EXHIBIT A
HEMISPHERX
2004 EQUITY INCENTIVE PLAN
1
HEMISPHERX
2004 EQUITY INCENTIVE PLAN
Hemispherx Biopharma, Inc. hereby establishes the Hemispherx 2004 Equity
Incentive Plan upon the terms and conditions set forth below.
1. Definitions
In this Plan document, except where the context otherwise indicates,
words in the masculine gender shall be deemed to include males and females,
singular terms also shall refer to the plural, and the following definitions
shall apply:
1.1. "Agreement" means a written agreement specifying the terms and conditions
of an Award.
1.2. "Award" means any Option, Right, Restricted Stock or Other Stock Award
granted under the Plan
1.3. "Board" means the Board of Directors of the Corporation.
1.4. "Change in Control" means the occurrence of any of the following: (i) the
acquisition by any "person" or "group" (as defined in or pursuant to Sections
13(d) and 14(d) of the Exchange Act) (other than the Corporation, any Subsidiary
or any Corporation or Subsidiary's employee benefit plan), directly or
indirectly, as "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of securities of the Corporation representing twenty percent (20%) or more
of either the then outstanding shares or the combined voting power of the then
outstanding securities of the Corporation; (ii) either a majority of the
directors of the Corporation elected at the Corporation's annual stockholders
meeting shall have been nominated for election other than by or at the direction
of the "incumbent directors" of the Corporation, or the "incumbent directors"
shall cease to constitute a majority of the directors of the Corporation. The
term "incumbent director" shall mean any director who was a director of the
Corporation on May 1, 2004 and any individual who becomes a director of the
Corporation subsequent to May 1, 2004 and who is elected or nominated by or at
the direction of at least two-thirds of the then incumbent directors; (iii) the
shareholders of the Corporation approve (a) a merger, consolidation or other
business combination of the Corporation with any other "person" or "group" (as
defined in or pursuant to Sections 13(d) and 14(d) of the 1934 Act) or affiliate
thereof, other than a merger or consolidation that would result in the
outstanding common stock of the Corporation immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into common
stock of the surviving entity or a parent or affiliate thereof) more than fifty
percent (50%) of the outstanding common stock of the Corporation or such
surviving entity or a parent or affiliate thereof outstanding immediately after
such merger, consolidation or other business combination, or (b) a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the Corporation's
assets; or (iv) any other event or circumstance which is not covered by the
foregoing subsections of this Section 1.4 but which the Board of Directors
determines to affect control of the Corporation and with respect to which the
Board of Directors adopts a resolution that the event or circumstance
constitutes a Change in Control for purposes of the Plan. This definition of
"Change in Control" shall not be amended after (i) the occurrence of a Change in
Control; (ii) the public announcement of a proposal for a transaction that, if
consummated, would constitute a Change in Control; or (iii) the Board of
Directors learns of a specific proposal containing the essential terms of a
transaction that, if consummated, would constitute a Change in Control;
provided, however, that in the case of a proposal under (ii) or (iii)
immediately above, if the proposal is finally withdrawn or terminated, this
definition may be amended after the withdrawal or termination. For purposes of
the Plan and all related Agreements, if the employment of any Participant is
terminated by the Corporation and/or any Subsidiary (other than for cause) after
an event causing the definition of "Change in Control" to become nonamendable
under the preceding subsections of this Section 1.4, that Participant's
termination of employment shall be considered to have occurred after a Change in
Control if a Change in Control occurs with respect to and within two (2) years
after the event causing the definition of "Change in Control" to become
nonamendable]
1.5. "Code" means the Internal Revenue Code of 1986, as amended.
1.6. "Common Stock" means the common stock, par value $.001 per share, of the
Corporation.
1.7. "Corporation" means Hemispherx Biopharma, Inc.
1.8. "Date of Exercise" means the date on which the Corporation receives notice
of the exercise of an Option or Right in accordance with the terms of Article 8.
