphs 2 and 11, this option shall
become exercisable for the Option Shares in one or more installments as
specified in the Grant Notice. As the option becomes exercisable for
such installments, those installments shall accumulate, and the option shall
remain exercisable for the accumulated installments until the Expiration Date or
sooner termination of the option term under Paragraph 6 or 7.
6. Cessation
of Service/Termination of Option. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date should any of the following provisions become
applicable:
(a) Should
Optionee cease to remain in Service for any reason (other than death, Permanent
Disability or Misconduct) while holding this option, then Optionee shall have a
period of three (3) months (commencing with the date of such cessation of
Service) during which to exercise this option, but in no event shall this option
be exercisable at any time after the Expiration Date.
(b) Should
Optionee die while holding this option, then the personal representative of
Optionee’s estate or the person or persons to whom the option is transferred
pursuant to Optionee’s will or in accordance with the laws of inheritance shall
have the right to exercise this option. Such right shall lapse, and
this option shall cease to be outstanding, upon the earlier of (i) the
expiration of the twelve (12)-month period measured from the date of Optionee’s
death or (ii) the Expiration Date.
(c) Should
Optionee cease Service by reason of Permanent Disability while holding this
option, then Optionee shall have a period of twelve (12) months (commencing
with the date of such cessation of Service) during which to exercise this
option. In no event shall this option be exercisable at any time
after the Expiration Date.
(d) The
applicable post-Service exercise period in effect for this option pursuant to
the foregoing provisions of this Paragraph 6 shall automatically be extended by
an additional period of time equal in duration to any interval within that
otherwise applicable post-Service exercise period during which the exercise of
this option or the immediate sale of the Option Shares acquired hereunder cannot
be effected in compliance with applicable federal and state securities laws, but
in no event shall such an extension result in the continuation of this option
beyond the Expiration Date.
1
(e) During
the limited period of post-Service exercisability, this option may not be
exercised in the aggregate for more than the number of vested Option Shares for
which the option is exercisable at the time of Optionee’s cessation of
Service. Upon the expiration of such limited exercise period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to be
outstanding for any vested Option Shares for which the option has not been
exercised. However, this option shall, immediately upon Optionee’s
cessation of Service for any reason, terminate and cease to be outstanding with
respect to any Option Shares in which Optionee is not otherwise at that time
vested or for which this option is not otherwise at that time
exercisable.
(f) Should
Optionee’s Service be terminated for Misconduct, or should Optionee engage in
Misconduct at any time Optionee holds this option, then this option shall
terminate immediately and cease to remain outstanding.
7. Special
Acceleration of Option.
(a) This
option to the extent outstanding at the time of a Change in Control but not
otherwise fully exercisable, shall not become
exercisable on an accelerated basis if and to the extent: (i) this option
is, in connection with the Change in Control, to be assumed by the successor
corporation (or parent thereof) or otherwise continued in full force and effect
pursuant to the terms of the Change in Control transaction or (ii) this option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing at the time of the Change in Control on the
Option Shares for which this option is not otherwise at that time exercisable
(the excess of the Fair Market Value of those Option Shares over the aggregate
Exercise Price payable for such shares) and provides for subsequent payout of
that spread in accordance with the same option exercise/vesting schedule set
forth in the Grant Notice. However, if none of the foregoing
conditions apply to this option at the time of Change in Control, then this
option shall automatically accelerate so that such option shall, immediately
prior to the effective date of that Change in Control, become exercisable for
all the shares of Common Stock at the time subject to this option and may be
exercised for any or all of those shares as fully vested shares of Common
Stock.
(b) Immediately
following the Change in Control, this option shall terminate and cease to be
outstanding, except to the extent this option is assumed by the successor
corporation (or parent thereof) in connection with the Change in Control or is
otherwise to continue in full force and effect pursuant to the terms of the
Change in Control transaction.
(c) If this
option is assumed in connection with a Change in Control or is otherwise to
continue in full force and effect, then this option shall be appropriately
adjusted, immediately after such Change in Control, to apply to the number and
class of securities which would have been issuable to Optionee in consummation
of such Change in Control had the option been exercised immediately prior to
such Change in Control, and appropriate adjustments shall also be made to the
Exercise Price, provided the
aggregate Exercise Price shall remain the same. To the extent the actual holders
of the Corporation’s outstanding Common Stock receive cash consideration for
their Common Stock in consummation of the Change in Control transaction, the
successor corporation may, in connection with the assumption or continuation of
this option, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Change in Control transaction.
