EXHIBIT 10.5
INVITROGEN CORPORATION 1997 STOCK OPTION PLAN
(AS AMENDED)
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Invitrogen Corporation 1997 Stock Option Plan
(the "PLAN") is hereby established effective as of May 28, 1997 (the "EFFECTIVE
DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the interests of the
Participating Company Group and its shareholders by providing an incentive to
attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.
1.3 TERM OF PLAN. The Plan shall continue in effect until the earlier of
its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all restrictions on
such shares under the terms of the Plan and the agreements evidencing Options
granted under the Plan have lapsed. However, all options shall be granted, if at
all, within ten (10) years from the earlier of the date the Plan is adopted by
the Board or the date the Plan is duly approved by the shareholders of the
Company.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company. If one
or more Committees have been appointed by the Board to administer the
Plan, "Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and
having,.such powers as shall be specified by the Board. Unless the
powers of the Committee have been specifically limited, the Committee
shall have all of the powers of the Board granted herein, including,
without limitation, the power to amend or terminate the Plan at any
time, subject to the terms of the Plan and any applicable limitations
imposed by law.
(d) "COMPANY" means Invitrogen Corporation, a California
corporation, or any successor corporation thereto.
(e) "CONSULTANT" means any person, including an advisor,
engaged by a Participating Company to render services other than as
an Employee or a Director.
(f) "DIRECTOR" means a member of the Board or of the board of
directors of any other Participating Company.
(g) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee)
in the records of a Participating Company, and, with respect to any
Incentive Stock Option granted to such person, who is an employee for
purposes of Section 422 of the Code; provided, however, that neither
service as a Director nor payment of a director's fee shall be
sufficient to constitute employment for purposes of the Plan.
(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(i) "FAIR MARKET VALUE" means, as of any date, the value of a
share of Stock or other property as determined by the Board, in its sole
discretion, or by the Company, in its sole discretion, if such
determination is expressly allocated to the Company herein, subject to
the following:
(i) If, on such date, there is a public market for the
Stock, the Fair Market Value of a share of Stock shall be the
closing sale price of a share of Stock (or the mean of the
closing bid and asked prices of a share of Stock if the Stock is
so quoted instead) as quoted on the Nasdaq National Market, the
Nasdaq Small-Cap Market or such other national or regional
securities exchange or market system constituting the primary
market for the Stock, as reported in the WALL STREET JOURNAL or
such other source as the Company deems reliable. If the relevant
date does not fall on a day on which the Stock has traded on
such securities exchange or market system, the date on which the
Fair Market Value shall be established shall be the last day on
which the Stock was so traded prior to the relevant date, or
such other appropriate day as shall be determined by the Board,
in its sole discretion.
(ii) If, on such date, there is no public market for the
Stock, the Fair Market Value of a share of Stock shall be as
determined by the Board without regard to any restriction other
than a restriction which, by its terms, will never lapse.
(j) "INCENTIVE STOCK OPTION" means an Option intended to be (as
set forth in the Option Agreement) and which qualifies as an incentive
stock option within the meaning of Section 422(b) of the Code.
(k) "INSIDER" means an officer or a Director of the Company or
any other person whose transactions in Stock are subject to Section 16
of the Exchange Act.
(l) "NONSTATUTORY STOCK OPTION" means an option not intended to
be (as set forth in the Option Agreement) or which does not qualify as
an Incentive Stock Option.
(m) "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and
conditions of the Plan. An Option may be either an Incentive Stock
Option or a Nonstatutory Stock Option.
(n) "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee setting forth the terms, conditions and
restrictions of the Option granted to the Optionee and any shares
acquired upon the exercise thereof.
(o) "OPTIONEE" means a person who has been granted one or more
Options.
(p) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(q) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation.
(r) "PARTICIPATING COMPANY GROUP" means, at any point in time,
all corporations collectively which are then Participating Companies.
(s) "RULE 16b-3" means Rule 16b-3 under the Exchange Act, as
amended from time to time, or any successor rule or regulation.