1.9. "Date of Grant" means the date on which the grant of an Award is authorized
under the Plan or such later date as may be specified in the authorization.
1.10. "Effective Date" means May 1, 2004.
1.11. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
1.12. "Fair Market Value" of a share of Common Stock on any relevant date means:
(i) if the Common Stock is at the time listed on any stock exchange, the Fair
Market Value shall be the closing selling price per share of Common Stock on the
date in question on the stock exchange, the Common Stock's price per share
officially quoted in the composite tape of transactions on the exchange that is
determined by the Board to be the primary market for the Common Stock and
published in The Wall Street Journal. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which a closing selling
price exists; (ii) if the Common Stock is at the time traded on the NASDAQ Stock
Market, then the Fair Market Value shall be the closing selling price per share
of Common Stock on the date in question that is the Common Stock's price per
share reported by the National Association of Securities Dealers on the NASDAQ
Stock Market and published in The Wall Street Journal. If there is no closing
selling price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for which a
closing selling price exists; and (iii) if (i) or (ii) does not apply for any
reason, the Fair Market Value shall be determined pursuant to a reasonable
method adopted by the Board in good faith for that purpose.
1.13. "Incentive Stock Option" means an Option granted as such under the Plan
that is intended at the Date of Grant to qualify as an incentive stock option
under Section 422 of the Code.
1.14. "Nonstatutory Stock Option" means an Option granted under the Plan that is
not an Incentive Stock Option.
1.15. "Option" means an option to purchase Shares granted under the Plan in
accordance with the terms of Article 6.
1.16. "Option Period" means the period during which an Option may be exercised.
1.17. "Option Price" means the price per Share at which an Option may be
exercised.
1.18. "Other Stock Award" means an award of Shares granted under the Plan in
accordance with the terms of Article 10.
1.19. "Participant" means an individual to whom an Award has been granted.
1.20. "Permanent Disability" means disabled within the meaning of Code Section
72(m)(7).
1.21. "Plan" means the Hemispherx 2004 Equity Incentive Plan.
1.22. "Related Option" means the Option granted in connection with a specified
Right.
1.23. "Related Right" means the Right granted in connection with a specified
Option.
1.24. "Restricted Stock" means Shares granted in accordance with the terms of
Article 9.
1.25. "Retirement" means retirement of an officer or other employee from the
Corporation or a Subsidiary at or after age 65, or in the case of a non-employee
director, retirement from the Board at or after age 65, or in the case of a
non-employee consultant or advisor, Termination of Service at or after age 65.
1.26. "Right" means a stock appreciation right granted under the plan in
accordance with the terms of Article 7.
1.27. "Right Period" means the period during which a Right may be exercised.
1.28. "Share" means a share of Common Stock that is authorized but unissued
pursuant to the Plan.
1.29. "Subsidiary" means a corporation at least 50% of the total combined voting
power of all classes of stock of which is owned by the Corporation, either
directly or through one or more other Subsidiaries.
1.30. "Termination of Service" means termination of an officer's or other
employee's employment with the Corporation or a Subsidiary, or in the case of a
non-employee director, termination from service as a director on the Board, or
in the case of a non-employee consultant or advisor, cessation of the
performance of services to the Corporation or a Subsidiary.
2. Purpose
The Plan is intended to assist the Corporation in attracting,
retaining, and motivating directors, officers, other key employees, consultants
and advisors of outstanding ability and to promote the identification of their
interests with those of the shareholders of the Corporation.
3. Administration
3.1. The Board shall have the power to determine in its discretion the
directors, officers, other key employees, consultants and advisors of the
Corporation or a Subsidiary to whom Awards shall be granted, the number of
Shares to be subject to each Award, and the terms and conditions of each Award.