(d) This
Agreement shall not in any way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
8. Adjustment
in Option Shares. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation’s receipt of
consideration, appropriate adjustments shall be made to (i) the total
number and/or class of securities subject to this option and (ii) the Exercise
Price in order to reflect such change and thereby preclude a dilution or
enlargement of benefits hereunder.
9. Shareholder
Rights. The holder of this option shall not have any shareholder rights
by reason of this option.
10. Manner of
Exercising Option.
(a) In order
to exercise this option with respect to all or any part of the Option Shares for
which this option is at the time exercisable, Optionee (or any other person or
persons exercising the option) must take the following actions:
(i) Execute
and deliver to the Corporation a Notice of Exercise for the Option Shares for
which the option is exercised.
(ii) Provide
irrevocable instructions (I) to a Corporation-designated brokerage firm to
effect the immediate sale of all the purchased shares and (II) to the
Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale transaction. The
broker shall remit to the Corporation sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all applicable income tax,
social insurance, payroll tax, contributions, payment on account obligations or
other payments (“Taxes”) required to be withheld by the Corporation by reason of
such exercise. All remaining proceeds shall be paid in cash to
Optionee in accordance with the Corporation’s procedures and applicable law and
regulations. The sale of the purchased shares shall be effected in
accordance with the procedures established by the Corporation and the brokerage
firm.
(iii) Furnish
to the Corporation appropriate documentation that the person or persons
exercising the option (if other than Optionee) have the right to exercise this
option.
(b) In no
event may this option be exercised for any fractional shares.
2
11. Compliance
with Laws and Regulations.
(a) The
exercise of this option and the issuance of the Option Shares to the broker upon
such exercise shall be subject to compliance by the Corporation and Optionee
with all applicable requirements of law (including without limitation, approval
of the Plan by the China State Administration of Foreign Exchange and other
local laws in the countries of Optionee’s employment and residence) relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
Capital Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.
(b) The
inability of the Corporation to obtain approval from any regulatory body having
authority deemed by the Corporation to be necessary to the lawful issuance and
sale of any Common Stock pursuant to this option shall relieve the Corporation
of any liability with respect to the non-issuance or sale of the Common Stock as
to which such approval shall not have been obtained. The Corporation,
however, shall use its best efforts to obtain all such approvals.
12. Successors
and Assigns. Except to the extent otherwise provided in
Paragraphs 4 and 7, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee’s assigns and the legal representatives, heirs and legatees
of Optionee’s estate.
13. Notices. Any
notice required to be given or delivered to the Corporation under the terms of
this Agreement shall be in writing and addressed to the Corporation at its
principal corporate offices. Any notice required to be given or
delivered to Optionee shall be in writing and addressed to Optionee at the
address indicated below Optionee’s signature line on the Grant
Notice. All notices shall be deemed effective upon personal delivery
or upon deposit in the U.S. mail, postage prepaid and properly addressed to the
party to be notified.
14. Construction. This
Agreement and the option evidenced hereby are made and granted pursuant to the
Plan and are in all respects limited by and subject to the terms of the
Plan. The Plan Administrator shall have the discretionary authority
to interpret and construe any term or provision of the Plan or this Agreement,
and such interpretation shall be binding on all persons having an interest in
this option.
15. Governing
Law; Translated Documents. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the British
Virgin Islands without resort to that State’s conflict-of-laws
rules. If Optionee has received this or any other document related to
the Plan translated into a language other than English, and if the translated
version is different from the English version, the English version shall
control.
16. Additional
Terms Applicable to an Incentive Option. In the event this
option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
(a) This
option shall cease to qualify for favorable tax treatment as an Incentive Option
if (and to the extent) this option is exercised for one or more Option Shares:
(A) more than three (3) months after the date Optionee ceases to be an Employee
for any reason other than death or Permanent Disability or (B) more than twelve
(12) months after the date Optionee ceases to be an Employee by reason of
Permanent Disability.
