EXHIBIT 10.2
2004 EQUITY INCENTIVE PLAN
OF
ADEZA BIOMEDICAL CORPORATION
1. PURPOSE OF THIS PLAN
The purpose of this 2004 Equity Incentive Plan is to enhance the long-term
stockholder value of Adeza Biomedical Corporation by offering opportunities to
eligible individuals to participate in the growth in value of the equity of
Adeza Biomedical Corporation
2. DEFINITIONS AND RULES OF INTERPRETATION
2.1 DEFINITIONS.
This Plan uses the following defined terms:
(a) "ADMINISTRATOR" means the Board or the Committee, or any
officer or employee of the Company to whom the Board or the Committee delegates
authority to administer this Plan.
(b) "AFFILIATE" means a "parent" or "subsidiary" (as each is
defined in Section 424 of the Code) of the Company and any other entity that the
Board or Committee designates as an "Affiliate" for purposes of this Plan.
(c) "APPLICABLE LAW" means any and all laws of whatever
jurisdiction, within or without the United States, and the rules of any stock
exchange or quotation system on which Shares are listed or quoted, applicable to
the taking or refraining from taking of any action under this Plan, including
the administration of this Plan and the issuance or transfer of Awards or Award
Shares.
(d) "AWARD" means a Stock Award (e.g. restricted stock unit
award), SAR, Cash Award, or Option granted in accordance with the terms of this
Plan.
(e) "AWARD AGREEMENT" means the document evidencing the grant of
an Award.
(f) "AWARD SHARES" means Shares covered by an outstanding Award or
purchased under an Award.
(g) "AWARDEE" means: (i) a person to whom an Award has been
granted, including a holder of a Substitute Award, (ii) a person to whom an
Award has been transferred in accordance with all applicable requirements of
Sections 6.5, 7(h), and 17.
(h) "BOARD" means the Board of Directors of the Company.
(i) "CASH AWARD" means the right to receive cash as described in
Section 8.3.
(j) "CAUSE" shall mean: (i) an Awardee's gross negligence or
willful failure substantially to perform his or her duties and responsibilities
to the Company or deliberate violation of a Company policy; (ii) an Awardee's
commission of any act of fraud, embezzlement, dishonesty or any other willful
misconduct that has caused or is reasonably expected to result in material
injury to the Company; (iii) unauthorized use or disclosure by an Awardee of any
proprietary information or trade secrets of the Company or any other party to
whom an Awardee owes an obligation of nondisclosure as a result of his or her
relationship with the Company; or (iv) an Awardee 's willful breach of any of
his or her obligations under any written agreement or covenant with the Company.
The determination as to whether an Awardee is being terminated for Cause shall
be made in good faith by the Company and shall be final and binding on the
Awardee .
(j) "CHANGE IN CONTROL" means any transaction or event that the
Board specifies as a Change in Control under Section 10.4.
(k) "CODE" means the Internal Revenue Code of 1986.
(l) "COMMITTEE" means a committee composed of Company Directors
appointed in accordance with the Company's charter documents and Section 4.
(m) "COMPANY" means Adeza Biomedical Corporation, a Delaware
corporation.
(n) "COMPANY DIRECTOR" means a member of the Board.
(o) "CONSULTANT" means an individual who, or an employee of any
entity that, provides bona fide services to the Company or an Affiliate not in
connection with the offer or sale of securities in a capital-raising
transaction, but who is not an Employee.
(p) "CORPORATE TRANSACTION" means any transaction or event
described in Section 10.3.
(q) "DIRECTOR" means a member of the Board of Directors of the
Company or an Affiliate.
(r) "DIVESTITURE" means any transaction or event that the Board
specifies as a Divestiture under Section 10.5.
(s) "DOMESTIC RELATIONS ORDER" means a "domestic relations order"
as defined in, and otherwise meeting the requirements of, Section 414(p) of the
Code, except that reference to a "plan" in that definition shall be to this
Plan.
(t) "EFFECTIVE DATE" means the first date of the sale by the
Company of shares of its capital stock in an initial public offering pursuant to
a registration statement on Form S-1 filed with the SEC.
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(u) "EMPLOYEE" means a regular employee of the Company or an
Affiliate, including an officer or Director, who is treated as an employee in
the personnel records of the Company or an Affiliate, but not individuals who
are classified by the Company or an Affiliate as: (i) leased from or otherwise
employed by a third party, (ii) independent contractors, or (iii) intermittent
or temporary workers. The Company's or an Affiliate's classification of an
individual as an "Employee" (or as not an "Employee") for purposes of this Plan
shall not be altered retroactively even if that classification is changed
retroactively for another purpose as a result of an audit, litigation or
otherwise. An Awardee shall not cease to be an Employee due to transfers between
locations of the Company, or between the Company and an Affiliate, or to any
successor to the Company or an Affiliate that assumes the Awardee's Options
under Section 10. Neither service as a Director nor receipt of a director's fee
shall be sufficient to make a Director an "Employee."
(v) "EXCHANGE ACT" means the Securities Exchange Act of 1934.
(w) "EXECUTIVE" means, if the Company has any class of any equity
security registered under Section 12 of the Exchange Act, an individual who is
subject to Section 16 of the Exchange Act or who is a "covered employee" under
Section 162(m) of the Code, in either case because of the individual's
relationship with the Company or an Affiliate. If the Company does not have any
class of any equity security registered under Section 12 of the Exchange Act,
"Executive" means any (i) Director, (ii) officer elected or appointed by the
Board, or (iii) beneficial owner of more than 10% of any class of the Company's
equity securities.
(x) "EXPIRATION DATE" means, with respect to an Award, the date
stated in the Award Agreement as the expiration date of the Award or, if no such
date is stated in the Award Agreement, then the last day of the maximum exercise
period for the Award, disregarding the effect of an Awardee's Termination or any
other event that would shorten that period.
(y) "FAIR MARKET VALUE" means the value of Shares as determined
under Section 18.2.
(z) "GRANT DATE" means the date the Administrator approves the
grant of an Award. However, if the Administrator specifies that an Award's Grant
Date is a future date or the date on which a condition is satisfied, the Grant
Date for such Award is that future date or the date that the condition is
satisfied.
(aa) "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option under Section 422 of the Code and designated as an
Incentive Stock Option in the Award Agreement for that Option.
(bb) "NONSTATUTORY OPTION" means any Option other than an Incentive
Stock Option.
(cc) "NON-EMPLOYEE DIRECTOR" means any person who is a member of
the Board but is not an Employee of the Company or any Affiliate of the Company
and has not been an Employee of the Company or any Affiliate of the Company at
any time during the preceding
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twelve months. Service as a Director does not in itself constitute employment
for purposes of this definition.
(dd) "OBJECTIVELY DETERMINABLE PERFORMANCE CONDITION" shall mean a
performance condition (i) that is established (A) at the time an Award is
granted or (B) no later than the earlier of (1) 90 days after the beginning of
the period of service to which it relates, or (2) before the elapse of 25% of
the period of service to which it relates, (ii) that is uncertain of achievement
at the time it is established, and (iii) the achievement of which is
determinable by a third party with knowledge of the relevant facts. Examples of
measures that may be used in Objectively Determinable Performance Conditions
include net order dollars, net profit dollars, net profit growth, net revenue
dollars, revenue growth, individual performance, earnings per share, return on
assets, return on equity, and other financial objectives, objective customer
satisfaction indicators and efficiency measures, each with respect to the
Company and/or an Affiliate or individual business unit.
(ee) "OFFICER" means an officer of the Company as defined in Rule
16a-1 adopted under the Exchange Act.
(ff) "OPTION" means a right to purchase Shares of the Company
granted under this Plan.
(gg) "OPTION PRICE" means the price payable under an Option for
Shares, not including any amount payable in respect of withholding or other
taxes.