Without limiting the generality of the foregoing, the Board may provide in its
discretion in an Agreement:
(i) that Options or Rights will not become exercisable until a Change in Control
or other specified event(s) with respect to the Corporation or the Participant;
(ii) for an agreement by the Participant to render services to the Corporation
or a Subsidiary upon such terms and conditions as may be specified in the
Agreement;
(iii) for restrictions on the transfer, sale or other disposition of shares of
Common Stock issued to the Participant under the Plan, in which case, the
Corporation may place a legend upon the applicable certificates noting the
restrictions on any Shares issued pursuant to an Award.
(iv) for an agreement by the Participant to resell to the Corporation, under
specified conditions, shares of Common Stock issued under the Plan; and
(v) for the payment of all or part of the Option Price upon the exercise of an
Option or purchase of Common Stock pursuant to an Other Stock Award, subject to
Section 9 or Section 10 below, as applicable.
3.2. The Plan shall be administered by the Board. In addition to any other
powers granted to the Board hereunder, it shall have the following powers,
subject to the express provisions of the Plan:
(i) to construe and interpret the Agreements and the Plan;
(ii) to require, whether or not provided for in the pertinent Agreement, of any
person to whom Shares are to be issued under the Plan, the making of any
representations or agreements which the Board may deem necessary or advisable in
order to comply with the securities laws of the United States or of any state,
including Section 16(b) of the Exchange Act;
(iii) to provide for satisfaction of a Participant's tax liabilities arising in
connection with the Plan under such terms and conditions as the Board deems
appropriate, including requirements in the event of a disqualifying disposition
of shares of Common Stock acquired by a Participant pursuant to exercise of an
Incentive Stock Option; and
(iv) to make all other determinations and take all other actions necessary or
advisable for the administration of the Plan.
3.3. Agreements shall be executed on behalf of the Corporation by the Chairman
of the Board.
3.4. Any determinations or actions made or taken by the Board pursuant to this
Article shall be binding and final.
4. Eligibility
Awards may be granted to those directors, officers, other key
employees, consultants and advisors of the Corporation or a Subsidiary who are
selected for Awards by the Board. Only individuals who are employees of the
Corporation or a Subsidiary shall be eligible for the grant of Incentive Stock
Options.
5. Stock Subject to the Plan
5.1. 8,000,000 Shares is (i) the maximum number of Shares that may be issued
under the Plan; and (ii) 3,000,000 is the maximum number of Shares with respect
to which Awards may be granted to any Participant during the period that the
Plan is in effect. The limitation in clause (ii) of the preceding sentence is
imposed to comply with the requirements for the exception for qualified
performance-based compensation under Section 162(m) of the Code and any
applicable regulations.
5.2. If an Award expires or terminates for any reason (other than termination by
virtue of the exercise of a Related Option or Related Right, as the case may be)
in whole or in part, the shares of Common Stock (or applicable portion thereof)
which had been subject to the Agreement relating thereto shall become Shares
that are available for the grant of other Awards.
5.3. Shares of Common Stock issued upon the exercise of a Right (or if cash is
payable in connection with the exercise, that number of Shares having a Fair
Market Value equal to the cash payable upon exercise) shall be charged against
the number of Shares issuable under the Plan and shall not become available for
the grant of other Awards. If the Right referred to in the preceding sentence is
a Related Right, the Shares subject to the Related Option, to the extent not
charged against the number of Shares subject to the Plan in accordance with this
Section 5.3, shall become available for the grant of other Awards.
5.4. The shares of Common Stock issued under the Plan may be authorized but
unissued shares, treasury shares or shares purchased by the Corporation on the
open market or from private sources for use under the Plan.
6. Options
6.1. All Agreements granting Options shall specify the extent to which the
Option is intended to be either (i) a Nonstatutory Stock Option or (ii) an
Incentive Stock Option.
6.2. The Option Period shall be determined by the Board and specifically set
forth in the Agreement, provided however, that an Option shall not be
exercisable after ten years from the Date of Grant.
6.3. All Incentive Stock Options granted under the Plan shall comply with the
provisions of the Code governing incentive stock options and with all other
applicable rules and regulations.
6.4. No Option shall be granted with an Option Price that is less than the Fair
Market Value of the Shares covered by the Option on the Date of Grant.
