Exhibit 10.6
ORION
ENERGY SYSTEMS, LTD.
2003 STOCK OPTION PLAN
The purpose of the Orion Energy
Systems, Ltd. 2003 Stock Option Plan (the “Plan”) is to
provide (i) designated employees and officers of Orion Energy
Systems, Ltd. (the “Company”) and its subsidiaries,
(ii) certain consultants and advisors who perform services for
the Company or its subsidiaries and (iii) non-employee members
of the Board of Directors of the Company (the “Board”)
with the opportunity to receive grants of nonqualified stock
options. The Company believes that the Plan will encourage the
participants to contribute materially to the growth of the Company,
thereby benefiting the Company’s shareholders, and will align
the economic interests of the participants with those of the
shareholders.
1. Administration
(a) Committee. The Plan shall be
administered and interpreted by the Board or by a committee
appointed by the Board (the “Committee”). After an
initial public offering of the Company’s stock as described
in Section 20(b) (a “Public Offering”), the Plan shall
be administered by a Committee, which may consist of “outside
directors” as defined under section 162(m) of the Internal
Revenue Code of 1986, as amended (the “Code”), and
related Treasury regulations and “non-employee
directors” as defined under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”). However, the Board may ratify or approve any grants as
it deems appropriate. If the Board administers the Plan, references
in the Plan to the “Committee” shall be deemed to refer
to the Board.
(b) Committee Authority. The
Committee shall have the sole authority to (i) determine the
individuals to whom grants shall be made under the Plan,
(ii) determine the type, size and terms of the grants to be
made to each such individual, (iii) determine the time when
the grants will be made and the duration of any applicable exercise
or restriction period, including the criteria for exercisability
and the acceleration of exercisability and (iv) deal with any
other matters arising under the Plan.
(c) Committee Determinations.
The Committee shall have full power and authority to administer and
interpret the Plan, to make factual determinations and to adopt or
amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it
deems necessary or advisable, in its sole discretion. The
Committee’s interpretations of the Plan and all
determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons
having any interest in the Plan or in any awards granted hereunder.
All powers of the Committee shall be executed in its sole
discretion, in the best interest of the Company, not as a
fiduciary, and in keeping with the objectives of the Plan and need
not be uniform as to similarly situated individuals.
2. Grants
Awards under the Plan may consist of
grants of nonqualified stock options as described in Section 5
and Section 6 (“Options” or “Grants”).
All Grants shall be subject to the terms and conditions set forth
herein and to such other terms and conditions consistent with this
Plan as the Committee deems appropriate and as are specified in
writing by the Committee to the individual in a grant instrument or
an amendment to the grant instrument (the “Grant
Instrument”). The Committee shall approve the form and
provisions of each Grant Instrument. Grants need not be uniform as
among the grantees.
3. Shares Subject to the
Plan
(a) Shares Authorized. Subject
to adjustment as described in subsection (b) below, the
aggregate number of shares of common stock of the Company
(“Company Stock”) that may be issued or transferred
under the Plan is three million five hundred thousand (3,500,000)
shares. After a Public Offering, the maximum aggregate number of
shares of Company Stock that shall be subject to Grants made under
the Plan to any individual during any calendar year shall be
250,000 shares, subject to adjustment as described below. The
shares may be authorized but unissued shares of Company Stock or
reacquired shares of Company Stock, including shares purchased by
the Company on the open market for purposes of the Plan. If and to
the extent Options authorized under this subsection
(a) terminate, expire, or are canceled, forfeited, exchanged
or surrendered without having been exercised, the shares subject to
such Grants shall again be available for purposes of the
Plan.
