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EXHIBIT 10.7
SONUS PHARMACEUTICALS, INC.
1999 NONQUALIFIED STOCK INCENTIVE PLAN
This 1999 NONQUALIFIED STOCK INCENTIVE PLAN (the "Plan") is hereby
established by SONUS PHARMACEUTICALS, INC., a Delaware corporation (the
"Company"), and adopted by its Board of Directors as of February 11, 1999 (the
"Effective Date").
ARTICLE 1.
PURPOSES OF THE PLAN
1.1 PURPOSES. The purposes of the Plan are (a) to enhance the Company's
ability to attract and retain the services of qualified employees, officers and
directors (including non-employee directors), and consultants and other service
providers upon whose judgment, initiative and efforts the successful conduct and
development of the Company's business largely depends, and (b) to provide
additional incentives to such persons or entities to devote their utmost effort
and skill to the advancement and betterment of the Company, by providing them an
opportunity to participate in the ownership of the Company and thereby have an
interest in the success and increased value of the Company. It is the intention
that this Plan shall be a broadly based plan including qualified employees of
the Company.
ARTICLE 2.
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings
indicated:
2.1 ADMINISTRATOR. "Administrator" means the Board or, if the Board
delegates responsibility for any matter to the Committee, the term Administrator
shall mean the Committee.
2.2 AFFILIATED COMPANY. "Affiliated Company" means any "parent
corporation" or "subsidiary corporation" of the Company, whether now existing or
hereafter created or acquired, as those terms are defined in Sections 424(e) and
424(f) of the Code, respectively.
2.3 BOARD. "Board" means the Board of Directors of the Company.
2.4 CHANGE IN CONTROL. "Change in Control" shall mean the occurrence of
any of the following: (i) any "person," as such term is used in Section 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than the Company, a Company subsidiary, or a Company employee
benefit plan, including any trustee of such plan acting as trustee) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company (or a successor to the Company)
representing fifty percent (50%) or more of the combined voting power of the
then-outstanding securities of the Company or such successor; (ii) at least a
majority of the directors of the Company constitute persons who were not at the
time of their first election to the Board, candidates proposed by a majority of
the Board in office prior to the time of such first election; (iii) a merger or
consolidation in which the Company is not the surviving entity, except for a
transaction, the principal purpose of which is to change the state
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in which the Company is incorporated; (iv) a sale, transfer or other disposition
of assets involving fifty percent (50%) or more in value of the assets of the
Company; (v) the dissolution of the Company, or liquidation of more than fifty
percent (50%) in value of the Company; or (vi) any reverse merger in which the
Company is a surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from the persons
holding those securities immediately prior to such reverse merger.
2.5 CODE. "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
2.6 COMMITTEE. "Committee" means a committee of two or more members of
the Board appointed to administer the Plan, as set forth in Section 7.1 hereof.
2.7 COMMON STOCK. "Common Stock" means the Common Stock, $.001 par value
of the Company, subject to adjustment pursuant to Section 4.2 hereof.
2.8 DISABILITY. "Disability" means permanent and total disability as
defined in Section 22(e)(3) of the Code. The Administrator's determination of a
Disability or the absence thereof shall be conclusive and binding on all
interested parties.
2.9 EFFECTIVE DATE. "Effective Date" means the date on which the Plan is
adopted by the Board, as set forth on the first page hereof.
2.10 EXERCISE PRICE. "Exercise Price" means the purchase price per share
of Common Stock payable upon exercise of an Option.
2.11 FAIR MARKET VALUE. "Fair Market Value" on any given date means the
value of one share of Common Stock, determined as follows:
(a) If the Common Stock is then listed or admitted to trading on
a Nasdaq market system or a stock exchange which reports closing sale prices,
the Fair Market Value shall be the closing sale price on the date of valuation
on such Nasdaq market system or principal stock exchange on which the Common
Stock is then listed or admitted to trading, or, if no closing sale price is
quoted on such day, then the Fair Market Value shall be the closing sale price
of the Common Stock on such Nasdaq market system or such exchange on the next
preceding day for which a closing sale price is reported.
