1
EXHIBIT 10.1
NANOPHASE TECHNOLOGIES CORPORATION
an Illinois corporation
Amended and Restated
1992 Stock Option Plan
1. Purpose. The purposes of this Amended and Restated 1992 Stock Option
Plan are to attract and retain the best available personnel, to provide
additional incentive to the Employees, Consultants and Outside Directors of
Nanophase Technologies Corporation, an Illinois corporation (the "Company"), and
to promote the success of the Company's business.
Options granted hereunder may, consistent with the terms of this Plan,
be either Incentive Stock Options or Nonstatutory Stock Options, at the
discretion of the Board or the Committee and as reflected in the terms of a
written option agreement.
2. Definitions. As used in this Plan, the following definitions
shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder.
(c) "Committee" means the Committee appointed by the Board or
otherwise determined in accordance with Section 4(a) of this Plan.
(d) "Common Stock" means the common stock of the Company, no par
value per share.
(e) "Consultant" means any person who is engaged by the Company or
any Parent or Subsidiary to render consulting services and is compensated for
such consulting services; provided that the term Consultant excludes directors
who are not compensated for their services or are paid only a director's fee by
the Company.
(f) "Continuous Status as an Employee, Consultant or Outside
Director" means the absence of any interruption or termination of service as an
Employee, Consultant or Outside Director, as applicable. Continuous Status as an
Employee, Consultant or Outside Director shall not be considered interrupted in
the case of sick leave or military leave, any other leave provided pursuant to a
written policy of the Company in effect at the time of determination, or any
other leave of absence approved by the Board or the Committee; provided that
such leave is for a period of not more than the greatest of (i) 90 days, (ii)
the date of the resumption of such service upon the expiration of such leave
which is guaranteed by contract or statute or is provided in a written policy of
the Company which was in effect upon the commencement of such leave, or (iii)
such period of leave as may be determined by the Board or the Committee in its
sole discretion.
(g) "Employee" means any person employed by the Company or any Parent
or Subsidiary of the Company, including employees who are also officers or
directors or both of the Company or any Parent or Subsidiary of the Company. The
payment of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
2
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated thereunder.
(i) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code, and the
rules and regulations promulgated thereunder.
(j) "Non-Employee Director" shall have the meaning set forth in Rule
16b-3(b)(3)(i), or any successor definition adopted by the Commission, provided
the person is also an "outside director" under Section 162(m) of the Code.
(k) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(l) "Option" means a stock option granted pursuant to this Plan.
(m) "Optioned Stock" means the Common Stock subject to an Option.
(n) "Optionee" means an Employee, Consultant or Outside Director who
receives an Option.
(o) "Outside Director" means any member of the Board of Directors of
the Company who is not an Employee or Consultant.
(p) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(q) "Plan" means this Nanophase Technologies Corporation Amended and
Restated 1992 Stock Option Plan, as amended from time to time.
(r) "Rule 16b-3" means Rule 16b-3, as promulgated by the Securities
and Exchange Commission under Section 16(b) of the Exchange Act, as such rule is
amended from time to time and as interpreted by the Securities and Exchange
Commission.
(s) "Share" means a share of the Common Stock, as adjusted in
accordance with Section of this Plan.
(t) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Scope of Plan. Subject to Section 10 of this Plan, and unless
otherwise amended by the Board and approved by the stockholders of the Company
as required by law, the maximum aggregate number of Shares issuable under this
Plan is 3,563,440, 3,413,440 of which shall be reserved for issuance to
Employees and Consultants and 150,000 of which shall be reserved for issuance to
Outside Directors, and such Shares are hereby made available and shall be
reserved for issuance under this Plan. The Shares may be authorized but
unissued, or reacquired, Common Stock.
2
3
If an Option expires or becomes unexercisable for any reason without
having been exercised in full, the unpurchased Shares subject thereto shall
(unless this Plan shall have terminated) become available for grants of other
Options under this Plan.
4. Administration of Plan.
(a) Procedure. Except as otherwise determined by the Board, this
Plan shall be administered by the Committee. The Committee shall consist of two
or more Outside Directors appointed by the Board, but all Committee members must
be Non-Employee Directors. If the Board fails to appoint such persons, the
Committee shall consist of all Outside Directors who are Non-Employee Directors.
