TELEGEN CORPORATION
2007 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE
The
purpose of this 2007 Stock Incentive Plan (the “
Plan ”)
is to enhance the long-term stockholder value of Telegen
Corporation, a California corporation (the “
Company ”),
by offering opportunities to employees, directors, officers,
consultants, agents, advisors and independent contractors of the
Company and its Subsidiaries (as defined in Section 2) to
participate in the Company’s growth and success, and to
encourage them to remain in the service of the Company and its
Subsidiaries and to acquire and maintain stock ownership in the
Company.
SECTION 2. DEFINITIONS
For
purposes of the Plan, the following terms shall be defined as
set forth below:
“
Award ”
means an award or grant made pursuant to the Plan, including,
without limitation, awards or grants of Options and Stock Awards,
or any combination of the foregoing.
“
Board ”
means the Board of Directors of the Company.
“
Cause ”
means dishonesty, fraud, misconduct, unauthorized use or disclosure
of confidential information, trade secrets or other intellectual
property, or conviction or confession (including a plea of no
contest) of a crime punishable by law (except minor violations), or
conduct that adversely affects the Company’s business or
reputation, in each case as determined by the Plan Administrator in
its sole discretion, and its determination as to whether an action
constitutes Cause shall be conclusive and binding.
“
Code ”
means the Internal Revenue Code of 1986, as amended from time to
time.
“
Common Stock ”
means the Company common stock, no par value per
share.
“
Corporate Transaction ”
means any of the following events:
(a)
Consummation
of any merger or consolidation of the Company in which the
Company is not the continuing or surviving corporation, or
pursuant to which shares of the Common Stock are converted
into cash, securities or other property, if following such
merger or consolidation the holders of the Company’s
outstanding voting securities immediately prior to such merger
or consolidation own less than 50% of the outstanding voting
securities of the surviving corporation;
(b)
Consummation
of any sale, lease, exchange or other transfer in one
transaction or a series of related transactions of all or
substantially all of the Company’s assets other than a
transfer of the Company’s assets to a majority-owned
subsidiary corporation of the Company; or
(c)
Approval
by the holders of the Common Stock of any plan or proposal for
the liquidation or dissolution of the Company.
Ownership
of voting securities shall take into account and shall include
ownership as determined by applying Rule 13d-3(d)(1)(i) (as in
effect on the date of adoption of the Plan) under the Exchange
Act.
“
Disability ”
means “disability” as that term is defined for purposes
of Section 22(e)(3) of the Code. As of the date of adoption of this
Plan, such terms means the inability to engage in any substantial
gainful activity by reason of any medically determinable mental or
physical impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period
of not less than 12 months.
“
Employee ”
means any person, including officers and directors, employed by the
Company (or one of its parent corporations or subsidiary
corporations), with the status of employment determined based upon
such minimum number of hours or periods worked as shall be
determined by the Plan Administrator in its discretion, subject to
any requirements of the Code. For purposes of this provision,
“parent corporation” and “subsidiary
corporation” shall have the meanings attributed to those
terms for purposes of Section 422 of the Code.
“
Exchange Act ”
means the Securities Exchange Act of 1934, as amended.
“
Fair Market Value ”
shall be the fair market value of the Common Stock, as of any date,
as determined by the Plan Administrator as follows:
(a)
if
the Common Stock is listed on any established stock exchange
or a national market system, or quoted on a quotation system,
including the OTC Bulletin Board, the Fair Market Value shall
be the closing sales price for such stock (or if no sales were
reported, the closing sales price on the date of
determination, as quoted on such system or exchange, or the
system or exchange with the greatest volume of trading in
Common Stock, on the date of determination, as reported in The
Wall Street Journal or such other source as the Plan
Administrator deems reliable; or
(b)
In
the absence of an established market for the Common Stock, the
Fair Market Value shall be determined in good faith by the
Plan Administrator.
“
Grant Date ”
means the date the Plan Administrator adopted the granting
resolution or a later date designated in a resolution of the Plan
Administrator as the date an Award is to be granted.
“
Holder ”
means (a) the person to whom an Award is granted, (b) for
a Holder who has died, the personal representative of the
Holder’s estate, the person(s) to whom the Holder’s
rights under the Award have passed by will or by the applicable
laws of descent and distribution, or the beneficiary designated in
accordance with Section 10, or (c) the person(s) to whom an
Award has been transferred in accordance with Section
10.
“
Incentive Stock Option ”
means an Option to purchase Common Stock granted under Section 7
with the intention that it qualify as an “incentive stock
option” as that term is defined in Section 422 of the
Code.
“
Nonqualified Stock Option ”
means an Option to purchase Common Stock granted under Section 7
other than an Incentive Stock Option.
“
Option ”
means the right to purchase Common Stock granted under Section
7.
“
Plan Administrator ”
means the Board or any committee of the Board designated to
administer the Plan under Section 3.1.