(b) If the Common Stock is not then listed or admitted to trading
on a Nasdaq market system or a stock exchange which reports closing sale prices,
the Fair Market Value shall be the average of the closing bid and asked prices
of the Common Stock in the over-the-counter market on the date of valuation.
(c) If neither (a) nor (b) is applicable as of the date of
valuation, then the Fair Market Value shall be determined by the Administrator
in good faith using any reasonable method of evaluation, which determination
shall be conclusive and binding on all interested parties.
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2.12 NASD DEALER. "NASD Dealer" means a broker-dealer that is a member
of the National Association of Securities Dealers, Inc.
2.13 OFFEREE. "Offeree" means a Participant to whom a Right to Purchase
has been offered or who has acquired Restricted Stock under the Plan.
2.14 OPTION. "Option" means any option to purchase Common Stock granted
pursuant to the Plan.
2.15 OPTION AGREEMENT. "Option Agreement" means the written agreement
entered into between the Company and the Optionee with respect to an Option
granted under the Plan.
2.16 OPTIONEE. "Optionee" means a Participant who holds an Option.
2.17 PARTICIPANT. "Participant" means an individual or entity who holds
an Option, a Right to Purchase or Restricted Stock under the Plan.
2.18 PURCHASE PRICE. "Purchase Price" means the purchase price per share
of Restricted Stock payable upon acceptance of a Right to Purchase.
2.19 RESTRICTED STOCK. "Restricted Stock" means shares of Common Stock
issued pursuant to Article 6 hereof, subject to any restrictions and conditions
as are established pursuant to such Article 6.
2.20 RIGHT TO PURCHASE. "Right to Purchase" means a right to purchase
Restricted Stock granted to an Offeree pursuant to Article 6 hereof.
2.21 SERVICE PROVIDER. "Service Provider" means a consultant or other
person or entity who provides services to the Company or an Affiliated Company
and who the Administrator authorizes to become a Participant in the Plan.
2.22 STOCK PURCHASE AGREEMENT. "Stock Purchase Agreement" means the
written agreement entered into between the Company and the Offeree with respect
to a Right to Purchase offered under the Plan.
ARTICLE 3.
ELIGIBILITY
3.1 OPTIONS AND RIGHTS TO PURCHASE. Officers and other key employees of
the Company or of an Affiliated Company, members of the Board (whether or not
employed by the Company or an Affiliated Company), and Service Providers are
eligible to receive Options or Rights to Purchase under the Plan.
3.2 LIMITATION ON SHARES. In no event shall any Participant be granted
Options or Rights to Purchase in any one calendar year pursuant to which the
aggregate number of shares of Common Stock that may be acquired thereunder
exceeds 300,000 shares.
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ARTICLE 4.
PLAN SHARES
4.1 SHARES SUBJECT TO THE PLAN. A total of 600,000 shares of Common
Stock may be issued under the Plan, subject to adjustment as to the number and
kind of shares pursuant to Section 4.2 hereof. For purposes of this limitation,
in the event that (a) all or any portion of any Option or Right to Purchase
granted or offered under the Plan can no longer under any circumstances be
exercised, or (b) any shares of Common Stock are reacquired by the Company
pursuant to a Stock Purchase Agreement, the shares of Common Stock allocable to
the unexercised portion of such Option or such Right to Purchase, or the shares
so reacquired, shall again be available for grant or issuance under the Plan.
4.2 CHANGES IN CAPITAL STRUCTURE. In the event that the outstanding
shares of Common Stock are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of a recapitalization, stock split, combination of shares,
reclassification, stock dividend, or other change in the capital structure of
the Company, then appropriate adjustments shall be made by the Administrator to
the aggregate number and kind of shares subject to this Plan, and the number and
kind of shares and the price per share subject to outstanding Option Agreements,
Rights to Purchase and Stock Purchase Agreements in order to preserve, as nearly
as practical, but not to increase, the benefits to Participants.