(b) Powers of Committee. Subject to Section 5(b) below and otherwise
subject to the provisions of this Plan, the Committee shall have full and final
authority in its discretion to: (i) grant Incentive Stock Options and
Nonstatutory Stock Options, (ii) determine, upon review of relevant information
and in accordance with Section below, the Fair Market Value of the Common Stock;
(iii) determine the exercise price per share of Options to be granted, in
accordance with this Plan, (iv) determine the Employees and Consultants to whom,
and the time or times at which, Options shall be granted, and the number of
shares to be represented by each Option; (v) cancel, with the consent of the
Optionee, outstanding Options and grant new Options in substitution therefor;
(vi) interpret this Plan; (vii) accelerate or defer (with the consent of
Optionee) the exercise date of any Option; (viii) prescribe, amend and rescind
rules and regulations relating to this Plan; (ix) determine the terms and
provisions of each Option granted (which need not be identical) by which Options
shall be evidenced and, with the consent of the holder thereof, modify or amend
any provisions (including without limitation provisions relating to the exercise
price and the obligation of any Optionee to sell purchased Shares to the Company
upon specified terms and conditions) of any Option; (x) require withholding from
or payment by an Optionee of any federal, state or local taxes; (xi) appoint and
compensate agents, counsel, auditors or other specialists as the Committee deems
necessary or advisable; (xii) correct any defect or supply any omission or
reconcile any inconsistency in this Plan and any agreement relating to any
Option, in such manner and to such extent the Committee determines to carry out
the purposes of this Plan, and; (xiii) construe and interpret this Plan, any
agreement relating to any Option, and make all other determinations deemed by
the Committee to be necessary or advisable for the administration of this Plan.
A majority of the Committee shall constitute a quorum at any meeting,
and the acts of a majority of the members present, or acts unanimously approved
in writing by the entire Committee without a meeting, shall be the acts of the
Committee. A member of the Committee shall not participate in any decisions with
respect to himself under this Plan.
(c) Effect of Committee's Decision. All decisions, determinations
and interpretations of the Committee shall be final and binding on all Optionees
and any other holders of any Options granted under this Plan.
3
4
5. Eligibility.
(a) Options may be granted to any Employee, Consultant or Outside
Director as the Committee may from time to time designate, provided that (i)
Incentive Stock Options may be granted only to Employees, and (ii) Options may
be granted to Outside Directors only in accordance with the provisions of
Section 5(b) below. In selecting the individuals to whom Options shall be
granted, as well as in determining the number of Options granted, the Committee
shall take into consideration such factors as it deems relevant in connection
with accomplishing the purpose of this Plan. Subject to the provisions of
Section above, an Optionee may, if he or she is otherwise eligible, be granted
an additional Option or Options if the Committee shall so determine. During any
calendar year, Options for no more than 100,000 shares of Common Stock shall be
granted to any individual Employee, Consultant or Outside Director.
(b) All grants of Options to Outside Directors under this Plan shall
be automatic and non-discretionary and shall be made strictly in accordance with
the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted options or to determine the number of Shares to be
covered by options granted to Outside Directors; provided, that nothing in this
Plan shall be construed to prevent an Outside Director from declining to receive
an Option under this Plan.
(ii) Each Outside Director who is first elected to the Board after
the adoption of this Plan shall be automatically granted on the date of such
election (whether by the stockholders or by the Board of Directors) an Option to
purchase 10,000 Shares (subject to adjustment as provided in Section 10 below,
following consummation of an initial public offering of the Company's
securities). On the date of the Annual Meeting of Stockholders of the Company in
each calendar year commencing with the first Annual Meeting of the Stockholders
of the Company held after the adoption of this Plan, each Outside Director who
is elected or reelected at that meeting, or whose term of office does not expire
at that meeting, shall be automatically granted an option to purchase 2,000
Shares (subject to adjustment as provided in Section 10 below, following
consummation of an initial public offering of the Company's securities);
provided that no such automatic annual grant shall be made to an Outside
Director (i) who is first elected to the Board at such Annual Meeting or was
first elected to the Board within three months prior to such Annual Meeting, or
(ii) if there are not sufficient shares remaining and available to all Outside
Directors eligible for an automatic annual grant at the time at which an
automatic annual grant would otherwise be made under this Section 5(b).
