1
Exhibit 10.53
DEPOTECH CORPORATION
1995 STOCK OPTION/STOCK ISSUANCE PLAN
AMENDED AND RESTATED AS OF JANUARY 16, 1996
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan ("Plan") is
intended to promote the interests of DepoTech Corporation, 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 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. Effective Date. 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. Predecessor Plans. This Plan shall serve as the successor
to the Corporation's 1991 Stock Option Plan, 1994 Stock Option Plan and 1995
Stock Option Plan (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 issuances 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.
2
C. Definitions. For purposes of this Plan, the following
provisions shall be applicable in determining the parent and subsidiary
corporations of the Corporation:
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. No Limitation on Corporate Action. 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. No Rights as Shareholder. 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. Components of Plan. The Plan shall be divided into three
separate components: the Discretionary Option Grant Program specified in Article
Two; the Automatic Option Grant Program specified in Article Three; and the
Stock Issuance Program specified in Article Four. Under the Discretionary 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 Automatic Option Grant Program,
non-employee Directors will automatically be granted options to purchase Common
Stock of the Corporation at 100% of the fair market value 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.
-2-
3
B. Application of Certain Articles. The provisions of Articles
One and Five of the Plan, except as otherwise expressly provided, shall apply to
the Discretionary Option Grant Program, the Automatic 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. Plan Administrator. This Plan shall be administered by a
committee ("Committee") of two (2) or more non-employee Board members who assume
full responsibility for the administration of the Plan (the "Plan
Administrator"). No member of the Committee shall have either been eligible for
or received any discretionary grant pursuant to Article Two of the Plan within
one (1) year prior to their appointment to the Committee. Members 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. Authority. 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.
C. Restriction on Discretion. Notwithstanding the above, the
administration of the Automatic Option Grant Program under Article Three shall
be self executing in accordance with the terms and conditions thereof and the
Plan Administrator shall not exercise any discretionary functions in respect to
matters governed by Article Three.
V. OPTION GRANTS AND STOCK ISSUANCES
A. Eligible Persons. The persons eligible to receive stock
issuances under the Stock Issuance Program ("Participant") and/or option grants
pursuant to the Discretionary Option Grant Program ("Optionee") are as follows:
(i) officers and other key 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) Directors, provided that no non-employee
Director shall be eligible to be an Optionee after the last day of the first
full calendar month following such Director's election to the Board; and
-3-
4
(iii) those consultants or other independent
contractors who provide valuable services to the Corporation (or its parent or
subsidiary corporations).
B. Limitations on Grants to Directors. Notwithstanding any
other provision of this Plan, no option grants under the Discretionary Option
Grant Program or stock issuances under the Stock Issuance Program shall be made
to any director hereunder unless, at the time of such option or issuance, the
Plan Administrator is a Committee composed entirely of non-employee Board
members none of whom have received an option grant or stock issuance under this
Plan or any other stock plan of the Corporation (or any parent or subsidiary
corporation), other than under the Automatic Option Grant Program, during the
preceding one year period. No member of a committee serving as Plan
Administrator shall be eligible to receive any option grant under the
Discretionary Grant Program or any stock issuances under the Stock Issuance
Program.
C. Eligible Directors. The individuals who will receive option
grants under the Automatic Option Grant Program are (i) those individuals who
are elected, re-elected or appointed as non-employee Board members on or after
the Effective Date of this Plan, provided they have not otherwise been in the
prior employ of the Corporation (or any parent or subsidiary corporation) within
the preceding two-year period.
D. Plan Administrator Authority. The Plan Administrator shall
have full authority to determine, (I) with respect to the option grants made
under the Discretionary 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. The Plan Administrator shall have no discretion
with regard to the Automatic Option Grant Program. The Plan Administrator shall
not have the discretion to affect in material fashion any option grants or the
terms of any option under the Automatic Option Grant Program.
-4-
5
E. Limitation on Option Grants. Notwithstanding any other
provision of this Plan, no individual shall be granted options to acquire more
than one million (1,000,000) shares of stock hereunder.