(t) "STOCK" means the common stock of the Company, as adjusted
from time to time in accordance with Section 4.2.
(u) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of
the Code.
(v) "TEN PERCENT OWNER OPTIONEE" means an Optionee who, at the
time an Option is granted to the Optionee, owns stock possessing more
than ten percent (10%) of the total combined voting power of all classes
of stock of a Participating Company within the meaning of Section
422(b)(6) of the Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by the
Board. All questions of interpretation of the Plan or of any Option shall be
determined by the Board, and such determinations shall be final and binding upon
all persons having an interest in the Plan or such Option. Any officer of a
Participating Company shall have the authority to act on behalf of the company
with respect to any matter, right, obligation, determination or election which
is the responsibility of or which is allocated to the Company herein, provided
the officer has apparent authority with respect to such matter, right,
obligation, determination or election.
3.2 ADMINISTRATION WITH RESPECT TO INSIDERS. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.
3.3 POWERS OF THE BOARD. In addition to any other powers set forth in
the Plan and subject to the provisions of the Plan, the Board shall have the
full and final power and authority, in its sole discretion:
(a) to determine the persons to whom, and the time or times at
which, options shall be granted and the number of shares of Stock to be
subject to each Option;
(b) to designate options as Incentive Stock Options or
Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of Stock or
other property;
(d) to determine the terms, conditions and restrictions
applicable to each option (which need not be identical) and any shares
acquired upon the exercise thereof, including, without limitation, W the
exercise price of the Option, (ii) the method of payment for shares
purchased upon the exercise of the option, (iii) the method for
satisfaction of any tax withholding obligation arising in connection
with the Option or such shares, including by the withholding or delivery
of shares of stock, (iv) the timing, terms and conditions of the
exercisability of the option or the vesting of any shares acquired upon
the exercise thereof, (v) the time of the expiration of the Option, (vi)
the effect of the Optionee's termination of employment or service with
the Participating Company Group on any of the foregoing, and (vii) all
other terms, conditions and restrictions applicable to the Option or
such shares not inconsistent with the terms of the Plan;
(e) to approve one or more forms of Option Agreement;
(f) to amend, modify, extend, cancel, or renew, any Option or to
waive any restrictions or conditions applicable to any Option or any
shares acquired upon the exercise thereof; provided, however, that
without the approval of the Company's stockholders, the Board shall not
reprice, replace, regrant through cancellation, or regrant by lowering
the exercise price of any option and/or award previously granted under
the Plans;
(g) to accelerate, continue, extend or defer the exercisability
of any Option or the vesting of any shares acquired upon the exercise
thereof, including with respect to the period following an Optionee's
termination of employment or service with the Participating Company
Group;
(h) to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or
alternative versions of, the Plan, including, without limitation, as the
Board deems necessary or desirable to comply with the laws of, or to
accommodate the tax policy or custom of, foreign jurisdictions whose
citizens may be granted options;
(i) to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option Agreement and to make all other
determinations and take such other actions with respect to the Plan or
any Option as the Board may deem advisable to the extent consistent with
the Plan and applicable law; and
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(j) to delegate the power to grant Options to any Employee or
Consultant who is not a Director, Insider, or other officer of the
Company in an amount not to exceed options to purchase 25,000 shares of
Stock (subject to adjustment to reflect changes in capital structure
covered by Section 4.2 below); provided that any such grant shall be
made only in accordance with a Stock Option Program or other program,
plan, or procedure approved by the Board.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as provided
in Section 4.2, the maximum aggregate number of shares of stock that may be
issued under the Plan shall be thirteen million four hundred eighty-five
thousand, four hundred seventy-nine (13,485,479) shares (the "SHARE RESERVE"),
and shall consist of authorized and unissued or reacquired shares of Stock or
any combination thereof. Notwithstanding the foregoing, the Share Reserve,
determined at any time, shall be reduced by (a) the number of shares issued upon
the exercise of options under the Company's 1995 Stock Option Plan (1995 PLAN
OPTIONS), and (b) the number of shares remaining subject to 1995 Plan Options.