(iii) The terms of each Option granted under this Section 5(b) shall be
as follows:
(A) the term of the option shall be ten (10) years;
(B) the Option shall become exercisable cumulatively with
respect to one-third of the Shares on each of the first, second
and third anniversaries of the date of grant; provided, however,
that in no
4
5
event shall any option be exercisable prior to obtaining
stockholder approval of this Plan; and
(C) the exercise price per share of Common Stock shall be 100%
of the "Fair Market Value" (as defined in Section 7(b) below) on
the date of grant of the Option.
(c) Each Option granted under Section 5(b) above shall be a Nonstatutory
Stock Option. Each other Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
Notwithstanding such designations, if and to the extent that the aggregate Fair
Market Value of the Shares with respect to which Options designated as Incentive
Stock Options are exercisable for the first time by any Optionee during any
calendar year (under all plans of the Company) exceeds $100,000, such options
shall be treated as Nonstatutory Stock Options. For purposes of this Section
5(c), Options shall be taken into account in the order in which they are
granted, and the Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(d) This Plan shall not confer upon any Optionee any right with respect
to continuation of employment by or the rendition of services to the Company or
any Parent or Subsidiary, nor shall it interfere in any way with his or her
right or the right of the Company or any Parent or Subsidiary to terminate his
or her employment or services at any time, with or without cause. The terms of
this Plan or any Options granted hereunder shall not be construed to give any
Optionee the right to any benefits not specifically provided by this Plan or in
any manner modify the Company's right to modify, amend or terminate any of its
pension or retirement plans.
6. Term of Plan. This Plan shall become effective upon the later to
occur of its adoption by the Board of Directors of the Company (such adoption to
include the approval of at least two Outside Directors) or its approval by vote
of the holders of a majority of the outstanding shares of the Company entitled
to vote on the adoption of this Plan, and shall terminate no later than December
31, 2007. No grants shall be made under this Plan after the date of termination
of this Plan. Any termination, either partially or wholly, shall not affect any
Options then outstanding under this Plan.
7. Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the Committee
as follows:
(i) In the case of an Incentive Stock Option granted to any
Employee, the per Share exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant, but if granted to an Employee who,
at the time of the grant of such Incentive Stock Option, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.
5
6
(ii) In the case of an Incentive Stock Option granted to any person
other than an Outside Director, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant, but if
granted to an Employee who, at the time of the grant of such Incentive Stock
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant. The exercise price of Options granted pursuant to
Section 5(b) above shall be 100% of the Fair Market Value on the date of grant
of the Option.
For purposes of this Section 7(a), if an Option is amended to reduce the
exercise price, the date of grant of such option shall thereafter be considered
to be the date of such amendment.
(iii) With respect to (i) or (ii) above, the per Share exercise price is
subject to adjustment as provided in Section 10 below.
(b) Fair Market Value. The "Fair Market Value" of the Common Stock
shall be determined by the Committee in its discretion; provided, that if the
Common Stock is listed on a stock exchange, the Fair Market Value per Share
shall be the closing price on such exchange on the date of grant of the Option
as reported in the Wall Street Journal (or, (i) if not so reported, as otherwise
reported by the exchange, and (ii) if not reported on the date of grant, then on
the last prior date on which a sale of the Common Stock was reported); or if not
listed on an exchange but traded on the National Association of Securities
Dealers Automated Quotation National Market System ("NASDAQ"), the Fair Market
Value per Share shall be the closing price per share of the Common Stock for the
date of grant, as reported in the Wall Street Journal (or, (i) if not so
reported, as otherwise reported by NASDAQ, and (ii) if not reported on the date
of grant, then on the last prior date on which a sale of the Common Stock was
reported); or, if the Common Stock is otherwise publicly traded, the mean of the
closing bid price and asked price for the last known sale.
(c) Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the methods of payment described in
Section 8(b)(ii) below, shall be determined by the Committee (and in the case of
an Incentive Stock Option, shall be determined at the time of grant) to the
extent permitted under applicable laws.