VI. STOCK SUBJECT TO THE PLAN
A. Shares Available. 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 2,000,000 shares,
subject to adjustment from time to time in accordance with the provisions of
this Section VI. As of June 1, 1995, such authorized number of shares is
comprised of (i) 226,859 shares issued under the Predecessor Plans, (ii)
1,037,369 shares reserved for issuance under the options granted under the
Predecessor Plans, (iii) 235,772 shares which would have been available for
future option grant or share issuance under the Predecessor Plans as last
approved by the shareholders, plus (iv) an additional increase of 500,000
shares. Such number will be subject to further adjustment prior to the Effective
Date as a result of additional grants of options, exercises of outstanding
options and option terminations.
B. Additional Available Shares. 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 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.D of Article Five and all share issuances under the Plan, whether or not such
shares are subsequently repurchased by the Corporation pursuant to repurchase
rights, shall reduce on a share-for-share basis the number of shares 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. Adjustments. 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
-5-
6
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. Additional Possible Restrictions. Common Stock issuable
under the Discretionary 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.
ARTICLE TWO
DISCRETIONARY 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 a 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 option 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.
(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 Five, Section III and the instrument evidencing the grant, shall be
payable in one of the following alternative forms specified below:
-6-
7
- full payment in cash or check drawn to the
Corporation's order;
- 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 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
-7-
8
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.
- 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.
- Notwithstanding the above, under no circumstances
will any 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 was 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 (1) 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.
-8-
9
(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 Incentive 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 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. Application of Certain Articles. Except as modified by the
preceding provisions of this Section II, the provisions of Articles One, Two and
Five of the Plan shall apply to all Incentive Options granted hereunder. Any
option designated as an Incentive Option but which fails to meet any requirement
of this Section II or of the Internal Revenue Code for qualification as an
Incentive Option shall nevertheless be a valid and outstanding option under the
Plan and shall be treated as a non-statutory option.
-9-
10
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 Discretionary 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 after the specified expiration date for the option.
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 options under this Article Two. Upon the
occurrence of a Hostile Take-Over (as defined in Section II.B of Article Five)
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
-10-
11
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
AUTOMATIC OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant of Options. Beginning at the annual meeting of
shareholders held in 1997, nonstatutory option grants to purchase 4,000 shares
of Common Stock shall be made automatically to each non-employee Board member
annually as of the date of the annual shareholder meeting commencing with the
first such meeting following such member's initial election or appointment to
the Board. The number of shares granted pursuant to this Automatic Grant Program
shall be subject to periodic adjustment pursuant to the applicable provisions of
Section VI.C of Article One.
B. Exercise Price. The exercise price per share of each
automatic option grant made under this Article Three shall be equal to one
hundred percent (100%) of the fair market value per share of Common Stock on the
grant date.
C. Payment. The exercise price shall be payable in one of the
alternative forms specified below:
-11-
12
(i) full payment in cash or check drawn to the
Corporation's order;
(ii) 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);
(iii) 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
(iv) full payment through a broker-dealer sale and
remittance procedure pursuant to which the non-employee Board member
(A) 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 taxes required to be withheld by the Corporation in connection
with such purchase and (B) 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 Section I.C. of Article Three,
the Exercise Date shall be the date on which written notice of the option
exercise is delivered to the Corporation, and the fair market value per share of
Common Stock on any relevant date shall be determined in accordance with the
provisions of Section II.A of Article Five. 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.
D. Option Term. Each automatic grant under this Article Three
shall have a term of ten (10) years measured from the automatic grant date.
E. Exercisability. Each option granted pursuant to this
automatic option grant program shall become exercisable in a series of four (4)
equal annual installments during the optionee's period of service on the Board,
with the first such installment to become exercisable one year after the
automatic grant date. No option shall become exercisable for any additional
option shares following the optionee's cessation of Board service for any
reason.
F. Non-Transferability. During the lifetime of the optionee,
each automatic option grant, together with the limited stock appreciation right
pertaining to such option, if any, shall be exercisable only by the optionee and
shall not be assignable or transferable by the optionee other than a transfer of
the option effected by will or by the laws of descent and distribution following
optionee's death.
