EXHIBIT 99.1
CHAD THERAPEUTICS, INC.
2004 STOCK INCENTIVE PLAN
1. ESTABLISHMENT, EFFECTIVE DATE AND TERM
Chad Therapeutics, Inc., a California corporation, hereby establishes the
"Chad Therapeutics, Inc. 2004 Stock Incentive Plan." The Effective Date of the
Plan shall be the date that the Plan was approved by the shareholders of the
Company in accordance with its By-laws and the laws of the State of California,
or such later date as provided in the resolutions adopting the Plan. Unless
earlier terminated pursuant to Section 13(i) hereof, the Plan shall terminate on
the tenth anniversary of the Effective Date. Capitalized terms used herein are
defined in Appendix 1 attached hereto.
2. PURPOSE
The purpose of the Plan is to advance the interests of the Company by
allowing the Company to attract, retain, reward and motivate Eligible
Individuals by providing them with an opportunity to acquire or increase a
proprietary interest in the Company and incentives to expend maximum effort for
the growth and success of the Company so as to strengthen the mutuality of the
interests between the Eligible Individuals and the shareholders of the Company.
3. ELIGIBILITY
Awards may be granted under the Plan to any Eligible Individual as
determined by the Committee from time to time on the basis of their importance
to the business of the Company pursuant to the terms of the Plan.
4. ADMINISTRATION
(a) Committee. The Plan shall be administered by the Committee, which
shall have the full power and authority to take all actions, and to make all
determinations not inconsistent with the specific terms and provisions of the
Plan deemed by the Committee to be necessary or appropriate to the
administration of the Plan, any Award granted or any Award Agreement entered
into hereunder. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Award Agreement in the manner
and to the extent it shall deem expedient to carry the Plan into effect as it
may determine in its sole discretion. The decisions by the Committee shall be
final, conclusive and binding with respect to the interpretation and
administration of the Plan, any Award or any Award Agreement entered into under
the Plan.
(b) Advisors to Committee. The Committee may designate employees of the
Company and professional advisors to assist the Committee in the administration
of the Plan and may grant authority to employees of the Company to execute
agreements or other documents on behalf of the Committee in connection with the
administration of the Plan. The Committee may employ such legal counsel,
consultants, and agents as it may deem desirable for the administration of the
Plan and may rely upon any advice and any computation received from any such
counsel, consultant, or agent. The Company shall pay all expenses and costs
incurred by the Committee for the engagement of any such counsel, consultant, or
agent.
(c) Participants Outside the U.S. In order to conform with the provisions
of local laws and regulations in foreign countries in which the Company
operates, the Committee shall have the sole discretion to (i) modify the terms
and conditions of the Awards granted under the Plan to Eligible Individuals
located outside the United States; (ii) establish subplans with such
modifications as may be necessary or advisable under the circumstances present
by local laws and regulations; and (iii) take any action which it deems
advisable to comply with or otherwise reflect any necessary governmental
regulatory procedures, or to obtain any exemptions or approvals necessary with
respect to the Plan or any subplan established hereunder.
(d) Liability and Indemnification. No Covered Individual shall be liable
for any action or determination made in good faith with respect to the Plan, any
Award granted or any Award Agreement entered into hereunder. The Company shall,
to the maximum extent permitted by applicable law and the Articles of
Incorporation and By-Laws of the Company, indemnify and hold harmless each
Covered Individual against any cost or expense (including reasonable attorney
fees reasonably acceptable to the Company) or liability (including any amount
paid in settlement of a claim with the approval of the Company), and amounts
advanced to such Covered Individual necessary to pay the foregoing at the
earliest time and to the fullest extent permitted, arising out of any act or
omission to act in connection with the Plan, any Award granted or any Award
Agreement entered into hereunder. Such indemnification shall be in addition to
any rights of indemnification such individuals may have under applicable law or
under the Articles of Incorporation or By-Laws of the Company. Notwithstanding
anything else herein, this indemnification will not apply to the actions or
determinations made by a Covered Individual with regard to Awards granted to
such Covered Individual under the Plan or arising out of such Covered
Individual's own fraud or bad faith.
5. COMMON STOCK
(a) Shares Available for Awards. The Common Stock that may be issued
pursuant to Awards granted under the Plan shall be treasury shares or authorized
but unissued shares of the Common Stock. The total number of shares of Common
Stock that may be issued pursuant to Awards granted under the Plan shall be
Seven Hundred Fifty Thousand (750,000) shares, subject to adjustment as provided
in the Plan. The available shares shall be allocated by the Committee among the
Awards that may be granted under the Plan as the Committee deems appropriate.
(b) Section 162(m) Per-Participant Limit. The aggregate maximum number of
shares of Common Stock with respect to which Awards may be granted to any
Participant under the Plan shall be 250,000 shares. No more than 100,000 shares
of Common Stock may be subject to grants of Options and Stock Appreciation Right
to any one Eligible Individual during any one fiscal year. No more than 50,000
shares of Common Stock may be subject to grants of Restricted Stock to any one
Eligible Individual during any one fiscal year. The per-Participant limit
described in this Section 5(b) shall be construed and applied consistently with
Section 162(m) of the Code. If an Option is in tandem with a Stock Appreciation
Right, such that the exercise of the Option or Stock Appreciation Right with
respect to a share of Common Stock cancels the tandem Stock Appreciation Right
or Option, respectively, with respect to such share, the tandem Option and Stock
Appreciation Right with respect to each share of Common Stock shall be counted
as covering but one share of Common Stock for purposes of applying the
limitations of this Section.
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(c) Reduction of Shares Available for Awards. Upon the granting of an
Award, the number of shares of Common Stock available under this Section hereof
for the granting of further Awards shall be reduced by the number of shares of
Common Stock subject to the Award. Shares issued in accordance with Section 7 in
settlement of a Stock Appreciation Right shall count against authorized shares
of Common Stock available for Awards, but only to the extent of the shares
issued, not to the extent of the number of underlying Stock Appreciation Right.
(d) Cancelled, Forfeited, or Surrendered Awards. If any Award is
cancelled, forfeited, exchanged, surrendered or terminated for any reason prior
to exercise or becoming vested in full, the shares of Common Stock that were
subject to such Award will to the extent cancelled, forfeited, exchanged,
surrendered or terminated be available for future Awards granted under the Plan
as if said Award had never been granted.
