Exhibit 10.21
2005 EQUITY INCENTIVE PLAN
OF
AVANIR PHARMACEUTICALS
1. PURPOSE OF THIS PLAN.
The purpose of this 2005 Equity Incentive Plan is to retain and motivate
executives, employees and directors while at the same time aligning their
interests with those of the Company's shareholders.
2. DEFINITIONS AND RULES OF INTERPRETATION.
2.1 DEFINITIONS.
This Plan uses the following defined terms:
(a) "ADMINISTRATOR" means the Board or the Committee, or any officer or
employee of the Company to whom the Board or the Committee delegates authority
to administer this Plan, but only to the extent of such delegation of authority.
(b) "AFFILIATE" means a "parent" or "subsidiary" (as each is defined in
Section 424 of the Code) of the Company and any other entity that the Board or
Committee designates as an "Affiliate" for purposes of this Plan.
(c) "APPLICABLE LAW" means any and all laws of whatever jurisdiction,
within or without the United States, and the rules of any stock exchange or
quotation system on which Shares are listed or quoted, applicable to the taking
or refraining from taking of any action under this Plan, including the
administration of this Plan and the issuance or transfer of Awards or Award
Shares.
(d) "AWARD" means a Stock Award (e.g. restricted stock unit award),
SAR, Cash Award, or Option granted in accordance with the terms of this Plan.
(e) "AWARD AGREEMENT" means the document evidencing the grant of an
Award.
(f) "AWARD SHARES" means Shares covered by an outstanding Award or
purchased under an Award.
(g) "AWARDEE" means: (i) a person to whom an Award has been granted,
including a holder of a Substitute Award, (ii) a person to whom an Award has
been transferred in accordance with all applicable requirements of Sections 6.5,
7(h), and 17.
(h) "BOARD" means the Board of Directors of the Company.
(i) "CASH AWARD" means the right to receive cash as described in
Section 8.3.
(j) "CHANGE IN CONTROL" means any transaction or event that the Board
specifies as a Change in Control under Section 10.4.
(k) "CODE" means the Internal Revenue Code of 1986.
(l) "COMMITTEE" means a committee composed of Company Directors
appointed in accordance with the Company's charter documents and Section 4.
(m) "COMPANY" means Avanir Pharmaceuticals, a California corporation.
(n) "COMPANY DIRECTOR" means a member of the Board.
(o) "CONSULTANT" means an individual who, or an employee of any entity
that, provides bona fide services to the Company or an Affiliate not in
connection with the offer or sale of securities in a capital-raising
transaction, but who is not an Employee.
(p) "DIRECTOR" means a member of the Board of Directors of the Company
or an Affiliate.
(q) "DIVESTITURE" means any transaction or event that the Board
specifies as a Divestiture under Section 10.5.
(r) "DOMESTIC RELATIONS ORDER" means a "domestic relations order" as
defined in, and otherwise meeting the requirements of, Section 414(p) of the
Code, except that reference to a "plan" in that definition shall be to this
Plan.
(s) "EFFECTIVE DATE" means the later of the date on which this Plan is
approved by the Company's shareholders and the date on which this Plan is
approved by the Board.
(t) "EMPLOYEE" means a regular employee of the Company or an Affiliate,
including an officer or Director, who is treated as an employee in the personnel
records of the Company or an Affiliate, but not individuals who are classified
by the Company or an Affiliate as: (i) leased from or otherwise employed by a
third party, (ii) independent contractors, or (iii) intermittent or temporary
workers. The Company's or an Affiliate's classification of an individual as an
"Employee" (or as not an "Employee") for purposes of this Plan shall not be
altered retroactively even if that classification is changed retroactively for
another purpose as a result of an audit, litigation or otherwise. An Awardee
shall not cease to be an Employee due to transfers between locations of the
Company, or between the Company and an Affiliate, or to any successor to the
Company or an Affiliate that assumes the Awardee's Options under Section 10.
Neither service as a Director nor receipt of a director's fee shall be
sufficient to make a Director an "Employee."
(u) "EXCHANGE ACT" means the Securities Exchange Act of 1934.
(v) "EXECUTIVE" means, if the Company has any class of any equity
security registered under Section 12 of the Exchange Act, an individual who is
subject to Section 16 of the Exchange Act or who is a "covered employee" under
Section 162(m) of the Code, in either case because of the individual's
relationship with the Company or an Affiliate. If the Company does not have any
class of any equity security registered under Section 12 of the Exchange Act,
"Executive" means any (i) Director, (ii) officer elected or appointed by the
Board, or (iii) beneficial owner of more than 10% of any class of the Company's
equity securities.
(w) "EXPIRATION DATE" means, with respect to an Award, the date stated
in the Award Agreement as the expiration date of the Award or, if no such date
is stated in the Award Agreement, then the last day of the maximum exercise
period for the Award, disregarding the effect of an Awardee's Termination or any
other event that would shorten the life of the Award.
(x) "FAIR MARKET VALUE" means the value of Shares as determined under
Section 18.2.
(y) "FUNDAMENTAL TRANSACTION" means any transaction or event described
in Section 10.3.
(z) "GRANT DATE" means the date the Administrator approves the grant of
an Award. However, if the Administrator specifies that an Award's Grant Date is
a future date or the date on which a condition is satisfied, the Grant Date for
such Award is that future date or the date that the condition is satisfied.
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(aa) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option under Section 422 of the Code and designated as an
Incentive Stock Option in the Award Agreement for that Option.
(bb) "NON-STATUTORY OPTION" means any Option other than an Incentive
Stock Option.
(cc) "NON-EMPLOYEE DIRECTOR" means any person who is a member of the
Board but is not an Employee of the Company or any Affiliate of the Company and
has not been an Employee of the Company or any Affiliate of the Company at any
time during the preceding twelve months. Service as a Director does not in
itself constitute employment for purposes of this definition.
(dd) "OBJECTIVELY DETERMINABLE PERFORMANCE CONDITION" shall mean a
performance condition (i) that is established (A) at the time an Award is
granted or (B) no later than the earlier of (1) 90 days after the beginning of
the period of service to which it relates, or (2) before the elapse of 25% of
the period of service to which it relates, (ii) that is uncertain of achievement
at the time it is established, and (iii) the achievement of which is
determinable by a third party with knowledge of the relevant facts. Examples of
measures that may be used in Objectively Determinable Performance Conditions
include net order dollars, net profit dollars, net profit growth, net revenue
dollars, revenue growth, individual performance, earnings per share, return on
assets, return on equity, and other financial objectives, objective customer
satisfaction indicators and efficiency measures, each with respect to the
Company and/or an Affiliate or individual business unit.