ARTICLE 5.
OPTIONS
5.1 OPTION AGREEMENT. Each Option granted pursuant to this Plan shall be
evidenced by an Option Agreement which shall specify the number of shares
subject thereto, the vesting provisions relating to such Option, and the
Exercise Price per share. As soon as is practical following the grant of an
Option, an Option Agreement shall be duly executed and delivered by or on behalf
of the Company to the Optionee to whom such Option was granted. Each Option
Agreement shall be in such form and contain such additional terms and
conditions, not inconsistent with the provisions of this Plan, as the
Administrator shall, from time to time, deem desirable, including, without
limitation, the imposition of any rights of first refusal and resale obligations
upon any shares of Common Stock acquired pursuant to an Option Agreement. Each
Option Agreement may be different from each other Option Agreement. Options
granted under the Plan shall not be incentive stock options within the meaning
of Section 424 of the Code.
5.2 EXERCISE PRICE. The Exercise Price per share of Common Stock covered
by each Option shall be determined by the Administrator, provided that the
Exercise Price shall not be less than 85% of Fair Market Value on the date the
Option is granted.
5.3 PAYMENT OF EXERCISE PRICE. Payment of the Exercise Price shall be
made upon exercise of an Option and may be made, in the discretion of the
Administrator, subject to any legal restrictions, by: (a) cash; (b) check; (c)
the surrender of shares of Common Stock owned by the Optionee that have been
held by the Optionee for at least six (6) months, which surrendered shares shall
be valued at Fair Market Value as of the date of such exercise; (d) the
Optionee's promissory
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note in a form and on terms acceptable to the Administrator; (e) the
cancellation of indebtedness of the Company to the Optionee; (f) the waiver of
compensation due or accrued to the Optionee for services rendered; (g) provided
that a public market for the Common Stock exists, a "same day sale" commitment
from the Optionee and an NASD Dealer whereby the Optionee irrevocably elects to
exercise the Option and to sell a portion of the shares so purchased to pay for
the Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt
of such shares to forward the Exercise Price directly to the Company; (h)
provided that a public market for the Common Stock exists, a "margin" commitment
from the Optionee and an NASD Dealer whereby the Optionee irrevocably elects to
exercise the Option and to pledge the shares so purchased to the NASD Dealer in
a margin account as security for a loan from the NASD Dealer in the amount of
the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt
of such shares to forward the Exercise Price directly to the Company; or (i) any
combination of the foregoing methods of payment or any other consideration or
method of payment as shall be permitted by applicable corporate law.
5.4 TERM AND TERMINATION OF OPTIONS. The term and provisions for
termination of each Option shall be as fixed by the Administrator, but no Option
may be exercisable more than ten (10) years after the date it is granted.
5.5 VESTING AND EXERCISE OF OPTIONS. Each Option shall vest and become
exercisable in one or more installments at such time or times and subject to
such conditions, including without limitation the achievement of specified
performance goals or objectives, as shall be determined by the Administrator.
5.6 NONTRANSFERABILITY OF OPTIONS. Options shall not be transferable by
an Optionee or a transferee of an Optionee except (i) by will or the laws of
descent and distribution; or (ii) with the prior written consent of the Company,
which consent may be withheld by the Company in the Company's sole discretion.
5.7 RIGHTS AS STOCKHOLDER. An Optionee or permitted transferee of an
Option shall have no rights or privileges as a stockholder with respect to any
shares covered by an Option until such Option has been duly exercised and
certificates representing shares purchased upon such exercise have been issued
to such person.
5.8 RESTRICTIONS ON UNDERLYING SHARES OF COMMON STOCK. Shares of Common
Stock issued pursuant to the exercise of an Option may be sold, assigned,
transferred, pledged and otherwise encumbered or disposed of, except as
specifically provided in the Option Agreement.
ARTICLE 6.