(e) Recapitalization. If the outstanding shares of Common Stock are
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company by reason of any
recapitalization, reclassification, reorganization, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock of the Company or other increase or decrease in such
shares effected without receipt of consideration by the Company occurring after
the Effective Date, an appropriate and proportionate adjustment shall be made by
the Committee (i) in the aggregate number and kind of shares of Common Stock
available under the Plan; (ii) in the number and kind of shares of Common Stock
issuable upon exercise (or vesting) of outstanding Awards granted under the
Plan; (iii) in the Exercise Price per share of outstanding Options granted under
the Plan and (iv) the number of shares of Common Stock subject to Awards granted
to Non-Employee Directors under Section 9. No fractional shares of Common Stock
or units of other securities shall be issued pursuant to any such adjustment
under this Section 5(e), and any fractions resulting from any such adjustment
shall be eliminated in each case by rounding downward to the nearest whole share
or unit. Any adjustments made under this Section 5(e) with respect to any
Incentive Stock Options must be made in accordance with Code Section 424.
6. OPTIONS
(a) Grant of Options. Subject to the terms and conditions of the Plan, the
Committee may grant to Eligible Individuals Options to purchase such number of
shares of Common Stock on such terms and conditions as the Committee may
determine. Each grant of an Option must satisfy the requirements set forth in
this Section. The Committee may establish terms and conditions governing the
vesting of any Options granted. Such terms and conditions may include, without
limitation, time based vesting as well as vesting based upon the achievement of
individual, group or Company performance criteria.
(b) Type of Options. Each Option granted under the Plan may be designated
by the Committee, in its sole discretion, as either (i) an Incentive Stock
Option, or (ii) a Non-qualified Stock Option. Options designated as Incentive
Stock Options that fail to continue to meet the requirements of Code Section 422
shall be re-designated as Non-qualified Stock Options automatically on the date
of such failure to continue to meet such requirements without further action by
the Committee. In the absence of any designation, Options granted under the Plan
will be deemed to be Non-qualified Stock Options.
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(c) Exercise Price. Subject to the limitations set forth in the Plan
relating to Incentive Stock Options, the Exercise Price of an Option shall be
fixed by the Committee and stated in the respective Award Agreement, provided
that the Exercise Price may not be less than Fair Market Value of the Common
Stock, or if greater, the par value of the Common Stock, as of the Grant Date of
the total number of shares of Common Stock that are subject to such Option.
(d) Limitation on Option Period. Subject to the limitations set forth in
the Plan relating to Incentive Stock Options, Options granted under the Plan and
all rights to purchase Common Stock thereunder shall terminate no later than the
tenth anniversary of the Grant Date of such Options, or on such earlier date as
may be stated in the Award Agreement relating to such Option. In the case of
Options expiring prior to the tenth anniversary of the Grant Date, the Committee
may in its discretion, at any time prior to the expiration or termination of
said Options, extend the term of any such Options for such additional period as
it may determine, but in no event beyond the tenth anniversary of the Grant Date
thereof.
(e) Limitations on Incentive Stock Options. Notwithstanding any other
provisions of the Plan, the following provisions shall apply with respect to
Incentive Stock Options granted pursuant to the Plan.
(i) Limitation on Grants. Incentive Stock Options may only be
granted to Section 424 Employees. The aggregate Fair Market Value
(determined at the time such Incentive Stock Option is granted) of the
shares of Common Stock for which any individual may have Incentive Stock
Options which first become vested and exercisable in any calendar year
(under all incentive stock option plans of the Company) shall not exceed
$100,000. Options granted to such individual in excess of the $100,000
limitation, and any Options issued subsequently which first become vested
and exercisable in the same calendar year, shall be treated as
Non-qualified Stock Options.
(ii) Minimum Exercise Price. In no event may the Exercise
Price of an Incentive Stock Option be less than 100% of the aggregate Fair
Market Value as of the Grant Date of the total number of shares of Common
Stock that are subject to such Incentive Stock Option.
(iii) Ten Percent Shareholder. Notwithstanding any other
provision of the Plan to the contrary, in the case of Incentive Stock
Options granted to a Section 424 Employee who, at the time the Option is
granted, owns (after application of the rules set forth in Code Section
424(d)) stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company, such Incentive Stock
Options (i) must have an Exercise Price that is at least 110% of the
aggregate Fair Market Value as of the Grant Date of the total number of
shares of Common Stock that are subject to such Option, and (ii) must not
be exercisable after the fifth anniversary of the Grant Date.
(f) Vesting Schedule and Conditions. No Options may be exercised prior to
the satisfaction of the conditions and vesting schedule provided for in the
Award Agreement relating thereto. Unless otherwise provided in the applicable
Award Agreement, Options will vest and
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become exercisable on each anniversary of the Grant Date in equal annual
installments over four (4) years following the Grant Date of the Option.
(g) Exercise. When the conditions to the exercise of an Option have been
satisfied, the Participant may exercise the Option only in accordance with the
following provisions. The Participant shall deliver to the Company a written
notice stating that the Participant is exercising the Option and specifying the
number of shares of Common Stock which are to be purchased pursuant to the
Option, and such notice shall be accompanied by payment in full of the Exercise
Price of the shares for which the Option is being exercised, by one or more of
the methods provided for in the Plan. Said notice must be delivered to the
Company at its principal office and addressed to the attention of the Company's
Chief Financial Officer. The minimum number of shares of Common Stock with
respect to which an Option may be exercised, in whole or in part, at any time
shall be the lesser of 100 shares or the maximum number of shares available for
purchase under the Option at the time of exercise. An attempt to exercise any
Option granted hereunder other than as set forth in the Plan shall be invalid
and of no force and effect.
(h) Payment. Payment of the Exercise Price for the shares of Common Stock
purchased pursuant to the exercise of an Option shall be made by one of the
following methods:
(i) by cash, certified or cashier's check, bank draft or money
order; or
(ii) through the delivery to the Company of shares of Common
Stock which have been previously owned by the Participant for the
requisite period necessary to avoid a charge to the Company's earnings for
financial reporting purposes; such shares shall be valued, for purposes of
determining the extent to which the Exercise Price has been paid thereby,
at their Fair Market Value on the date of exercise; without limiting the
foregoing, the Committee may require the Participant to furnish an opinion
of counsel acceptable to the Committee to the effect that such delivery
would not result in the Company incurring any liability under Section
16(b) of the Exchange Act.