(b) No
installment under this option shall qualify for favorable tax treatment as an
Incentive Option if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Common Stock for which such installment
first becomes exercisable hereunder would, when added to the aggregate value
(determined as of the respective date or dates of grant) of the Common Stock or
other securities for which this option or any other Incentive Options granted to
Optionee prior to the Grant Date (whether under the Plan or any other option
plan of the Corporation or any Parent or Subsidiary) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. Should such One Hundred Thousand
Dollar ($100,000) limitation be exceeded in any calendar year, this option
shall nevertheless become exercisable for the excess shares in such calendar
year as a Non-Statutory Option.
(c) Should
the exercisability of this option be accelerated upon a Change in Control, then
this option shall qualify for favorable tax treatment as an Incentive Option
only to the extent the aggregate Fair Market Value (determined at the Grant
Date) of the Common Stock for which this option first becomes exercisable in the
calendar year in which the Change in Control occurs does not, when added to the
aggregate value (determined as of the respective date or dates of grant) of the
Common Stock or other securities for which this option or one or more other
Incentive Options granted to Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One Hundred
Thousand Dollars ($100,000) in the aggregate. Should the applicable
One Hundred Thousand Dollar ($100,000) limitation be exceeded in the calendar
year of such Change in Control, the option may nevertheless be exercised for the
excess shares in such calendar year as a Non-Statutory Option.
(d) Should
Optionee hold, in addition to this option, one or more other options to purchase
Common Stock which become exercisable for the first time in the same calendar
year as this option, then for purposes of the foregoing limitations on the
exercisability of such options as Incentive Options, this option and each of
those other options shall be deemed to become first exercisable in that calendar
year on the basis of the chronological order in which they were granted, except
to the extent otherwise provided under applicable law or
regulation.
17. Severability. The
provisions of this Agreement are severable, and if any one or more provisions
may be determined to be illegal or otherwise unenforceable, in whole or in part,
the remaining provisions shall nevertheless be binding and
enforceable.
18. Electronic
Delivery. The Corporation may, in its sole discretion, decide
to deliver any document related to the option, the Plan or future options that
may be granted under the Plan by electronic means, and Optionee hereby consents
to receive such documents by electronic delivery.
3
EXHIBIT
I
FORM
OF NOTICE OF EXERCISE
I hereby
notify Pansoft Company Limited (the “Corporation”) that I elect to exercise that
certain option (the “Option”) granted to me under the Corporation’s 2008 Stock
Incentive Plan on ___________________, 20___ for ______________ shares of the
Corporation’s Common Stock (the “Purchased Shares”) at the option exercise price
of $________ per share (the “Exercise Price”).
Concurrently
with the delivery of this Exercise Notice to the Corporation, I shall utilize
the special broker-dealer sale and remittance procedure specified in my
agreement to effect payment of the Exercise Price and any additional amounts for
which I am liable or which are required to be withheld by my employer and shall
deliver whatever additional documents may be required by such agreement as a
condition for exercise.
___________________________, 20____
Date
|
Optionee
|
|
|
Address:
|
|
4
APPENDIX
The following definitions shall be in effect under the Agreement:
A. Agreement
shall mean this Stock Option Agreement.
B. Board
shall mean the Corporation’s Board of Directors.
C. Change in
Control shall mean a change in ownership or control of the Corporation
effected through any of the following transactions:
(i) a
shareholder-approved merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation’s
outstanding securities are transferred to a person or persons different from the
persons holding those securities immediately prior to such
transaction,
(ii) a
shareholder-approved sale, transfer or other disposition of all or substantially
all of the Corporation’s assets in complete liquidation or dissolution of the
Corporation, or
(iii) the
acquisition, directly or indirectly by any person or related group of persons
(other than the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation), of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act
of 1934, as amended) of securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation’s outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation’s
shareholders.
D. Code
shall mean the Internal Revenue Code of 1986, as amended.
E. Common
Stock shall mean shares of the Corporation’s common stock.
F. Corporation
shall mean Pansoft Company Limited, a British Virgin Islands corporation, and
any corporate successor to all or substantially all of the assets or voting
stock of Pansoft Company Limited, which shall by appropriate action adopt the
Plan.
G. Employee
shall mean an individual who is in the employ of the Corporation (or any Parent
or Subsidiary), subject to the control and direction of the employer entity as
to both the work to be performed and the manner and method of
performance.
