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EXHIBIT 10.18
IMMUSOL, INC.
1996 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
This 1996 Stock Option/Stock Issuance Plan ("Plan") is
intended to promote the interests of Immusol, Inc., a California Corporation
(the "Corporation"), by providing (i) key employees (including officers) of the
Corporation (or its parent or subsidiary corporations) who are responsible for
the management, growth and financial success of the Corporation (or its parent
or subsidiary corporations), (ii) Directors and (iii) consultants and other
independent contractors who provide valuable services to the Corporation (or
its parent or subsidiary corporations) with the opportunity to acquire a
proprietary or increase their proprietary interest in the Corporation as an
incentive for them to remain in the service of the Corporation (or its parent
or subsidiary corporations).
II. GENERAL
A. The Plan shall become effective on the first date on
which shares of the Corporation's Common Stock are registered under Section
12(g) of the Securities Exchange Act of 1934, as amended (the "1934 Act").
Such date is hereby designated as the "Effective Date" of this Plan.
B. This Plan shall serve as the successor to all prior
stock option or stock issuance plans (together, the "Predecessor Plans"), and
no further option grants or share issuances shall be made under the Predecessor
Plans from and after the Effective Date. Each outstanding option or share
issuances under the Predecessor Plans immediately prior to the Effective Date
are hereby incorporated into this Plan and shall accordingly be treated as
outstanding options or share issuance under this Plan. However, each such
option or share issuance shall continue to be governed solely by the terms and
conditions of the instrument evidencing such grant or issuance, and, except as
otherwise expressly provided herein, no provision of this Plan shall affect or
otherwise modify the rights or obligations of the holders of such incorporated
options or shares with respect to their acquisition of shares of the
Corporation's Common Stock or otherwise modify the rights or obligations of the
holders of such options or shares.
C. For purposes of this Plan, the following provisions
shall be applicable in determining the parent and subsidiary corporations of
the Corporation:
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Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation shall be
considered to be a PARENT of the Corporation, provided each such
corporation in the unbroken chain (other than the Corporation) owns,
at the time of the determination, stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation shall be
considered to be a SUBSIDIARY of the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
D. Neither the grant of options nor the issuance of any
shares pursuant to this Plan shall in any way affect the right of the
Corporation 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 holder of an option grant under this Plan shall
have none of the rights of a shareholder with respect to any shares subject to
such option until such individual shall have exercised the option, paid the
exercise price for the purchased shares and been issued a stock certificate for
such shares.
III. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two components: the
Option Grant Program specified in Article Two; and the Stock Issuance Program
specified in Article Three. Under the Option Grant Program, eligible
individuals may be granted options to purchase shares of the Corporation's
Common Stock at not less than 85% of the fair market value of such shares on
the grant date. Under the Stock Issuance Program, eligible individuals may be
allowed to purchase shares of the Corporation's Common Stock at discounts from
the fair market value of such shares of up to 15%. Such shares may be issued
as fully-vested shares or as shares to vest over time.
B. The provisions of Articles One and Four of the Plan,
except as otherwise expressly provided, shall apply to the Option Grant Program
and the Stock Issuance Program and shall accordingly govern the interests of
all individuals in the Plan.
IV. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered by the Board of
Directors (the "Board") or a committee ("Committee") of two (2) or more Board
members who assume full responsibility for the administration of the Plan (the
"Plan Administrator"). Members
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of the Committee shall serve for such period of time as the Board may determine
and shall be subject to removal by the Board at any time.
B. The Plan Administrator shall have full power and
authority (subject to the express provisions of the Plan) to establish such
rules and regulations as it may deem appropriate for the proper administration
of the Plan and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding option grants or stock
issuances as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan or any outstanding option or stock issuance.
V. OPTION GRANTS AND STOCK ISSUANCES
A. Except as set forth in paragraph B. hereof, the
persons eligible to receive stock issuances under the Stock Issuance Program
("Participant") and/or option grants pursuant to the Option Grant Program
("Optionee") are as follows:
(i) officers, directors and other employees of
the Corporation (or its parent or subsidiary corporations) who render services
which contribute to the management, growth and financial success of the
Corporation (or its parent or subsidiary corporations);
(ii) those consultants or other independent
contractors who provide valuable services to the Corporation (or its parent or
subsidiary corporations).