RIGHTS TO PURCHASE
6.1 NATURE OF RIGHT TO PURCHASE AND PURCHASE PRICE. A Right to Purchase
granted to an Offeree entitles the Offeree to purchase, for a Purchase Price
determined by the Administrator, shares of Common Stock subject to such terms,
restrictions and conditions as the Administrator may determine at the time of
grant ("Restricted Stock"). Such conditions may include, but are not limited to,
continued employment or the achievement of specified performance goals or
objectives. The
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Purchase Price per share of Common Stock covered by each Right to Purchase shall
be determined by the Administrator.
6.2 ACCEPTANCE OF RIGHT TO PURCHASE. An Offeree shall have no rights
with respect to the Restricted Stock subject to a Right to Purchase unless the
Offeree shall have accepted the Right to Purchase within ten (10) days (or such
longer or shorter period as the Administrator may specify) following the grant
of the Right to Purchase by making payment of the full Purchase Price to the
Company in the manner set forth in Section 6.3 hereof and by executing and
delivering to the Company a Stock Purchase Agreement. Each Stock Purchase
Agreement shall be in such form, and shall set forth the Purchase Price and such
other terms, conditions and restrictions of the Restricted Stock, not
inconsistent with the provisions of this Plan, as the Administrator shall, from
time to time, deem desirable. Each Stock Purchase Agreement may be different
from each other Stock Purchase Agreement.
6.3 PAYMENT OF PURCHASE PRICE. Subject to any legal restrictions,
payment of the Purchase Price upon acceptance of a Right to Purchase Restricted
Stock may be made, in the discretion of the Administrator, by: (a) cash; (b)
check; (c) the surrender of shares of Common Stock owned by the Offeree that
have been held by the Offeree for at least six (6) months, which surrendered
shares shall be valued at Fair Market Value as of the date of such exercise; (d)
the Offeree's promissory note in a form and on terms acceptable to the
Administrator; (e) the cancellation of indebtedness of the Company to the
Offeree; (f) the waiver of compensation due or accrued to the Offeree for
services rendered; or (g) any combination of the foregoing methods of payment or
any other consideration or method of payment as shall be permitted by applicable
corporate law.
6.4 RIGHTS AS A STOCKHOLDER. Upon complying with the provisions of
Section 6.2 hereof, an Offeree shall have the rights of a stockholder with
respect to the Restricted Stock purchased pursuant to the Right to Purchase,
including voting and dividend rights, subject to the terms, restrictions and
conditions as are set forth in the Stock Purchase Agreement. Unless the
Administrator shall determine otherwise, certificates evidencing shares of
Restricted Stock shall remain in the possession of the Company until such shares
have vested in accordance with the terms of the Stock Purchase Agreement.
6.5 RESTRICTIONS AND REPURCHASE RIGHT. Vested Shares of Restricted Stock
may be sold, assigned, transferred, pledged and otherwise encumbered or disposed
of, except as specifically provided in the Stock Purchase Agreement. In the
event of termination of a Participant's employment, service as a director of the
Company or Service Provider status for any reason whatsoever (including death or
disability), the Stock Purchase Agreement may provide, in the discretion of the
Administrator, that the Company shall have the right, exercisable at the
discretion of the Administrator, to repurchase, at the original Purchase Price,
any shares of Restricted Stock which have not vested as of the date of
termination.
6.6 VESTING OF RESTRICTED STOCK. The Stock Purchase Agreement shall
specify, if applicable as determined by the Administrator in its discretion, the
date or dates, the performance goals or objectives which must be achieved, and
any other conditions on which the Restricted Stock may vest.
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6.7 DIVIDENDS. If payment for shares of Restricted Stock is made by
promissory note, any cash dividends paid with respect to the Restricted Stock
may be applied, in the discretion of the Administrator, to repayment of such
note.
6.8 NONASSIGNABILITY OF RIGHTS. Rights to Purchase shall not be
transferable by a Participant or a transferee of a Participant except (i) by
will or the laws of descent and distribution; or (ii) with the prior written
consent of the Company, which consent may be withheld by the Company in the
Company's sole discretion.