If an outstanding option for any reason expires or is terminated or canceled, or
if the shares of Stock acquired, subject to repurchase, upon the exercise of an
Option are repurchased by the Company, the shares of Stock allocable to the
unexercised portion of such Option or such repurchased shares of Stock shall
again be available for issuance under the Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number and class of shares subject
to the Plan and to any outstanding Options and in the exercise price per share
of any outstanding Options. If a majority of the shares which are of the same
class as the shares that are subject to outstanding options are exchanged for,
converted into, or otherwise become ,(whether or not pursuant to an Ownership
Change Event, as defined in Section 8.1) shares of another corporation (the "NEW
SHARES"), the Board may unilaterally amend the outstanding options to provide
that such Options are exercisable for New Shares. In the event of any such
amendment, the number of shares subject to, and the exercise price per share of,
the outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Board, in its sole discretion. Notwithstanding the foregoing,
any fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded up or down to the nearest whole number, as determined by the
Board, and in no event may the exercise price of any option be decreased to an
amount less than the par value, if any, of the stock subject to the option. The
adjustments determined by the Board pursuant to this Section 4.2 shall be final,
binding and conclusive.
4.3 INDIVIDUAL SHARE LIMIT. The maximum aggregate number of shares of
Stock with respect to which Options may be granted during any calendar year to
any Employee may not exceed 500,000 shares or, in the case of the calendar year
during which an Employee first commences employment with any Participating
Company, 1,000,000 shares (subject to adjustment to reflect changes in capital
structure covered by Section 4.2 above).
5. ELIGIBILITY AND OPTION LIMITATIONS.
5.1 PERSONS ELIGIBLE FOR OPTIONS. Options may be granted only to
Employees, Consultants, and Directors. For purposes of the foregoing sentence,
"Employees," "Consultants," and "Directors" shall include prospective Employees,
prospective Consultants and prospective Directors to whom options are granted in
connection with written offers of employment or other service relationship with
the Participating Company Group. Eligible persons may be granted more than one
(1) Option.
5.2 OPTION GRANT RESTRICTIONS. Any person who is not an Employee on the
effective date of the grant of an Option to such person may be granted only a
Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee shall be deemed
granted effective on the date such person commences service as an Employee with
a Participating Company, with an exercise price determined as of such date in
accordance with Section 6.1.
5.3 FAIR MARKET VALUE LIMITATION. To the extent that options designated
as Incentive Stock options (granted under all stock option plans of the
Participating Company Group, including the Plan) become exercisable by an
Optionee for the first time during any calendar year for stock having an
aggregate Fair Market Value greater than One Hundred Thousand Dollars
($100,000), the portion of such options which exceeds such amount shall be
treated as Nonstatutory Stock Options. For purposes of this Section 5.3, options
designated as Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of stock shall be
determined as of the time the option with respect to such stock is granted. If
the Code is amended to provide for a different limitation from that set forth in
this Section 5.3, such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive
Stock option in part and as a Nonstatutory Stock option in part by reason of the
limitation set forth in this Section 5.3, the Optionee may designate which
portion of such Option the Optionee is exercising. In the absence of such
designation, the Optionee shall be deemed to have exercised the Incentive Stock
Option portion of the option first. Separate certificates representing each such
portion shall be issued upon the exercise of the Option.
6. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by option
Agreements specifying the number of shares of Stock covered thereby, in such
form as the Board shall from time to time establish. No Option or purported
option shall be a valid and binding obligation of the Company unless evidenced
by a fully executed Option Agreement. Option Agreements may incorporate all or
any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:
6.1 EXERCISE PRICE. The exercise price for each Option shall be
established in the sole discretion of the Board; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
option, (b) the exercise price per share for a Nonstatutory Stock option shall
be not less than eighty-five percent (85%) of the Fair market Value of a share
of Stock on the effective date of grant of the option, and (c) no Option granted
to a Ten Percent Owner Optionee shall have an exercise price per share less than
one hundred ten percent (110%) of the Fair Market Value of a share of Stock on
the effective date of grant of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than the minimum exercise price set forth
above if such option is granted pursuant to an assumption or substitution for
another option in a manner qualifying under the provisions of Section 424(a) of
the Code.
