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Incentive Stock Option Grant Agreement
Under The
TeleCommunication Systems, Inc.
Fourth Amended and Restated 1997 Stock Incentive
Plan
1. Terminology . All
capitalized words that are not defined in this Agreement have the
meanings ascribed to them in the Plan. For purposes of this
Agreement, the terms below have the following meanings:
(a)
" Cause " has the meaning ascribed to such term or
words of similar import in the Employee’s written employment
or service contract with the Company and, in the absence of such
agreement or definition, means: (i) the willful commission by
the Employee of a criminal or other act that causes or is likely to
cause substantial economic damage to the Company or substantial
injury to the business reputation of the Company; (ii) the
commission by the Employee of an act of fraud in the performance of
such Employee’s duties on behalf of the Company; or
(iii) the continuing willful failure of the Employee to
perform the duties of such Employee to the Company (other than such
failure resulting from the Employee’s incapacity due to
physical or mental illness), all as determined by the
Administrator, which determination will be conclusive. For purposes
of this Agreement, no act, or failure to act, on the
Employee’s part shall be considered "willful" unless done or
omitted to be done by the Employee not in good faith with the
reasonable belief that the Employee’s action or omission was
in the best interest of the Company.
(b)
" Change in Control " means: (i) an acquisition
(other than from the Company) in a transaction, or a series of
related transactions, by any person, entity or "group," within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the " Exchange Act "),
(excluding for this purpose, (A) the Company or its
subsidiaries, (B) any employee benefit plan of the Company or
its subsidiaries which acquires beneficial ownership of voting
securities of the Company, (C) an underwriter temporarily
holding securities pursuant to an offering of such securities, or
(D) any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions
as their ownership of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors) of
beneficial ownership, within the meaning of Rule 13d-3
promulgated under the Exchange Act, of 50% or more of either the
then outstanding shares of common stock or the combined voting
power of the Company’s then outstanding voting securities
entitled to vote generally in the election of directors (the "
Company Voting Stock "); (ii) the effective time
of any merger, share exchange, consolidation or other
reorganization or business combination of the Company if
immediately after such transaction persons who hold a majority of
the outstanding voting securities entitled to vote generally in the
election of directors of the surviving entity (or the entity owning
100% of such surviving entity) are not persons who held the Company
Voting Stock immediately prior to such transaction; (iii) the
closing of a sale or conveyance of all or substantially all of the
assets of the Company; (iv) individuals who were the Board’s
nominees for election as directors immediately prior to a meeting
of the stockholders of the Company involving an actual or
threatened election contest relating to the election of the
directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act, cease to constitute a majority of the Board following the
election; or (v) the dissolution or liquidation of the
Company; provided , however , that the term "Change
in Control" does not include a public offering
of capital stock of the Company that is effected pursuant to a
registration statement filed with, and declared effective by, the
Securities and Exchange Commission under the Securities Act of
1933.
(c)
" Company " includes TeleCommunication Systems, Inc.
and its Affiliates, except where the context otherwise
requires.
(d)
" Option Shares " mean the shares of Common Stock
underlying the Options.
(e)
" Total and Permanent Disability " means the
inability to engage in any substantial gainful activity by reason
of any medically determinable physical or mental 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 twelve
months. The Administrator may require such proof of Total and
Permanent Disability as the Administrator in its sole discretion
deems appropriate and the Administrator’s good faith
determination as to whether the Employee is totally and permanently
disabled will be final and binding on all parties concerned.
2. Vesting . The
Options vest in accordance with the vesting schedule identified in
the Stock Option Certificate which is attached hereto and
constitutes a part of the Agreement (the " Vesting
Schedule "), so long as the Employee is in the continuous
employ of, or in a service relationship with, the Company from the
Grant Date through the applicable date upon which vesting is
scheduled to occur. No vesting will accrue to any Options after the
Employee ceases to be in either an employment or other service
relationship with the Company.
3. Exercise of
Options .
(a)
Right to Exercise . The Employee may exercise the Options to
the extent vested at any time on or before the Expiration Date or
the earlier termination of the Options, unless otherwise provided
in this Agreement. Section 4 below describes certain
limitations on exercise of the Options that apply in the event of
the Employee’s death, Total and Permanent Disability,
discharge by the Company without Cause or other termination of
employment or other service relationship with the Company. The
Options may be exercised only in multiples of whole shares and may
not be exercised at any one time as to fewer than one hundred
shares (or such lesser number of shares as to which the Options are
then exercisable). No fractional shares will be issued under the
Options.