(ee) "OFFICER" means an officer of the Company as defined in Rule 16a-1
adopted under the Exchange Act.
(ff) "OPTION" means a right to purchase Shares of the Company granted
under this Plan.
(gg) "OPTION PRICE" means the price payable under an Option for Shares,
not including any amount payable in respect of withholding or other taxes.
(hh) "OPTION SHARES" means Shares covered by an outstanding Option or
purchased under an Option.
(ii) "PLAN" means this 2005 Equity Incentive Plan of Avanir
Pharmaceuticals.
(jj) "PURCHASE PRICE" means the price payable under a Stock Award for
Shares, not including any amount payable in respect of withholding or other
taxes.
(kk) "RULE 16B-3" means Rule 16b-3 adopted under Section 16(b) of the
Exchange Act.
(ll) "SAR" OR "STOCK APPRECIATION RIGHT" means a right to receive cash
based on a change in the Fair Market Value of a specific number of Shares
pursuant to an Award Agreement, as described in Section 8.1.
(mm) "SECURITIES ACT" means the Securities Act of 1933.
(nn) "SHARE" means a share of the Class A common stock of the Company
or other securities substituted for the Class A common stock under Section 10.
(oo) "STOCK AWARD" means an offer by the Company to sell shares subject
to certain restrictions pursuant to the Award Agreement as described in Section
8.2 or, as determined by the Committee, a notional account representing the
right to be paid an amount based on Shares.
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(pp) "SUBSTITUTE AWARD" means a Substitute Option, Substitute SAR or
Substitute Stock Award granted in accordance with the terms of this Plan.
(qq) "SUBSTITUTE OPTION" means an Option granted in substitution for,
or upon the conversion of, an option granted by another entity to purchase
equity securities in the granting entity.
(rr) "SUBSTITUTE SAR" means a SAR granted in substitution for, or upon
the conversion of, a stock appreciation right granted by another entity with
respect to equity securities in the granting entity.
(ss) "SUBSTITUTE STOCK AWARD" means a Stock Award granted in
substitution for, or upon the conversion of, a stock award granted by another
entity to purchase equity securities in the granting entity.
(tt) "TERMINATION" means that the Awardee has ceased to be, with or
without any cause or reason, an Employee, Director or Consultant. However,
unless so determined by the Administrator, or otherwise provided in this Plan,
"Termination" shall not include a change in status from an Employee, Consultant
or Director to another such status. An event that causes an Affiliate to cease
being an Affiliate shall be treated as the "Termination" of that Affiliate's
Employees, Directors, and Consultants.
2.2 RULES OF INTERPRETATION. Any reference to a "Section," without more, is
to a Section of this Plan. Captions and titles are used for convenience in this
Plan and shall not, by themselves, determine the meaning of this Plan. Except
when otherwise indicated by the context, the singular includes the plural and
vice versa. Any reference to a statute is also a reference to the applicable
rules and regulations adopted under that statute. Any reference to a statute,
rule or regulation, or to a section of a statute, rule or regulation, is a
reference to that statute, rule, regulation, or section as amended from time to
time, both before and after the Effective Date and including any successor
provisions.
3. SHARES SUBJECT TO THIS PLAN; TERM OF THIS PLAN.
3.1 NUMBER OF AWARD SHARES.Subject to the provisions of Section 10.2 of
this Plan, the maximum aggregate number of Shares that may be sold under the
Plan is 2,000,000 Shares, plus an annual increase on the first day of each of
the Company's fiscal years beginning in fiscal 2006 equal to the lesser of (a)
1% of the Shares outstanding on the last day of the immediately preceding fiscal
year, (b) 1,300,000 Shares, or (c) such lesser number of Shares as the Board
shall determine. Additionally, the maximum number of Shares that may be issued
under this Plan pursuant to Stock Awards shall not exceed 15% of the aggregate
Shares reserved for issuance under the Plan. The number of Shares initially
reserved for issuance over the term of this Plan shall be increased by those
Shares that are restored pursuant to the decision of the Board or Committee
pursuant to Section 6.4(a) to deliver only such Shares as are necessary to award
the net Share appreciation. Except as required by applicable law, Shares
issuable pursuant to outstanding Awards shall not reduce the number of Shares
reserved for issuance under this Plan until the earlier of the date such Shares
are vested pursuant to the terms of the applicable Award or the actual date of
delivery of the Shares to the Awardee. Also, if an Award later terminates or
expires without having been exercised in full, the maximum number of shares that
may be issued under this Plan shall be increased by the number of Shares that
were covered by, but not purchased under, that Award. By contrast, the
repurchase of Shares by the Company shall not increase the maximum number of
Shares that may be issued under this Plan.
3.2 SOURCE OF SHARES. Award Shares may be Shares that have never been
issued or Shares that are outstanding and are acquired to discharge the
Company's obligation to deliver Award Shares.
3.3 TERM OF THIS PLAN.
(a) This Plan shall be effective on, and Awards may be granted under
this Plan on and after the Effective Date.
(b) Subject to the provisions of Section 14, Awards may be granted
under this Plan for a period of ten years from the earlier of the date on which
the Board approves this Plan and the date the Company's
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shareholders approve this Plan. Accordingly, Awards may not be granted under
this Plan after the ten-year anniversary of the earlier of those dates.
4. ADMINISTRATION.
4.1 GENERAL.
(a) The Board shall have ultimate responsibility for administering this
Plan. The Board may delegate certain of its responsibilities to a Committee,
which shall consist of at least two members of the Board. The Board or the
Committee may further delegate its responsibilities to any Employee of the
Company or any Affiliate. Where this Plan specifies that an action is to be
taken or a determination made by the Board, only the Board may take that action
or make that determination. Where this Plan specifies that an action is to be
taken or a determination made by the Committee, only the Committee may take that
action or make that determination. Where this Plan references the
"Administrator," the action may be taken or determination made by the Board, the
Committee, or other Administrator, but only to the extent of the authority
delegated by the Board or the Committee to that Administrator. However, only the
Board or the Committee may approve grants of Awards to Executives, and an
Administrator other than the Board or the Committee may grant Awards only within
the guidelines established by the Board or Committee. Moreover, all actions and
determinations by any Administrator are subject to the provisions of this Plan.
(b) The Committee shall consist of Company Directors who are
"Non-Employee Directors" as defined in Rule 16b-3 and, after the expiration of
any transition period permitted by Treasury Regulations Section 1.162-27(h)(3),
who are "outside directors" as defined in Section 162(m) of the Code.