B. The Plan Administrator shall have full authority to
determine, (I) with respect to the option grants made under the Option Grant
Program, which eligible individuals are to receive option grants, the number of
shares to be covered by each such grant, whether the granted option is to be an
incentive stock option ("Incentive Option") which satisfies the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code") or a non-statutory option not intended to meet such
requirements, the time or times at which and the circumstances under which each
granted option is to become exercisable and the maximum term for which the
option may remain outstanding and (II), with respect to stock issuances under
the Stock Issuance Program, the number of shares to be issued to each
Participant, the vesting schedule and conditions to vesting (if any) to be
applicable to the issued shares, and the consideration to be paid by the
individual for such shares.
C. Notwithstanding any other provision of this Plan, no
individual shall be granted options to acquire more than five hundred thousand
(500,000) shares of stock hereunder.
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VI. STOCK SUBJECT TO THE PLAN
A. Shares of the Corporation's Common Stock shall be
available for issuance under the Plan and shall be drawn from either the
Corporation's authorized but unissued shares of Common Stock or from reacquired
shares of Common Stock, including shares repurchased by the Corporation on the
open market. The maximum number of shares of Common Stock which may be issued
over the term of the Plan shall not exceed 2,600,000 shares, subject to
adjustment from time to time in accordance with the provisions of this Section
VI. Such authorized number of shares is comprised of (i) 2,300,000 shares
previously authorized under the Predecessor Plans, (ii) an additional 300,000
shares.
B. Should one or more outstanding options under this
Plan (including outstanding options under the Predecessor Plans incorporated
into this Plan) expire or terminate for any reason prior to exercise in full
(including any option cancelled in accordance with the cancellation-regrant
provisions of Section III of Article Two of the Plan), then the shares subject
to the portion of each option not so exercised shall be available for
subsequent option grant or share issuance under this Plan. Shares subject to
any option or portion thereof surrendered or cancelled in accordance with
Section I.C. of Article Four and all shares issuances under the Plan, whether
or not such shares are subsequently repurchased by the Corporation pursuant to
its repurchase rights under the Plan or otherwise surrendered for cancellation,
shall reduce on a share-for-share basis the number of shares of the same class
of Common Stock available for subsequent option grant or stock issuance under
the Plan. In addition, should the exercise price of an outstanding option
under the Plan be paid with shares of Common Stock or should shares of Common
Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an outstanding option under the Plan, then the number of shares of Common
Stock available for issuance under the Plan shall be reduced by the gross
number of shares for which the option is exercised.
C. In the event any change is made to the Common Stock
issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, conversion or
other change affecting the outstanding Common Stock, or any class of Common
Stock as a class, without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the number and/or class of shares
issuable under the Plan, (ii) the number and/or class of shares and price per
share in effect under each outstanding option under this Plan (including
outstanding options incorporated into this Plan from the Predecessor Plans).
Such adjustments to the outstanding options are to be effected in a manner
which shall preclude the enlargement or dilution of rights and benefits under
such options. The adjustments determined by the Plan Administrator shall be
final, binding and conclusive.
D. Common Stock issuable under the Option Grant Program
or the Stock Issuance Program may be subject to such restrictions on transfer,
repurchase rights or such other restrictions as determined by the Plan
Administrator.
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ARTICLE TWO
OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted to Employees of the Corporation or its parent
or subsidiary corporations pursuant to this Article Two shall be authorized by
action of the Plan Administrator and may, at the Plan Administrator's
discretion, be either Incentive Options or non-statutory options. Individuals
who are not Employees of the Corporation or its parent or subsidiary
corporations may only be granted non-statutory options. Each granted option
shall be evidenced by one or more instruments in the form approved by the Plan
Administrator; provided, however, that each such instrument shall comply with
the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
A. Option Price.
(i) In General. The option price per share shall
be fixed by the Plan Administrator. In no event, however, shall the
price for any share be less than eighty-five percent (85%) of the fair
market value of that share on the date of the option grant. During
the 180 day lock-up period after the effective date of the S-8
Registration Statement registering the shares issuable under the Plan
(the "Effective Date"), no options shall be granted to any employee of
the Corporation who is an employee as of the Effective Date at an
exercise price per share less than the Corporation's initial public
offering price per share.
(ii) 10% Shareholder. If any individual to whom
an option is granted is the owner of stock (as determined under
Section 424(d) of the Internal Revenue Code) possessing 10% or more of
the total combined voting power of all classes of stock of the
Corporation or any one of its parent or subsidiary corporations, then
the option price per share shall not be less than one hundred and ten
percent (110%) of the fair market value per share of Common Stock on
the grant date.