6.2 EXERCISE PERIOD. Options shall be exercisable at such time or times,
or upon such event or events, and subject to such terms, conditions, performance
criteria, and restrictions as shall be determined by the Board and set forth in
the Option Agreement evidencing such option; provided, however, that (a) no
option shall be exercisable after the expiration of ten (10) years after the
effective date of grant of such option, (b) no Incentive Stock Option granted to
a Ten Percent Owner Optionee shall be exercisable after the expiration of five
(5) years after the effective date of grant of such option, and (c) no option
granted to a prospective Employee, prospective Consultant or prospective
Director may become exercisable prior to the date on which such person commences
service with a Participating Company.
6.3 PAYMENT OF EXERCISE PRICE.
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(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the exercise price for the number of shares
of Stock being purchased pursuant to any Option shall be made (i) in
cash, by check, or cash equivalent, (ii) by tender to the Company of
shares of Stock owned by the Optionee having a Fair Market Value (as
determined by the Company without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company) not
less than the exercise price, (iii) by the assignment of the proceeds of
a sale or loan with respect to some or all of the shares being acquired
upon the exercise of the option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated
from time to time by the Board of Governors of the Federal Reserve
System) (a "CASHLESS EXERCISE"), (iv) by the Optionee's promissory note
in a form approved by the Company, (v) by such other consideration as
may be approved by the Board from time to time to the extent permitted
by applicable law, or (vi) by any combination thereof. The Board may at
any time or from time to time, by adoption of or by amendment to the
standard forms of Option Agreement described in Section 7, or by other
means,grant options which do not permit all of the foregoing forms of
consideration to be used in payment of the exercise price or which
otherwise restrict one or more forms of consideration.
(b) TENDER OF STOCK. Notwithstanding the foregoing, an Option may
not be exercised by tender to the Company of shares of Stock to the
extent such tender of would constitute a violation of the provisions of
any law, regulation or agreement restricting the redemption of the
Company's stock. Unless otherwise provided by the Board, an Option may
not be exercised by tender to the Company of shares of Stock unless such
shares either have been owned by the Optionee for more than six (6)
months or were not acquired, directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for
the exercise of options by means of a Cashless Exercise.
(d) PAYMENT BY PROMISSORY NOTE. No promissory note shall be
permitted if the exercise of an option using a promissory note would be
a violation of any law. Any permitted promissory note shall be on such
terms as the Board shall determine at the time the Option is granted.
The Board shall have the authority to permit or require the Optionee to
secure any promissory note used to exercise an Option with the shares of
Stock acquired upon the exercise of the Option or with other collateral
acceptable to the Company. Unless otherwise provided by the Board, if
the Company at any time is subject to the regulations promulgated by the
Board of Governors of the Federal Reserve System or any other
governmental entity affecting the extension of credit in connection with
the Company's securities, any promissory note shall comply with such
applicable regulations, and the Optionee shall pay the unpaid principal
and accrued interest, if any, to the extent necessary to comply with
such applicable regulations.
6.4 TAX WITHHOLDING. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value, as determined by the Company, equal to all
or any part of the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to such
option or the shares acquired upon the exercise thereof. Alternatively or in
addition, in its sole discretion, the Company shall have the right to require
the Optionee, through payroll withholding, cash payment or otherwise, including
by means of a Cashless Exercise, to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon the exercise thereof. The Company
shall have no obligation to deliver shares of Stock or to release shares of
Stock from an escrow established pursuant to the Option Agreement until the
Participating Company Group's tax withholding obligations have been satisfied by
the Optionee.
6.5 NONEMPLOYEE DIRECTOR OPTIONS
(a) AUTOMATIC GRANT. Subject to the execution by a Nonemployee
Director of an appropriate Option Agreement, Nonemployee Director
Options shall be granted automatically and without further action of the
Board, as follows:
(i) INITIAL OPTION. Each person who first becomes a
Nonemployee Director on or after the date of this Amendment
shall be granted on the date such person first becomes a
Nonemployee Director a Nonemployee Director Option to purchase
ten thousand (10,000) shares of Stock (an "INITIAL OPTION");
provided, however, that an Initial Option shall not be granted
to a Director who previously did not qualify as a Nonemployee
Director but subsequently becomes a Nonemployee Director as a
result of the termination of his or her status as an Employee.