(hh) "OPTION SHARES" means Shares covered by an outstanding Option
or purchased under an Option.
(ii) "PLAN" means this 2004 Equity Incentive Plan of Adeza
Biomedical Corporation.
(jj) "PRIOR PLAN" means the Company's 1995 Stock Plan.
(kk) "PURCHASE PRICE" means the price payable under a Stock Award
for Shares, not including any amount payable in respect of withholding or other
taxes.
(ll) "RULE 16B-3" means Rule 16b-3 adopted under Section 16(b) of
the Exchange Act.
(mm) "SAR" OR "STOCK APPRECIATION RIGHT" means a right to receive
cash based on a change in the Fair Market Value of a specific number of Shares
pursuant to an Award Agreement, as described in Section 8.1.
(nn) "SECURITIES ACT" means the Securities Act of 1933.
(oo) "SHARE" means a share of the common stock of the Company or
other securities substituted for the common stock under Section 10.
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(pp) "STOCK AWARD" means an offer by the Company to sell shares
subject to certain restrictions pursuant to the Award Agreement as described in
Section 8.2 or, as determined by the Committee, a notional account representing
the right to be paid an amount based on Shares.
(qq) "SUBSTITUTE AWARD" means a Substitute Option, Substitute SAR
or Substitute Stock Award granted in accordance with the terms of this Plan.
(rr) "SUBSTITUTE OPTION" means an Option granted in substitution
for, or upon the conversion of, an option granted by another entity to purchase
equity securities in the granting entity.
(ss) "SUBSTITUTE SAR" means a SAR granted in substitution for, or
upon the conversion of, a stock appreciation right granted by another entity
with respect to equity securities in the granting entity.
(tt) "SUBSTITUTE STOCK AWARD" means a Stock Award granted in
substitution for, or upon the conversion of, a stock award granted by another
entity to purchase equity securities in the granting entity.
(uu) "TERMINATION" means that the Awardee has ceased to be, with or
without any cause or reason, an Employee, Director or Consultant. However,
unless so determined by the Administrator, or otherwise provided in this Plan,
"Termination" shall not include a change in status from an Employee, Consultant
or Director to another such status. An event that causes an Affiliate to cease
being an Affiliate shall be treated as the "Termination" of that Affiliate's
Employees, Directors, and Consultants.
2.2 RULES OF INTERPRETATION.
Any reference to a "Section," without more, is to a Section of this Plan.
Captions and titles are used for convenience in this Plan and shall not, by
themselves, determine the meaning of this Plan. Except when otherwise indicated
by the context, the singular includes the plural and vice versa. Any reference
to a statute is also a reference to the applicable rules and regulations adopted
under that statute. Any reference to a statute, rule or regulation, or to a
section of a statute, rule or regulation, is a reference to that statute, rule,
regulation, or section as amended from time to time, both before and after the
Effective Date and including any successor provisions.
3. SHARES SUBJECT TO THIS PLAN; TERM OF THIS PLAN
3.1 NUMBER OF AWARD SHARES.
The Shares issuable under this Plan shall be authorized but unissued or
reacquired Shares, including Shares repurchased by the Company on the open
market. The number of Shares initially reserved for issuance over the term of
this Plan shall be 2,500,000 increased by (i) the number of Shares available for
issuance, as of the Effective Date, under the Prior Plan as last approved by the
Company's stockholders, including the Shares subject to outstanding options
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under the Prior Plans, plus (ii) those Shares issued under the Prior Plans that
are forfeited or repurchased by the Company or that are issuable upon exercise
of options granted pursuant to the Prior Plan that expire or become
unexercisable for any reason without having been exercised in full after the
Effective Date, plus (iii) those Shares that are restored pursuant to the
decision of the Board or Committee pursuant to Section 6.4(a) to deliver only
such Shares as are necessary to award the net Share appreciation. The maximum
number of Shares shall be cumulatively increased on the first January 1 after
the Effective Date and each January 1 thereafter for 9 more years, by a number
of Shares equal to the lesser of (a) three percent (3%) of the number of Shares
issued and outstanding on the immediately preceding December 31, (b) 700,000
Shares, and (c) a number of Shares set by the Board. Except as required by
applicable law, the number of Shares reserved for issuance under this Plan shall
not be reduced until the earlier of the date such Shares are vested pursuant to
the terms of the applicable Award or the actual date of delivery of the Shares
to the Awardee. Also, if an Award later terminates or expires without having
been exercised in full, the maximum number of Shares that may be issued under
this Plan shall be increased by the number of Shares that were covered by, but
not purchased under, that Award. By contrast, the repurchase of Shares by the
Company shall not increase the maximum number of Shares that may be issued under
this Plan.
3.2 SOURCE OF SHARES.
Award Shares may be: (a) Shares that have never been issued, (b) Shares
that have been issued but are no longer outstanding, or (c) Shares that are
outstanding and are acquired to discharge the Company's obligation to deliver
Award Shares.
3.3 TERM OF THIS PLAN.
(a) This Plan shall be effective on, and Awards may be granted
under this Plan on and after, the earlier of the date on which the Plan has been
adopted by the Board or approved by the Company's stockholders.
(b) Subject to the provisions of Section 14, Awards may be granted
under this Plan for a period of ten years from the earlier of the date on which
the Board approves this Plan and the date the Company's stockholders approve
this Plan. Accordingly, Awards may not be granted under this Plan after the
earlier of those dates.
4. ADMINISTRATION
4.1 GENERAL.
(a) The Board shall have ultimate responsibility for administering
this Plan. The Board may delegate certain of its responsibilities to a
Committee, which shall consist of at least two members of the Board. The Board
or the Committee may further delegate its responsibilities to any Employee of
the Company or any Affiliate. Where this Plan specifies that an action is to be
taken or a determination made by the Board, only the Board may take that action
or make that determination. Where this Plan specifies that an action is to be
taken or a determination made by the Committee, only the Committee may take that
action or make that determination. Where this Plan references the
"Administrator," the action may be taken or
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determination made by the Board, the Committee, or other Administrator. However,
only the Board or the Committee may approve grants of Awards to Executives, and
an Administrator other than the Board or the Committee may grant Awards only
within the guidelines established by the Board or Committee. Moreover, all
actions and determinations by any Administrator are subject to the provisions of
this Plan.
(b) So long as the Company has registered and outstanding a class
of equity securities under Section 12 of the Exchange Act, the Committee shall
consist of Company Directors who are "Non-Employee Directors" as defined in Rule
16b-3 and, after the expiration of any transition period permitted by Treasury
Regulations Section 1.162-27(h)(3), who are "outside directors" as defined in
Section 162(m) of the Code.
4.2 AUTHORITY OF THE BOARD OR THE COMMITTEE.
Subject to the other provisions of this Plan, the Board or the Committee
shall have the authority to:
(a) grant Awards, including Substitute Awards;
(b) determine the Fair Market Value of Shares;
(c) determine the Option Price and the Purchase Price of Awards;
(d) select the Awardees;
(e) determine the times Awards are granted;
(f) determine the number of Shares subject to each Award;
(g) determine the methods of payment that may be used to purchase
Award Shares;
(h) determine the methods of payment that may be used to satisfy
withholding tax obligations;
(i) determine the other terms of each Award, including but not
limited to the time or times at which Awards may be exercised, whether and under
what conditions an Award is assignable, and whether an Option is a Nonstatutory
Option or an Incentive Stock Option;
(j) modify or amend any Award;
(k) authorize any person to sign any Award Agreement or other
document related to this Plan on behalf of the Company;
(l) determine the form of any Award Agreement or other document
related to this Plan, and whether that document, including signatures, may be in
electronic form;
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(m) interpret this Plan and any Award Agreement or document
related to this Plan;
(n) correct any defect, remedy any omission, or reconcile any
inconsistency in this Plan, any Award Agreement or any other document related to
this Plan;
(o) adopt, amend, and revoke rules and regulations under this
Plan, including rules and regulations relating to sub-plans and Plan addenda;
(p) adopt, amend, and revoke special rules and procedures which
may be inconsistent with the terms of this Plan, set forth (if the Administrator
so chooses) in sub-plans regarding (for example) the operation and
administration of this Plan and the terms of Awards, if and to the extent
necessary or useful to accommodate non-U.S. Applicable Laws and practices as
they apply to Awards and Award Shares held by, or granted or issued to, persons
working or resident outside of the United States or employed by Affiliates
incorporated outside the United States;
(q) determine whether a transaction or event should be treated as
a Change in Control, a Divestiture or neither;
(r) determine the effect of a Corporate Transaction and, if the
Board determines that a transaction or event should be treated as a Change in
Control or a Divestiture, then the effect of that Change in Control or
Divestiture; and
(s) make all other determinations the Administrator deems
necessary or advisable for the administration of this Plan.