(d) Withholding. No later than the date as of which an amount first
becomes includable in the gross income of the Optionee for Federal income tax
purposes with respect to an option, the Optionee shall pay to the Company (or
other entity identified by the Committee), or make arrangements satisfactory to
the Company or other entity identified by the Committee regarding the payment
of, any Federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Committee, withholding obligations may be settled with Common Stock, including
Common Stock underlying the subject option, provided that any applicable
requirements under Section 16 of the Exchange Act are satisfied so as to avoid
6
7
liability thereunder. The obligations of the Company under this Plan shall be
conditional upon such payment or arrangements, and the Company shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Optionee.
8. Options.
(a) Term of Option. The term of each Option granted (other than an
Option granted under Section 5(b) above) shall be for a period of no more than
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Option agreement. However, in the case of an Option granted to
an Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter time as may be provided in
the Option Agreement.
(b) Exercise of Options.
(i) Procedure for Exercise; Rights as a Shareholder. Any Option
granted under this Plan (other than an Option granted pursuant to Section 5(b)
above) shall be exercisable at such times and under such conditions as
determined by the Committee, including performance criteria with respect to the
Company and/or the Optionee, and as shall otherwise be permissible under the
terms of this Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Committee, consist of any
consideration and method of payment allowable under Section 7 of this Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. If the
exercise of an Option is treated in part as the exercise of an Incentive Stock
Option and in part as the exercise of a Nonstatutory Stock Option pursuant to
Section 5(b) above, the Company shall issue a separate stock certificate
evidencing the Shares treated as acquired upon exercise of an Incentive Stock
Option and a separate stock certificate evidencing the Shares treated as
acquired upon exercise of a Nonstatutory Stock Option and shall identify each
such certificate accordingly in its stock transfer records. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section of this
Plan.
7
8
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of this
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(ii) Method of Exercise. An Optionee may exercise an Option, in whole
or in part, at any time during the option period by the Optionee's giving
written notice of exercise on a form provided by the Committee (if available) to
the Company specifying the number of shares of Common Stock subject to the
Option to be purchased. Such notice shall be accompanied by payment in full of
the purchase price by cash or check or such other form of payment as the Company
may accept. If approved by the Committee, payment in full or in part may also be
made (A) by delivering other Shares of Common Stock which (I) either have been
owned by the Optionee for more than six (6) months on the date of surrender or
were not acquired directly or indirectly from the Company, and (II) have a Fair
Market Value on the date of surrender (determined without regard to any
limitations on transferability imposed by securities laws) equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised; (B) by the execution and delivery of a note or other evidence of
indebtedness (and any security agreement thereunder) satisfactory to the
Committee; (C) by authorizing the Company to retain shares of Common Stock which
would otherwise be issuable upon exercise of the Option having a total Fair
Market Value on the date of delivery equal to the exercise price of the subject
Option; (D) by the delivery of cash by a broker-dealer to whom the Optionee has
submitted an irrevocable notice of exercise (in accordance with Part 220,
Chapter II, Title 12 of the Code of Federal Regulations, so-called "cashless"
exercise); or (E) by any combination of the foregoing. In the case of an
Incentive Stock Option, the right to make a payment in the form of already owned
shares of Common Stock of the same class as the Common Stock subject to the
Option may be authorized only at the time the Option is granted. No shares of
Common Stock shall be issued until full payment therefor has been made. An
Optionee shall have all of the rights of a shareholder of the Company holding
the class of Common Stock that is subject to such Option (including, if
applicable, the right to vote the shares and the right to receive dividends),
when the Optionee has given written notice of exercise, has paid in full for
such shares and such shares have been recorded on the Company's official
shareholder records as having been issued or transferred.
(iii) Termination of Status as an Employee, Consultant or Outside
Director. If an Optionee's Continuous Status as an Employee, Consultant or
Outside Director (as the case may be) is terminated for any reason whatever,
such Optionee may, but only within such period of time as provided in the Option
agreement, after the date of such termination (but in no event later than the
date of expiration of the term of such Option as set forth in the Option
agreement), exercise the Option to the extent that such Employee, Consultant or
Outside Director was entitled to exercise it at the date of such termination
pursuant to the terms of the Option agreement. To the extent that such Employee,
Consultant or Outside Director was not entitled to exercise the Option at the
date of such termination, or if such Employee, Consultant or Outside Director
does not exercise such Option (which such Employee, Consultant or Outside
Director was entitled to exercise) within the time specified in the Option
agreement, the Option shall terminate.