(iii) How Payable. The option price shall become
immediately due upon exercise of the option and, subject to the
provisions of Article Four, Section III and the instrument evidencing
the grant, shall be payable in one of the following alternative forms
specified below:
- full payment in cash or check drawn to the
Corporation's order;
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- full payment in shares of Common Stock held
for at least six (6) months and valued at fair market value on the
Exercise Date (as such term is defined below);
- full payment in a combination of shares of
Common Stock held for at least six (6) months and valued at fair
market value on the Exercise Date and cash or check; or
- full payment through a broker-dealer sale and
remittance procedure pursuant to which the Optionee (I) shall provide
irrevocable written instructions to a designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate option price payable for
the purchased shares plus all applicable Federal and State income and
employment taxes required to be withheld by the Corporation in
connection with such purchase and (II) shall provide written
directives to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale transaction.
For purposes of this subparagraph (iii), the Exercise Date
shall be the date on which written notice of the option exercise is delivered
to the Corporation. Except to the extent the sale and remittance procedure is
utilized in connection with the exercise of the option, payment of the option
price for the purchased shares must accompany such notice.
B. Term and Exercise of Options. Each option granted
under this Article Two shall have such term as may be fixed by the Plan
Administrator, be exercisable at such time or times and during such period, and
on such conditions, as is determined by the Plan Administrator and set forth in
the stock option agreement evidencing the grant. No such option, however,
shall have a maximum term in excess of ten (10) years from the grant date and
no option granted to a 10% shareholder shall have a maximum term in excess of
five (5) years from the grant date. During the lifetime of the Optionee, the
option (together with any related stock appreciation right) shall, unless
otherwise expressly permitted by the Plan Administrator in its sole discretion,
be exercisable only by the Optionee and shall not be assignable or transferable
by the Optionee otherwise than by will or by the laws of descent and
distribution following the Optionee's death.
C. Termination of Service.
(i) Except to the extent otherwise provided
pursuant to Section V of this Article Two, the following provisions
shall govern the exercise period applicable to any outstanding options
under this Article Two which are held by the Optionee at the time of
his or her cessation of Service or death.
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- Should an Optionee's Service terminate for any reason
(including death or permanent disability as defined in Section
22(e)(3) of the Internal Revenue Code) while the holder of one or more
outstanding options under the Plan, then none of those options shall
(except to the extent otherwise provided pursuant to Section V of this
Article Two) remain exercisable beyond the later of (i) the limited
post-Service period designated by the Plan Administrator at the time
of the option grant and set forth in the option agreement; or (ii) (A)
ninety (90) days from the date of termination if termination was
caused by other than the death or disability (as defined in Section
22(e)(3) of the Internal Revenue Code) of such Optionee or (B) twelve
(12) months from the date of termination if termination was caused by
death or disability of Optionee.
- Any option granted to an Optionee under this Article
Two and exercisable in whole or in part on the date of the Optionee's
death may be subsequently exercised, by the personal representative of
the Optionee's estate or by the person or persons to whom the option
is transferred pursuant to the Optionee's will or in accordance with
the laws of descent and distribution, provided and only if such
exercise occurs prior to the earlier of (i) the first anniversary of
the date of the Optionee's death or (ii) the specified expiration date
of the option term. Upon the occurrence of the earlier event, the
option shall terminate and cease to be exercisable.
- Under no circumstances, however, shall any such
option be exercisable after the specified expiration date of the
option term.
- During the limited post-Service period of
exercisability, the option may not be exercised for more than the
number of shares for which the option is exercisable on the date the
Optionee's Service terminates. Upon the expiration of such limited
exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be exercisable.
(ii) The Plan Administrator shall have complete
discretion, exercisable either at the time the option is granted or at
any time while the option remains outstanding, to permit one or more
options held by the Optionee under this Article Two to be exercised,
during the limited period of exercisability provided under
subparagraph (i) above, not only with respect to the number of shares
for which each such option is exercisable at the time of the
Optionee's cessation of Service but also with respect to one or more
subsequent installments of purchasable shares for which the option
would otherwise have become exercisable had such cessation of Service
not occurred.
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(iii) For purposes of the foregoing provisions of this
Section I.C. of Article Two (and for all other purposes under the
Plan):
- The Optionee shall (except to the extent otherwise
specifically provided in the applicable option or issuance agreement)
be deemed to remain in the SERVICE of the Corporation for so long as
such individual renders services on a periodic basis to the
Corporation (or any parent or subsidiary corporation) in the capacity
of an Employee, a non-employee member of the Board or an independent
consultant or advisor.