4.3 SCOPE OF DISCRETION.
Subject to the provisions of this Section 4.3, on all matters for which
this Plan confers the authority, right or power on the Board, the Committee, or
other Administrator to make decisions, that body may make those decisions in its
sole and absolute discretion. Those decisions will be final, binding and
conclusive. In making its decisions, the Board, Committee or other Administrator
need not treat all persons eligible to receive Awards, all Awardees, all Awards
or all Award Shares the same way. Notwithstanding anything herein to the
contrary, and except as provided in Section 14.3, the discretion of the Board,
Committee or other Administrator is subject to the specific provisions and
specific limitations of this Plan, as well as all rights conferred on specific
Awardees by Award Agreements and other agreements.
5. PERSONS ELIGIBLE TO RECEIVE AWARDS
5.1 ELIGIBLE INDIVIDUALS.
Awards (including Substitute Awards) may be granted to, and only to,
Employees, Directors and Consultants, including to prospective Employees,
Directors and Consultants conditioned on the beginning of their service for the
Company or an Affiliate. However, Incentive Stock Options may only be granted to
Employees, as provided in Section 7(g).
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5.2 Section 162(m) Limitation.
(a) OPTIONS AND SARS. Subject to the provisions of this Section
5.2, for so long as the Company is a "publicly held corporation" within the
meaning of Section 162(m) of the Code: (i) no Employee may be granted one or
more SARs and Options within any fiscal year of the Company under this Plan to
purchase more than 2,500,000 Shares under Options or to receive compensation
calculated with reference to more than that number of Shares under SARs, subject
to adjustment pursuant to Section 10, (ii) Options and SARs may be granted to an
Executive only by the Committee (and, notwithstanding anything to the contrary
in Section 4.1(a), not by the Board). If an Option or SAR is cancelled without
being exercised or of the Option Price of an Option is reduced, that cancelled
or repriced Option or SAR shall continue to be counted against the limit on
Awards that my be granted to any individual under this Section 5.2.
(b) CASH AWARDS AND STOCK AWARDS. Any Cash Award or Stock Award
intended as "qualified performance-based compensation" within the meaning of
Section 162(m) of the Code must vest or become exercisable contingent on the
achievement of one or more Objectively Determinable Performance Conditions. The
Committee shall have the discretion to determine the time and manner of
compliance with Section 162(m) of the Code.
6. TERMS AND CONDITIONS OF OPTIONS
The following rules apply to all Options:
6.1 PRICE.
Except as specifically provided herein or as otherwise determined by the
Administrator, a Nonstatutory Option shall have an Option Price that is not less
than 85% of the Fair Market Value of the Shares on the Grant Date. No Option
intended as "qualified incentive-based compensation" within the meaning of
Section 162(m) of the Code may have an Option Price less than 100% of the Fair
Market Value of the Shares on the Grant Date. In no event will the Option Price
of any Option be less than the par value of the Shares issuable under the Option
if that is required by Applicable Law. The Option Price of an Incentive Stock
Option shall be subject to Section 7(f).
6.2 TERM.
No Option shall be exercisable after its Expiration Date. No Option may
have an Expiration Date that is more than ten years after its Grant Date.
Additional provisions regarding the term of Incentive Stock Options are provided
in Sections 7(a) and 7(e).
6.3 VESTING.
Options shall be exercisable: (a) on the Grant Date, or (b) in accordance
with a schedule related to the Grant Date, the date the Optionee's directorship,
employment or consultancy begins, or a different date specified in the Option
Agreement. Additional provisions regarding the vesting of Incentive Stock
Options are provided in Section 7(c). No Option granted to an
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individual who is subject to the overtime pay provisions of the Fair Labor
Standards Act may be exercised before the expiration of six months after the
Grant Date.
6.4 FORM AND METHOD OF PAYMENT.
(a) The Board or Committee shall determine the acceptable form and
method of payment for exercising an Option.
(b) Acceptable forms of payment for all Option Shares are cash,
check or wire transfer, denominated in U.S. dollars except as specified by the
Administrator for non-U.S. Employees or non-U.S. sub-plans.
(c) In addition, the Administrator may permit payment to be made
by any of the following methods:
(i) other Shares, or the designation of other Shares, which
(A) are "mature" shares for purposes of avoiding variable accounting treatment
under generally accepted accounting principles (generally mature shares are
those that have been owned by the Optionee for more than six months on the date
of surrender), and (B) have a Fair Market Value on the date of surrender equal
to the Option Price of the Shares as to which the Option is being exercised;
(ii) provided that a public market exists for the Shares,
consideration received by the Company under a procedure under which a licensed
broker-dealer advances funds on behalf of an Optionee or sells Option Shares on
behalf of an Optionee (a "CASHLESS EXERCISE PROCEDURE"), provided that if the
Company extends or arranges for the extension of credit to an Optionee under any
Cashless Exercise Procedure, no Officer or Director may participate in that
Cashless Exercise Procedure;
(iii) cancellation of any debt owed by the Company or any
Affiliate to the Optionee by the Company including without limitation waiver of
compensation due or accrued for services previously rendered to the Company; and
(iv) any combination of the methods of payment permitted by
any paragraph of this Section 6.4.
(d) The Administrator may also permit any other form or method of
payment for Option Shares permitted by Applicable Law.
6.5 NONASSIGNABILITY OF OPTIONS.
Except as determined by the Administrator, no Option shall be assignable
or otherwise transferable by the Optionee except by will or by the laws of
descent and distribution. However, Options may be transferred and exercised in
accordance with a Domestic Relations Order and may be exercised by a guardian or
conservator appointed to act for the Optionee. Incentive Stock Options may only
be assigned in compliance with Section 7(h).
6.6 SUBSTITUTE OPTIONS.
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The Board may cause the Company to grant Substitute Options in connection
with the acquisition by the Company or an Affiliate of equity securities of any
entity (including by merger, tender offer, or other similar transaction) or of
all or a portion of the assets of any entity. Any such substitution shall be
effective on the effective date of the acquisition. Substitute Options may be
Nonstatutory Options or Incentive Stock Options. Unless and to the extent
specified otherwise by the Board, Substitute Options shall have the same terms
and conditions as the options they replace, except that (subject to the
provisions of Section 10) Substitute Options shall be Options to purchase Shares
rather than equity securities of the granting entity and shall have an Option
Price determined by the Board.
6.7 REPRICINGS.
In furtherance of, and not in limitation of the provisions of Section 10,
Options may be repriced, replaced or regranted through cancellation or
modification without stockholder approval.
7. INCENTIVE STOCK OPTIONS.
The following rules apply only to Incentive Stock Options and only to the
extent these rules are more restrictive than the rules that would otherwise
apply under this Plan. With the consent of the Optionee, or where this Plan
provides that an action may be taken notwithstanding any other provision of this
Plan, the Administrator may deviate from the requirements of this Section,
notwithstanding that any Incentive Stock Option modified by the Administrator
will thereafter be treated as a Nonstatutory Option.