-12-
13
G. Effect of Termination of Board Membership. Should the
optionee cease to serve as a Board member for any reason (other than death)
while holding one or more automatic option grants under this Article Three, such
optionee shall have a six (6) month period following the date of such cessation
of Board membership in which to exercise each such option for any or all of the
shares of Common Stock for which the option was exercisable at the time of such
cessation of Board service. Each such option shall immediately terminate and
cease to be outstanding at the time of such cessation of Board service with
respect to any shares for which the option is not then exercisable.
Should the optionee die while serving as a member of
the Board or within six (6) months after cessation of Board service, then each
outstanding automatic option grant held by the optionee at the time of death may
subsequently be exercised, for any or all of the shares of Common Stock for
which the option is exercisable at the time of the optionee's cessation of Board
service (less any option shares subsequently purchased by the optionee prior to
death), 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. Any such exercise must
occur within twelve (12) months after the date of the optionee's death. However,
each such automatic option grant shall immediately terminate and cease to be
outstanding, at the time of the optionee's cessation of Board service, with
respect to any option shares for which it is not otherwise at such time
exercisable.
In no event shall any automatic grant under this
Article Three remain exercisable after the specified expiration date of the ten
(10)-year option term. Upon the expiration of the applicable exercise period in
accordance with this paragraph G or (if earlier) upon the expiration of the ten
(10) year option term, the automatic grant shall terminate and cease to be
outstanding for any unexercised shares for which the option was exercisable at
the time of the optionee's cessation of Board service.
II. LIMITED STOCK APPRECIATION RIGHT.
A. Upon the occurrence of a Hostile Take-Over (as defined in
Section II.B of Article Five), each non-employee Board member holding an
automatic option grant which has been outstanding under this Article Three for a
period of at least six (6) months shall have the unconditional right
(exercisable for a thirty (30)-day period following such Hostile Take-Over) to
surrender such option in return for a cash distribution from the Corporation in
an amount equal to the excess of (i) the Take-Over Price of the shares of Common
Stock at the time subject to the surrendered option (whether or not the option
is otherwise at the time exercisable for such shares) over (ii) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the option surrender date. Neither the approval
of the Plan Administrator nor the consent of the Board shall be required in
connection with such option surrender and cash distribution.
-13-
14
B. The shares of Common Stock subject to each option
surrendered in connection with the Hostile Take-Over shall NOT be available for
subsequent issuance under this Plan.
ARTICLE FOUR
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 Four.
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 to 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.
-14-
15
1. Shares of Common Stock issued under this Article
Four 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,
(iv) any conditions or contingencies to vesting, and
(v) the effect which death, disability or other
events designated by the Plan Administrator are 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 Four, 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 Article Five 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
Four, 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
-15-
16
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. Escrow Arrangements and Legends. Unvested shares under this
Article Four 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 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. Limited Transferability. The Participant shall have no
right to transfer any unvested shares of Common Stock issued to him or her under
this Article
-16-
17
Four. 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 FIVE
MISCELLANEOUS
I. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Assumption of Options. Each outstanding option which is
assumed in connection with a Corporate Transaction (as defined below) or is
otherwise to continue in effect following a Corporate Transaction shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would be issuable, in
consummation of such Corporate Transaction, to an actual holder of the same
number of shares of Common Stock as are subject to such option immediately prior
to such Corporate Transaction, and appropriate adjustments shall also be made to
the option price payable per share, provided the aggregate option price payable
for such securities shall remain the same. Appropriate adjustments shall also be
made to the class and number of securities available for issuance under the Plan
following the consummation of such Corporate Transaction.
B. Acceleration of Options. In the event of any Corporate
Transaction the exercisability of each option grant at the time outstanding
under this Plan which is not continued under paragraph A above shall
automatically accelerate so that each such option shall, immediately prior to
the specified effective date for the Corporate Transaction, 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. Upon the consummation of the Corporate Transaction, all option grants
under this Plan shall terminate and cease to be outstanding. The Plan
Administrator may, in its discretion, extend the provisions of this paragraph B
to options outstanding under the Predecessor Plans.