8
9
(iv) Company Loan or Guarantee. Upon the exercise of any Option and
subject to the pertinent Option agreement and the discretion of the Committee,
the Company may at the request of the Optionee; (A) lend to the Optionee, with
recourse, an amount equal to such portion of the option exercise price as the
Committee may determine; or (B) guarantee a loan obtained by the Optionee from a
third-party for the purpose of tendering the option exercise price.
9. Non-transferability of Options. Except as otherwise provided in
an Option agreement, an Option granted hereunder shall by its terms not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or the laws of descent and distribution. Except as otherwise
provided in an Option agreement, an Option may be exercised during the
Optionee's lifetime only by the Optionee.
10. Adjustments Upon Changes in Capitalization or Merger.
(a) Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock which have
been authorized for issuance under this Plan but as to which no Options have yet
been granted or which have been returned to this Plan upon cancellation or
expiration of an Option, and the number of shares of Common Stock subject to
each outstanding Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock of the Company or the payment of a stock
dividend with respect to the Common Stock. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Committee. The Committee may, in the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Committee and give each Optionee the right to exercise his or
her Option as to all or any part of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable.
(c) Sale or Merger. "Sale" means: (i) sale (other than a sale by the
Company) of securities entitled to more than 75% of the voting power of the
Company in a single transaction or a related series of transactions; or (ii)
sale of substantially all of the assets of the Company; or (iii) approval by the
stockholders of the Company of a reorganization, merger or consolidation of the
Company, as a result of which the persons who were the stockholders of the
Company immediately prior to such reorganization, merger or consolidation do not
own securities immediately after the reorganization, merger or consolidation
entitled to more than 25% of the voting power of the reorganized, merged or
consolidated company. Immediately prior to a Sale, each Optionee may exercise
his or her Option as to all Shares then subject to the Option, regardless of any
vesting conditions
9
10
otherwise expressed in the Option. Voting power, as used in this Section 10(c),
shall refer to those securities entitled to vote generally in the election of
directors, and securities of the Company not entitled to vote but which are
convertible into, or exercisable for, securities of the Company entitled to vote
generally in the election of directors shall be counted as if converted or
exercised, and each unit of voting securities shall be counted in proportion to
the number of votes such unit is entitled to cast.
(d) Purchased Shares. No adjustment under this Section 10 shall
apply to any purchased Shares already deemed issued at the time any adjustment
would occur.
(e) Notice of Adjustments. Whenever the purchase price or the number
or kind of securities issuable upon the exercise of the Option shall be adjusted
pursuant to Section 10, the Company shall give each Optionee written notice
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, and the method by which such adjustment was
calculated.
(f) Certain Cash Payments. If an Optionee would not be permitted to
exercise an Option or any portion thereof (for purposes of this subsection (f)
only, each such Option being referred to as a "Subject Option") or dispose of
the Shares received upon the exercise thereof without loss or liability (other
than a loss or liability for the exercise price, applicable withholding or any
associated transactional cost), or if the Board determines that the Optionee may
not be permitted to exercise the same rights or receive the same consideration
with respect to the Sale of the Company as a shareholder of the Company with
respect to any Subject Options or portion thereof or the Shares received upon
the exercise thereof, then notwithstanding any other provision of this Plan and
unless the Committee shall provide otherwise in an agreement with such Optionee
with respect to any Subject Options, such Optionee shall have the right, whether
or not the Subject Option is fully exercisable or may be otherwise realized by
the Optionee, by giving notice during the 60-day period from and after a Sale to
the Company, to elect to surrender all or part of any Subject Options to the
Company and to receive cash, within 30 days of such notice, in an amount equal
to the amount by which the "Sale Price" (as defined herein) per share of Common
Stock on the date of such election shall exceed the amount which the Optionee
must pay to exercise the Subject Options per share of Common Stock under such
Subject Options (the "Spread") multiplied by the number of shares of Common
Stock granted under the Subject Options as to which the right granted hereunder
shall be applicable and shall have been exercised; provided, however, that if
the end of such 60- day period from and after a Sale is within six months of the
date of grant of a Subject Option held by an Optionee (except an Optionee who
has deceased during such six month period) who is an officer or director of the
Company (within the meaning of Section 16(b) of the Exchange Act), such Subject
Option shall be canceled in exchange for a payment to the Optionee, effective on
the day which is six months and one day after the date of grant of such Subject
Option, equal to the Spread multiplied by the number of shares of Common Stock
granted under the Subject Option. With respect to any Optionee who is an officer