(a) The Expiration Date of an Incentive Stock Option shall not be
later than ten years from its Grant Date, with the result that no Incentive
Stock Option may be exercised after the expiration of ten years from its Grant
Date.
(b) Any Incentive Stock Option granted to a Ten Percent
Stockholder, must have an Expiration Date that is not later than five years from
its Grant Date, with the result that no such Option may be exercised after the
expiration of five years from the Grant Date. A "TEN PERCENT STOCKHOLDER" is any
person who, directly or by attribution under Section 424(d) of the Code, owns
stock possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or of any Affiliate on the Grant Date.
(c) No Incentive Stock Option may be granted more than ten years
from the date this Plan was approved by the Board.
(d) Options intended to be incentive stock options under Section
422 of the Code that are granted to any single Optionee under all incentive
stock option plans of the Company and its Affiliates, including incentive stock
options granted under this Plan, may not vest at a rate of more than $100,000 in
Fair Market Value of stock (measured on the grant dates of the options) during
any calendar year. For this purpose, an option vests with respect to a given
share of stock the first time its holder may purchase that share,
notwithstanding any right of the Company to repurchase that share. Unless the
administrator of that option plan specifies otherwise in the related agreement
governing the option, this vesting limitation shall be applied
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by, to the extent necessary to satisfy this $ 100,000 rule, treating certain
stock options that were intended to be incentive stock options under Section 422
of the Code as Nonstatutory Options. The stock options or portions of stock
options to be reclassified as Nonstatutory Options are those with the highest
option prices, whether granted under this Plan or any other equity compensation
plan of the Company or any Affiliate that permits that treatment. This Section
7(c) shall not cause an Incentive Stock Option to vest before its original
vesting date or cause an Incentive Stock Option that has already vested to cease
to be vested.
(e) In order for an Incentive Stock Option to be exercised for any
form of payment other than those described in Section 6.4(b), that right must be
stated at the time of grant in the Option Agreement relating to that Incentive
Stock Option.
(f) The Option Price of an Incentive Stock Option shall never be
less than the Fair Market Value of the Shares at the Grant Date. The Option
Price for the Shares covered by an Incentive Stock Option granted to a Ten
Percent Stockholder shall never be less than 110% of the Fair Market Value of
the Shares at the Grant Date.
(g) Incentive Stock Options may be granted only to Employees. If
an Optionee changes status from an Employee to a Consultant, that Optionee's
Incentive Stock Options become Nonstatutory Options if not exercised within the
time period described in Section 7(i) (determined by treating that change in
status as a Termination solely for purposes of this Section 7(g)).
(h) No rights under an Incentive Stock Option may be transferred
by the Optionee, other than by will or the laws of descent and distribution.
During the life of the Optionee, an Incentive Stock Option may be exercised only
by the Optionee. The Company's compliance with a Domestic Relations Order, or
the exercise of an Incentive Stock Option by a guardian or conservator appointed
to act for the Optionee, shall not violate this Section 7(h).
(i) An Incentive Stock Option shall be treated as a Nonstatutory
Option if it remains exercisable after, and is not exercised within, the
three-month period beginning with the Optionee's Termination for any reason
other than the Optionee's death or disability (as defined in Section 22(e) of
the Code). In the case of Termination due to death, an Incentive Stock Option
shall continue to be treated as an Incentive Stock Option if it remains
exercisable after, and is not exercised within, the three month period after the
Optionee's Termination provided it is exercised before the Expiration Date. In
the case of Termination due to disability, an Incentive Stock Option shall be
treated as a Nonstatutory Option if it remains exercisable after, and is not
exercised within, one year after the Optionee's Termination.
(j) An Incentive Stock Option may only be modified by the Board.
8. STOCK APPRECIATION RIGHTS, STOCK AWARDS AND CASH AWARDS
8.1 STOCK APPRECIATION RIGHTS.
The following rules apply to SARs:
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(a) GENERAL. SARs may be granted either alone, in addition to, or
in tandem with other Awards granted under this Plan. The Administrator may grant
SARs to eligible participants subject to terms and conditions not inconsistent
with this Plan and determined by the Administrator. The specific terms and
conditions applicable to the Awardee shall be provided for in the Award
Agreement. SARs shall be exercisable, in whole or in part, at such times as the
Administrator shall specify in the Award Agreement. The grant or vesting of a
SAR may be made contingent on the achievement of Objectively Determinable
Performance Conditions.
(b) EXERCISE OF SARS. Upon the exercise of an SAR, in whole or in
part, an Awardee shall be entitled to a payment in an amount equal to the excess
of the Fair Market Value of a fixed number of Shares covered by the exercised
portion of the SAR on the date of exercise, over the Fair Market Value of the
Shares covered by the exercised portion of the SAR on the Grant Date. The amount
due to the Awardee upon the exercise of a SAR shall be paid in cash, Shares or a
combination thereof, over the period or periods specified in the Award
Agreement. An Award Agreement may place limits on the amount that may be paid
over any specified period or periods upon the exercise of a SAR, on an aggregate
basis or as to any Awardee. A SAR shall be considered exercised when the Company
receives written notice of exercise in accordance with the terms of the Award
Agreement from the person entitled to exercise the SAR. If a SAR has been
granted in tandem with an Option, upon the exercise of the SAR, the number of
shares that may be purchased pursuant to the Option shall be reduced by the
number of shares with respect to which the SAR is exercised.
(c) NONASSIGNABILITY OF SARS. Except as determined by the
Administrator, no SAR shall be assignable or otherwise transferable by the
Awardee except by will or by the laws of descent and distribution.
Notwithstanding anything herein to the contrary, SARs may be transferred and
exercised in accordance with a Domestic Relations Order.
(d) SUBSTITUTE SARS. The Board may cause the Company to grant
Substitute SARs in connection with the acquisition by the Company or an
Affiliate of equity securities of any entity (including by merger) or all or a
portion of the assets of any entity. Any such substitution shall be effective on
the effective date of the acquisition. Unless and to the extent specified
otherwise by the Board, Substitute SARs shall have the same terms and conditions
as the options they replace, except that (subject to the provisions of Section
9) Substitute SARs shall be exercisable with respect to the Fair Market Value of
Shares rather than equity securities of the granting entity and shall be on
terms that, as determined by the Board in its sole and absolute discretion,
properly reflects the substitution.
(e) REPRICINGS. A SAR may not be repriced, replaced or regranted,
through cancellation or modification without stockholder approval.
8.2 STOCK AWARDS.
The following rules apply to all Stock Awards:
(a) GENERAL. The specific terms and conditions of a Stock Award
applicable to the Awardee shall be provided for in the Award Agreement. The
Award Agreement shall state the number of Shares that the Awardee shall be
entitled to receive or purchase, the terms and
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conditions on which the Shares shall vest, the price to be paid, whether Shares
are to be delivered at the time of grant or at some deferred date specified in
the Award Agreement (e.g. a restricted stock unit award agreement), whether the
Award is payable solely in Shares, cash or either and, if applicable, the time
within which the Awardee must accept such offer. The offer shall be accepted by
execution of the Award Agreement. The Administrator may require that all Shares
subject to a right of repurchase or risk of forfeiture be held in escrow until
such repurchase right or risk of forfeiture lapses. The grant or vesting of a
Stock Award may be made contingent on the achievement of Objectively
Determinable Performance Conditions.
(b) RIGHT OF REPURCHASE. If so provided in the Award Agreement,
Award Shares acquired pursuant to a Stock Award may be subject to repurchase by
the Company or an Affiliate if not vested in accordance with the Award
Agreement.