4.2 AUTHORITY OF THE BOARD OR THE COMMITTEE.Subject to the other provisions
of this Plan, the Board or the Committee shall have the authority to:
(a) grant Awards, including Substitute Awards;
(b) determine the Fair Market Value of Shares as set forth in Section
18.2;
(c) determine the Option Price and the Purchase Price of Awards;
(d) select the Awardees;
(e) determine the times Awards are granted;
(f) determine the number of Shares subject to each Award;
(g) determine the methods of payment that may be used to purchase Award
Shares;
(h) determine the methods of payment that may be used to satisfy
withholding tax obligations;
(i) determine the other terms of each Award, including but not limited
to the time or times at which Awards may be exercised, whether and under what
conditions an Award is assignable, and whether an Option is a Non-statutory
Option or an Incentive Stock Option;
(j) modify or amend any Award;
(k) authorize any person to sign any Award Agreement or other document
related to this Plan on behalf of the Company;
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(l) determine the form of any Award Agreement or other document related
to this Plan, and whether that document, including signatures, may be in
electronic form;
(m) interpret this Plan and any Award Agreement or document related to
this Plan;
(n) correct any defect, remedy any omission, or reconcile any
inconsistency in this Plan, any Award Agreement or any other document related to
this Plan;
(o) adopt, amend, and revoke rules and regulations under this Plan,
including rules and regulations relating to sub-plans and Plan addenda;
(p) adopt, amend, and revoke special rules and procedures which may be
inconsistent with the terms of this Plan, set forth (if the Administrator so
chooses) in sub-plans regarding (for example) the operation and administration
of this Plan and the terms of Awards, if and to the extent necessary or useful
to accommodate non-U.S. Applicable Laws and practices as they apply to Awards
and Award Shares held by, or granted or issued to, persons working or resident
outside of the United States or employed by Affiliates incorporated outside the
United States;
(q) determine whether a transaction or event should be treated as a
Change in Control, a Divestiture or neither;
(r) determine the effect of a Fundamental Transaction and, if the Board
determines that a transaction or event should be treated as a Change in Control
or a Divestiture, then the effect of that Change in Control or Divestiture; and
(s) make all other determinations the Administrator deems necessary or
advisable for the administration of this Plan.
4.3 SCOPE OF DISCRETION. Subject to the provisions of this Section 4.3, on
all matters for which this Plan confers the authority, right or power on the
Board, the Committee, or other Administrator to make decisions, that body may
make those decisions in its sole and absolute discretion. Those decisions will
be final, binding and conclusive. In making its decisions, the Board, Committee
or other Administrator need not treat all persons eligible to receive Awards,
all Awardees, all Awards or all Award Shares the same way. Notwithstanding
anything herein to the contrary, and except as provided in Section 14.3, the
discretion of the Board, Committee or other Administrator is subject to the
specific provisions and specific limitations of this Plan, as well as all rights
conferred on specific Awardees by Award Agreements and other agreements.
5. PERSONS ELIGIBLE TO RECEIVE AWARDS.
5.1 ELIGIBLE INDIVIDUALS. Awards (including Substitute Awards) may be
granted to, and only to, Employees, Directors and Consultants, including to
prospective Employees, Directors and Consultants conditioned on the beginning of
their service for the Company or an Affiliate. However, Incentive Stock Options
may only be granted to Employees, as provided in Section 7(g).
5.2 SECTION 162(m) LIMITATION.
(a) OPTIONS AND SARS. Subject to the provisions of this Section 5.2,
for so long as the Company is a "publicly held corporation" within the meaning
of Section 162(m) of the Code: (i) no Employee may be granted one or more SARs
and Options within any fiscal year of the Company under this Plan to purchase
more than 500,000 Shares under Options or to receive compensation calculated
with reference to more than that number of Shares under SARs, subject to
adjustment pursuant to Section 10, (ii) Options and SARs may be granted to an
Executive only by the Committee (and, notwithstanding anything to the contrary
in Section 4.1(a), not by the Board). If an Option or SAR is cancelled without
being exercised or if the Option Price of an Option is reduced,
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that cancelled or repriced Option or SAR shall continue to be counted against
the limit on Awards that my be granted to any individual under this Section 5.2.
Notwithstanding the foregoing, a new Employee of the Company or an Affiliate
shall be eligible to receive up to a maximum of 1,000,000 Shares under Options
in the calendar year which they commence employment, or such compensation
calculated with reference to such number of Shares under SARs, subject to
adjustment pursuant to Section 10.
(b) CASH AWARDS AND STOCK AWARDS. Any Cash Award or Stock Award
intended as "qualified performance-based compensation" within the meaning of
Section 162(m) of the Code must vest or become exercisable contingent on the
achievement of one or more Objectively Determinable Performance Conditions. The
Committee shall have the discretion to determine the time and manner of
compliance with Section 162(m) of the Code.
6. TERMS AND CONDITIONS OF OPTIONS.
6.1 PRICE. No Option may have an Option Price less than the greater of (i)
100% of the Fair Market Value of the Shares on the Grant Date or (ii) the par
value of the Shares, if any, on the Grant Date. The Option Price of an Incentive
Stock Option shall also be subject to Section 7(f).
6.2 TERM. No Option shall be exercisable after its Expiration Date. No
Option may have an Expiration Date that is more than ten years after its Grant
Date. Additional provisions regarding the term of Incentive Stock Options are
provided in Sections 7(a) and 7(e).
6.3 VESTING. Options shall be exercisable: (a) on the Grant Date, or (b) in
accordance with a schedule related to the Grant Date, the date the Optionee's
directorship, employment or consultancy begins, or a different date specified in
the Option Agreement. Additional provisions regarding the vesting of Incentive
Stock Options are provided in Section 7(c). No Option granted to an individual
who is subject to the overtime pay provisions of the Fair Labor Standards Act
may be exercised before the expiration of six months after the Grant Date.
6.4 FORM AND METHOD OF PAYMENT.
(a) The Board or Committee shall determine the acceptable form and
method of payment for exercising an Option. So long as variable accounting
pursuant to "APB 25" does not apply and the Board or Committee otherwise
determines there is no material adverse accounting consequence at the time of
exercise, the Board or Committee may require the delivery in Shares for the
value of the net appreciation of the Shares at the time of exercise over the
exercise price. The difference between full number of Shares covered by the
exercised portion of the Award and the number of Shares actually delivered shall
be restored to the amount of Shares reserved for issuance under Section 3.1.