6.5. Tax obligations of a Participant resulting from the exercise of an Option
shall be withheld or provided for pursuant to any methods approved by the Board.
The amount of taxes paid pursuant to this Section at the time of the exercise of
the Option shall not be less than the statutory minimum withholding obligations
that result from the exercise of the Option and shall not exceed the
Participant's total estimated federal, state and any local tax obligations that
result from the exercise of the Option, except that the Corporation shall not
retain shares of Common Stock otherwise issuable following the exercise of the
Option in excess of the number required to meet the statutory minimum
withholding obligations.
6.6. All other terms of Options granted under the Plan shall be determined by
the Board in its sole discretion.
7. Rights
7.1. A Right may be granted under the Plan:
(i) in connection with, and at the same time as, the grant of an Option;
(ii) by amendment of an outstanding Nonstatutory Stock Option granted under the
Plan; or
(iii) independently of any Option granted under the Plan.
A Right granted under clause (i) or (ii) of the preceding sentence is a Related
Right. A Related Right may, in the Board's discretion, apply to all or a portion
of the Shares subject to the Related Option.
7.2. A Right may be exercised in whole or in part as provided in the Agreement,
and subject to the provisions of the Agreement, entitles its Participant to
receive, without any payment to the Corporation (other than required tax
withholding amounts) either cash or that number of Shares (equal to the highest
whole number of Shares), or a combination thereof, in an amount or having a Fair
Market Value determined as of the Date of Exercise not to exceed the number of
Shares subject to the portion of the Right exercised multiplied by an amount
equal to the excess of (i) the Fair Market Value per Share on the Date of
Exercise of the Right over (ii) either (A) the Fair Market Value per Share on
the Date of Grant of the Right if it is not a Related Right, or (B) the Option
Price as provided in the Related Option if the Right is a Related Right.
7.3. The Right Period shall be determined by the Board and specifically set
forth in the Agreement, provided, however, that:
(i) a Right will expire no later than the earlier of (A) ten years from the Date
of Grant or (B) in the case of a Related Right, the expiration of the Related
Option;
(ii) a Right may be exercised only when the Fair Market Value of a Share exceeds
either (A) the Fair Market Value per Share on the Date of Grant of the Right if
it is not a Related Right, or (B) the Option Price as provided in the Related
Option if the Right is a Related Right; and
(iii) a Right that is a Related Right to an Incentive Stock Option may be
exercised only when and to the extent the Related Option is exercisable.
7.4. The exercise, in whole or in part, of a Related Right shall reduce the
number of Shares subject to the Related Option by the number of Shares with
respect to which the Related Right is exercised. Similarly, the exercise, in
whole or in part, of a Related Option shall reduce the number of Shares subject
to the Related Right by the number of Shares with respect to which the Related
Option is exercised.
7.5. Tax obligations of a Participant resulting from the exercise of a Right
shall be withheld or provided for pursuant to any methods approved by the Board.
The amount of taxes paid pursuant to this Section at the time of the exercise of
the Option shall not be less than the statutory minimum withholding obligations
that result from the exercise of the Option and shall not exceed the
Participant's total estimated federal, state and any local tax obligations that
result from the exercise of the Option, except that the Corporation shall not
retain shares of Common Stock otherwise issuable following the exercise of the
Option in excess of the number required to meet the statutory minimum
withholding obligations.
8. Exercise
An Option or Right may, subject to the provisions of the Agreement
under which it was granted, be exercised in whole or in part by the delivery to
the Corporation of written notice of the exercise, in such form as the Board may
prescribe, accompanied, in the case of an Option, by full payment for the Shares
with respect to which the Option is exercised. A Participant may pay the
purchase price either (i) in cash; (ii) with previously acquired shares of
Common Stock (valued at Fair Market Value on the Date of Exercise of the Option)
that have either been purchased in open market transactions or issued by the
Corporation pursuant to a plan thereof or of a Subsidiary; (iii) by payment of
such other consideration as the Board may specify; or (iv) a combination
thereof.