(c) FORM OF PAYMENT. The Administrator shall determine the
acceptable form and method of payment for exercising a Stock Award. Acceptable
forms of payment for all Award Shares are cash, check or wire transfer,
denominated in U.S. dollars except as specified by the Administrator for
non-U.S. sub-plans. In addition, the Administrator may permit payment to be made
by any of the methods permitted with respect to the exercise of Options pursuant
to Section 6.4.
(d) NONASSIGNABILITY OF STOCK AWARDS. Except as determined by the
Administrator, no Stock Award shall be assignable or otherwise transferable by
the Awardee except by will or by the laws of descent and distribution.
Notwithstanding anything to the contrary herein, Stock Awards may be transferred
and exercised in accordance with a Domestic Relations Order.
(e) SUBSTITUTE STOCK AWARD. The Board may cause the Company to
grant Substitute Stock Awards in connection with the acquisition by the Company
or an Affiliate of equity securities of any entity (including by merger) or all
or a portion of the assets of any entity. Unless and to the extent specified
otherwise by the Board, Substitute Stock Awards shall have the same terms and
conditions as the stock awards they replace, except that (subject to the
provisions of Section 10) Substitute Stock Awards shall be Stock Awards to
purchase Shares rather than equity securities of the granting entity and shall
have a Purchase Price that, as determined by the Board in its sole and absolute
discretion, properly reflects the substitution. Any such Substituted Stock Award
shall be effective on the effective date of the acquisition.
8.3 CASH AWARDS.
The following rules apply to all Cash Awards:
Cash Awards may be granted either alone, in addition to, or in tandem with
other Awards granted under this Plan. After the Administrator determines that it
will offer a Cash Award, it shall advise the Awardee, by means of an Award
Agreement, of the terms, conditions and restrictions related to the Cash Award.
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9. EXERCISE OF AWARDS
9.1 IN GENERAL.
An Award shall be exercisable in accordance with this Plan and the Award
Agreement under which it is granted.
9.2 TIME OF EXERCISE.
Options and Stock Awards shall be considered exercised when the Company
receives: (a) written notice of exercise from the person entitled to exercise
the Option or Stock Award, (b) full payment, or provision for payment, in a form
and method approved by the Administrator, for the Shares for which the Option or
Stock Award is being exercised, and (c) with respect to Nonstatutory Options,
payment, or provision for payment, in a form approved by the Administrator, of
all applicable withholding taxes due upon exercise. An Award may not be
exercised for a fraction of a Share. SARs shall be considered exercised when the
Company receives written notice of the exercise from the person entitled to
exercise the SAR.
9.3 ISSUANCE OF AWARD SHARES.
The Company shall issue Award Shares in the name of the person properly
exercising the Award. If the Awardee is that person and so requests, the Award
Shares shall be issued in the name of the Awardee and the Awardee's spouse. The
Company shall endeavor to issue Award Shares promptly after an Award is
exercised or after the Grant Date of a Stock Award, as applicable. Until Award
Shares are actually issued, as evidenced by the appropriate entry on the stock
register of the Company or its transfer agent, the Awardee will not have the
rights of a stockholder with respect to those Award Shares, even though the
Awardee has completed all the steps necessary to exercise the Award. No
adjustment shall be made for any dividend, distribution, or other right for
which the record date precedes the date the Award Shares are issued, except as
provided in Section 10.
9.4 TERMINATION
(a) IN GENERAL. Except as provided in an Award Agreement or in
writing by the Administrator, including in an Award Agreement, and as otherwise
provided in Sections 9.4(b), (c), (d) and (e) after an Awardee's Termination,
the Awardee's Awards shall be exercisable to the extent (but only to the extent)
they are vested on the date of that Termination and only during the ninety (90)
days after the Termination, but in no event after the Expiration Date. To the
extent the Awardee does not exercise an Award within the time specified for
exercise, the Award shall automatically terminate.
(b) LEAVES OF ABSENCE. Unless otherwise provided in the Award
Agreement, no Award may be exercised more than three months after the beginning
of a leave of absence, other than a personal or medical leave approved by an
authorized representative of the Company with employment guaranteed upon return.
Awards shall not continue to vest during a leave of absence, unless otherwise
determined by the Administrator with respect to an approved personal or medical
leave with employment guaranteed upon return.
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(c) DEATH OR DISABILITY. Unless otherwise provided by the
Administrator, if an Awardee's Termination is due to death or disability (as
determined by the Administrator with respect to all Awards other than Incentive
Stock Options and as defined by Section 22(e) of the Code with respect to
Incentive Stock Options), all Awards of that Awardee to the extent exercisable
at the date of that Termination may be exercised for one year after that
Termination, but in no event after the Expiration Date. In the case of
Termination due to death, an Award may be exercised as provided in Section 17.
In the case of Termination due to disability, if a guardian or conservator has
been appointed to act for the Awardee and been granted this authority as part of
that appointment, that guardian or conservator may exercise the Award on behalf
of the Awardee. Death or disability occurring after an Awardee's Termination
shall not cause the Termination to be treated as having occurred due to death or
disability. To the extent an Award is not so exercised within the time specified
for its exercise, the Award shall automatically terminate.
(d) DIVESTITURE. If an Awardee's Termination is due to a
Divestiture, the Board may take any one or more of the actions described in
Section 10.3 or 10.4 with respect to the Awardee's Awards.
(e) ADMINISTRATOR DISCRETION. Notwithstanding the provisions of
Section 9.4 (a)-(e), the Plan Administrator shall have complete discretion,
exercisable either at the time an Award is granted or at any time while the
Award remains outstanding, to:
(i) Extend the period of time for which the Award is to
remain exercisable, following the Awardee's Termination, from the limited
exercise period otherwise in effect for that Award to such greater period of
time as the Administrator shall deem appropriate, but in no event beyond the
Expiration Date; and/or
(ii) Permit the Award to be exercised, during the applicable
post-Termination exercise period, not only with respect to the number of vested
Shares for which such Award may be exercisable at the time of the Awardee's
Termination but also with respect to one or more additional installments in
which the Awardee would have vested had the Awardee not been subject to
Termination.
(f) CONSULTING OR EMPLOYMENT RELATIONSHIP. Nothing in this Plan or
in any Award Agreement, and no Award or the fact that Award Shares remain
subject to repurchase rights, shall: (A) interfere with or limit the right of
the Company or any Affiliate to terminate the employment or consultancy of any
Awardee at any time, whether with or without cause or reason, and with or
without the payment of severance or any other compensation or payment, or (B)
interfere with the application of any provision in any of the Company's or any
Affiliate's charter documents or Applicable Law relating to the election,
appointment, term of office, or removal of a Director.
10. CERTAIN TRANSACTIONS AND EVENTS
10.1 IN GENERAL.
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Except as provided in this Section 10, no change in the capital structure
of the Company, merger, sale or other disposition of assets or a subsidiary,
change in control, issuance by the Company of shares of any class of securities
or securities convertible into shares of any class of securities, exchange or
conversion of securities, or other transaction or event shall require or be the
occasion for any adjustments of the type described in this Section 10.
Additional provisions with respect to the foregoing transactions are set forth
in Section 14.3.
10.2 CHANGES IN CAPITAL STRUCTURE.
In the event of any stock split, reverse stock split, recapitalization,
combination or reclassification of stock, stock dividend, spin-off, or similar
change to the capital structure of the Company (not including a Corporate
Transaction or Change in Control), the Board shall make whatever adjustments it
concludes are appropriate to: (a) the number and type of Awards that may be
granted under this Plan, (b) the number and type of Options that may be granted
to any individual under this Plan, (c) the limitation set forth in Section
5.2(a); (d) the terms of any SAR, (e) the Purchase Price of any Stock Award, (f)
the Option Price and number and class of securities issuable under each
outstanding Option, and (g) the repurchase price of any securities substituted
for Award Shares that are subject to repurchase rights. The specific adjustments
shall be determined by the Board. Unless the Board specifies otherwise, any
securities issuable as a result of any such adjustment shall be rounded down to
the next lower whole security. The Board need not adopt the same rules for each
Award or each Awardee.