(b) Acceptable forms of payment for all Option Shares are cash, check
or wire transfer, denominated in U.S. dollars except as specified by the
Administrator for non-U.S. Employees or non-U.S. sub-plans.
(c) In addition, the Administrator may permit payment to be made by any
of the following methods:
(i) other Shares, or the designation of other Shares, which (A) are
"mature" shares for purposes of avoiding variable accounting treatment under
generally accepted accounting principles (generally mature shares are those that
have been owned by the Optionee for more than six months on the date of
surrender), and (B) have in the aggregate a Fair Market Value on the date of
surrender at least equal to the Option Price of the Shares as to which the
Option is being exercised;
(ii) provided that a public market exists for the Shares,
consideration received by the Company under a procedure under which a licensed
broker-dealer advances funds on behalf of an Optionee or sells Option Shares on
behalf of an Optionee (a "CASHLESS EXERCISE PROCEDURE"), provided that if the
Company extends
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or arranges for the extension of credit to an Optionee under any Cashless
Exercise Procedure, no Officer or Director may participate in that Cashless
Exercise Procedure;
(iii) cancellation of any debt owed by the Company or any Affiliate
to the Optionee by the Company including without limitation waiver of
compensation due or accrued for services previously rendered to the Company; and
(iv) any combination of the methods of payment permitted by any
paragraph of this Section 6.4.
(d) The Administrator may also permit any other form or method of
payment for Option Shares permitted by Applicable Law.
6.5 NONASSIGNABILITY OF OPTIONS. Except as determined by the Administrator
and as otherwise permitted by this Section 6.5, no Option shall be assignable or
otherwise transferable by the Optionee except by will or by the laws of descent
and distribution. Options may be transferred and exercised in accordance with a
Domestic Relations Order and may be exercised by a guardian or conservator
appointed to act for the Optionee. Incentive Stock Options may only be assigned
in compliance with Section 7(h).
6.6 SUBSTITUTE OPTIONS. The Board may cause the Company to grant Substitute
Options in connection with the acquisition by the Company or an Affiliate of
equity securities of any entity (including by merger, tender offer, or other
similar transaction) or of all or a portion of the assets of any entity. Any
such substitution shall be effective on the effective date of the acquisition.
Substitute Options may be Non-statutory Options or Incentive Stock Options.
Unless and to the extent specified otherwise by the Board, Substitute Options
shall have the same terms and conditions as the options they replace, except
that (subject to the provisions of Section 10) Substitute Options shall be
Options to purchase Shares rather than equity securities of the granting entity
and shall have an Option Price determined by the Board.
6.7 REPRICINGS.
Options may not be repriced, replaced or regranted through cancellation or
modification without shareholder approval.
7. INCENTIVE STOCK OPTIONS.
The following rules apply only to Incentive Stock Options and only to the
extent these rules are more restrictive than the rules that would otherwise
apply under this Plan. With the consent of the Optionee, or where this Plan
provides that an action may be taken notwithstanding any other provision of this
Plan, the Administrator may deviate from the requirements of this Section,
notwithstanding that any Incentive Stock Option modified by the Administrator
will thereafter be treated as a Non-statutory Option.
(a) The Expiration Date of an Incentive Stock Option shall not be later
than ten years from its Grant Date, with the result that no Incentive Stock
Option may be exercised after the expiration of ten years from its Grant Date.
(b) No Incentive Stock Option may be granted more than ten years from
the date this Plan was approved by the Board.
(c) Options intended to be incentive stock options under Section 422 of
the Code that are granted to any single Optionee under all incentive stock
option plans of the Company and its Affiliates, including incentive stock
options granted under this Plan, may not vest at a rate of more than $100,000 in
Fair Market Value of stock (measured on the grant dates of the options) during
any calendar year. For this purpose, an option vests with respect to a given
share of stock the first time its holder may purchase that share,
notwithstanding any right of the Company to repurchase that share. Unless the
administrator of that option plan specifies otherwise in the related agreement
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governing the option, this vesting limitation shall be applied by, to the extent
necessary to satisfy this $100,000 rule, treating certain stock options that
were intended to be incentive stock options under Section 422 of the Code as
Non-statutory Options. The stock options or portions of stock options to be
reclassified as Non-statutory Options are those with the highest option prices,
whether granted under this Plan or any other equity compensation plan of the
Company or any Affiliate that permits that treatment. This Section 7(c) shall
not cause an Incentive Stock Option to vest before its original vesting date or
cause an Incentive Stock Option that has already vested to cease to be vested.
(d) In order for an Incentive Stock Option to be exercised for any form
of payment other than those described in Section 6.4(b), that right must be
stated at the time of grant in the Option Agreement relating to that Incentive
Stock Option.
(e) Any Incentive Stock Option granted to a Ten Percent Shareholder,
must have an Expiration Date that is not later than five years from its Grant
Date, with the result that no such Option may be exercised after the expiration
of five years from the Grant Date. A "TEN PERCENT SHAREHOLDER" is any person
who, directly or by attribution under Section 424(d) of the Code, owns stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or of any Affiliate on the Grant Date.
(f) The Option Price of an Incentive Stock Option shall never be less
than the Fair Market Value of the Shares at the Grant Date. The Option Price for
the Shares covered by an Incentive Stock Option granted to a Ten Percent
Shareholder shall never be less than 110% of the Fair Market Value of the Shares
at the Grant Date.
(g) Incentive Stock Options may be granted only to Employees. If an
Optionee changes status from an Employee to a Consultant, that Optionee's
Incentive Stock Options become Non-statutory Options if not exercised within the
time period described in Section 7(i) (determined by treating that change in
status as a Termination solely for purposes of this Section 7(g)).
(h) No rights under an Incentive Stock Option may be transferred by the
Optionee, other than by will or the laws of descent and distribution. During the
life of the Optionee, an Incentive Stock Option may be exercised only by the
Optionee. The Company's compliance with a Domestic Relations Order, or the
exercise of an Incentive Stock Option by a guardian or conservator appointed to
act for the Optionee, shall not violate this Section 7(h).
(i) An Incentive Stock Option shall be treated as a Non-statutory
Option if it remains exercisable after, and is not exercised within, the
three-month period beginning with the Optionee's Termination for any reason
other than the Optionee's death or disability (as defined in Section 22(e) of
the Code). In the case of Termination due to death, an Incentive Stock Option
shall continue to be treated as an Incentive Stock Option if it remains
exercisable after, and is not exercised within, the three month period after the
Optionee's Termination provided it is exercised before the Expiration Date. In
the case of Termination due to disability, an Incentive Stock Option shall be
treated as a Non-statutory Option if it remains exercisable after, and is not
exercised within, one year after the Optionee's Termination.