9. Restricted Stock
9.1. The Board may cause the Corporation to issue Restricted Stock from time to
time. Whenever the Board deems it appropriate to grant Restricted Stock to a
Participant, notice shall be given to the Participant stating the number of
Shares granted as Restricted Stock and the terms and conditions to which the
Restricted Stock is subject. That notice shall become an Agreement upon written
acceptance by the Participant, and certificates representing the Restricted
Stock shall be issued and delivered to the Participant as soon as practicable
after execution and return of the Agreement. Restricted Stock may be granted
with or without cash consideration.
9.2. Restricted Stock issued pursuant to the Plan shall be subject to the
following restrictions:
(i) No Restricted Stock may be sold, assigned, transferred, pledged,
hypothecated, or otherwise encumbered or disposed of until the restrictions set
forth in the applicable Agreement have lapsed or been removed pursuant to
Section 9.3 or Section 9.4.
(ii) In the case of a Participant's Termination of Service for any reason
(whether voluntarily or involuntarily, with or without cause), the Participant
shall forfeit to the Corporation any Restricted Stock on which the restrictions
have not lapsed or been removed pursuant to Section 9.3 or Section 9.4 below on
the date of the Termination of Service, and the Corporation shall have no
obligation to pay any amounts with respect to such Restricted Stock, unless the
Board determines to the contrary.
9.3. The Board shall establish as to each Award of Restricted Stock (i) the
terms and conditions upon which the restrictions set forth in Section 9.2 above
shall lapse, and (ii) the extent, if any, to which the Participant shall have
the voting, dividend, distribution and other rights of a shareholder with
respect to the Restricted Stock. Certificates representing Restricted Stock
shall bear a legend referring to the restrictions set forth in the Plan and the
Participant's Agreement. Those terms and conditions may include, without
limitation, the lapsing of restrictions as a result of the death, Permanent
Disability or Retirement of the Participant or the occurrence of a Change in
Control.
9.4. Notwithstanding Section 9.2(i) and Section 9.2(ii) above, the Board may at
any time, in its sole discretion, accelerate the time at which any or all
restrictions on Restricted Stock will lapse or remove any and all such
restrictions.
9.5. Tax obligations of a Participant resulting from the Participant's earning
Restricted Stock hereunder shall be withheld or provided for pursuant to any
methods approved by the Board and set forth in the Agreement. The amount of
taxes so paid shall not be less than the statutory minimum withholding
obligations that result when the Restricted Stock is earned and shall not exceed
the Participant's total estimated federal, state and any local tax obligations
that result when the Restricted Stock is earned, except that the Corporation
shall not retain shares of Common Stock otherwise issuable in excess of the
number required to meet the statutory minimum withholding requirements.
10. Other Stock Awards
The Board may cause the Corporation to issue Common Stock from time to
time pursuant to an Other Stock Award in exchange for consideration from the
Participant specified by the Board that is either the Participant's cash or
other direct payment to the Corporation or the Participant's past services
rendered to the Corporation or a Subsidiary on or before the date of issuance.
Whenever the Board deems it appropriate to grant an Other Stock Award to a
Participant, notice shall be given to the Participant stating the number of
Shares to be issued pursuant to the Other Stock Award and the other terms and
conditions of the Other Stock Award. That notice shall become an Agreement upon
written acceptance by the Participant. Tax obligations of a Participant
resulting from the Participant's Other Stock Award shall be withheld or provided
for pursuant to any methods approved by the Board and set forth in the
Agreement. The amount of taxes so paid shall not be less than the applicable
statutory minimum withholding obligations that result when the Common Stock is
earned and shall not exceed the Participant's total estimated federal, state and
any local tax obligations that relate to the Other Stock Award, except that the
Corporation shall not retain shares of Common Stock otherwise issuable in excess
of the number required to meet the statutory minimum withholding requirements.