- The Optionee shall be considered to be an EMPLOYEE
for so long as he or she remains in the employ of the Corporation or
one or more parent or subsidiary corporations, subject to the control
and direction of the employer entity not only as to the work to be
performed but also as to the manner and method of performance.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable
to all Incentive Options granted under this Article Two. Incentive Options may
only be granted to individuals who are Employees of the Corporation. Options
which are specifically designated as "non-statutory" options when issued under
the Plan shall not be subject to such terms and conditions.
A. Option Price. The option price per share of any
share of Common Stock subject to an Incentive Option shall in no event be less
than one hundred percent (100%) of the fair market value of such share of
Common Stock on the grant date.
B. Dollar Limitation. The aggregate fair market value
(determined as of the respective date or dates of grant) of the Common Stock
for which one or more options granted to any Employee after December 31, 1986
under this Plan (or any other option plan of the Corporation or its parent or
subsidiary corporations) may for the first time become exercisable as incentive
stock options under the Federal tax laws during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two or more such options which become exercisable for the first
time in the same calendar year, the foregoing limitation on the exercisability
of such options as Incentive Options under the Federal tax laws shall be
applied on the basis of the order in which such options are granted.
C. During the lifetime of the Optionee, the incentive
stock option (together with any related stock appreciation right) shall be
exercisable only by the Optionee and shall not be assignable or transferable by
the Optionee otherwise than by will or by the laws of descent and distribution
following the Optionee's death.
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D. Except as modified by the preceding provisions of
this Section II, the provisions of Articles One, Two and Four of the Plan shall
apply to all Incentive Options granted hereunder.
III. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding options under this Article Two
(including outstanding options under the Predecessor Plans incorporated into
this Plan) and to grant in substitution new options under this Article Two
covering the same or different numbers of shares of Common Stock but having an
option price for each share which is not less than (i) eighty-five percent
(85%) of the fair market value of such share on the new grant date or (ii) one
hundred percent (100%) of such fair market value in the case of an Incentive
Option.
IV. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator
determines in its discretion to implement the stock appreciation right
provisions of this Section IV, one or more Optionees under the Option Grant
Program may be granted the right, exercisable upon such terms and conditions as
the Plan Administrator may establish, to surrender all or part of an
unexercised option under this Article Two in exchange for a distribution from
the Corporation in an amount equal to the excess of (i) the fair market value
(on the option surrender date) of the number of shares in which the Optionee is
at the time vested under the surrendered option (or surrendered portion
thereof) over (ii) the aggregate option price payable for such vested shares.
B. No surrender of an option shall be effective
hereunder unless it is approved by the Plan Administrator. If the surrender is
so approved, then the distribution to which the Optionee shall accordingly
become entitled under this Section IV may be made in shares of any class of
Common Stock valued at fair market value on the option surrender date, in cash,
or partly in shares and partly in cash, as the Plan Administrator shall in its
sole discretion deem appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of
(i) five (5) business days after the receipt of the rejection notice or (ii)
the last day on which the option is otherwise exercisable in accordance with
the terms of the instrument evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the date of the option
grant.
D. One or more officers of the Corporation subject to
the short-swing profit restrictions of the Federal securities laws may, in the
Plan Administrator's sole discretion, be granted limited stock appreciation
rights in tandem with their outstanding
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options under this Article Two. Upon the occurrence of a Hostile Take-Over (as
defined in Section II.B. of Article Four) effected at any time when the
Corporation's outstanding Common Stock is registered under Section 12(g) of the
1934 Act, each outstanding option with such a limited stock appreciation right
in effect for at least six (6) months shall automatically be cancelled, to the
extent such option is at the time exercisable for fully-vested shares of Common
Stock. The Optionee shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Take-Over Price of
the vested shares of Common Stock at the time subject to the cancelled option
(or cancelled portion of such option) over (ii) the aggregate exercise price
payable for such shares. The cash distribution payable upon such cancellation
shall be made within five (5) days following the consummation of the Hostile
Take-Over. Neither the approval of the Plan Administrator nor the consent of
the Board shall be required in connection with such option cancellation and
cash distribution. The balance of the option (if any) shall continue to remain
outstanding and exercisable in accordance with the terms of the instrument
evidencing such grant.