(j) An Incentive Stock Option may only be modified by the Board.
8. STOCK APPRECIATION RIGHTS, STOCK AWARDS AND CASH AWARDS.
8.1 STOCK APPRECIATION RIGHTS.
(a) GENERAL. SARs may be granted either alone, in addition to, or in
tandem with other Awards granted under this Plan. The Administrator may grant
SARs to eligible participants subject to terms and conditions not inconsistent
with this Plan and determined by the Administrator. The specific terms and
conditions applicable to the Awardee shall be provided for in the Award
Agreement. SARs shall be exercisable, in whole or in part, at such times as the
Administrator shall specify in the Award Agreement. The grant or vesting of a
SAR may be made contingent on the achievement of Objectively Determinable
Performance Conditions.
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(b) EXERCISE OF SARS. Upon the exercise of an SAR, in whole or in part,
an Awardee shall be entitled to a payment in an amount equal to the excess of
the Fair Market Value of a fixed number of Shares covered by the exercised
portion of the SAR on the date of exercise, over the Fair Market Value of the
Shares covered by the exercised portion of the SAR on the Grant Date. The amount
due to the Awardee upon the exercise of a SAR shall be paid in Shares over the
period or periods specified in the Award Agreement. An Award Agreement may place
limits on the amount that may be paid over any specified period or periods upon
the exercise of a SAR, on an aggregate basis or as to any Awardee. A SAR shall
be considered exercised when the Company receives written notice of exercise in
accordance with the terms of the Award Agreement from the person entitled to
exercise the SAR. If a SAR has been granted in tandem with an Option, upon the
exercise of the SAR, the number of shares that may be purchased pursuant to the
Option shall be reduced by the number of shares with respect to which the SAR is
exercised.
(c) NONASSIGNABILITY OF SARS. Except as determined by the
Administrator, no SAR shall be assignable or otherwise transferable by the
Awardee except by will or by the laws of descent and distribution, provided,
however, that SARs may be transferred and exercised in accordance with a
Domestic Relations Order.
(d) SUBSTITUTE SARS. The Board may cause the Company to grant
Substitute SARs in connection with the acquisition by the Company or an
Affiliate of equity securities of any entity (including by merger) or all or a
portion of the assets of any entity. Any such substitution shall be effective on
the effective date of the acquisition. Unless and to the extent specified
otherwise by the Board, Substitute SARs shall have the same terms and conditions
as the options they replace, except that (subject to the provisions of Section
9) Substitute SARs shall be exercisable with respect to the Fair Market Value of
Shares rather than equity securities of the granting entity and shall be on
terms that, as determined by the Board in its sole and absolute discretion,
properly reflects the substitution.
(e) REPRICINGS. A SAR may not be repriced, replaced or regranted,
through cancellation or modification without shareholder approval.
8.2 STOCK AWARDS.
(a) GENERAL. The specific terms and conditions of a Stock Award
applicable to the Awardee shall be provided for in the Award Agreement. The
Award Agreement shall state the number of Shares that the Awardee shall be
entitled to receive or purchase, the terms and conditions on which the Shares
shall vest, the price to be paid, whether Shares are to be delivered at the time
of grant or at some deferred date specified in the Award Agreement (e.g. a
restricted stock unit award agreement), whether the Award is payable solely in
Shares, cash or either and, if applicable, the time within which the Awardee
must accept such offer. The offer shall be accepted by execution of the Award
Agreement. The Administrator may require that all Shares subject to a right of
repurchase or risk of forfeiture be held in escrow until such repurchase right
or risk of forfeiture lapses. The grant or vesting of a Stock Award may be made
contingent on the achievement of Objectively Determinable Performance
Conditions.
(b) RIGHT OF REPURCHASE. If so provided in the Award Agreement, Award
Shares acquired pursuant to a Stock Award may be subject to repurchase by the
Company or an Affiliate if not vested in accordance with the Award Agreement.
(c) FORM OF PAYMENT. The Administrator shall determine the acceptable
form and method of payment for exercising a Stock Award. Acceptable forms of
payment for all Award Shares are cash, check or wire transfer, denominated in
U.S. dollars except as specified by the Administrator for non-U.S. sub-plans. In
addition, the Administrator may permit payment to be made by any of the methods
permitted with respect to the exercise of Options pursuant to Section 6.4.
(d) NONASSIGNABILITY OF STOCK AWARDS. Except as determined by the
Administrator, no Stock Award shall be assignable or otherwise transferable by
the Awardee except by will or by the laws of descent and distribution, provided,
however, that Stock Awards may be transferred and exercised in accordance with a
Domestic Relations Order.
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(e) SUBSTITUTE STOCK AWARD. The Board may cause the Company to grant
Substitute Stock Awards in connection with the acquisition by the Company or an
Affiliate of equity securities of any entity (including by merger) or all or a
portion of the assets of any entity. Unless and to the extent specified
otherwise by the Board, Substitute Stock Awards shall have the same terms and
conditions as the stock awards they replace, except that (subject to the
provisions of Section 10) Substitute Stock Awards shall be Stock Awards to
purchase Shares rather than equity securities of the granting entity and shall
have a Purchase Price that, as determined by the Board in its sole and absolute
discretion, properly reflects the substitution. Any such Substituted Stock Award
shall be effective on the effective date of the acquisition.
8.3 CASH AWARDS.
Cash Awards may be granted either alone, in addition to, or in tandem
with other Awards granted under this Plan. After the Administrator determines
that it will offer a Cash Award, it shall advise the Awardee, by means of an
Award Agreement, of the terms, conditions and restrictions related to the Cash
Award.
9. EXERCISE OF AWARDS.
9.1 IN GENERAL. An Award shall be exercisable in accordance with this Plan
and the Award Agreement under which it is granted.
9.2 TIME OF EXERCISE. Options and Stock Awards shall be considered
exercised when the Company receives: (a) written notice of exercise from the
person entitled to exercise the Option or Stock Award, (b) full payment, or
provision for payment, in a form and method approved by the Administrator, for
the Shares for which the Option or Stock Award is being exercised, and (c) with
respect to Non-statutory Options, payment, or provision for payment, in a form
approved by the Administrator, of all applicable withholding taxes due upon
exercise. An Award may not be exercised for a fraction of a Share. SARs shall be
considered exercised when the Company receives written notice of the exercise
from the person entitled to exercise the SAR.