(b) Adjustments. If there is any
change in the number or kind of shares of Company Stock outstanding
(i) by reason of a stock dividend, spin-off, recapitalization,
stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the
Company is the surviving corporation, (iii) by reason of a
reclassification or change in par value, or (iv) by reason of
any other extraordinary or unusual event affecting the outstanding
Company Stock as a class without the Company’s receipt of
consideration, or if the value of outstanding shares of Company
Stock is substantially reduced as a result of a spin-off or the
Company’s payment of an extraordinary dividend or
distribution, the maximum number of shares of Company Stock
available for Grants, the maximum number of shares of Company Stock
that any individual participating in the Plan may be granted in any
year, the number of shares covered by outstanding Grants, the kind
of shares issued under the Plan, and the price per share or the
applicable market value of such Grants shall be appropriately
adjusted by the Committee to reflect any increase or decrease in
the number of, or change in the kind or value of, issued shares of
Company Stock to preclude, to the extent practicable, the
enlargement or dilution of rights and benefits under such Grants;
provided, however, that any fractional shares resulting from such
adjustment shall be eliminated. Any adjustments determined by the
Committee shall be final, binding and conclusive.
4. Eligibility for
Participation
(a) Eligible Persons. All
employees of the Company and its subsidiaries
(“Employees”), including Employees who are officers or
members of the Board, and members of
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the
Board who are not Employees (“Non-Employee Directors”)
shall be eligible to participate in the Plan. Non-Employee
Directors shall be eligible to receive Grants only under
Section 6 of the Plan. Consultants and advisors who perform
services to the Company or any of its subsidiaries (“Key
Advisors”) shall be eligible to participate in the Plan if
the Key Advisors render bona fide services and such services are
not in connection with the offer or sale of securities in a
capital-raising transaction.
(b) Selection of Grantees. The
Committee shall select the Employees, Non-Employee Directors and
Key Advisors to receive Grants and shall determine the number of
shares of Company Stock subject to a particular Grant in such
manner as the Committee determines. Employees, Key Advisors and
Non-Employee Directors who receive Grants under this Plan shall
hereinafter be referred to as “Grantees”.
5. Granting of Options
(a) Number of Shares. The
Committee shall determine the number of shares of Company Stock
that will be subject to each Grant of Options to Employees,
Non-Employee Directors and Key Advisors.
(b) Type of Option and
Price.
(i) The
Committee may grant Nonqualified Stock Options that are not
intended to qualify as “incentive stock options” within
the meaning of section 422 of the Code in accordance with the terms
and conditions set forth herein. Nonqualified Stock Options may be
granted to Employees, Non-Employee Directors and Key
Advisors.
(ii) The
purchase price (the “Exercise Price”) of Company Stock
subject to an Option shall be determined by the Committee and may
be equal to, greater than, or less than the Fair Market Value (as
defined below) of a share of Company Stock on the date the Option
is granted; provided, however, that the Exercise Price shall not be
less than $1.375 per share.
(iii) If
the Company Stock is publicly traded, then the Fair Market Value
per share shall be determined as follows: (x) if the principal
trading market for the Company Stock is a national securities
exchange or the NASDAQ National Market, the last reported sale
price thereof on the relevant date or (if there were no trades on
that date) the latest preceding date upon which a sale was
reported, or (y) if the Company Stock is not principally
traded on such exchange or market, the mean between the last
reported “bid” and “asked” prices of
Company Stock on the relevant date, as reported on NASDAQ or, if
not so reported, as reported by the National Daily Quotation
Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines. If the
Company Stock is not publicly traded or, if publicly traded, is not
subject to reported transactions or “bid” or
“asked” quotations as set forth above, the Fair Market
Value per share shall be as determined by the Committee.
(c) Option Term. The Committee
shall determine the term of each Option. The term of any Option
shall not exceed ten (10) years from the date of grant.
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(d) Exercisability of Options.
Options shall become exercisable in accordance with such terms and
conditions, consistent with the Plan, as may be determined by the
Committee and specified in the Grant Instrument. The Committee may
accelerate the exercisability of any or all outstanding Options at
any time for any reason.
(e) Termination of Employment,
Disability or Death.
(i) Except
as provided below, an Option may only be exercised while the
Grantee is employed by, or providing service to, the Company as an
Employee, Key Advisor or member of the Board. In the event that a
Grantee ceases to be employed by, or provide service to, the
Company for any reason other than a “disability”,
death, or termination for “cause”, any Option which is
otherwise exercisable by the Grantee shall terminate unless
exercised within 90 days after the date on which the Grantee
ceases to be employed by, or provide service to, the Company (or
within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration
of the Option term. Except as otherwise provided by the Committee,
any of the Grantee’s Options that are not otherwise
exercisable as of the date on which the Grantee ceases to be
employed by, or provide service to, the Company shall terminate as
of such date.