E. The shares of Common Stock subject to any option
surrendered or cancelled for an appreciation distribution pursuant to this
Section IV shall NOT be available for subsequent option grant under the Plan.
V. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority to
extend the period of time for which any option granted under this Article Two
is to remain exercisable following the Optionee's cessation of Service or death
from the limited period in effect under Section I.C.(i) of this Article Two to
such greater period of time as the Plan Administrator shall deem appropriate;
provided, however, that in no event shall such option be exercisable after the
specified expiration date of the option term.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate purchases without any intervening stock
option grants. The issued shares shall be evidenced by a Stock Issuance
Agreement ("Issuance Agreement") that complies with the terms and conditions of
this Article Three.
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A. CONSIDERATION
Shares of Common Stock shall be issued under the Plan for one
or more of the following items of consideration, which the Plan Administrator
may deem appropriate in each individual instance:
(i) cash or cash equivalents (such as a personal
check or bank draft) paid the Corporation;
(ii) in Common Stock of the Corporation valued at
fair market value on the date of issuance;
(iii) a promissory note payable to the
Corporation's order in one or more installments, which may be subject
to cancellation in whole or in part upon terms and conditions
established by the Plan Administrator;
(iv) past services rendered to the Corporation or
any parent or subsidiary corporation;
(v) any combination of the above approved by the
Plan Administrator.
Shares may, in the absolute discretion of the Plan
Administrator, be issued for consideration with a value less than one-hundred
percent (100%) of the fair market value of such shares, but in no event less
than eighty-five percent (85%) of such fair market value. Notwithstanding the
foregoing, in the case of 10% shareholders, Shares must be issued at one
hundred percent (100%) of fair market value of such shares.
B. VESTING PROVISIONS
1. Shares of Common Stock issued under this
Article Three may, in the absolute discretion of the Plan Administrator, be
fully and immediately vested upon issuance or may vest in one or more
installments over the Participant's period of Service (as such term is defined
in Section I.C.(iii) of Article Two); provided, that such vesting must be at a
rate of at least 20% per year over no more than five years from the date such
shares are issued. The elements of the vesting schedule applicable to any
unvested shares of Common Stock issued under the Plan, namely:
(i) the Service period to be completed
by the Participant or the performance objectives to be achieved by the
Corporation,
(ii) the number of installments in which
the shares are to vest,
(iii) the interval or intervals (if any)
which are to lapse between installments,
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(iv) any conditions or contingencies to
vesting, and
(v) the effect which death, disability
or other event designated by the Plan Administrator is to have upon
the vesting schedule, shall be determined by the Plan Administrator
and incorporated into the Issuance Agreement executed by the
Corporation and the Participant at the time such unvested shares are
issued.
2. The Participant shall have full shareholder
rights with respect to any shares of Common Stock issued to him or her under
this Article Three, whether or not his or her interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares. Any new,
additional or different shares of stock or other property (including money paid
other than as a regular cash dividend) which the Participant may have the right
to receive with respect to his or her unvested shares by reason of any stock
dividend, stock split, reclassification of Common Stock or other similar change
in the Corporation's capital structure or by reason of any Corporate
Transaction under Section I of this Article Four shall be issued, subject to
(i) the same vesting requirements applicable to his or her unvested shares and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. Should the Participant cease to remain in
Service while holding one or more unvested shares of Common Stock under this
Article Three, then those shares shall be immediately surrendered to the
Corporation for cancellation, and the Participant shall have no further
shareholder rights with respect to those shares. The Corporation shall repay
to the Participant the cash consideration paid for the surrendered shares and
shall cancel the principal balance of any outstanding purchase-money note of
the Participant to the extent attributable to such surrendered shares. The
surrendered shares may, at the Plan Administrator's discretion, be retained by
the Corporation as Treasury Shares or may be retired to authorized but unissued
share status.
4. The Plan Administrator may in its discretion
elect to waive the surrender and cancellation of one or more unvested shares of
Common Stock (or other assets attributable thereto) which would otherwise occur
upon the non-completion of the vesting schedule applicable to such shares.
Such waiver shall result in the immediate vesting of the Participant's interest
in the shares of Common Stock as to which the waiver applies. Such waiver may
be effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
II. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Unvested shares under this Article Three may, in the
Plan Administrator's discretion, be held in escrow by the Corporation until the
Participant's interest in such shares vests or may be issued directly to the
Participant with restrictive
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legends on the certificates evidencing such unvested shares. To the extent an
escrow arrangement is utilized, the unvested shares and any securities or other
assets issued with respect to such shares (other than regular cash dividends)
shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such shares (or other securities or assets) vests.