9.3 ISSUANCE OF AWARD SHARES. The Company shall issue Award Shares in the
name of the person properly exercising the Award. If the Awardee so requests,
the Award Shares shall be issued in the name of the Awardee and the Awardee's
spouse. The Company shall endeavor to issue Award Shares promptly after an Award
is exercised or after the Grant Date of a Stock Award, as applicable. Until
Award Shares are actually issued, as evidenced by the appropriate entry on the
stock register of the Company or its transfer agent, the Awardee will not have
the rights of a shareholder with respect to those Award Shares, even though the
Awardee has completed all the steps necessary to exercise the Award. No
adjustment shall be made for any dividend, distribution, or other right for
which the record date precedes the date the Award Shares are issued, except as
provided in Section 10.
9.4 TERMINATION.
(a) IN GENERAL. Except as provided in an Award Agreement or in writing
by the Administrator, including in an Award Agreement, and as otherwise provided
in Sections 9.4(b), (c), (d) and (e) after an Awardee's Termination, the
Awardee's Awards shall be exercisable to the extent (but only to the extent)
they are vested on the date of that Termination and only during the three months
after the Termination, but in no event after the Expiration Date. To the extent
the Awardee does not exercise an Award within the time specified for exercise,
the Award shall automatically terminate.
(b) LEAVES OF ABSENCE. Unless otherwise provided in the Award
Agreement, no Award may be exercised more than three months after the beginning
of a leave of absence, other than a personal or medical leave approved by an
authorized representative of the Company with employment guaranteed upon return.
Awards shall not continue to vest during a leave of absence, unless otherwise
determined by the Administrator with respect to an approved personal or medical
leave with employment guaranteed upon return.
(c) DEATH OR DISABILITY. Unless otherwise provided by the
Administrator, if an Awardee's Termination is due to death or disability (as
determined by the Administrator with respect to all Awards other than
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Incentive Stock Options and as defined by Section 422(e) of the Code with
respect to Incentive Stock Options), all Awards of that Awardee to the extent
exercisable at the date of that Termination may be exercised for one year after
that Termination, but in no event after the Expiration Date. In the case of
Termination due to death, an Award may be exercised as provided in Section 17.
In the case of Termination due to disability, if a guardian or conservator has
been appointed to act for the Awardee and been granted this authority as part of
that appointment, that guardian or conservator may exercise the Award on behalf
of the Awardee. Death or disability occurring after an Awardee's Termination
shall not cause the Termination to be treated as having occurred due to death or
disability. To the extent an Award is not so exercised within the time specified
for its exercise, the Award shall automatically terminate.
(d) DIVESTITURE. If an Awardee's Termination is due to a Divestiture,
the Board may take any one or more of the actions described in Section 10.3 or
10.4 with respect to the Awardee's Awards.
(e) ADMINISTRATOR DISCRETION. Notwithstanding the provisions of Section
9.4 (a)-(d), the Plan Administrator shall have complete discretion, exercisable
either at the time an Award is granted or at any time while the Award remains
outstanding, to:
(i) Extend the period of time for which the Award is to remain
exercisable, following the Awardee's Termination, from the limited exercise
period otherwise in effect for that Award to such greater period of time as the
Administrator shall deem appropriate, but in no event beyond the Expiration
Date; and/or
(ii) Permit the Award to be exercised, during the applicable
post-Termination exercise period, not only with respect to the number of vested
Shares for which such Award may be exercisable at the time of the Awardee's
Termination but also with respect to one or more additional installments in
which the Awardee would have vested had the Awardee not been subject to
Termination.
(f) CONSULTING OR EMPLOYMENT RELATIONSHIP. Nothing in this Plan or in
any Award Agreement, and no Award or the fact that Award Shares remain subject
to repurchase rights, shall: (A) interfere with or limit the right of the
Company or any Affiliate to terminate the employment or consultancy of any
Awardee at any time, whether with or without cause or reason, and with or
without the payment of severance or any other compensation or payment, or (B)
interfere with the application of any provision in any of the Company's or any
Affiliate's charter documents or Applicable Law relating to the election,
appointment, term of office, or removal of a Director.
10. CERTAIN TRANSACTIONS AND EVENTS.
10.1 IN GENERAL. Except as provided in this Section 10, no change in the
capital structure of the Company, merger, sale or other disposition of assets or
a subsidiary, change in control, issuance by the Company of shares of any class
of securities or securities convertible into shares of any class of securities,
exchange or conversion of securities, or other transaction or event shall
require or be the occasion for any adjustments of the type described in this
Section 10. Additional provisions with respect to the foregoing transactions are
set forth in Section 14.3.
10.2 CHANGES IN CAPITAL STRUCTURE. In the event of any stock split, reverse
stock split, recapitalization, combination or reclassification of stock, stock
dividend, spin-off, extraordinary cash or other property dividend or similar
change to the capital structure of the Company (not including a Fundamental
Transaction or Change in Control), the Board shall make whatever adjustments it
concludes are appropriate to: (a) the number and type of Awards that may be
granted under this Plan, (b) the number and type of Options that may be granted
to any individual under this Plan, (c) the terms of any SAR, (d) the Purchase
Price of any Stock Award, (e) the Option Price and number and class of
securities issuable under each outstanding Option, and (f) the repurchase price
of any securities substituted for Award Shares that are subject to repurchase
rights. The specific adjustments shall be determined by the Board. Unless the
Board specifies otherwise, any securities issuable as a result of any such
adjustment shall be rounded down to the next lower whole security. The Board
need not adopt the same rules for each Award or each Awardee.