(ii) ANNUAL OPTION. Each Nonemployee Director (including
any Director who previously did not qualify as a Nonemployee
Director but who subsequently becomes a Nonemployee Director)
shall be granted on the date immediately following each annual
meeting of the stockholders of the Company which occurs on or
after the date of this Amendment (an "ANNUAL MEETING") a
Nonemployee Director Option to purchase ten thousand (10,000)
shares of Stock (an "ANNUAL OPTION"); provided, however, that a
Nonemployee Director granted an Initial Option less than six
months prior to date of an Annual Meeting shall not be granted
an Annual Option pursuant to this Section on the date
immediately following the same Annual Meeting.
(iii) RIGHT TO DECLINE NONEMPLOYEE DIRECTOR OPTION.
Notwithstanding the foregoing, any person may elect not to
receive a Nonemployee Director option by delivering written
notice of such election to the Board no later than the day prior
to the date such Nonemployee Director Option would otherwise be
granted. A person so declining a Nonemployee Director option
shall receive no payment or other consideration in lieu of such
declined Nonemployee Director Option. A person who has declined
a Nonemployee Director option may revoke such election by
delivering written notice of such revocation to the Board no
later than the day prior to the date such Nonemployee Director
Option would be granted pursuant to Section 6.5(a)(i) or
6.5(a)(ii), as the case may be.
(b) EXERCISE PRICE. The exercise price per share of Stock
subject to a Nonemployee Director option shall be the Fair Market Value
of a share of Stock on the date the Nonemployee Director Option is
granted.
(c) EXERCISE PERIOD. Each Nonemployee Director Option shall
terminate and cease to be exercisable on the date ten (10) years after
the date of grant of the Nonemployee Director Option unless earlier
terminated pursuant to the terms of the Plan or the Option Agreement.
(d) RIGHT TO EXERCISE NONEMPLOYEE DIRECTOR OPTIONS.
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(i) INITIAL OPTIONS. Except as otherwise provided in the
Option Agreement, each initial Option shall become vested and
exercisable cumulatively for 1/3 of the shares of Stock
initially subject to the option on each of the first three (3)
anniversaries of the date on which the initial Option was
granted, provided that the Optionee's Service has not terminated
prior to the relevant date.
(ii) ANNUAL OPTIONS. Except as otherwise provided in the
option Agreement, each Annual Option shall become fully vested
and exercisable on the first anniversary of the date of grant,
provided the Optionee's Service has not terminated prior to such
date.
(e) EFFECT OF TERMINATION OF SERVICE ON NONEMPLOYEE DIRECTOR
OPTIONS.
(i) OPTION EXERCISABILITY. Subject to earlier
termination of the Nonemployee Director Option as otherwise
provided herein, a Nonemployee Director Option shall be
exercisable after an Optionee's termination of Service as
follows:
(A) DISABILITY. If the Optionee's Service with
the Participating Company Group is terminated because of
the Disability of the Optionee, the Nonemployee Director
Option, to the extent unexercised and exercisable on the
date on which the Optionee's Service terminated, may be
exercised by the Optionee (or the Optionee's guardian or
legal representative) at any time prior to the
expiration of twelve (12) months after the date on which
the Optionee's Service terminated, but in any event no
later than the date of expiration of the Option
Expiration Date.
(B) DEATH. If the Optionee's Service with the
Participating Company Group is terminated because of the
death of the Optionee, the Nonemployee Director Option,
to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be
exercised by the optionee's legal representative or
other person who acquired the right to exercise the
Nonemployee Director option by reason of the Optionee's
death at any time prior to the expiration of twelve (12)
months after the date on which the Optionee's Service
terminated, but in any event no later than the Option
Expiration Date. The Optionee's Service shall be deemed
to have terminated on account of death if the Optionee
dies within six (6) months after the Optionee's
termination of Service.