ARTICLE 7.
ADMINISTRATION OF THE PLAN
7.1 ADMINISTRATOR. Authority to control and manage the operation and
administration of the Plan shall be vested in the Board, which may delegate such
responsibilities in whole or in part to a committee consisting of two (2) or
more members of the Board (the "Committee"). Members of the Committee may be
appointed from time to time by, and shall serve at the pleasure of, the Board.
As used herein, the term "Administrator" means the Board or, with respect to any
matter as to which responsibility has been delegated to the Committee, the term
Administrator shall mean the Committee.
7.2 POWERS OF THE ADMINISTRATOR. In addition to any other powers or
authority conferred upon the Administrator elsewhere in the Plan or by law, the
Administrator shall have full power and authority: (a) to determine the persons
to whom, and the time or times at which, Options shall be granted and Rights to
Purchase shall be offered, the number of shares to be represented by each Option
and Right to Purchase and the consideration to be received by the Company upon
the exercise thereof; (b) to interpret the Plan; (c) to create, amend or rescind
rules and regulations relating to the Plan; (d) to determine the terms,
conditions and restrictions contained in, and the form of, Option Agreements and
Stock Purchase Agreements; (e) to determine the identity or capacity of any
persons who may be entitled to exercise a Participant's rights under any Option
or Right to Purchase under the Plan; (f) to correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Option Agreement
or Stock Purchase Agreement; (g) to accelerate the vesting of any Option or
release or waive any repurchase rights of the Company with respect to Restricted
Stock; (h) to extend the exercise date of any Option or acceptance date of any
Right to Purchase; (i) to provide for rights of first refusal and/or repurchase
rights; (j) to amend outstanding Option Agreements and Stock Purchase Agreements
to provide for, among other things, any change or modification which the
Administrator could have provided for upon the grant of an Option or Right to
Purchase or in furtherance of the powers provided for herein; and (k) to make
all other determinations necessary or advisable for the administration of the
Plan, but only to the extent not contrary to the express provisions of the Plan.
Any action, decision, interpretation or determination made in good faith by the
Administrator in the exercise of its authority conferred upon it under the Plan
shall be final and binding on the Company and all Participants.
7.3 LIMITATION ON LIABILITY. No employee of the Company or member of the
Board or Committee shall be subject to any liability with respect to duties
under the Plan unless the person acts fraudulently or in bad faith. To the
extent permitted by law, the Company shall indemnify each member of the Board or
Committee, and any employee of the Company with duties under the Plan,
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who was or is a party, or is threatened to be made a party, to any threatened,
pending or completed proceeding, whether civil, criminal, administrative or
investigative, by reason of such person's conduct in the performance of duties
under the Plan.
ARTICLE 8.
CHANGE IN CONTROL
8.1 CHANGE IN CONTROL. In order to preserve a Participant's rights in
the event of a Change in Control of the Company, (i) the time period relating to
the exercise or realization of all outstanding Options, Rights to Purchase and
Restricted Stock shall automatically accelerate immediately prior to the
consummation of such Change in Control, and (ii) with respect to Options and
Rights to Purchase, the Administrator in its discretion may, at any time an
Option or Right to Purchase is granted, or at any time thereafter, take one or
more of the following actions: (A) provide for the purchase or exchange of each
Option or Right to Purchase for an amount of cash or other property having a
value equal to the difference, or spread, between (x) the value of the cash or
other property that the Participant would have received pursuant to such Change
in Control transaction in exchange for the shares issuable upon exercise of the
Option or Right to Purchase had the Option or Right to Purchase been exercised
immediately prior to such Change in Control transaction and (y) the Exercise
Price of such Option or the Purchase Price under such Right to Purchase, plus,
in each case, any required tax withholdings, (B) adjust the terms of the Options
and Rights to Purchase in a manner determined by the Administrator to reflect
the Change in Control, (C) cause the Options and Rights to Purchase to be
assumed, or new rights substituted therefor, by another entity, through the
continuance of the Plan and the assumption of outstanding Options and Rights to
Purchase, or the substitution for such Options and Rights to Purchase of new
options and new rights to purchase of comparable value covering shares of a
successor corporation, with appropriate adjustments as to the number and kind of
shares and Exercise Prices, in which event the Plan and such Options and Rights
to Purchase, or the new options and rights to purchase substituted therefor,
shall continue in the manner and under the terms so provided, or (D) make such
other provision as the Administrator may consider equitable. If the
Administrator does not take any of the forgoing actions, all Options and Rights
to Purchase shall terminate upon the consummation of the Change in Control and
the Administrator shall cause written notice of the proposed transaction to be
given to all Participants not less than thirty (30) days prior to the
anticipated effective date of the proposed transaction.