(ii) In
the event the Grantee ceases to be employed by, or provide service
to, the Company on account of a termination for “cause”
by the Company, any Option held by the Grantee shall terminate as
of the date the Grantee ceases to be employed by, or provide
service to, the Company. In addition, notwithstanding any other
provisions of this Section 5, if the Committee determines that
the Grantee has engaged in conduct that constitutes
“cause” at any time while the Grantee is employed by,
or providing service to, the Company or after the Grantee’s
termination of employment or service, any Option held by the
Grantee shall immediately terminate and the Grantee shall
automatically forfeit all shares underlying any exercised portion
of an Option for which the Company has not yet delivered the share
certificates, upon refund by the Company of the exercise Price paid
by the Grantee for such shares. Upon any exercise of an Option, the
Company may withhold delivery of share certificates pending
resolution of an inquiry that could lead to a finding resulting in
a forfeiture.
(iii) In
the event the Grantee ceases to be employed by, or provide service
to, the Company because the Grantee is “disabled”, all
Options shall become fully exercisable by the Grantee and shall
terminate unless exercised within one year after the date on which
the Grantee ceases to be employed by, or provide service to, the
Company (or within such other period of time as may be specified by
the Committee), but in any event no later than the date of
expiration of the Option term.
(iv) If
the Grantee dies while employed by, or providing service to, the
Company or within 90 days after the date on which the Grantee
ceases to be employed or provide service on account of a
termination specified in Section 5(e)(i) above (or within such
other period of time as may be specified by the Committee), all
Options shall become fully exercisable by the Grantee and shall
terminate unless exercised within one year after the date on which
the Grantee ceases to be employed by, or provide service to, the
Company (or within such
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other
period of time as may be specified by the Committee), but in any
event no later than the date of expiration of the Option
term.
(v) For purposes of this Section 5(e)
and Section 6:
(A) The term “Company”
shall mean the Company and its parent and subsidiary
corporations.
(B) “Employed by, or provide
service to, the Company” shall mean employment or service as
an Employee, Key Advisor or member of the Board (so that, for
purposes of exercising Options, a Grantee shall not be considered
to have terminated employment or service until the Grantee ceases
to be an Employee, Key Advisor and member of the Board), unless the
Committee determines otherwise.
(C) “Disability” shall
mean a Grantee’s becoming disabled within the meaning of
section 22(e)(3) of the Code.
(D) “Cause” shall mean,
except to the extent specified otherwise by the Committee, a
finding by the Committee that the Grantee (i) has breached his
or her employment or service contract with the Company,
(ii) has engaged in disloyalty to the Company, including,
without limitation, fraud, embezzlement, theft, commission of a
felony or proven dishonesty in the course of his or her employment
or service, (iii) has disclosed trade secrets or confidential
information of the Company to persons not entitled to receive such
information or (iv) has engaged in such other behavior
detrimental to the interests of the Company as the Committee
determines.
(f) Exercise of Options. A
Grantee may exercise an Option that has become exercisable, in
whole or in part, by delivering a notice of exercise to the Company
with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Committee
(x) in cash, (y) with the approval of the Committee, by
delivering shares of Company Stock owned by the Grantee (including
Company Stock acquired in connection with the exercise of an
Option, subject to such restrictions as the Committee deems
appropriate) and having a Fair Market Value on the date of exercise
equal to the Exercise Price or (z) by such other method as the
Committee may approve, including, after a Public Offering, payment
through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board. The Committee may
authorize loans by the Company to Grantees in connection with the
exercise of an Option, upon such terms and conditions as the
Committee, in its sole discretion, deems appropriate. Shares of
Company Stock used to exercise an Option shall have been held by
the Grantee for the requisite period of time to avoid adverse
accounting consequences to
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