Alternatively, if the unvested shares are issued directly to the Participant,
the restrictive legend on the certificates for such shares shall read
substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND
ARE ACCORDINGLY SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS
AND TO (II) CANCELLATION OR REPURCHASE IN THE EVENT THE
REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) CEASES
TO REMAIN IN THE CORPORATION'S SERVICE. SUCH TRANSFER
RESTRICTIONS AND THE TERMS AND CONDITIONS OF SUCH CANCELLATION
OR REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE AGREEMENT
BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER
PREDECESSOR IN INTEREST) DATED __________, 19__, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION.
B. The Participant shall have no right to transfer any
unvested shares of Common Stock issued to him or her under this Article Three.
For purposes of this restriction, the term "transfer" shall include (without
limitation) any sale, pledge, assignment, encumbrance, gift, or other
disposition of such shares, whether voluntary or involuntary. Upon any such
attempted transfer, the unvested shares shall immediately be cancelled, and
neither the Participant nor the proposed transferee shall have any rights with
respect to those shares. However, the Participant shall have the right to make
a gift of unvested shares acquired under the Plan to his or her spouse or
issue, including adopted children, or to a trust established for such spouse or
issue, provided the donee of such shares delivers to the Corporation a written
agreement to be bound by all the provisions of the Plan and the Issuance
Agreement applicable to the gifted shares.
ARTICLE FOUR
MISCELLANEOUS
I. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. The treatment and rights of optionees or participants
in connection with any Corporate Transaction (as defined below) shall be
established in the option agreement governing such option, which agreement may
accelerate vesting or exercisability, or may provide that the option shall
terminate upon any such transaction.
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B. A Corporate Transaction means:
(i) a merger or consolidation in which the
Corporation is not the surviving entity, except for a transaction the
principal purpose of which is to change the State of the Corporation's
incorporation,
(ii) the sale, transfer or disposition of all
or substantially all of the assets of the Corporation in liquidation or
dissolution of the Corporation, or
(iii) any reverse merger in which the
Corporation is the surviving entity but in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are issued to holders different
from those who held such securities immediately prior to such merger.
C. Except as otherwise provided by the Plan
Administrator in agreements governing the grant of options or stock issuances,
in connection with any Change in Control of the Corporation, the exercisability
of each option grant at the time outstanding under this Plan shall
automatically accelerate so that each such option shall, immediately prior to
the specified effective date for the Change in Control, become fully
exercisable with respect to the total number of shares of Common Stock at the
time subject to such option and may be exercised for all or any portion of such
shares. Similarly, all unvested shares issued under the Plan shall
automatically vest immediately prior to the effective date of the Change in
Control. For purposes of this Article Four, a Change in Control shall be deemed
to occur in the event:
(i) any person or related group of persons
(other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the
Corporation) directly or indirectly acquires beneficial ownership
(within the meaning of Rule 13d-3 of the Securities Exchange Act of
1934, as amended) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's shareholders which the Board does not
recommend such shareholders to accept; or
(ii) there is a change in the composition of
the Board over a period of twenty-four (24) consecutive months or less
such that a majority of the Board members (rounded up to the next whole
number) cease, by reason of one or more proxy contests for the election
of Board members, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such period or
(B) have been elected or nominated for election as Board members during
such period by at least a
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majority of the Board members described in clause (A) who were still
in office at the time such election or nomination was approved by the
Board.
The provisions of this Paragraph C shall apply to option grants and/or stock
issuances under the Predecessor Plans only to the extent expressly extended
thereto by the Plan Administrator.
II. CERTAIN DEFINITIONS
A. Fair Market Value. The fair market value of a share
of Common Stock shall be determined in accordance with the following
provisions:
- If shares of the Class of Common Stock to be
valued are not at the time listed or admitted to trading on any
national stock exchange but is traded on the Nasdaq National Market
System, the fair market value shall be the closing selling price per
share of a share of that class on the date in question, as such price
is reported by the National Association of Securities Dealers through
the Nasdaq National Market System or any successor system. If there
is no reported closing selling price for the series on the date in
question, then the closing selling price on the last preceding date
for which such quotation exists shall be determinative of fair market
value.