C. Corporate Transaction. A Corporate Transaction means:
(i) a merger or consolidation in which the
Corporation is not the surviving entity, except for a transaction the
-17-
18
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, or
(iii) any reverse merger in which the Corporation is
the surviving entity but in which the holders of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities (as measured immediately prior to
such merger) transfer ownership of those securities to person or
persons not otherwise part of the transferor group.
D. Change in Control. Except as otherwise provided by the Plan
Administrator in agreements governing the grant of discretionary option grants
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 Five, a Change in Control shall be deemed to occur in
the event:
(i) a Hostile Take-Over (as defined below)
(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 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 D 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:
-18-
19
- 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, 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 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, 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.
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 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.
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 Five, or (b) the highest reported price per share
paid by the tender offeror in effecting such Hostile Take-Over.
-19-
20
III. LOANS OR GUARANTEE OF LOANS
A. Loans or Guarantees. 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 Discretionary Option
Grant Program or the purchase of one or more shares issued to such Participant
under the Article Four 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. Discretion of Plan Administrator. 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. Withholding. The Company's obligation to deliver shares or
cash upon the exercise of stock options or stock appreciation rights granted
under the Discretionary Option Grant Program or the Automatic 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.
B. Withholding of Shares Otherwise Issuable. The Plan
Administrator may, in its discretion and upon such terms and conditions as it
may deem appropriate (including the applicable safe-harbor provisions of SEC
Rule 16b-3), provide any or all holders of outstanding option grants under the
Discretionary Option Grant Program with the election to have the Company
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
-20-
21
holders may also be granted the right to deliver shares of Common Stock to the
Company in satisfaction of such Taxes. The withheld or delivered shares shall be
valued at the fair market value on the applicable determination date for such
Taxes or such other date required by the applicable safe-harbor provisions of
SEC Rule 16b-3.
V. AMENDMENT OF THE PLAN AND AWARDS
A. Amendment. 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 not, without the approval of the
Corporation's shareholders, amend the Plan to (i) materially increase the
maximum number of shares issuable under the Plan (except for permissible
adjustments under Article One, Section VI) or (ii) materially modify the
eligibility requirements for participation in the Plan or materially increase
the benefits accruing to Optionees or Participants under the Plan.
B. Limitation on Amendment of Options. Notwithstanding Article
Five, Section V.A, neither the provisions of the Automatic Option Grant Program
nor the options outstanding under Article Three may be amended at intervals more
frequently than once every six (6) months, other than to the extent necessary to
comport with changes in the Internal Revenue Code, the Employee Retirement
Income Security Act or any rules thereunder.
C. Escrow Prior to Shareholder Approval. (i) Options to
purchase shares of Common Stock may be granted under the Discretionary Option
Grant Program and (ii) 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 Discretionary Option Grant Program or the Stock Issuance
Program are held in escrow until shareholder approval is obtained for a
sufficient increase in the number of shares available for issuance under the
Plan. If such shareholder approval 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.
-21-
22
VI. EFFECTIVE DATE AND TERM OF PLAN
A. Effective Date. This Plan, as successor to the Company's
Predecessor Plans, shall become effective as of the Effective Date, and no
further option grants shall be made under the Predecessor Plans after such
Effective Date. If shareholder approval of this Plan is not obtained within
twelve (12) 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. Predecessor Plans. 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. Applicability of Certain Procedures to Predecessor Plans.
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 Predecessor Plans 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 Predecessor Plans.
D. Termination. 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
Discretionary 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.
-22-
23
VII. USE OF PROCEEDS
Cash proceeds received by the Company from the sale of shares
under the Plan shall be used for general corporate purposes.
VIII. REGULATORY APPROVALS
A. Regulatory Approvals. The implementation of the Plan, the
granting of any option under the Discretionary 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. Federal and State Securities Laws. 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. Assignment. 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. Successors. 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.
-23-