11. Nontransferability of Options and Rights
Unless otherwise determined by the Board, Options and Rights granted
under the Plan shall not be transferable other than by will or the laws of
descent and distribution, and an Option or Right may be exercised during the
Participant's lifetime only by him or in the event of his legal disability, by
his legal representative. A Related Right is transferable only when the Related
Option is transferable and only with the Related Option and under the same
conditions.
12. Capital Adjustments
The number and class of Shares subject to each outstanding Award, the
Option Price and the aggregate number and class of Shares for which Awards
thereafter may be made shall be adjusted by the Board, as appropriate and
equitable, to reflect such events as stock dividends, dividends payable other
than in cash or other extraordinary dividends, stock splits, recapitalizations,
mergers, consolidations or reorganizations of or by the Corporation.
13. Termination or Amendment
The Board shall have the power to terminate the Plan and to amend it in
any respect, provided that, after the Plan has been approved by the shareholders
of the Corporation, the Board may not, without the approval of the shareholders
of the Corporation, amend the Plan so as to increase the aggregate number of
Shares that may be issued under the Plan (except as provided in Article 12), to
modify the requirements as to eligibility to receive Awards, or to increase
materially the benefits accruing to Participants. Notwithstanding the preceding
sentence, no termination or amendment of the Plan shall, without his or her
consent, adversely affect the rights or obligations of a Participant with
respect to any Award previously granted except as reasonably required for
compliance with Rule 16b-3 under the Exchange Act or with the provisions of the
Code and other applicable rules and regulations thereunder governing incentive
stock options.
14. Modification, Extension and Renewal of Options and Rights
Subject to the terms and conditions and within the limitations of the
Plan, the Board may modify, extend or renew outstanding Awards; provided,
however, that no Option or Right shall be repriced, whether by the reduction of
the Option Price (or the Fair Market Value per Share on the Date of Grant in the
case of a Right that is not a Related Right) or by the cancellation of an Option
or Right and the issuance of a substitute Option or Right with a lower Exercise
Price (or the Fair Market Value per Share on the Date of Grant in the case of a
Right that is not a Related Right).
15. Term of the Plan
Unless sooner terminated by the Board pursuant to Article 13, the Plan
shall terminate on the date ten years after its adoption by the Board, and no
Awards may be granted or awarded after termination. The termination shall not
affect the validity of any Award outstanding on the date of termination.
16. Indemnification of Board
In addition to any other indemnification rights they may have as
directors, the members of the Board shall be indemnified by the Corporation
against the reasonable expenses, including attorneys' fees, actually incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan or
any Award granted hereunder, and against all amounts reasonably paid by them in
settlement thereof or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, if such members acted in good faith and in a manner
which they believed to be in, and not opposed to, the best interests of the
Corporation.
17. General Provisions
17.1. The establishment of the Plan shall not confer upon any director, officer,
other employee, consultant or advisor of the Corporation any legal or equitable
right against the Corporation, any Subsidiary or the Board, except as expressly
provided in the Plan.
17.2. The Plan does not constitute inducement or consideration for the
employment of officer or other employee of the Corporation, nor is it a contract
between the Corporation or any Subsidiary and any director, officer, other
employee, consultant or advisor of the Corporation. Participation in the Plan
shall not give a director, officer, other employee, consultant or advisor of the
Corporation any right to be retained in the service of the Corporation or any
Subsidiary.
17.3. The interests under the Plan of any Participant under the Plan are not
subject to the claims of creditors and may not, in any way, be assigned,
alienated or encumbered.
17.4. The Plan shall be governed, construed and administered in accordance with
the laws of the state of Delaware and the intention of the Corporation that
Incentive Stock Options granted under the Plan qualify under Section 422 of the
Code.
IN TESTIMONY WHEREOF, Hemispherx Biopharma, Inc. has caused this Plan
to be executed in its name by its duly authorized officer effective the 1st day
of May, 2004.
HEMISPHERX BIOPHARMA, INC.
By:
----------------------------
Its:
----------------------------