- If shares of the class of Common Stock to be
valued are at the time listed or admitted to trading on any national
stock exchange, then the fair market value of a share of that class
shall be the closing selling price per share on the date in question
on the stock exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If
there is no reported sale of a share of the class on such exchange on
the date in question, then the fair market value shall be the closing
selling price on the exchange on the last preceding date for which
such quotation exists.
- If shares of the series of Common Stock to be
valued at the time are neither listed nor admitted to trading on any
stock exchange nor traded on the Nasdaq National Market System, then
the fair market value shall be determined by the Plan Administrator
after taking into account such factors as the Plan Administrator shall
deem appropriate, which may include independent professional
appraisals, in a manner consistent with the provisions of Section
260.140.50 of the Rules of the California Corporations Commissioner.
B. Hostile Take-Over. A HOSTILE TAKE-OVER shall be
deemed to occur in the event (i) any person or related group of persons (other
than the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the
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Corporation) directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's shareholders which the Board does not recommend such
shareholders to accept.
C. Take-Over Price. The Take-Over Price per share shall
be deemed to be equal to the greater of (a) the fair market value per share on
the option surrender date, as determined pursuant to the valuation provisions
of Section II.A. of this Article Four, or (b) the highest reported price per
share paid by the tender offeror in effecting such Hostile Take-Over.
III. LOANS OR GUARANTEE OF LOANS
A. The Plan Administrator may, in its discretion, assist
any Optionee or Participant (including an Optionee or Participant who is an
officer of the Corporation) in the exercise of one or more options granted to
such Optionee under the Article Two Option Grant Program or the purchase of one
or more shares issued to such Participant under the Article Three Stock
Issuance Program, including the satisfaction of any Federal and State income
and employment tax obligations arising therefrom by (i) authorizing the
extension of a loan from the Corporation to such Optionee or Participant or
(ii) permitting the Optionee or Participant to pay the option price or purchase
price for the purchased Common Stock in installments over a period of years.
The terms of any loan or installment method of payment (including the interest
rate and terms of repayment) will be upon such terms as the Plan Administrator
specifies in the applicable option or issuance agreement or otherwise deems
appropriate under the circumstances. Loans and installment payments may be
granted with or without security or collateral (other than to individuals who
are consultants or independent contractors, in which event the loan must be
adequately secured by collateral other than the purchased shares). However,
the maximum credit available to the Optionee or Participant may not exceed the
option or purchase price of the acquired shares (less the par value of such
shares) plus any Federal and State income and employment tax liability incurred
by the Optionee or Participant in connection with the acquisition of such
shares.
B. The Plan Administrator may, in its absolute
discretion, determine that one or more loans extended under this financial
assistance program shall be subject to forgiveness by the Corporation in whole
or in part upon such terms and conditions as the Plan Administrator may deem
appropriate.
IV. TAX WITHHOLDING
A. The Corporations's obligation to deliver shares or
cash upon the exercise of stock options or stock appreciation rights granted
under the Option Grant Program or upon direct issuance under the Stock Issuance
Program shall be subject to the satisfaction of all applicable Federal, State
and local income and employment tax withholding requirements.
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B. The Plan Administrator may, in its discretion and
upon such terms and conditions as it may deem appropriate provide any or all
holders of outstanding option grants under the Option Grant Program with the
election to have the Corporation withhold, from the shares of Common Stock
otherwise issuable upon the exercise of such options, a portion of such shares
with an aggregate fair market value equal to the designated percentage (up to
100% as specified by the optionee) of the Federal and State income taxes
("Taxes") incurred in connection with the acquisition of such shares. In lieu
of such direct withholding, one or more option holders may also be granted the
right to deliver shares of Common Stock to the Corporation in satisfaction of
such Taxes.
V. AMENDMENT OF THE PLAN AND AWARDS
A. Except as herein provided, the Board has complete and
exclusive power and authority to amend or modify the Plan (or any component
thereof) in any or all respects whatsoever. No amendment or modification may
adversely affect the rights and obligations of an Optionee with respect to
options at the time outstanding under the Plan, nor adversely affect the rights
of any Participant with respect to Common Stock issued under the Plan prior to
such action, unless the Optionee or Participant consents to such amendment. In
addition, the Board may, in its discretion, condition any and all such
amendments on the Corporation obtaining approval of its shareholders.