H. Exercise
Date shall mean the date on which the option shall have been exercised in
accordance with Paragraph 10 of the Agreement.
I. Exercise
Price shall mean the exercise price per Option Share as specified in the
Grant Notice.
J. Expiration
Date shall mean the date on which the option expires as specified in the
Grant Notice.
K. Fair
Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:
(i) If the
Common Stock is at the time traded on the NASDAQ Capital Market, then the Fair
Market Value shall be the closing selling price per share of Common Stock at the
close of regular hours trading (i.e., before after- hours trading begins) on the
NASDAQ Capital Market on the date in question, as such price is reported by the
National Association of Securities Dealers. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such quotation
exists.
(ii) If the
Common Stock is at the time listed on any Stock Exchange, then the Fair Market
Value shall be the closing selling price per share of Common Stock at the close
of regular hours trading (i.e., before after-hours trading begins) on the date
in question on the Stock Exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which such
quotation exists.
▇. ▇▇▇▇▇
Date shall mean the date of grant of the option as specified in the Grant
Notice.
5
▇. ▇▇▇▇▇
Notice shall mean the Notice of Grant of Stock Option, in written or
electronic format, accompanying the Agreement, pursuant to which Optionee has
been informed of the basic terms of the option evidenced hereby.
N. Incentive
Option shall mean an option that satisfies the requirements of Code
Section 422.
O. Misconduct
shall mean the commission of any act of fraud, embezzlement or dishonesty by the
Optionee, any unauthorized use or disclosure by such person of confidential
information or trade secrets of the Corporation (or any Parent or Subsidiary),
or any other intentional misconduct by such person adversely affecting the
business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not in any way preclude or
restrict the right of the Corporation (or any Parent or Subsidiary) to discharge
or dismiss the Optionee or any other person in the Service of the Corporation
(or any Parent or Subsidiary) for any other acts or omissions, but such other
acts or omissions shall not be deemed, for purposes of the Plan or this
Agreement, to constitute grounds for termination for Misconduct.
P. Non-Statutory
Option shall mean an option not intended to satisfy the requirements of
Code Section 422.
Q. Notice of
Exercise shall mean the notice of exercise in the form attached hereto as
Exhibit I.
R. Option
Shares shall mean the number of shares of Common Stock subject to the
option as specified in the Grant Notice.
S. Optionee
shall mean the person to whom the option is granted as specified in the Grant
Notice.
T. Parent
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation, provided each corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. Permanent
Disability shall mean the inability of Optionee to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which is expected to result in death or has lasted or can be
expected to last for a continuous period of twelve (12) months or
more.
V. Plan
shall mean the Corporation’s 2008 Stock Incentive Plan.
W. Plan
Administrator shall mean either the Board or a committee of the Board
acting in its capacity as administrator of the Plan.
X. Service
shall mean the Optionee’s performance of services for the Corporation (or any
Parent or Subsidiary, whether now existing or subsequently established) by a
person in the capacity of an Employee, a non-employee member of the board of
directors or a consultant or independent advisor. However, the
Optionee shall be deemed to cease Service immediately upon the occurrence of the
either of the following events: (i) the Optionee no longer performs
services in any of the foregoing capacities for the Corporation or any Parent or
Subsidiary or (ii) the entity for which the Optionee is performing such services
ceases to remain a Parent or Subsidiary of the Corporation, even though the
Optionee may subsequently continue to perform services for that
entity. Service shall not be deemed to cease during a period of
military leave, sick leave or other personal leave approved by the Corporation;
provided, however, that should
such leave of absence exceed three (3) months, then for purposes of determining
the period within which the option may be exercised as an Incentive Stock Option
under the federal tax laws (if the option is designated as such in the Grant
Notice), the Optionee’s Service shall be deemed to cease on the first day
immediately following the expiration of such three (3)-month period, unless
Optionee is provided, either by statute or by written contract, with the right
to return to Service following such leave. Except to the extent
otherwise required by law or expressly authorized by the Plan Administrator or
by the Corporation’s written policy on leaves of absence, no Service credit
shall be given for vesting purposes for any period the Optionee is on a leave of
absence.
Y. Stock
Exchange shall mean either the American Stock Exchange or the New York
Stock Exchange (or the Nasdaq Capital Market, if applicable).
Z. Subsidiary
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, provided each corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
6