(C) OTHER TERMINATION OF SERVICE. If the
Optionee's Service with the Participating Company Group
terminates for any reason, except Disability or death,
the Nonemployee Director Option, to the extent
unexercised and exercisable by the Optionee on the date
on which the Optionee's Service terminated, may be
exercised by the Optionee within six (6) months after
the date on which the Optionee's Service terminated, but
in any event no later than the Option Expiration Date.
(ii) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable
time periods set forth in section 6.5(e)(i) of shares acquired
upon the exercise of the Nonemployee Director Option would
subject the Optionee to suit under Section 16(b) of the Exchange
Act, the Nonemployee Director option shall remain exercisable
until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the
Optionee would no longer be subject to such suit, (ii) the one
hundred and ninetieth (190th) day after the Optionee's
termination of Service, and (iii) the Option Expiration Date.
7. STANDARD FORMS OF OPTION AGREEMENT.
7.1 INCENTIVE STOCK OPTIONS. Unless otherwise provided by the Board at
the time the Option is granted, an Option designated as an "Incentive Stock
option" shall comply with and be subject to the terms and conditions set forth
in the form of Incentive Stock option Agreement adopted by the Board
concurrently with its adoption of the Plan and as amended from time to time.
7.2 NONSTATUTORY STOCK OPTIONS. Unless otherwise provided by the Board
at the time the option is granted, an option designated as a "Nonstatutory Stock
Option" shall comply with and be subject to the terms and conditions set forth
in the form of Nonstatutory Stock Option Agreement adopted by the Board
concurrently with its adoption of the Plan and as amended from time to time.
7.3 STANDARD TERM OF OPTIONS. Except as otherwise provided in Section
6.2 or by the Board in the grant of an Option, any Option granted hereunder
shall have a term of ten (10) years from the effective date of grant of the
Option.
7.4 AUTHORITY TO VARY TERMS. The Board shall have the authority from
time to time to vary the terms of any of the standard forms of Option Agreement
described in this Section 7 either in connection with the grant or amendment of
an individual option or in connection with the authorization of a new standard
form or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Option Agreement are not
inconsistent with the terms of the Plan.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred
if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single
or series of related transactions by the shareholders of the
Company of more than fifty percent (50%) of the voting stock of
the Company;
(ii) a merger or consolidation in which the Company is a
party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership Change Event
or a series of related ownership Change Events (collectively, the
"TRANSACTION") wherein the shareholders of the Company immediately
before the Transaction do not retain immediately after the Transaction,
in substantially the same proportions as their ownership of shares of
the Company's voting stock immediately before the Transaction,
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direct or indirect beneficial ownership of more than fifty percent (50%)
of the total combined voting power of the outstanding voting stock of
the Company or the corporation or corporations to which the assets of
the Company were transferred (the "TRANSFEREE CORPORATION(S)"), as the
case may be. For purposes of the preceding sentence, indirect beneficial
ownership shall include, without limitation, an interest resulting from
ownership of the voting stock of one or more corporations which, as a
result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or
more subsidiary corporations. The Board shall have the right to
determine whether multiple sales or exchanges of the voting stock of the
Company or multiple ownership Change Events are related, and its
determination shall be final, binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTIONS. In the event of a Transfer
of Control, the percentage of the Option that has vested shall be adjusted to
100% (if not already at that percentage) on the date that the Company mails the
Optionee notice of the Transfer of Control at the last address shown on the
records of the Company for such Optionee (the "NOTICE"), unless the surviving,
continuing, successor, or purchasing corporation or parent corporation thereof,
as the case may be (the "ACQUIRING CORPORATION"), either assumes the Company's
rights and obligations under outstanding Options or substitutes for outstanding
Options substantially equivalent options for the Acquiring Corporation's stock.