(b)
Exercise Procedure . In order to exercise the Options, the
following items must be delivered to the Administrator before the
expiration or termination of the Options: (i) an exercise
notice, in such form as the Administrator may require from time to
time, specifying the number of Option Shares to be purchased, and
(ii) full payment of the Exercise Price for such Option Shares
or properly executed, irrevocable instructions, in such form as the
Administrator may require from time to time, to effectuate a
broker-assisted cashless exercise, each in accordance with Section
3(c) of this Agreement. An exercise will not be effective until all
of the foregoing items are received by the Administrator.
(c)
Method of Payment . Payment of the Exercise Price may be
made by delivery of cash, certified or cashier’s check, money
order or other cash equivalent acceptable to the Administrator in
its discretion, a broker-assisted cashless exercise in accordance
with Regulation T of the Board of Governors of the Federal
Reserve System through a brokerage firm approved by the
Administrator, or a combination of the foregoing. In addition,
payment of the Exercise Price may be made by any of the following
methods, or a combination thereof, as determined by the
Administrator in its discretion at the time of exercise:
(i)
by tender (via actual delivery or attestation) to the Company of
other shares of Common Stock of the Company which have a Fair
Market Value on the date of tender equal to the Exercise Price,
provided that such shares have been owned by the
Employee for a period of at least six months free of any
substantial risk of forfeiture or were purchased on the open market
without assistance, direct or indirect, from the Company;
(ii)
by delivery of the Employee’s full recourse promissory note
payable to the Company in a form approved by the Administrator;
or
(iii)
by any other method approved by the Administrator.
(d)
Issuance of Shares upon Exercise . Upon exercise of the
Options in accordance with the terms of this Agreement, the Company
will issue to the Employee, the brokerage firm specified in the
Employee’s delivery instructions pursuant to a
broker-assisted cashless exercise, or such other person exercising
the Options, as the case may be, the number of shares of Common
Stock so paid for, in the form of fully paid and nonassessable
stock. The Company will deliver stock certificates for the Option
Shares as soon as practicable after exercise, which certificates
will, unless such Option Shares are registered or an exemption from
registration is available under applicable federal and state law,
bear a legend restricting transferability of such shares.
4. Termination of
Employment or Service .
(a)
Exercise Period Following Cessation of Employment or Other
Service Relationship, In General . If the Employee ceases to be
employed by, or in a service relationship with, the Company for any
reason other than death, Total and Permanent Disability, or
discharge by the Company without Cause, the Options terminate in
their entirety, regardless of whether the options are vested,
immediately upon the Employee’s termination of employment or
other service relationship.
(b)
Termination by the Company Without Cause . In the event the
Employee’s employment or other service relationship is
terminated by the Company without Cause, (i) the unvested
Options, after giving effect to the provisions of Section 2 of
this Agreement, terminate immediately upon such cessation, and
(ii) the vested Options remain exercisable during the 90-day
period following such cessation, but in no event after the
Expiration Date. Unless sooner terminated, the vested Options
terminate upon the expiration of such 90-day period.
(c)
Disability of Employee . Notwithstanding the provisions of
Section 4(a) above, if the Employee ceases to be employed by, or in
a service relationship with, the Company as a result of the
Employee’s Total and Permanent Disability, (i) the
unvested Options, after giving effect to the provisions of
Section 2 of this Agreement, terminate immediately upon such
cessation, and (ii) the vested Options remain exercisable during
the six-month period following such cessation, but in no event
after the Expiration Date. Unless sooner terminated, the vested
Options terminate upon the expiration of such six-month period.
(d)
Death of Employee . If the Employee dies prior to the
expiration or other termination of the Options, (i) the
unvested Options, after giving effect to the provisions of
Section 2 of this Agreement, terminate immediately upon the
Employee’s death, and (ii) the vested Options remain
exercisable during the six-month period following the
Employee’s death, but in no event after the Expiration Date,
by the Employee’s executor, personal representative, or the
person(s) to whom the
Options are transferred by will or the laws of descent and
distribution. Unless sooner terminated, the vested Options
terminate upon the expiration of such six-month period.
(e)
Misconduct . Notwithstanding anything to the contrary in
this Agreement, the Options terminate in their entirety, regardless
of whether the Options are vested, immediately upon the
Employee’s discharge of employment or other service
relationship for Cause or upon the Employee’s commission of
any of the following acts during any period following the cessation
of employment or other service relationship during which the
Options otherwise would be exercisable: (i) fraud on or
misappropriation of any funds or property of the Company, or
(ii) breach by the Employee of any provision of any
employment, non-disclosure, non-competition, non-solicitation,
assignment of inventions, or ot
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