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10.3 FUNDAMENTAL TRANSACTIONS. Except for grants to Non-Employee Directors
pursuant to Section 11 herein, in the event of (a) a merger or consolidation in
which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the shareholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption shall be binding on all
Participants), (b) a merger in which the Company is the surviving corporation
but after which the shareholders of the Company immediately prior to such merger
(other than any shareholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (c) the sale of all or
substantially all of the assets of the Company, or (d) the acquisition, sale, or
transfer of more than 50% of the outstanding shares of the Company by tender
offer or similar transaction (each, a "FUNDAMENTAL TRANSACTION"), any or all
outstanding Awards may be assumed, converted or replaced by the successor
corporation (if any), which assumption, conversion or replacement shall be
binding on all participants under this Plan. In the alternative, the successor
corporation may substitute equivalent Awards or provide substantially similar
consideration to participants as was provided to shareholders (after taking into
account the existing provisions of the Awards). The successor corporation may
also issue, in place of outstanding Shares held by the participants,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the participant. In the event such successor
corporation (if any) does not assume or substitute Awards, as provided above,
pursuant to a transaction described in this Subsection 10.3, the vesting with
respect to such Awards shall fully and immediately accelerate or the repurchase
rights of the Company shall fully and immediately terminate, as the case may be,
so that the Awards may be exercised or the repurchase rights shall terminate
before, or otherwise in connection with the closing or completion of the
Fundamental Transaction or event, but then terminate. Notwithstanding anything
in this Plan to the contrary, the Committee may, in its sole discretion, provide
that the vesting of any or all Award Shares subject to vesting or right of
repurchase shall accelerate or lapse, as the case may be, upon a transaction
described in this Section 10.3. If the Committee exercises such discretion with
respect to Options, such Options shall become exercisable in full prior to the
consummation of such event at such time and on such conditions as the Committee
determines, and if such Options are not exercised prior to the consummation of
the Fundamental Transaction, they shall terminate at such time as determined by
the Committee. Subject to any greater rights granted to participants under the
foregoing provisions of this Section 10.3, in the event of the occurrence of any
Fundamental Transaction, any outstanding Awards shall be treated as provided in
the applicable agreement or plan of merger, consolidation, dissolution,
liquidation, or sale of assets.
10.4 CHANGES OF CONTROL. The Board may also, but need not, specify that
other transactions or events constitute a "CHANGE IN CONTROL". The Board may do
that either before or after the transaction or event occurs. Examples of
transactions or events that the Board may treat as Changes of Control are: (a)
any person or entity, including a "group" as contemplated by Section 13(d)(3) of
the Exchange Act, acquires securities holding 50% or more of the total combined
voting power or value of the Company, or (b) as a result of or in connection
with a contested election of Company Directors, the persons who were Company
Directors immediately before the election cease to constitute a majority of the
Board. In connection with a Change in Control, notwithstanding any other
provision of this Plan, the Board may, but need not, take any one or more of the
actions described in Section 10.3. In addition, the Board may extend the date
for the exercise of Awards (but not beyond their original Expiration Date). The
Board need not adopt the same rules for each Award or each Awardee.
Notwithstanding anything in this Plan to the contrary, in the event of an
involuntary Termination of services for any reason other than death, disability
or Cause, within 12 months following the consummation of a Fundamental
Transaction or Change in Control, any Awards, assumed or substituted in a
Fundamental Transaction or Change in Control, that are subject to vesting
conditions and/or the right of repurchase in favor of the Company or a successor
entity, shall accelerate fully so that such Award Shares are immediately
exercisable upon Termination or, if subject to the right of repurchase in favor
of the Company, such repurchase rights shall lapse as of the date of
Termination. Such Awards shall be exercisable for a period of three months
following termination.
10.5 DIVESTITURE. If the Company or an Affiliate sells or otherwise
transfers equity securities of an Affiliate to a person or entity other than the
Company or an Affiliate, or leases, exchanges or transfers all or any portion of
its assets to such a person or entity, then the Board may specify that such
transaction or event constitutes a "DIVESTITURE". In connection with a
Divestiture, notwithstanding any other provision of this Plan, the Board may,
but need not, take one or more of the actions described in Section 10.3 or 10.4
with respect to Awards of Award
13
Shares held by, for example, Employees, Directors or Consultants for whom that
transaction or event results in a Termination. The Board need not adopt the same
rules for each Award or Awardee.
10.6 DISSOLUTION. If the Company adopts a plan of dissolution, the Board
may cause Awards to be fully vested and exercisable (but not after their
Expiration Date) before the dissolution is completed but contingent on its
completion and may cause the Company's repurchase rights on Award Shares to
lapse upon completion of the dissolution. The Board need not adopt the same
rules for each Award or each Awardee. Notwithstanding anything herein to the
contrary, in the event of a dissolution of the Company, to the extent not
exercised before the earlier of the completion of the dissolution or their
Expiration Date, Awards shall terminate immediately prior to the dissolution.
10.7 CUT-BACK TO PRESERVE BENEFITS. If the Administrator determines that
the net after-tax amount to be realized by any Awardee, taking into account any
accelerated vesting, termination of repurchase rights, or cash payments to that
Awardee in connection with any transaction or event set forth in this Section 10
would be greater if one or more of those steps were not taken or payments were
not made with respect to that Awardee's Awards or Award Shares, then, at the
election of the Awardee, to such extent, one or more of those steps shall not be
taken and payments shall not be made.
11. NON-EMPLOYEE DIRECTOR AWARDS.
11.1 NON-EMPLOYEE DIRECTOR AWARDS.
(a) GENERAL. Except as otherwise determined by the Committee,
Non-Employee Directors will automatically receive Options as set forth below.
(i) Non-Employee Directors initially elected to the Board on or
after the Effective Date will, at that time, automatically receive an Option to
purchase 25,000 Shares at a price equal to 100% the Fair Market Value on the
Grant Date, such Option to have a ten-year term and to vest and become
exercisable with respect to one-third of the underlying Shares on the first
anniversary of the Grant Date and then with respect to one-twelfth of the
underlying shares quarterly thereafter.
(ii) Immediately following each annual meeting of shareholders held
on or after the Effective Date, Non-Employee Directors who have then served on
the Board for at least six months will automatically receive an Option to
purchase 10,000 Shares at a price equal to 100% the Fair Market Value on the
Grant Date, such Option to have a ten-year term and to be fully vested and
exercisable on the Grant Date.
(b) TERMINATION OF SERVICE. The following provisions shall govern the
exercise of any Awards granted pursuant to Section 11.1 held by the Awardee at
the time the Awardee ceases to serve as a Non-Employee Director, Employee or
Consultant:
(i) IN GENERAL. Except as otherwise provided in Section 10.3, after
cessation of service (the "CESSATION DATE"), the Awardee's Awards shall be
exercisable to the extent (but only to the extent) they are vested on the
Cessation Date and only during the one year after such Cessation Date, but in no
event after the Expiration Date. To the extent the Awardee does not exercise an
Award within the time specified for exercise, the Award shall automatically
terminate.
(ii) DEATH OR DISABILITY. If an Awardee's cessation of service is
due to death or disability (as determined by the Board), all Awards of that
Awardee, to the extent exercisable upon such Cessation Date, may be exercised
for one year after the Cessation Date, but in no event after the Expiration
Date. In the case of a cessation of service due to death, an Award may be
exercised as provided in Section 16. In the case of a cessation of service due
to disability, if a guardian or conservator has been appointed to act for the
Awardee and been granted this authority as part of that appointment, that
guardian or conservator may exercise the Award on behalf of the Awardee. Death
or disability occurring after an Awardee's cessation of service shall not cause
the
14
cessation of service to be treated as having occurred due to death or
disability. To the extent an Award is not so exercised within the time specified
for its exercise, the Award shall automatically terminate.