Any Options which are neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the
date fifteen days after the Notice of the Transfer of Control shall terminate
and cease to be outstanding effective upon the later of (i) the date of the
Transfer of Control or (ii) fifteen days after mailing of the Notice. For
purposes of this Section 8.2, an option shall be deemed assumed if, following
the Transfer of Control, the Option confers the right to purchase in accordance
with its terms and conditions, for each share of Stock subject to the Option
immediately prior to the Transfer of Control, the consideration (whether stock,
cash or other securities or property) to which a holder of a share of Stock on
the effective date of the Transfer of Control was entitled. Notwithstanding the
foregoing, shares acquired upon exercise of an Option prior to the Transfer of
Control and any consideration received pursuant to the Transfer of Control with
respect to such shares shall continue to be subject to all applicable provisions
of the Option Agreement evidencing such Option except as otherwise provided in
such Option Agreement. Furthermore, notwithstanding the foregoing, if the
corporation the stock of which is subject to the outstanding options immediately
prior to an Ownership Change Event described in Section 8.1(a)(i) constituting a
Transfer of Control is the surviving or continuing corporation and immediately
after such ownership Change Event less than fifty percent (50%) of the total
combined voting power of its voting stock is held by another corporation or by
other corporations that are members of an affiliated group within the meaning of
Section 1504(a) of the Code without regard to the provisions of Section 1504(b)
of the Code, the outstanding options shall not terminate unless the Board
otherwise provides in its sole discretion.
9. PROVISION OF INFORMATION. At least annually, copies of the Company's balance
sheet and income statement for the just completed fiscal year shall be made
available to each Optionee and purchaser of shares of Stock upon the exercise of
an option. The Company shall not be required to provide such information to
persons whose duties in connection with the Company assure them access to
equivalent information.
10. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, an
option shall be exercisable only by the Optionee or the Optionee's guardian or
legal representative. No Option shall be assignable or transferable by the
optionee, except by will or by the laws of descent and distribution.
11. INDEMNIFICATION. In addition to such other rights of indemnification as they
may have as members of the Board or officers or employees of the Participating
company Group, members of the Board and any officers or employees of the
Participating Company Group to whom authority to act for the Board or the
Company is delegated shall be indemnified by the Company against all reasonable
expenses, including attorneys' fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan, or
any right granted hereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such person is liable
for gross negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such action, suit
or proceeding, such person shall offer to the Company, in writing, the
opportunity at its own expense to handle and defend the same.
12. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or amend the Plan
at any time. However, without the approval of the Company's shareholders there
shall be (a) no increase in the maximum aggregate number of shares of Stock that
may be issued under the Plan (except by operation of the provisions of Section
4.2), (b) no change in the class of persons eligible to receive Incentive Stock
Options, (c) no amendment of the Plan that would provide a material increase in
the benefits to optionees, and (d) no other amendment of the Plan that would
require approval of the Company's shareholders under any applicable law,
regulation or rule. For purposes of this Section 12, the following types of
amendments would be deemed to provide a material increase in benefits to
optionees: (1) amendments to allow repricing of options; (2) amendments to allow
granting of options with exercise prices less than fair market value on the date
of grant; and (3) amendments to allow the granting of restricted stock.
Non-material amendments, such as administrative matters, changes in relevant
laws or regulations, or changes that result from stock splits and comparable
restructuring would not require shareholder approval. In any event, no
termination or amendment of the Plan may adversely affect any then outstanding
Option or any unexercised portion thereof, without the consent of the Optionee,
unless such termination or amendment is required to enable an option designated
as an Incentive Stock Option to qualify as an Incentive Stock option or is
necessary to comply with any applicable law, regulation or rule.
13. SHAREHOLDER APPROVAL. The Plan or any increase in the maximum number of
shares of Stock issuable thereunder as provided in Section 4.1 (the "MAXIMUM
SHARES") shall be approved by the shareholders of the Company within twelve (12)
months of the date of adoption thereof by the Board. Options granted prior to
shareholder approval of the Plan or in excess of the maximum Shares previously,
approved by the shareholders shall become exercisable no earlier than the date
of shareholder approval of the Plan or such increase in the Maximum Shares, as
the case may be.
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