or director of the Company (within the meaning of Section 16(b) of the Exchange
Act), the 60-day period shall be extended, if necessary, to include the "window
period" of Rule 16(b)-3 which first commences on or after the date of the Sale,
and the Committee shall have sole discretion, if necessary, to approve the
Optionee's exercise
10
11
hereunder and the date on which the Spread is calculated may be adjusted, if
necessary, to a later date if necessary to avoid liability to such Optionee
under Section 16(b). For purposes of the Plan, "Sale Price" means the higher of
(a) the highest reported sales price of a share of Common Stock in any
transaction reported on the principal exchange on which such shares are listed
or on NASDAQ during the 60-day period prior to and including the date of a Sale
or (b) if the Sale is the result of a tender or exchange offer or a corporate
transaction, the highest price per share of Common Stock paid in such tender or
exchange offer or a corporate transaction, except that, in the case of Incentive
Stock Options, such price shall be based only on the Fair Market Value of the
Common Stock on the date such Incentive Stock Option is exercised. To the extent
that the consideration paid in any such transaction described above consists all
or in part of securities or other non-cash consideration, the value of such
securities or other non-cash consideration shall be determined in the sole
discretion of the Committee.
(g) Mitigation of Excise Tax. If any payment or right accruing to an
Optionee under this Plan (without the application of this Section), either alone
or together with other payments or rights accruing to the Optionee from the
Company or an affiliate ("Total Payments") would constitute a "parachute
payment" (as defined in Section 280G of the Code and regulations thereunder),
the Committee may in each particular instance determine to (a) reduce such
payment or right to the largest amount or greatest right that will result in no
portion of the amount payable or right accruing under the Plan being subject to
an excise tax under Section 4999 of the Code or being disallowed as a deduction
under Section 280G of the Code, or (b) take such other actions, or make such
other arrangements or payments with respect to any such payment or right as the
Committee may determine in the circumstances. Any such determination shall be
made by the Committee in the exercise of its sole discretion, and such
determination shall be conclusive and binding on the Optionee. The Optionee
shall cooperate as may be requested by the Committee in connection with the
Committee's determination, including providing the Committee with such
information concerning such Optionee as the Committee may deem relevant to its
determination.
11. Time of Granting Options. The date of grant of an Option shall,
for all purposes, be the date on which the Committee makes the determination
granting such Option. Notice of the determination shall be given to each
Employee, Consultant or Outside Director to whom an Option is so granted within
a reasonable time after the date of such grant. If the Committee cancels, with
the consent of Optionee, any Option granted under this Plan, and a new Option is
substituted therefor, the date that the canceled Option was originally granted
shall be the date used to determine the earliest date for exercising the new
substituted Option under Section 7 of this Plan so that the Optionee may
exercise the substituted Option at the same time as if the Optionee had held the
substituted Option since the date the canceled Option was granted.
11
12
12. Amendment and Termination of Plan.
(a) Amendment and Termination. The Board or the Committee may amend,
waive or terminate this Plan from time to time in such respects as it shall deem
advisable; provided that, to the extent necessary to comply with Rule 16b-3 or
with Section 422 of the Code (or any other successor or applicable law or
regulation), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as is required by the applicable law, rule
or regulation.
(b) Effect of Amendment or Termination. Any such amendment or
termination of this Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Committee, which agreement must be in writing and signed by the Optionee and
the Company.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, and the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
14. Restrictions on Shares. Shares of Common Stock issued upon
exercise of an Option shall be subject to the terms and conditions specified
herein and to such other terms, conditions and restrictions as the Committee in
its discretion may determine or provide in the grant. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock, cash
or other property prior to (i) the listing of such shares on any stock exchange
(or other public market) on which the Common Stock may then be listed (or
regularly traded), (ii) the completion of any registration or qualification of
such shares under federal or state law, or any ruling or regulation of any
government body which the Committee determines to be necessary or advisable, and
(iii) the satisfaction of any applicable withholding obligation in order for the
Company or an affiliate to obtain a deduction with respect to the exercise of an
Option. The Company may cause any certificate for any share of Common Stock to
be delivered to be properly marked with a legend or other notation reflecting
the limitations on transfer of such Common Stock as provided in this Plan or as
the Committee may otherwise require. The Committee may require any person
exercising an Option to make such representations and furnish such information
as it may consider appropriate in connection with the issuance or delivery of
the shares of Common Stock in compliance with applicable law or otherwise.