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ARTICLE 9.
AMENDMENT AND TERMINATION OF THE PLAN
9.1 AMENDMENTS. The Board may from time to time alter, amend, suspend or
terminate the Plan in such respects as the Board may deem advisable. No such
alteration, amendment, suspension or termination shall be made which shall
substantially affect or impair the rights of any Participant under an
outstanding Option Agreement or Stock Purchase Agreement without such
Participant's consent. The Board may alter or amend the Plan to comply with
requirements under the Code relating to Options which give Optionees more
favorable tax treatment than that applicable to Options granted under this Plan
as of the date of its adoption, or to comply with provisions under applicable
securities laws, including without limitation, Rule 16b-3 under the Securities
Exchange Act of 1934, as amended. Upon any such alteration or amendment, any
outstanding Option granted hereunder may, if the Administrator so determines and
if permitted by applicable law, be subject to the more favorable tax treatment
afforded to an Optionee pursuant to such terms and conditions.
9.2 PLAN TERMINATION. Unless the Plan shall theretofore have been
terminated, the Plan shall terminate on the tenth (10th) anniversary of the
Effective Date and no Options or Rights to Purchase may be granted under the
Plan thereafter, but Option Agreements, Stock Purchase Agreements and Rights to
Purchase then outstanding shall continue in effect in accordance with their
respective terms.
ARTICLE 10.
TAX WITHHOLDING
10.1 WITHHOLDING. The Company shall have the power to withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
any applicable Federal, state, and local tax withholding requirements with
respect to any Options exercised or Restricted Stock issued under the Plan. To
the extent permissible under applicable tax, securities and other laws, the
Administrator may, in its sole discretion and upon such terms and conditions as
it may deem appropriate, permit a Participant to satisfy his or her obligation
to pay any such tax, in whole or in part, up to an amount determined on the
basis of the highest marginal tax rate applicable to such Participant, by (a)
directing the Company to apply shares of Common Stock to which the Participant
is entitled as a result of the exercise of an Option or as a result of the
purchase of or lapse of restrictions on Restricted Stock or (b) delivering to
the Company shares of Common Stock owned by the Participant. The shares of
Common Stock so applied or delivered in satisfaction of the Participant's tax
withholding obligation shall be valued at their Fair Market Value as of the date
of measurement of the amount of income subject to withholding.
ARTICLE 11.
MISCELLANEOUS
11.1 BENEFITS NOT ALIENABLE. Other than as provided above, benefits
under the Plan may not be assigned or alienated, whether voluntarily or
involuntarily. Any unauthorized attempt at assignment, transfer, pledge or other
disposition shall be without effect.
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11.2 NO ENLARGEMENT OF EMPLOYEE RIGHTS. This Plan is strictly a
voluntary undertaking on the part of the Company and shall not be deemed to
constitute a contract between the Company and any Participant to be
consideration for, or an inducement to, or a condition of, the employment of any
Participant. Nothing contained in the Plan shall be deemed to give the right to
any Participant to be retained as an employee of the Company or any Affiliated
Company or to limit the right of the Company or any Affiliated Company to
discharge any Participant at any time.
11.3 APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Stock pursuant to Option Agreements and Stock Purchase
Agreements, except as otherwise provided herein, will be used for general
corporate purposes.
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