Notwithstanding the foregoing, the Committee may, in its sole and absolute
discretion and to the extent permitted by applicable law, permit such payment to
be made by one of the following methods or in any combination thereof as it may
determine: (i) through a "cashless exercise sale and remittance procedure"
pursuant to which the Participant shall concurrently provide irrevocable
instructions (1) to a brokerage firm approved by the Committee to effect the
immediate sale of the purchased shares and remit to the Company, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for the purchased shares plus all applicable
Federal, state and local income, employment, excise and other taxes required to
be withheld by the Company by reason of such exercise and (2) to the Company to
deliver the certificates for the purchased shares directly to such brokerage
firm in order to complete the sale; or (ii) any other method as may be permitted
by the Committee.
(i) Termination of Employment, Retirement, Disability, or Death.
The Committee shall have the authority to promulgate rules and regulations to
determine the treatment of a Participant's Award under the Plan in the event of
such Participant's termination of employment or service with the Company for any
reason. In addition, notwithstanding the provisions of this Section 6(i), the
terms of an Award Agreement or the rules and regulations
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promulgated by the Committee in effect from time to time, the Committee may, in
its discretion, accelerate the vesting or exercisability of an Award, eliminate
or make less restrictive any restrictions contained in an Award, waive any
restrictions or other provision of this Plan or an Award or otherwise amend or
modify the Award in any manner that is either: (i) not adverse to such
Participant; or (ii) consented to by such Participant. The following guidelines,
which may be amended by the Committee in its sole discretion, shall apply in
determining the treatment of any unexercised or deferred Awards upon the
termination of the employment or other service of a Participant with the Company
for any reason:
(a) Termination for Cause. If a Participant's termination of
employment or service is for Cause, any Option held by such Participant
shall terminate and expire immediately upon the date of such termination.
(b) Disability. If a Participant's termination of employment or
service with the Company is by reason of a Disability of such Participant,
the Participant shall have the right at any time within a period not to
exceed one (1) year after such termination and prior to termination of the
Option pursuant to its terms, to exercise, in whole or in part, any vested
portion of the Option held by such Participant at the date of such
termination; provided, however, that if the Participant dies within such
period, any vested Option held by such Participant upon death shall be
exercisable by the Participant's estate, devisee or heir at law (whichever
is applicable) for a period not to exceed one (1) year after the
Participant's death and prior to the termination of the Option pursuant to
its terms.
(c) Termination by Reason of Retirement or Without Cause. If a
Participant's termination of employment or service by reason of
Retirement, or the Company terminates Participant's employment or service
for reasons other than Cause or Disability, the Participant shall have the
right at any time within a period not to exceed ninety (90) days from the
date of such termination, and prior to the termination of the Option
pursuant to its terms, to exercise, in whole or in part, any vested
portion of the Option held by such Participant at the date of such
termination; provided, however, that, if the Participant dies within such
exercise period, any vested Option held by such Participant upon death
shall be exercisable by the Participant's estate, devisee or heir at law
(whichever is applicable) for a period not to exceed one (1) year after
the Participant's death and prior to the termination of the Option
pursuant to its terms.
(d) Death. If a Participant dies while in the employment or service
of the Company, the Participant's estate or the devisee named in the
Participant's valid last will and testament or the Participant's heir at
law who inherits the Option has the right, at any time within a period not
to exceed one (1) year after the date of such Participant's death and
prior to termination of the Option pursuant to its terms, to exercise, in
whole or in part, any portion of the vested Option held by such
Participant at the date of such Participant's death.
(e) Voluntary Termination. If a Participant voluntarily terminates
his or her employment or service for reasons other than by Retirement or
Disability or Cause, the Participant shall have the right at any time
within a period not to exceed thirty (30) days from the date of such
termination, and prior to the
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termination of the Option pursuant to its terms, to exercise, in whole or
in part, any vested portion of the Option held by such Participant at the
date of such termination.
7. STOCK APPRECIATION RIGHTS
(a) Grant of Stock Appreciation Rights. Subject to the terms and
conditions of the Plan, the Committee may grant to such Eligible Individuals as
the Committee may determine, Stock Appreciation Rights, in such amounts, as the
Committee shall determine in its sole and absolute discretion. Stock
Appreciation Rights may be granted in tandem with an Option, or may be granted
on a freestanding basis, not related to any Option. Each grant of a Stock
Appreciation Right shall satisfy the requirements as set forth in this Section.
(b) Terms and Conditions of Stock Appreciation Rights. Unless otherwise
provided in an Award Agreement, the terms and conditions (including, without
limitation, the exercise period of the Stock Appreciation Right, the vesting
schedule applicable thereto and the impact of any termination of service on the
Participant's rights with respect to the Stock Appreciation Right) applicable
with respect to (i) Stock Appreciation Rights granted in tandem with an Option
shall be substantially identical (to the extent possible taking into account the
differences related to the character of the Stock Appreciation Right) to the
terms and conditions applicable to the tandem Options, and (ii) freestanding
Stock Appreciation Rights shall be substantially identical (to the extent
possible taking into account the differences related to the character of the
Stock Appreciation Right) to the terms and conditions that would have been
applicable under Section 6 above were the grant of the Stock Appreciation Rights
a grant of an Option. Notwithstanding anything to the contrary, the Committee
may, in its sole and absolute discretion, determine such other terms,
conditions, restrictions and/or limitations, including, without limitation, time
and performance based vesting restrictions, on a Stock Appreciation Right.
(c) Exercise of Stock Appreciation Rights. Stock Appreciation Rights
(regardless of whether free-standing or tandem) shall be exercised by a
Participant only by written notice delivered to the Chief Financial Officer,
specifying the number of shares of Common Stock with respect to which the Stock
Appreciation Right is being exercised. Tandem Stock Appreciation Rights may only
be exercised upon the surrender of the right to exercise the related Option for
an equivalent number of shares of Common Stock and may be exercised only with
respect to the shares of Common Stock for which the related Option is then
exercisable. Upon the exercise of an Option granted in connection with a Stock
Appreciation Right, the related Stock Appreciation Right shall be canceled to
the extent of the number of shares of Common Stock to which the Option was
exercised.