“
Restricted Stock ”
means shares of Common Stock granted under Section 9, the rights of
ownership of which are subject to restrictions prescribed by the
Plan Administrator.
“
Securities Act ”
means the Securities Act of 1933, as amended.
“
Stock Award ”
means an Award granted under Section 9.
“
Subsidiary ”
means any entity that is directly or indirectly controlled by the
Company or in which the Company has a significant ownership
interest, as determined by the Plan Administrator, and any entity
that may become a direct or indirect parent of the
Company.
“
Successor Corporation ”
has the meaning set forth under Section 11.2.
SECTION 3. ADMINISTRATION
3.1
Plan Administrator .
The Plan shall be administered by the Board, or a committee or
committees (which term includes subcommittees) appointed by, and
consisting of two or more members of, the Board. For so long as the
Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, the Board shall consider in selecting the Plan
Administrator and the membership of any committee acting as Plan
Administrator, with respect to any persons subject or likely to
become subject to Section 16 of the Exchange Act, the provisions
regarding (a) “outside directors” as contemplated
by Section 162(m) of the Code, (b) “nonemployee
directors” as contemplated by Rule 16b-3 under the Exchange
Act, and (c) any requirements as to “independent
directors” pursuant to rules of any securities exchange on
which the Common Stock is quoted or listed for trading. The Board
may delegate the responsibility for administering the Plan with
respect to designated classes of eligible persons to different
committees consisting of two or more members of the Board, subject
to such limitations as the Board deems appropriate. Committee
members shall serve for such term as the Board may determine,
subject to removal by the Board at any time.
3.2
Administration and Interpretation by the Plan
Administrator .
Except for the terms and conditions explicitly set forth in the
Plan, the Plan Administrator shall have exclusive authority, in its
discretion, to determine all matters relating to Awards under the
Plan, including the selection of individuals to be granted Awards,
the type of Awards, the number of shares of Common Stock subject to
an Award, all terms, conditions, restrictions and limitations, if
any, of an Award and the terms of any document, agreement or
instrument that evidences the Award. The Plan Administrator shall
also have exclusive authority to interpret the Plan and may from
time to time adopt, and change, rules and regulations of general
application for the Plan’s administration. The Plan
Administrator’s interpretation of the Plan and its rules and
regulations, and all actions taken and determinations made by the
Plan Administrator pursuant to the Plan, shall be conclusive and
binding on all parties involved or affected. The Plan Administrator
may delegate administrative duties to such of the Company’s
officers as it so determines.
3.3
Replacement of Options .
Without limiting the authority granted to the Plan Administrator
under Section 3.2, the Plan Administrator, in its sole discretion,
shall have the authority, among other things, to (a) grant
Options subject to the condition that Options previously granted at
a higher or lower exercise price under the Plan be canceled or
exchanged in connection with such grant (the number of shares
covered by the new Options, the exercise price, the term and the
other terms and conditions of the new Option, shall be determined
in accordance with the Plan and may be different from the
provisions of the canceled or exchanged Options), and
(b) amend or modify outstanding and unexercised Options, with
the consent of the Holder, to, among other things, reduce the
exercise price per share, establish the exercise price at the
then-current Fair Market Value or accelerate or defer the exercise
date, vesting schedule or expiration date of any
Option.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1
Authorized Number of Shares .
Subject to adjustment from time to time as provided in Section
11.1, a maximum of 10,000,000 (ten million) shares of Common Stock
shall be available for issuance under the Plan. Shares issued under
the Plan shall be drawn from authorized and unissued shares or
shares now held or subsequently acquired by the
Company.
4.2
Reuse of Shares .
Any shares of Common Stock that have been made subject to an Award
that cease to be subject to the Award (other than by reason of
exercise or payment of the Award to the extent it is exercised for
or settled in shares) shall again be available for issuance in
connection with future grants of Awards under the
Plan.
SECTION 5. ELIGIBILITY
Awards
may be granted under the Plan to those Employees, officers and
directors of the Company and its Subsidiaries as the Plan
Administrator from time to time selects. Awards may also be
made to consultants, agents, advisors and independent
contractors who provide services to the Company and its
Subsidiaries, as the Plan Administrator from time to time
selects. In granting Awards to consultants, agents, advisors
and independent contractors, the Plan Administrator shall give
consideration to the requirements set forth in the
instructions to the use of Form S-8 registration statement
under the Securities Act. A member of the Board may be
eligible to participate in or receive or hold Awards under
this Plan; provided, however, that no member of the Board
shall vote with respect to the granting of an Award to himself
or herself.
SECTION 6. AWARDS
6.1
Form and Grant of Awards .
The Plan Administrator shall have the authority, in its sole
discretion, to determine the type or types of Awards to be made
under the Plan. Such Awards may include, but are not limited to,
Incentive Stock Options, Nonqualified Stock Options and Stock
Awards. Awards may be granted singly or in combination. An eligible
person may receive one or more grants of Awards as the Plan
Administrator shall from time to time determine, and such
determinations may be different as to different Holders and may
vary as to different grants, even when made
simultaneously.