10.3 CORPORATE TRANSACTIONS.
Except for grants to Non-Employee Directors pursuant to Section 11 herein,
in the event of (a) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders of
the Company or their relative stock holdings and the Awards granted under this
Plan are assumed, converted or replaced by the successor corporation, which
assumption shall be binding on all Participants), (b) a merger in which the
Company is the surviving corporation but after which the stockholders of the
Company immediately prior to such merger (other than any stockholder that
merges, or which owns or controls another corporation that merges, with the
Company in such merger) cease to own their shares or other equity interest in
the Company, (c) the sale of all or substantially all of the assets of the
Company, or (d) the acquisition, sale, or transfer of more than 50% of the
outstanding shares of the Company by tender offer or similar transaction (each,
a "CORPORATE TRANSACTION"), any or all outstanding Awards may be assumed,
converted or replaced by the successor corporation (if any), which assumption,
conversion or replacement shall be binding on all participants under this Plan.
In the alternative, the successor corporation may substitute equivalent Awards
or provide substantially similar consideration to participants as was provided
to stockholders (after taking into account the existing provisions of the
Awards). The successor corporation may also issue, in place of outstanding
Shares held by the participants, substantially similar shares or other property
subject to repurchase restrictions no less favorable to the participant. In the
event such successor corporation (if any) does not assume or substitute Awards,
as provided above, pursuant to a transaction described in this Subsection 10.3,
the vesting with respect to such Awards shall fully and immediately accelerate
or the repurchase rights of the Company shall fully and
17
immediately terminate, as the case may be, so that the Awards may be exercised
or the repurchase rights shall terminate before, or otherwise in connection with
the closing or completion of the Corporate Transaction or event, but then
terminate. Notwithstanding anything in this Plan to the contrary, the Committee
may, in its sole discretion, provide that the vesting of any or all Award Shares
subject to vesting or right of repurchase shall accelerate or lapse, as the case
may be, upon a transaction described in this Section 10.3. If the Committee
exercises such discretion with respect to Options, such Options shall become
exercisable in full prior to the consummation of such event at such time and on
such conditions as the Committee determines, and if such Options are not
exercised prior to the consummation of the Corporate Transaction, they shall
terminate at such time as determined by the Committee. Subject to any greater
rights granted to participants under the foregoing provisions of this Section
10.3, in the event of the occurrence of any Corporate Transaction, any
outstanding Awards shall be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, or sale of assets.
Notwithstanding anything in this Plan to the contrary, in the event of an
Optionee's voluntary Termination of services following the relocation of the
Optionee's work site which has the effect of increasing the Optionee's then
current commute by more than 50 miles, within 12 months following the
consummation of a Corporate Transaction, the vesting of any Awards, assumed or
substituted in a Corporate Transaction, shall fully and immediately accelerate
or the repurchase rights of the Company shall fully and immediately terminate,
as the case may be, so that the Awards may be exercised or the repurchase rights
shall terminate as of the date of Termination. Such Awards shall be exercisable
for a period of three (3) months following termination.
10.4 CHANGES IN CONTROL.
The Board may also, but need not, specify that other transactions or
events constitute a "CHANGE IN CONTROL". The Board may do that either before or
after the transaction or event occurs. Examples of transactions or events that
the Board may treat as Changes of Control are: (a) any person or entity,
including a "group" as contemplated by Section 13(d)(3) of the Exchange Act,
acquires securities holding 30% or more of the total combined voting power or
value of the Company, or (b) as a result of or in connection with a contested
election of Company Directors, the persons who were Company Directors
immediately before the election cease to constitute a majority of the Board. In
connection with a Change in Control, notwithstanding any other provision of this
Plan, the Board may, but need not, take any one or more of the actions described
in Section 10.3. In addition, the Board may extend the date for the exercise of
Awards (but not beyond their original Expiration Date). The Board need not adopt
the same rules for each Award or each Awardee.
10.5 DIVESTITURE.
If the Company or an Affiliate sells or otherwise transfers equity
securities of an Affiliate to a person or entity other than the Company or an
Affiliate, or leases, exchanges or transfers all or any portion of its assets to
such a person or entity, then the Board may specify that such transaction or
event constitutes a "DIVESTITURE". In connection with a Divestiture,
notwithstanding any other provision of this Plan, the Board may, but need not,
take one or more
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of the actions described in Section 10.3 or 10.4 with respect to Awards of Award
Shares held by, for example, Employees, Directors or Consultants for whom that
transaction or event results in a Termination. The Board need not adopt the same
rules for each Award or Awardee.
10.6 DISSOLUTION.
If the Company adopts a plan of dissolution, the Board may cause Awards to
be fully vested and exercisable (but not after their Expiration Date) before the
dissolution is completed but contingent on its completion and may cause the
Company's repurchase rights on Award Shares to lapse upon completion of the
dissolution. The Board need not adopt the same rules for each Award or each
Awardee. Notwithstanding anything herein to the contrary, in the event of a
dissolution of the Company, to the extent not exercised before the earlier of
the completion of the dissolution or their Expiration Date, Awards shall
terminate immediately prior to the dissolution.
10.7 CUT-BACK TO PRESERVE BENEFITS.
If the Administrator determines that the net after-tax amount to be
realized by any Awardee, taking into account any accelerated vesting,
termination of repurchase rights, or cash payments to that Awardee in connection
with any transaction or event set forth in this Section 10 would be greater if
one or more of those steps were not taken or payments were not made with respect
to that Awardee's Awards or Award Shares, then, at the election of the Awardee,
to such extent, one or more of those steps shall not be taken and payments shall
not be made.
11. AUTOMATIC OPTION GRANTS TO NON-EMPLOYEE DIRECTORS
11.1 AUTOMATIC OPTION GRANTS TO NON-EMPLOYEE DIRECTORS
(a) GRANT DATES. Option grants to Non-Employee Directors shall be
made on the dates specified below:
(i) Each Non-Employee Director who is on the Board as of the
Effective Date of the Plan, or who is first elected or appointed to the Board at
any time after the Effective Date of the Plan, shall automatically be granted,
on the Effective Date of the Plan, or the date of such initial election or
appointment, as applicable, an Option to purchase 30,000 Shares (40,000 Shares
for the Non-Employee Director who serves as Chairman of the Board on the date of
grant) (the "INITIAL GRANT").
(ii) Commencing in 2005, on the date of each annual
stockholders meeting, each individual who is to continue to serve as a
Non-Employee Director shall automatically be granted an Option to purchase
10,000 Shares (15,000 Shares for the Non-Employee Director who serves as
Chairman of the Board on the date of grant) (the "ANNUAL GRANT"), provided,
however, that such individual has served as a Non-Employee Director for at least
six (6) months.
19
(b) EXERCISE PRICE.
(i) The Option Price shall be equal to one hundred percent
(100%) of the Fair Market Value of the Shares on the Option grant date. For
purposes of the Initial Grants made on the Effective Date of the Plan, the Fair
Market Value shall be the price per share at which shares of the Company's
Common Stock are initially offered for sale to the public by the Company's
underwriters in the initial public offering of the Company's Common Stock
pursuant to a registration statement filed on Form S-1 filed with the SEC.
(ii) The Option Price shall be payable in one or more of the
alternative forms authorized pursuant to Section 6.4. Except to the extent the
sale and remittance procedure specified thereunder is utilized, payment of the
Option Price must be made on the date of exercise.
(c) OPTION TERM. Each Option shall have a term of ten (10) years
measured from the Option grant date.
(d) EXERCISE AND VESTING OF OPTIONS. Except as otherwise
determined by the whole Board, the Shares underlying each Option granted
pursuant to Section 11.1 shall vest and be exercisable as set forth below.