(d) Payment of Stock Appreciation Right. Unless otherwise provided in an
Award Agreement, upon exercise of a Stock Appreciation Right, the Participant or
Participant's estate, devisee or heir at law (whichever is applicable) shall be
entitled to receive payment, in cash, in shares of Common Stock, or in a
combination thereof, as determined by the Committee in its sole and absolute
discretion. The amount of such payment shall be determined by multiplying the
excess, if any, of the Fair Market Value of a share of Common Stock on the date
of exercise over the Fair Market Value of a share of Common Stock on the Grant
Date, by the number of shares of Common Stock with respect to which the Stock
Appreciation Rights are then being exercised. No fractional shares shall be
issued for such payment and the Committee shall determine whether cash shall be
given in lieu of such fractional shares or whether such fractional
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shares shall be eliminated. Notwithstanding the foregoing, the Committee may
specify in an Award Agreement that the amount payable upon the exercise of a
Stock Appreciation Right shall not exceed a designated amount or otherwise limit
in any manner the amount payable with respect to a Stock Appreciation Right.
(e) No Stockholder Rights. No Participant shall have any rights as a
stockholder of the Company with respect to shares of Common Stock subject to a
Stock Appreciation Right until the issuance of shares (if any) to the
Participant pursuant to the exercise of such Stock Appreciation Right.
8. RESTRICTED STOCK
(a) Grant of Restricted Stock. Subject to the terms and conditions of the
Plan and the applicable Award Agreement, the Committee may grant to such
Eligible Individuals as the Committee may determine, Restricted Stock, in such
amounts, as the Committee shall determine in its sole and absolute discretion.
(b) Restrictions. Subject to the terms of the applicable Award Agreement,
the Committee shall impose such restrictions on any Restricted Stock granted
pursuant to the Plan as it may deem advisable including, without limitation,
time based vesting restrictions, restrictions on transferability, and
requirements of continued employment or service, individual performance, group
performance or the performance of the Company.
(c) Certificates and Certificate Legend. With respect to a grant of
Restricted Stock, the Company may issue a certificate evidencing such Restricted
Stock to the Participant or issue and hold such shares of Restricted Stock for
the benefit of the Participant until the applicable restrictions expire. The
Company may legend the certificate representing Restricted Stock to give
appropriate notice of such restrictions. In addition to any such legends, each
certificate representing shares of Restricted Stock granted pursuant to the Plan
shall bear the following legend:
"The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, are
subject to certain terms, conditions, and restrictions on transfer as set
forth in Chad Therapeutics, Inc.'s 2004 Stock Incentive Plan, and in an
Agreement entered into by and between the registered owner of such shares
and the Company, dated ____________________. A copy of the Plan and the
Award Agreement may be obtained from the Secretary of the Company."
(d) Removal of Restrictions. Except as otherwise provided in the Plan,
shares of Restricted Stock shall become freely transferable by the Participant
upon the lapse of the applicable restrictions, as determined by the Committee.
Once the shares of Restricted Stock are released from the restrictions, the
Participant shall be entitled to have the legend required by paragraph (c) above
removed from the share certificate evidencing such Restricted Stock and the
Company shall pay or distribute to the Participant all dividends and
distributions held in escrow by the Company with respect to such Restricted
Stock.
(e) Shareholder Rights. Until the expiration of all applicable
restrictions, the Restricted Stock shall be treated as outstanding, the
Participant holding shares of Restricted
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Stock may exercise full voting rights with respect to such shares and shall be
entitled to receive all dividends and other distributions paid with respect to
such shares while they are so held. If any such dividends or distributions are
paid in shares of Common Stock, such shares shall be subject to the same
restrictions on transferability and forfeitability as the shares of Restricted
Stock with respect to which they were paid. Notwithstanding anything to the
contrary, at the discretion of the Committee, all such dividend and
distributions may be held in escrow by the Company until all restrictions on the
respective Restricted Stock have lapsed.
(f) Termination of Service. Except as otherwise determined by the
Committee or unless otherwise specified in the Award Agreement evidencing the
Award, upon a Participant's termination of employment or service with the
Company for any reason during the applicable restriction period, all nonvested
shares of Restricted Stock held by the Participant and any dividends or
distributions held in escrow by the Company with respect to such Restricted
Stock shall be forfeited and reacquired by the Company; provided, however, that
the Committee may, when it finds that a waiver would be in the best interest of
the Company, waive in whole or in part any or all remaining restrictions with
respect to the Restricted Stock or any dividends or distributions held in escrow
by the Company with respect to such Restricted Stock Awards.
9. AWARD GRANTS TO NON-EMPLOYEE DIRECTORS
In addition to other types of Award permitted under the Plan, all
Non-Employee Directors shall be eligible to receive, at the discretion of the
Committee, shares of Restricted Stock Awards or Options, or a combination
thereof, pursuant to the terms of this Section.
(a) Restricted Stock Awards for Non-Employee Directors. Awards of
Restricted Stock made to a Non-Employee Director pursuant to this Section shall
be subject to the provisions of Section 8 above and made pursuant to the
following terms:
(i) Initial Award. In addition to any other Awards granted
hereunder, each Non-Employee Director may receive such shares of
Restricted Stock upon the date the Non-Employee Director begins service as
a Non-Employee Director (even if previously an employee director) as
determined by the Committee in its sole discretion.
(ii) Annual Awards. On the first business day of each calendar
quarter in each fiscal year of the Company, or at such other intervals as
determined by the Committee, each Non-Employee Director who is a director
of the Company on such date may receive such shares of Restricted Stock as
determined by the Committee in its sole discretion.
(b) Options. All Options granted to a Non-Employee Director pursuant to
this Section shall be Non-Qualified Stock Options and shall be made pursuant to
the following terms:
(i) Initial Grant. In addition to any other Awards granted
hereunder, a Non-Employee Director may receive an Option to purchase such
shares of Common Stock upon the date the Non-Employee Director begins
service as a Non-Employee Director (even if previously an employee
director) as determined by the Committee in its sole discretion. .
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(ii) Annual Grant. Each Non-Employee Director may receive an
Option to purchase such shares of Common Stock on each Annual Grant Date
as determined by the Committee in its sole discretion.
(iii) Exercise Price. The Exercise Price of an Option granted
hereunder shall be equal to greater of the Fair Market Value of a share of
Common Stock or the par value of the Common Stock.
(iv) Option Period. An Option granted hereunder and all rights
to purchase Common Stock thereunder shall terminate on the tenth
anniversary of the Grant Date of such Option.
(v) Exercisability. An Option granted hereunder shall vest and
become exercisable on the date that is six months and 1 day after the
Grant Date of the Option provided that the Non-Employee Director is a
director of the Company on such date.