B. Options to purchase shares of Common Stock may be
granted under the Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program, which are in both instances in excess of the
number of shares then available for issuance under the Plan, provided any
excess shares actually issued under the Option Grant Program or the Stock
Issuance Program are held in escrow until shareholder approval, if required by
the Board in connection with the amendment of the Plan, is obtained for a
sufficient increase in the number of shares available for issuance under the
Plan. If such shareholder approval is required and is not obtained within
twelve (12) months after the date the first such excess option grants or excess
share issuances are made, then (I) any unexercised excess options shall
terminate and cease to be exercisable and (II) the Corporation shall promptly
refund the purchase price paid for any excess shares actually issued under the
Plan and held in escrow, together with interest (at the applicable Short Term
Federal Rate) for the period the shares were held in escrow.
C. Shareholder approval of this Plan shall not be
construed or interpreted to require that shareholder approval shall be required
in connection with any amendment of this Plan, the adoption by the Corporation
of any other plans, or the grant of options or issuance of shares not covered
by any plan.
VI. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan, as successor to the Corporation's
Predecessor Plans, shall become effective as of the Effective Date, and no
further option grants shall be made under the Option Plan nor shall any further
shares be issued under the Stock Plan from and after
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such Effective Date. If shareholder approval of this Plan is not obtained
within twelve months after the date this Plan is adopted by the Board, then
each option granted under this Plan from and after the Effective Date shall
terminate without ever becoming exercisable for the option shares and all
shares issued hereunder shall be repurchased by the Corporation at the purchase
price paid, together with interest (at the applicable Short Term Federal Rate).
However, in the event such shareholder approval is not obtained, the
Predecessor Plans shall continue in effect in accordance with the terms and
provisions last approved by the Corporation's shareholders, and all outstanding
options and unvested stock issuances under the Predecessor Plans shall remain
in full force and effect in accordance with the instruments evidencing such
options and issuances.
B. Each outstanding option and share issuance under the
Predecessor Plans immediately prior to the Effective Date of this Plan are
hereby incorporated into this Plan and shall accordingly be treated as an
outstanding option or share issuance under this Plan. However, each such
option or share issuance shall continue to be governed solely by the terms and
conditions of the instrument evidencing such grant or issuance, and except as
otherwise expressly provided in this Plan, no provision of this Plan shall
affect or otherwise modify the rights or obligations of the holders of such
options or shares with respect to their acquisition of shares of Common Stock,
or otherwise modify the rights or obligations of the holders of such options or
shares.
C. The sale and remittance procedure authorized for the
exercise of outstanding options under this Plan shall be available for all
options granted under this Plan on or after the Effective Date and for all
non-statutory options outstanding under the Option Plan and incorporated into
this Plan. The Plan Administrator may also allow such procedure to be utilized
in connection with one or more disqualifying dispositions of Incentive Option
shares effected after the Effective Date, whether such Incentive Options were
granted under this Plan or the Option Plan.
D. The Plan shall terminate upon the earlier of (i) the
tenth anniversary of the Effective Date or (ii) the date on which all shares
available for issuance under the Plan shall have been issued or cancelled
pursuant to the exercise, surrender or cash-out of the options granted under
the Option Grant Program or the issuance of shares (whether vested or unvested)
under the Stock Issuance Program. If the date of termination is determined
under clause (i) above, then all option grants and unvested stock issuances
outstanding on such date shall thereafter continue to have force and effect in
accordance with the provisions of the instruments evidencing such grants or
issuances.
VII. USE OF PROCEEDS
Cash proceeds received by the Corporation from the sale of
shares under the Plan shall be used for general corporate purposes.
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VIII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any
option under the Option Grant Program, the issuance of any shares under the
Stock Issuance Program, and the issuance of Common Stock upon the exercise or
surrender of the option grants made hereunder shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it,
and the Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be
issued or delivered under this Plan unless and until there shall have been
compliance with all applicable requirements of Federal and State securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any securities exchange on which stock of
the same class is then listed.
IX. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the
Plan, nor any action taken by the Plan Administrator hereunder, nor any
provision of the Plan shall be construed so as to grant any individual the
right to remain in the employ or service of the Corporation (or any parent or
subsidiary corporation) for any period of specific duration, and the
Corporation (or any parent or subsidiary corporation retaining the services of
such individual) may terminate such individual's employment or service at any
time and for any reason, with or without cause.
X. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets
under the Plan may not be assigned, encumbered or otherwise transferred by any
Optionee or Participant.
B. The provisions of the Plan shall inure to the benefit
of, and be binding upon, the Corporation and its successors or assigns, whether
by Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
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