6.2
Number of Shares .
The maximum number of shares that may be issued pursuant to the
grant of an Award shall be as established by the Plan
Administrator. Provided, however, to the extent required for
compliance with the exclusion from the limitation on deductibility
of compensation under Section 162(m) of the Code, the Plan
Administrator shall not grant Awards to any person in any one
fiscal year of the Company in an amount that exceeds, in the
aggregate, 1,000,000 (One Million) shares of Common Stock (subject
to adjustment as provided in Section 11).
6.3
Acquired Company Awards .
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Awards under the Plan in substitution for
awards issued under other plans, or assume under the Plan awards
issued under other plans, if the other plans are or were plans of
other acquired entities (“
Acquired Entities ”)
(or the parent of the Acquired Entity) and the new Award is
substituted, or the old award is assumed, by reason of a merger,
consolidation, acquisition of property or of stock, reorganization
or liquidation (the “
Acquisition Transaction ”).
In the event that a written agreement pursuant to which the
Acquisition Transaction is completed is approved by the Board and
said agreement sets forth the terms and conditions of the
substitution for or assumption of outstanding awards of the
Acquired Entity, said terms and conditions shall be deemed to be
the action of the Plan Administrator without any further action by
the Plan Administrator, except as may be required for compliance
with Rule 16b-3 under the Exchange Act, and the persons holding
such Awards shall be deemed to be Holders.
SECTION 7. AWARDS OF OPTIONS
7.1
Grant of Options .
The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as
Nonqualified Stock Options, which shall be appropriately
designated.
7.2
Option Exercise Price .
The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than
100% of the Fair Market Value of the Common Stock on the Grant
Date.
7.3
Term of Options .
The term of each Option shall be as established by the Plan
Administrator or, if not so established, shall be 10 years from the
Grant Date.
7.4
Vesting / Exercisability of Options .
The Plan Administrator shall establish and set forth in each
agreement that evidences an Option the time at which or the
installments in which, if any, the Option shall vest and become
exercisable. In the absence of a defined vesting schedule in the
agreement evidencing the Option, the Option covered by such
agreement will vest and become exercisable ratably over 36
(thirty-six) months from the date of grant. The Plan Administrator,
in its absolute discretion, may waive or accelerate any vesting
requirement contained in outstanding and unexercised
Options.
7.5
Exercise of Options .
Options shall be exercised in accordance with the following terms
and conditions:
(a)
Procedure .
To the extent that an Option has vested and is currently
exercisable, an Option may be exercised from time to time by
written notice to the Company, in accordance with procedures
established by the Plan Administrator, setting forth the number of
shares with respect to which the Option is being exercised and
accompanied by payment in full of the exercise price. The Plan
Administrator may determine at any time that an Option may not be
exercised as to less than 100 shares at any one time (or the lesser
number of remaining shares covered by the Option). Only whole
shares shall be issued pursuant to the exercise of any
Option.
(b)
Payment of Exercise Price .
(1)
The
exercise price for shares purchased under an Option shall be
paid in full to the Company by delivery of consideration equal
to the product of the Option exercise price and the number of
shares being purchased. Such consideration must be paid in any
combination of cash and/or bank-certified or cashier’s
check (or personal check if determined acceptable by the Plan
Administrator in its sole discretion), either at the time the
Option is granted or within three days after notice of
exercise is tendered to the Company.
(2)
In
addition, to the extent permitted by the Plan Administrator in
its sole discretion, the exercise price for shares purchased
under an Option may be paid, either singly or in combination
with one or more of the alternative forms of payment
authorized by this Section 7.5, by (y) delivery of a
full-recourse promissory note or (z) such other
consideration as the Plan Administrator may permit. The terms
of any such promissory note, including the interest rate,
terms of and security for repayment, and maturity, will be
subject to the Plan Administrator’s discretion. Any such
promissory note shall bear interest at a rate specified by the
Plan Administrator but in no case less than the rate required
to avoid imputation of interest (taking into account any
exceptions to the imputed interest rules) for federal income
tax purposes.
(3)
For
so long as the Common Stock is registered under Section 12 of
the Exchange Act, then, to the extent permitted by applicable
laws and regulations (including, but not limited to, federal
tax and securities laws and regulations) and unless the Plan
Administrator determines otherwise, an Option also may be
exercised by (a) delivery of shares of Common Stock
(which shares, if tendered by an affiliate of the Company,
shall have been held by the Holder for at least six months)
having a Fair Market Value equal to the aggregate exercise
price (such payment in stock may occur in the context of a
single exercise of an option or successive and simultaneous
exercises, sometimes referred to as “pyramiding,”
which provides that, rather than physically exchanging
certificates for a series of exercises, bookkeeping entries
will be made pursuant to which the Holder is permitted to
retain his existing stock certificate and a new stock
certificate is issued for the net shares), or
(b) delivery of a prop
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