(vi) Method of Exercise. When the conditions of paragraph
(b)(v) above have been satisfied, a Non-Employee Directors may exercise an
Option granted under this Section only in accordance with the following
provisions. The Non-Employee Director shall deliver to the Company a
written notice stating that the Non-Employee Directors is exercising the
Option and specifying the number of shares of Common Stock which are to be
purchased pursuant to the Option, and such notice shall be accompanied by
payment in full of the Exercise Price of the shares for which the Option
is being exercised in accordance with Section 6(h) above. Said notice must
be delivered to the Company at its principal office and addressed to the
attention of the Company's Chief Financial Officer. The minimum number of
shares of Common Stock with respect to which an Option may be exercised,
in whole or in part, at any time shall be the lesser of 100 shares or the
maximum number of shares available for purchase under the Option at the
time of exercise. An attempt to exercise any Option granted hereunder
other than as set forth in the Plan shall be invalid and of no force and
effect.
(vii) Termination of Directorship. Upon the termination of a
Non-Employee Director's directorship for any reason, any unexercised or
deferred Awards shall be treated as provided in the specific Award
Agreement evidencing the Award, except that the Committee may, in its
discretion, accelerate the vesting or exercisability of an Award,
eliminate or make less restrictive any restrictions contained in an Award,
waive any restrictions or other provision of this Plan or an Award or
otherwise amend or modify the Award in any manner that is either: (i) not
adverse to such Participant; or (ii) consented to by such Participant. The
following guidelines, which may be amended by the Committee in its sole
discretion, shall apply in determining the treatment of any unexercised or
deferred Awards upon the termination of a Non-Employee Director's
directorship:
(A) Termination for Reason other than Cause, Disability, or Death.
If a Non-Employee Director's directorship terminates for any reason other
than Cause, Disability, or death, the Non-Employee Director or the
Non-Employee
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Director's estate, devisee or heir at law (whichever is applicable) shall
have the right at any time within a period not to exceed three (3) years
from the date of such termination, and prior to the termination of the
Option pursuant to its terms to exercise, in whole or in part, any vested
portion of the Option held by such Non-Employee Director at the date of
such termination. Upon such termination the Non-Employee Director's
unvested Options shall expire, except as otherwise provided by the
Committee.
(B) Termination of Directorship for Cause. Upon the removal, failure
to stand for reelection or failure to be re-nominated for Cause, or if the
Company obtains information after a Non-Employee Director's directorship
terminates that such Non-Employee Director had engaged in conduct that
would have justified removal for Cause during the Non-Employee Director's
directorship, all outstanding Options held by such Non-Employee Director
shall expire immediately and the Non-Employee Director or the Non-Employee
Director's estate, devisee or heir at law (whichever is applicable) shall
have no further right to purchase shares of Common Stock pursuant to such
Options.
(C) Death. If a Non-Employee Director's directorship terminates by
reason of such director's death, all nonvested Options held by such
director shall vest and become fully exercisable and the Non-Employee
Director's estate, devisee or heir at law (whichever is applicable) shall
have the right at any time within a period not to exceed three (3) years
from the date of the director's death, and prior to the termination of the
Option pursuant to its terms to exercise, in whole or in part, any vested
portion of the Option held by such Non-Employee Director upon death.
(c) Limitation on Awards. In the event that a grant of an Award under this
Section would violate the limitations of Section 5(b), such grant shall be
proportionately reduced to an amount that would not violate such limitations
and, a make-up grant shall be made on the first day of the first month
commencing at least twenty (20) days after such limitation is no longer exceeded
in an amount equal to such prior reduction. Such make-up grants shall be made to
a Non-Employee Director only if such director is a Non-Employee Director on the
date such make-up grant is made. Notwithstanding anything to the contrary, in
the event that no Fair Market Value of the Common Stock can be determined in a
fiscal year, no annual grants of Awards shall be made for such fiscal year.
10. DEFERRAL OF AWARDS
The Committee may from time to time establish procedures pursuant to which
a Participant may elect to defer, until a time or times later than the exercise
of an Award, receipt of all or a portion of the shares of Common Stock subject
to such Award and/or to receive cash at such later time or times in lieu of such
deferred shares of Common Stock, all on such terms and conditions as the
Committee shall determine. If any such deferrals are permitted, then
notwithstanding anything to the contrary herein, a Participant who elects such
deferral shall not have any rights as a shareholder with respect to deferred
shares of Common Stock unless and until shares of Common Stock are actually
delivered to the Participant with respect thereto, except to the extent
otherwise determined by the Committee.
11
11. CHANGE IN CONTROL AND OTHER CORPORATE EVENTS
(a) Change in Control. In the event there is a Change in Control of the
Company, as determined by the Committee, the Committee may, in its sole
discretion, (i) provide for the assumption or substitution of, or adjustment to,
each outstanding Award; (ii) accelerate the vesting of Options and terminate any
restrictions on any Awards; or (iii) provide for the cancellation of Awards for
a cash payment to the Participant.
(b) Change in Status of Parent or Subsidiary. Unless otherwise provided in
an Award Agreement or otherwise determined by the Committee, in the event that
an entity which was previously a part of the Company is no longer a part of the
Company, as determined by the Committee in its sole discretion, the employment
or other services of a Participant employed by such entity may be treated in the
sole discretion of the Committee as terminated if such Participant is not
employed by the Company immediately after such event.
12. REQUIREMENTS OF LAW
(a) Shareholder Approval. Notwithstanding anything to the contrary herein,
no Awards shall be made pursuant to the Plan prior to the date on which the Plan
is approved by the shareholders of the Company in accordance with its By-laws
and the laws of the State of California and the rules and regulations of the
securities exchange on which the Common Stock is traded.
(b) Violations of Law. The Company shall not be required to sell or issue
any shares of Common Stock under any Award if the sale or issuance of such
shares would constitute a violation by the individual exercising the Award, the
Participant or the Company of any provisions of any law or regulation of any
governmental authority, including without limitation any provisions of the
Sarbanes-Oxley Act, and any other Federal or state securities laws or
regulations. Any determination in this connection by the Committee shall be
final, binding, and conclusive. The Company shall not be obligated to take any
affirmative action in order to cause the exercise of an Award, the issuance of
shares pursuant thereto or the grant of an Award to comply with any law or
regulation of any governmental authority.