(i) INITIAL GRANT. The Shares underlying each Option issued
pursuant to the Initial Grant shall vest and be exercisable as to 2.0833% of the
Shares at the end of each full succeeding month from the date of grant, rounded
down to the nearest whole Share, for so long as the Non-Employee Director
continuously remains a Director of, or a Consultant to, the Company.
(ii) ANNUAL GRANT. The Shares underlying each Option issued
pursuant to the Annual Grant shall vest and be exercisable as to 8.3333% of the
Shares at the end of each full succeeding month from the date of grant, rounded
down to the nearest whole Share, for so long as the Non-Employee Director
continuously remains a Director of, or a Consultant to, the Company.
(e) TERMINATION OF SERVICE. The following provisions shall govern
the exercise of any Options held by the Awardee at the time the Awardee ceases
to serve as a Non-Employee Director, Employee or Consultant:
(i) IN GENERAL. Except as otherwise provided in Section
10.3, after cessation of service (the "CESSATION DATE"), the Awardee's Options
shall be exercisable to the extent (but only to the extent) they are vested on
the Cessation Date and only during the three months after such Cessation Date,
but in no event after the Expiration Date. To the extent the Awardee does not
exercise an Option within the time specified for exercise, the Option shall
automatically terminate.
(ii) DEATH OR DISABILITY. If an Awardee's cessation of
service is due to death or disability (as determined by the Board), all Options
of that Awardee, to the extent exercisable upon such Cessation Date, may be
exercised for one year after the Cessation Date,
20
but in no event after the Expiration Date. In the case of a cessation of service
due to death, an Option may be exercised as provided in Section 16. In the case
of a cessation of service due to disability, if a guardian or conservator has
been appointed to act for the Awardee and been granted this authority as part of
that appointment, that guardian or conservator may exercise the Option on behalf
of the Awardee. Death or disability occurring after an Awardee's cessation of
service shall not cause the cessation of service to be treated as having
occurred due to death or disability. To the extent an Option is not so exercised
within the time specified for its exercise, the Option shall automatically
terminate.
(f) BOARD DISCRETION. The Awards under this Section 11.1 are not
intended as the exclusive Awards that may be made to Non-Employee Directors
under this Plan. The Board may, in its discretion, amend the Plan with respect
to the terms of the Awards herein, may add or substitute other types of Awards
or may temporarily or permanently suspend Awards hereunder, all without approval
of the Company's stockholders.
11.2 CERTAIN TRANSACTIONS AND EVENTS
(a) In the event of a Corporate Transaction while the Awardee
remains a Non-Employee Director, the Shares at the time subject to each
outstanding Option held by such Awardee pursuant to Section 11, but not
otherwise vested, shall automatically vest in full so that each such Option
shall, immediately prior to the effective date of the Corporate Transaction,
become exercisable for all the Shares as fully vested Shares and may be
exercised for any or all of those vested Shares. Immediately following the
consummation of the Corporate Transaction, each Option shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation (or
Affiliate thereof).
(b) In the event of a Change in Control while the Awardee remains
a Non-Employee Director, the Shares at the time subject to each outstanding
Option held by such Awardee pursuant to Section 11, but not otherwise vested,
shall automatically vest in full so that each such Option shall, immediately
prior to the effective date of the Change in Control, become exercisable for all
the Shares as fully vested Shares and may be exercised for any or all of those
vested Shares. Each such Option shall remain exercisable for such fully vested
Shares until the expiration or sooner termination of the Option term in
connection with a Change in Control.
(c) Each Option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Awardee in consummation of such Corporate Transaction had
the Option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the Option Price payable per share
under each outstanding Option, provided the aggregate Option Price payable for
such securities shall remain the same. To the extent the actual holders of the
Company's outstanding Common Stock receive cash consideration for their Common
Stock in consummation of the Corporate Transaction, the successor corporation
may, in connection with the assumption of the outstanding Options granted
pursuant to Section 11, 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 Corporate Transaction.
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(d) The grant of Options pursuant to Section 11 shall in no way
affect the right of the Company 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.
(e) The remaining terms of each Option granted pursuant to Section
11 shall, as applicable, be the same as terms in effect for Awards granted under
this Plan. Notwithstanding the foregoing, the provisions of Section 9.4 and
Section 10 shall not apply to Options granted pursuant to Section 11.
11.3 LIMITED TRANSFERABILITY OF OPTIONS.
Each Option granted pursuant to Section 11 may be assigned in whole or in
part during the Awardee's lifetime to one or more members of the Awardee's
family or to a trust established exclusively for one or more such family members
or to an entity in which the Awardee is majority owner or to the Awardee 's
former spouse, to the extent such assignment is in connection with the Awardee
's estate or financial plan or pursuant to a Domestic Relations Order. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the Option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
Option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Administrator may deem appropriate. The
Awardee may also designate one or more persons as the beneficiary or
beneficiaries of his or her outstanding Options under Section 11, and those
Options shall, in accordance with such designation, automatically be transferred
to such beneficiary or beneficiaries upon the Awardee 's death while holding
those Options. Such beneficiary or beneficiaries shall take the transferred
Options subject to all the terms and conditions of the applicable Award
Agreement evidencing each such transferred Option, including (without
limitation) the limited time period during which the Option may be exercised
following the Awardee 's death.
12. WITHHOLDING AND TAX REPORTING
12.1 TAX WITHHOLDING ALTERNATIVES.
(a) GENERAL. Whenever Award Shares are issued or become free of
restrictions, the Company may require the Awardee to remit to the Company an
amount sufficient to satisfy any applicable tax withholding requirement, whether
the related tax is imposed on the Awardee or the Company. The Company shall have
no obligation to deliver Award Shares or release Award Shares from an escrow or
permit a transfer of Award Shares until the Awardee has satisfied those tax
withholding obligations. Whenever payment in satisfaction of Awards is made in
cash, the payment will be reduced by an amount sufficient to satisfy all tax
withholding requirements.
(b) METHOD OF PAYMENT. The Awardee shall pay any required
withholding using the forms of consideration described in Section 6.4(b), except
that, in the discretion of the Administrator, the Company may also permit the
Awardee to use any of the forms of payment described in Section 6.4(c). The
Administrator, in its sole discretion, may also permit Award
22
Shares to be withheld to pay required withholding. If the Administrator permits
Award Shares to be withheld, the Fair Market Value of the Award Shares withheld,
as determined as of the date of withholding, shall not exceed the amount
determined by the applicable minimum statutory withholding rates.
12.2 REPORTING OF DISPOSITIONS.
Any holder of Option Shares acquired under an Incentive Stock Option shall
promptly notify the Administrator, following such procedures as the
Administrator may require, of the sale or other disposition of any of those
Option Shares if the disposition occurs during: (a) the longer of two years
after the Grant Date of the Incentive Stock Option and one year after the date
the Incentive Stock Option was exercised, or (b) such other period as the
Administrator has established.
13. COMPLIANCE WITH LAW
The grant of Awards and the issuance and subsequent transfer of Award
Shares shall be subject to compliance with all Applicable Law, including all
applicable securities laws. Awards may not be exercised, and Award Shares may
not be transferred, in violation of Applicable Law. Thus, for example, Awards
may not be exercised unless: (a) a registration statement under the Securities
Act is then in effect with respect to the related Award Shares, or (b) in the
opinion of legal counsel to the Company, those Award Shares may be issued in
accordance with an applicable exemption from the registration requirements of
the Securities Act and any other applicable securities laws. The failure or
inability of the Company to obtain from any regulatory body the authority
considered by the Company's legal counsel to be necessary or useful for the
lawful issuance of any Award Shares or their subsequent transfer shall relieve
the Company of any liability for failing to issue those Award Shares or
permitting their transfer. As a condition to the exercise of any Award or the
transfer of any Award Shares, the Company may require the Awardee to satisfy any
requirements or qualifications that may be necessary or appropriate to comply
with or evidence compliance with any Applicable Law.