12
13
Fractional shares shall not be delivered, but shall be rounded to the next lower
whole number of shares.
15. Shareholder Rights. No person shall have any rights of a
shareholder as to shares of Common Stock subject to an Option until, after
proper exercise of the Option or other action required, such shares shall have
been recorded on the Company's official shareholder records as having been
issued or transferred. Subject to the preceding Section and upon exercise of the
Option or any portion thereof, the Company will have thirty (30) days in which
to issue the shares, and the Optionee will not be treated as a shareholder for
any purpose whatsoever prior to such issuance. No adjustment shall be made for
cash dividends or other rights for which the record date is prior to the date
such shares are recorded as issued or transferred in the Company's official
shareholder records, except as provided herein or in an agreement.
16. Registration. If there has been a public offering of the
Company's Common Stock, the Company may register under the Securities Act the
Common Stock delivered or deliverable pursuant to Options on Commission Form S-8
if available to the Company for this purpose (or any successor or alternate form
that is substantially similar to that form to the extent available to effect
such registration), in accordance with the rules and regulations governing such
forms, as soon as such forms are available for registration to the Company for
this purpose. The Company will, if it so determines, use its good faith efforts
to cause the registration statement to become effective as soon as possible and
will file such supplements and amendments to the registration statement as may
be necessary to keep the registration statement in effect until the earliest of
(a) one year following the expiration of the option period of the last Option
outstanding, (b) the date the Company is no longer a reporting company under the
Exchange Act and (c) the date all Optionees have disposed of all shares
delivered pursuant to any Option. The Company may delay the foregoing actions at
any time and from time to time if the Committee determines in its discretion
that any such registration would materially and adversely affect the Company's
interests or if there is no material benefit to Optionees.
17. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to permit the exercise of all Options outstanding under this
Plan. The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained for any
reason.
18. Option Agreements. Options shall be evidenced by written Option
agreements in such form as the Committee shall approve.
19. Information to Optionees. To the extent required by applicable
law, the Company shall provide to each Optionee, during the period for which
such Optionee has one or more Options outstanding, copies of all annual reports
and other information which are provided to all stockholders of the Company.
Except as otherwise noted in the
13
14
foregoing sentence, the Company shall have no obligation or duty to
affirmatively disclose to any Optionee, and no Optionee shall have any right to
be advised of, any material information regarding the Company or any Parent or
Subsidiary at any time prior to, upon or otherwise in connection with, the
exercise of an Option.
20. Funding. Benefits payable under this Plan to any person shall be
paid directly by the Company. The Company shall not be required to fund or
otherwise segregate assets to be used for payment of benefits under this Plan.
21. Controlling Law. This Plan shall be governed by the laws of the
state of incorporation of the Company at the time of determination of any issues
raised with respect to the interpretation or enforcement of this Plan, without
application of any conflict of laws principles.
14
15
FIRST AMENDMENT TO
THE NANOPHASE TECHNOLOGIES CORPORATION
AMENDED AND RESTATED 1992 STOCK OPTION PLAN
RESOLVED, that the Nanophase Technologies Corporation Amended and Restated
1992 Stock Option Plan (the "Plan") be and hereby is amended, subject to
shareholder approval, as follows:
I
Section 3 (which describes the maximum aggregate number of shares of
Common Stock issuable under the Plan) hereby is amended by deleting the first
sentence of the first paragraph and inserting in its place the following
sentence:
"Subject to Section 10 of this Plan, and unless
otherwise amended by the Board and approved by the
stockholders of the Company as required by law, the
maximum aggregate number of Shares issuable under this
Plan is 4,763,440, 4,613,440 of which shall be reserved
for issuance to Employees and Consultants and 150,000
of which shall be reserved for issuance to Outside
Directors, and such Shares are hereby made available
and shall be reserved for issuance under this Plan."
II
In all other respects, the Plan shall continue in full force
and effect.