(c) Registration. At the time of any exercise or receipt of any Award, the
Company may, if it shall determine it necessary or desirable for any reason,
require the Participant (or Participant's heirs, legatees or legal
representative, as the case may be), as a condition to the exercise or grant
thereof, to deliver to the Company a written representation of present intention
to hold the shares for their own account as an investment and not with a view
to, or for sale in connection with, the distribution of such shares, except in
compliance with applicable Federal and state securities laws with respect
thereto. In the event such representation is required to be delivered, an
appropriate legend may be placed upon each certificate delivered to the
Participant (or Participant's heirs, legatees or legal representative, as the
case may be) upon the Participant's exercise of part or all of the Award or
receipt of an Award and a stop transfer order may be placed with the transfer
agent. Each Award shall also be subject to the requirement that, if at any time
the Company determines, in its discretion, that the listing, registration or
qualification of the shares subject to the Award upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of or in connection
with, the issuance or purchase of the shares thereunder, the Award may not be
exercised in whole or in part and the restrictions on an Award may not be
removed
12
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to Company in
its sole discretion. The Participant shall provide the Company with any
certificates, representations and information that the Company requests and
shall otherwise cooperate with the Company in obtaining any listing,
registration, qualification, exemption, consent or approval that the Company
deems necessary or appropriate. The Company shall not be obligated to take any
affirmative action in order to cause the exercisability or vesting of an Award,
to cause the exercise of an Award or the issuance of shares pursuant thereto, or
to cause the grant of Award to comply with any law or regulation of any
governmental authority.
(d) Withholding. The Committee may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of any taxes
that the Company is required by any law or regulation of any governmental
authority, whether Federal, state or local, domestic or foreign, to withhold in
connection with the grant or exercise of an Award, or the removal of
restrictions on an Award including, but not limited to: (i) the withholding of
delivery of shares of Common Stock until the holder reimburses the Company for
the amount the Company is required to withhold with respect to such taxes, (ii)
the canceling of any number of shares of Common Stock issuable in an amount
sufficient to reimburse the Company for the amount it is required to so
withhold, (iii) withholding the amount due from any such person's wages or
compensation due to such person, or (iv) requiring the Participant to pay the
Company cash in the amount the Company is required to withhold with respect to
such taxes.
(e) Governing Law. The Plan shall be governed by, and construed and
enforced in accordance with, the laws of the State of California.
13. GENERAL PROVISIONS
(a) Award Agreements. All Awards granted pursuant to the Plan shall be
evidenced by an Award Agreement. Each Award Agreement shall specify the terms
and conditions of the Award granted and shall contain such provisions, as the
Committee shall deem appropriate. The terms of each Award Agreement need not be
identical for Eligible Individuals provided that all Award Agreements comply
with the terms of the Plan.
(b) Purchase Price. To the extent the purchase price of any Award granted
hereunder is less than par value of a share of Common Stock and such purchase
price is not permitted by applicable law, the per share purchase price shall be
equal to the par value of a share of Common Stock.
(c) Prospective Employees. Notwithstanding anything to the contrary, any
Award granted to a Prospective Employee shall not become vested prior to the
date the Prospective Employee first becomes an employee of the Company.
(d) Issuance of Certificates; Shareholder Rights. The Company shall
deliver to the Participant a certificate evidencing the Participant's ownership
of shares of Common Stock issued pursuant to the exercise of an Award as soon as
administratively practicable after satisfaction of all conditions relating to
the issuance of such shares. A Participant shall not have any of the rights of a
shareholder with respect to such Common Stock prior to satisfaction of all
conditions relating to the issuance of such Common Stock, and, except as
expressly provided in the Plan, no adjustment shall be made for dividends,
distributions or other rights of any kind for which the record date is prior to
the date on which all such conditions have been satisfied. The
13
Committee in its absolute and sole discretion may credit a Participant's Award
with Dividend Equivalents with respect to any Awards. To the extent that
dividends and distributions relating to an Award are held in escrow by the
Company, or Dividend Equivalents are credited to an Award, a Participant shall
not be entitled to any interest on any such amounts.
(e) Transferability of Awards. A Participant may not Transfer an Award
other than by will or the laws of descent and distribution. Awards may be
exercised during the Participant's lifetime only by the Participant. No Award
shall be liable for or subject to the debts, contracts, or liabilities of any
Participant, nor shall any Award be subject to legal process or attachment for
or against such person. Any purported Transfer of an Award in contravention of
the provisions of the Plan shall have no force or effect and shall be null and
void, and the purported transferee of such Award shall not acquire any rights
with respect to such Award. Notwithstanding anything to the contrary, the
Committee may in its sole and absolute discretion permit the Transfer of an
Award to a Participant's "family member" as such term is defined in the Form 8
Registration Statement under the Securities Act of 1933, under such terms and
conditions as specified by the Committee. In such case, such Award shall be
exercisable only by the transferee approved of by the Committee. To the extent
that the Committee permits the Transfer of an Incentive Stock Option to a
"family member", so that such Option fails to continue to satisfy the
requirements of an Incentive Stock Option under the Code such Option shall
automatically be re-designated as a Non-Qualified Stock Option.
(f) Buyout and Settlement Provisions. The Committee may at any time on
behalf of the Company offer to buy out any Awards previously granted based on
such terms and conditions as the Committee shall determine which shall be
communicated to the Participants at the time such offer is made.
(g) Use of Proceeds. The proceeds received by the Company from the sale of
Common Stock pursuant to Awards granted under the Plan shall constitute general
funds of the Company.
(h) Modification or Substitution of an Award. Subject to the terms and
conditions of the Plan, the Committee may modify outstanding Awards.
Notwithstanding the following, no modification of an Award shall adversely
affect any rights or obligations of the Participant under the applicable Award
Agreement without the Participant's consent. The Committee in its sole and
absolute discretion may rescind, modify, or waive any vesting requirements or
other conditions applicable to an Award. Notwithstanding the foregoing, without
approval of the shareholders of the Company, an Award may not be modified to
reduce the exercise price thereof nor may an Award at a lower price be
substituted for a surrender of an Award, provided that (i) the foregoing shall
not apply to adjustments or substitutions in accordance with Section 5 or
Section 11, and (ii) if an Award is modified, extended or renewed and thereby
deemed to be in issuance of a new Award under the Code or the applicable
accounting rules, the exercise price of such Award may continue to be the
original Exercise Price even if less than Fair Market Value of the Common Stock
at the time of such modification, extension or renewal.