14. AMENDMENT OR TERMINATION OF THIS PLAN OR OUTSTANDING AWARDS
14.1 AMENDMENT AND TERMINATION.
The Board may at any time amend, suspend, or terminate this Plan.
14.2 STOCKHOLDER APPROVAL.
The Company shall obtain the approval of the Company's stockholders for
any amendment to this Plan if stockholder approval is necessary or desirable to
comply with any Applicable Law or with the requirements applicable to the grant
of Awards intended to be Incentive Stock Options. The Board may also, but need
not, require that the Company's stockholders approve any other amendments to
this Plan.
14.3 EFFECT.
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No amendment, suspension, or termination of this Plan, and no modification
of any Award even in the absence of an amendment, suspension, or termination of
this Plan, shall impair any existing contractual rights of any Awardee unless
the affected Awardee consents to the amendment, suspension, termination, or
modification. Notwithstanding anything herein to the contrary, no such consent
shall be required if the Board determines, in its sole and absolute discretion,
that the amendment, suspension, termination, or modification: (a) is required or
advisable in order for the Company, this Plan or the Award to satisfy Applicable
Law, to meet the requirements of any accounting standard or to avoid any adverse
accounting treatment, or (b) in connection with any transaction or event
described in Section 10, is in the best interests of the Company or its
stockholders. The Board may, but need not, take the tax or accounting
consequences to affected Awardees into consideration in acting under the
preceding sentence. Those decisions shall be final, binding and conclusive.
Termination of this Plan shall not affect the Administrator's ability to
exercise the powers granted to it under this Plan with respect to Awards granted
before the termination of Award Shares issued under such Awards even if those
Award Shares are issued after the termination.
15. RESERVED RIGHTS
15.1 NONEXCLUSIVITY OF THIS PLAN.
This Plan shall not limit the power of the Company or any Affiliate to
adopt other incentive arrangements including, for example, the grant or issuance
of stock options, stock, or other equity-based rights under other plans.
15.2 UNFUNDED PLAN.
This Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Awardees, any such accounts will be used merely as a
convenience. The Company shall not be required to segregate any assets on
account of this Plan, the grant of Awards, or the issuance of Award Shares. The
Company and the Administrator shall not be deemed to be a trustee of stock or
cash to be awarded under this Plan. Any obligations of the Company to any
Awardee shall be based solely upon contracts entered into under this Plan, such
as Award Agreements. No such obligations shall be deemed to be secured by any
pledge or other encumbrance on any assets of the Company. Neither the Company
nor the Administrator shall be required to give any security or bond for the
performance of any such obligations.
16. SPECIAL ARRANGEMENTS REGARDING AWARD SHARES
16.1 ESCROW OF STOCK CERTIFICATES.
To enforce any restrictions on Award Shares, the Administrator may require
their holder to deposit the certificates representing Award Shares, with stock
powers or other transfer instruments approved by the Administrator endorsed in
blank, with the Company or an agent of the Company to hold in escrow until the
restrictions have lapsed or terminated. The Administrator may also cause a
legend or legends referencing the restrictions to be placed on the certificates.
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16.2 REPURCHASE RIGHTS.
(a) GENERAL. If a Stock Award is subject to vesting conditions,
the Company shall have the right, during the seven months after the Awardee's
Termination, to repurchase any or all of the Award Shares that were unvested as
of the date of that Termination. The repurchase price shall be determined by the
Administrator in accordance with this Section 16.2 which shall be either (i) the
Purchase Price for the Award Shares (minus the amount of any cash dividends paid
or payable with respect to the Award Shares for which the record date precedes
the repurchase) or (ii) the lower of (A) the Purchase Price for the Shares or
(B) the Fair Market Value of those Award Shares as of the date of the
Termination. The repurchase price shall be paid in cash. The Company may assign
this right of repurchase.
(b) PROCEDURE. The Company or its assignee may choose to give the
Awardee a written notice of exercise of its repurchase rights under this Section
16.2. However, the Company's failure to give such a notice shall not affect its
rights to repurchase Award Shares. The Company must, however, tender the
repurchase price during the period specified in this Section 16.2 for exercising
its repurchase rights in order to exercise such rights.
17. BENEFICIARIES
An Awardee may file a written designation of one or more beneficiaries who
are to receive the Awardee's rights under the Awardee's Awards after the
Awardee's death. An Awardee may change such a designation at any time by written
notice. If an Awardee designates a beneficiary, the beneficiary may exercise the
Awardee's Awards after the Awardee's death. If an Awardee dies when the Awardee
has no living beneficiary designated under this Plan, the Company shall allow
the executor or administrator of the Awardee's estate to exercise the Award or,
if there is none, the person entitled to exercise the Option under the Awardee's
will or the laws of descent and distribution. In any case, no Award may be
exercised after its Expiration Date.
18. MISCELLANEOUS
18.1 GOVERNING LAW.
This Plan, the Award Agreements and all other agreements entered into
under this Plan, and all actions taken under this Plan or in connection with
Awards or Award Shares, shall be governed by the laws of the State of Delaware.
18.2 DETERMINATION OF VALUE.
Fair Market Value shall be determined as follows:
(a) LISTED STOCK. If the Shares are traded on any established
stock exchange or quoted on a national market system, Fair Market Value shall be
the closing sales price for the Shares as quoted on that stock exchange or
system for the date the value is to be determined (the "VALUE DATE") as reported
in The Wall Street Journal or a similar publication. If no sales are reported as
having occurred on the Value Date, Fair Market Value shall be that closing sales
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price for the last preceding trading day on which sales of Shares are reported
as having occurred. If no sales are reported as having occurred during the five
trading days before the Value Date, Fair Market Value shall be the closing bid
for Shares on the Value Date. If Shares are listed on multiple exchanges or
systems, Fair Market Value shall be based on sales or bid prices on the primary
exchange or system on which Shares are traded or quoted.
(b) STOCK QUOTED BY SECURITIES DEALER. If Shares are regularly
quoted by a recognized securities dealer but selling prices are not reported on
any established stock exchange or quoted on a national market system, Fair
Market Value shall be the mean between the high bid and low asked prices on the
Value Date. If no prices are quoted for the Value Date, Fair Market Value shall
be the mean between the high bid and low asked prices on the last preceding
trading day on which any bid and asked prices were quoted.
(c) NO ESTABLISHED MARKET. If Shares are not traded on any
established stock exchange or quoted on a national market system and are not
quoted by a recognized securities dealer, the Administrator (following
guidelines established by the Board or Committee) will determine Fair Market
Value in good faith. The Administrator will consider the following factors, and
any others it considers significant, in determining Fair Market Value: (i) the
price at which other securities of the Company have been issued to purchasers
other than Employees, Directors, or Consultants, (ii) the Company's
stockholder's equity, prospective earning power, dividend-paying capacity, and
non-operating assets, if any, and (iii) any other relevant factors, including
the economic outlook for the Company and the Company's industry, the Company's
position in that industry, the Company's goodwill and other intellectual
property, and the values of securities of other businesses in the same industry.
18.3 RESERVATION OF SHARES.
During the term of this Plan, the Company shall at all times reserve and
keep available such number of Shares as are still issuable under this Plan.
18.4 ELECTRONIC COMMUNICATIONS.
Any Award Agreement, notice of exercise of an Award, or other document
required or permitted by this Plan may be delivered in writing or, to the extent
determined by the Administrator, electronically. Signatures may also be
electronic if permitted by the Administrator.
18.5 NOTICES.
Unless the Administrator specifies otherwise, any notice to the Company
under any Option Agreement or with respect to any Awards or Award Shares shall
be in writing (or, if so authorized by Section 18.4, communicated
electronically), shall be addressed to the Secretary of the Company, and shall
only be effective when received by the Secretary of the Company.
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