(i) Amendment and Termination of Plan. The Board may, at any time and from
time to time, amend, suspend or terminate the Plan as to any shares of Common
Stock as to which Awards have not been granted; provided, however, that the
approval by a majority of the votes present and entitled to vote at a duly held
meeting of the shareholders of the Company at which a quorum representing a
majority of all outstanding voting stock is, either in person or by proxy,
present and voting on the amendment, or by written consent in accordance with
applicable state
14
law and the Articles of Incorporation and By-Laws of the Company shall be
required for any amendment (i) that changes the class of individuals eligible to
receive Awards under the Plan, (ii) that increases the maximum number of shares
of Common Stock in the aggregate that may be subject to Awards that are granted
under the Plan (except as permitted under Section 5 or Section 11 hereof), (iii)
if approval of such amendment is necessary to comply with federal or state law
(including without limitation Section 162(m) of the Code and Rule 16b-3 under
the Exchange Act) or with the rules of any stock exchange or automated quotation
system on which the Common Stock may be listed or traded, or (iv) if such
amendment eliminates a requirement provided herein that the shareholders of the
Company must approve an action to be undertaken under the Plan. Except as
permitted under Section 5 or Section 11 hereof, no amendment, suspension or
termination of the Plan shall, without the consent of the holder of an Award,
alter or impair rights or obligations under any Award theretofore granted under
the Plan. Awards granted prior to the termination of the Plan may extend beyond
the date the Plan is terminated and shall continue subject to the terms of the
Plan as in effect on the date the Plan is terminated.
(j) Notification of 83(b) Election. If in connection with the grant of any
Award any Participant makes an election permitted under Code Section 83(b), such
Participant must notify the Company in writing of such election within ten (10)
days of filing such election with the Internal Revenue Service.
(k) Disclaimer of Rights. No provision in the Plan, any Award granted or
any Award Agreement entered into pursuant to the Plan shall be construed to
confer upon any individual the right to remain in the employ of or service with
the Company or to interfere in any way with the right and authority of the
Company either to increase or decrease the compensation of any individual,
including any holder of an Award, at any time, or to terminate any employment or
other relationship between any individual and the Company. The grant of an Award
pursuant to the Plan shall not affect or limit in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge, consolidate, dissolve or
liquidate, or to sell or transfer all or any part of its business or assets.
(l) Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments as to which a Participant has a fixed and vested interest but which are
not yet made to such Participant by the Company, nothing contained herein shall
give any such Participant any rights that are greater than those of a general
creditor of the Company.
(m) Nonexclusivity of Plan. The adoption of the Plan shall not be
construed as creating any limitations upon the right and authority of the Board
to adopt such other incentive compensation arrangements (which arrangements may
be applicable either generally to a class or classes of individuals or
specifically to a particular individual or individuals) as the Board in its
discretion determines desirable.
(n) Other Benefits. No Award payment under the Plan shall be deemed
compensation for purposes of computing benefits under any retirement plan of the
Company or any agreement between a Participant and the Company, nor affect any
benefits under any other benefit plan of the Company now or subsequently in
effect under which benefits are based upon a Participant's level of
compensation.
15
(o) Headings. The section headings in the Plan are for convenience only;
they form no part of this Agreement and shall not affect its interpretation.
(p) Pronouns. The use of any gender in the Plan shall be deemed to include
all genders, and the use of the singular shall be deemed to include the plural
and vice versa, wherever it appears appropriate from the context.
(q) Successors and Assigns. The Plan shall be binding on all successors of
the Company and all successors and permitted assigns of a Participant,
including, but not limited to, a Participant's estate, devisee, or heir at law.
(r) Severability. If any provision of the Plan or any Award Agreement
shall be determined to be illegal or unenforceable by any court of law in any
jurisdiction, the remaining provisions hereof and thereof shall be severable and
enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.
(s) Notices. Any communication or notice required or permitted to be given
under the Plan shall be in writing, and mailed by registered or certified mail
or delivered by hand, to the Company, to its principal place of business,
attention: Chief Financial Officer, and if to the holder of an Award, to the
address as appearing on the records of the Company.
[Remainder of Page Left Intentionally Blank.]
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APPENDIX 1
DEFINITIONS
"Annual Grant Date" means April 1, 2005, and each April 1 thereafter.
"Award" means any Common Stock, Option, Stock Appreciation Right or
Restricted Stock or any other award granted pursuant to the Plan.
"Award Agreement" means a written agreement entered into by the Company
and a Participant setting forth the terms and conditions of the grant of an
Award to such Participant.
"Board" means the board of directors of the Company.
"Cause" means, with respect to a termination of employment or service with
the Company, a termination of employment or service due to a Participant's
dishonesty, fraud, insubordination, willful misconduct, refusal to perform
services (for any reason other than illness or incapacity) or materially
unsatisfactory performance of the Participant's duties for the Company;
provided, however, that if the Participant and the Company have entered into an
employment agreement or consulting agreement which defines the term Cause, the
term Cause shall be defined in accordance with such agreement with respect to
any Award granted to the Participant on or after the effective date of the
respective employment or consulting agreement. The Committee shall determine in
its sole and absolute discretion whether Cause exists for purposes of the Plan.
"Change in Control" shall be deemed to occur upon:
(a) any "person" as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than the Company, any trustee or other fiduciary
holding securities under any employee benefit plan of the Company, or any
company owned, directly or indirectly, by the shareholders of the Company
in substantially the same proportions as their ownership of common stock
of the Company), is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing twenty-five percent (25%) or more of the combined
voting power of the Company's then outstanding securities;
(b) during any period of two (2) consecutive years, individuals who
at the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in paragraph
(a), (c), or (d) of this section) whose election by the Board or
nomination for election by the Company's shareholders was approved by a
vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of the two-year period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute at least a majority of the Board;
(c) a merger, consolidation, reorganization, or other business
combination of the Company with any other entity, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the combined voting
power of the voting securities of
i
the Company or such surviving entity outstanding immediately after such
merger or consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no person acquires more than twenty-five percent
(25%) of the combined voting power of the Company's then outstanding
securities shall not constitute a Change in Control; or
(d) the shareholders of the Company approve a plan of complete
liquidation of the Company or the consummation of the sale or disposition
by the Company of all or substantially all of the Company's assets other
than (x) the sale or disposition of all or substantially all of the assets
of the Company to a person or persons who beneficially own, directly or
indirectly, at least fifty percent (50%) or more of the combined voting
power of the outstanding voting securities of the Company at the time of
the sale or (y) pursuant to a spin-off type transaction, directly or
indirectly, of such assets to the shareholders of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"Committee" means the Compensation Committee of the Company consisting of
two or more members of the Board, none of whom shall be an officer or other
salaried employee of the Company, and each of whom shall qualify in all respects
as a "non-employee director" as defined in Rule 16b-3 under the Exchange Act,
and as an "outside director" for purposes of Code Section 162(m). If no
Committee exists, the functions of the Committee will be exercised by the Board;
provided, however, that a Committee shall be created prior to the grant of
Awards to a Covered Employee and that grants of Awards to a Covered Employee
shall be made only by such Committee. Not withstanding the foregoing, with
respect to the grant of Awards to non-employee directors, the Committee shall be
the Board.
"Common Stock" means the common stock, $.01 par value per share, of the
Company.
"Company" means Chad Therapeutics, Inc. and all entities whose financial
statements are required to be consolidated with the financial statements of the
Company pursuant to United States generally accepted accounting principles and
any other entity determined to be an affiliate as determined by the Committee in
its sole and absolute discretion.
"Consultant" means any person (other than an employee or a director,
solely with respect to rendering services in such person's capacity as a
director) who is engaged by the Company to render bona fide consulting or
advisory services to the Company; provided that such services are not in
connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the Company's securities.
"Covered Employee" means "covered employee" as defined in Code Section
162(m)(3).
"Covered Individual" means any current or former member of the Committee,
any current or former officer of the Company, or any individual designated
pursuant to Section 4(b).
"Disability" means a "permanent and total disability" within the meaning
of Code Section 22(e)(3); provided, however, that if a Participant and the
Company have entered into an employment or consulting agreement which defines
the term Disability for purposes of such agreement, Disability shall be defined
pursuant to the definition in such agreement with respect
ii
to any Award granted to the Participant on or after the effective date of the
respective employment or consulting agreement. The Committee shall determine in
its sole and absolute discretion whether a Disability exists for purposes of the
Plan.
"Dividend Equivalents" means an amount equal to the cash dividends paid by
the Company upon one share of Common Stock subject to an Award granted to a
Participant under the Plan.
"Effective Date" shall mean the date that the Plan was approved by the
shareholders of the Company in accordance with its By-laws and the laws of the
State of California.
"Eligible Individual" means any employee, officer, director (employee or
non-employee director) of the Company, Consultant and any Prospective Employee
to whom Awards are granted in connection with an offer of future employment with
the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" means the purchase price of each share of Common Stock
subject to an Award.
"Fair Market Value" means, unless otherwise required by the Code, as of
any date, the last sales price reported for the Common Stock on the applicable
date, (i) as reported by the national securities exchange in the United States
on which it is then traded or The Nasdaq Stock Market, Inc. or (ii) if not
traded on any such national securities exchange or The Nasdaq Stock Market,
Inc., as quoted on an automated quotation system sponsored by the National
Association of Securities Dealers, Inc., or if the Common Stock shall not have
been reported or quoted on such date, on the first day prior thereto on which
the Common Stock was reported or quoted; provided, however, that the Committee
may modify the definition of Fair Market Value to reflect any changes in the
trading practices of any exchange or automated system sponsored by the National
Association of Securities Dealers, Inc. on which the Common Stock is listed or
traded. For purposes of the grant of any Award, the applicable date shall be the
day prior to the date on which the Award is granted. If the Common Stock is not
readily traded on a national securities exchange, The Nasdaq Stock Market, Inc.
or any system sponsored by the National Association of Securities Dealers, Inc.,
the Fair Market Value shall be determined in good faith by the Committee.
"Grant Date" means the date on which the Committee approves the grant of
an Award or such later date as is specified by the Committee and set forth in
the applicable Award Agreement.
"Incentive Stock Option" means an "incentive stock option" within the
meaning of Code Section 422.
The "Company" means Chad Therapeutics, Inc., a California corporation.
"Non-Employee Director" means a director of the Company who is not an
active employee of the Company.
"Non-qualified Stock Option" means an Option which is not an Incentive
Stock Option.
"Option" means an option to purchase Common Stock granted pursuant to
Sections 6 or 9 of the Plan.
iii
"Participant" means any Eligible Individual who holds an Award under the
Plan and any of such individual's successors or permitted assigns.
"Person" shall mean any person, corporation, partnership, joint venture or
other entity or any group (as such term is defined for purposes of Section 13(d)
of the Exchange Act), other than a Parent or Subsidiary.
"Plan" means this Chad Therapeutics, Inc.'s 2004 Stock Incentive Plan.
"Prospective Employee" means any individual who has committed to become an
employee of the Company within sixty (60) days from the date an Award is granted
to such individual.
"Restricted Stock" means Common Stock subject to certain restrictions, as
determined by the Committee, and granted pursuant to Section 8 hereunder.
"Retirement" means a termination of employment of a Participant (other
than for Cause or within ninety (90) days after an event which would be grounds
for a termination of employment for Cause) who has attained (1) at least age
sixty-five (65); (2) at least age sixty-two (62) and performed ten (10) or more
years of service with the Company (or its predecessors); or (3) such earlier
date after age fifty-five (55) as approved by the Committee with regard to such
Participant.
"Section 424 Employee" means an employee of the Company or any "subsidiary
corporation" or "parent corporation" as such terms are defined in and in
accordance with Code Section 424. The term "Section 424 Employee" also includes
employees of a corporation issuing or assuming any Options in a transaction to
which Code Section 424(a) applies.
"Stock Appreciation Right" means the right to receive all or some portion
of the increase in value of a fixed number of shares of Common Stock granted
pursuant to Section 7 hereunder.
"Transfer" means, as a noun, any direct or indirect, voluntary or
involuntary, exchange, sale, bequeath, pledge, mortgage, hypothecation,
encumbrance, distribution, transfer, gift, assignment or other disposition or
attempted disposition of, and, as a verb, directly or indirectly, voluntarily or
involuntarily, to exchange, sell, bequeath, pledge, mortgage, hypothecate,
encumber, distribute, transfer, give, assign or in any other manner whatsoever
dispose or attempt to dispose of.
iv