(c) BOARD DISCRETION. The Awards under this Section 11.1 are not
intended as the exclusive Awards that may be made to Non-Employee Directors
under this Plan. The Board may, in its discretion, amend the Plan with respect
to the terms of the Awards herein, may add or substitute other Awards or may
temporarily or permanently suspend Awards hereunder, all without approval of the
Company's shareholders.
11.2 CERTAIN TRANSACTIONS AND EVENTS.
(a) In the event of a Fundamental Transaction while the Awardee remains
a Non-Employee Director, the Shares at the time subject to each outstanding
Option held by such Awardee pursuant to Section 11, but not otherwise vested,
shall automatically vest in full so that each such Option shall, immediately
prior to the effective date of the Fundamental Transaction, become exercisable
for all the Shares as fully vested Shares and may be exercised for any or all of
those vested Shares. Immediately following the consummation of the Fundamental
Transaction, each Option shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or Affiliate thereof).
(b) In the event of a Change in Control while the Awardee remains a
Non-Employee Director, the Shares at the time subject to each outstanding Option
held by such Awardee pursuant to Section 11, but not otherwise vested, shall
automatically vest in full so that each such Option shall, immediately prior to
the effective date of the Change in Control, become exercisable for all the
Shares as fully vested Shares and may be exercised for any or all of those
vested Shares. Each such Option shall remain exercisable for such fully vested
Shares until the expiration or sooner termination of the Option term in
connection with a Change in Control.
(c) Each Option which is assumed in connection with a Fundamental
Transaction shall be appropriately adjusted, immediately after such Fundamental
Transaction, to apply to the number and class of securities which would have
been issuable to the Awardee in consummation of such Fundamental Transaction had
the Option been exercised immediately prior to such Fundamental Transaction.
Appropriate adjustments shall also be made to the Option Price payable per share
under each outstanding Option, provided the aggregate Option Price payable for
such securities shall remain the same. To the extent the actual holders of the
Company's outstanding Class A common stock receive cash consideration for their
Class A common stock in consummation of the Fundamental Transaction, the
successor corporation may, in connection with the assumption of the outstanding
Options granted pursuant to Section 11, substitute one or more shares of its own
common stock with a fair market value equivalent to the cash consideration paid
per share of Class A common stock in such Fundamental Transaction.
(d) The grant of Options pursuant to Section 11 shall in no way affect
the right of the Company to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
(e) The remaining terms of each Option granted pursuant to Section 11
shall, as applicable, be the same as terms in effect for Awards granted under
this Plan, provided that the provisions of Section 9.4 and Section 10 shall not
apply to Options granted pursuant to Section 11.
11.3 LIMITED TRANSFERABILITY OF OPTIONS. Each Option granted pursuant to
Section 11 may be assigned in whole or in part during the Awardee's lifetime to
one or more members of the Awardee's family or to a trust established
exclusively for one or more such family members or to an entity in which the
Awardee is majority owner or to the Awardee 's former spouse, to the extent such
assignment is in connection with the Awardee 's estate or financial plan or
pursuant to a Domestic Relations Order. The assigned portion may only be
exercised by the person or persons who acquire a proprietary interest in the
Option pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for the Option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Administrator may deem appropriate. The Awardee may also designate one or
more persons as the beneficiary or beneficiaries of his or her outstanding
Options under
15
Section 11, and those Options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Awardee 's death while holding those Options. Such beneficiary or beneficiaries
shall take the transferred Options subject to all the terms and conditions of
the applicable Award Agreement evidencing each such transferred Option,
including (without limitation) the limited time period during which the Option
may be exercised following the Awardee 's death.
12. WITHHOLDING AND TAX REPORTING.
12.1 TAX WITHHOLDING ALTERNATIVES.
(a) GENERAL. Whenever Award Shares are issued or become free of
restrictions, the Company may require the Awardee to remit to the Company an
amount sufficient to satisfy any applicable tax withholding requirement, whether
the related tax is imposed on the Awardee or the Company. The Company shall have
no obligation to deliver Award Shares or release Award Shares from an escrow or
permit a transfer of Award Shares until the Awardee has satisfied those tax
withholding obligations. Whenever payment in satisfaction of Awards is made in
cash, the payment will be reduced by an amount sufficient to satisfy all tax
withholding requirements.
(b) METHOD OF PAYMENT. The Awardee shall pay any required withholding
using the forms of consideration described in Section 6.4(b), except that, in
the discretion of the Administrator, the Company may also permit the Awardee to
use any of the forms of payment described in Section 6.4(c). The Administrator,
in its sole discretion, may also permit Award Shares to be withheld to pay
required withholding. If the Administrator permits Award Shares to be withheld,
the Fair Market Value of the Award Shares withheld, as determined as of the date
of withholding, shall not exceed the amount determined by the applicable minimum
statutory withholding rates.
12.2 REPORTING OF DISPOSITIONS. Any holder of Option Shares acquired under
an Incentive Stock Option shall promptly notify the Administrator, following
such procedures as the Administrator may require, of the sale or other
disposition of any of those Option Shares if the disposition occurs during: (a)
the longer of two years after the Grant Date of the Incentive Stock Option and
one year after the date the Incentive Stock Option was exercised, or (b) such
other period as the Administrator has established.
13. COMPLIANCE WITH LAW.
The grant of Awards and the issuance and subsequent transfer of Award
Shares shall be subject to compliance with all Applicable Law, including all
applicable securities laws. Awards may not be exercised, and Award Shares may
not be transferred, in violation of Applicable Law. Thus, for example, Awards
may not be exercised unless: (a) a registration statement under the Securities
Act is then in effect with respect to the related Award Shares, or (b) in the
opinion of legal counsel to the Company, those Award Shares may be issued in
accordance with an applicable exemption from the registration requirements of
the Securities Act and any other applicable securities laws. The failure or
inability of the Company to obtain from any regulatory body the authority
considered by the Company's legal counsel to be necessary or useful for the
lawful issuance of any Award Shares or their subsequent transfer shall relieve
the Company of any liability for failing to issue those Award Shares or
permitting their transfer. As a condition to the exercise of any Award or the
transfer of any Award Shares, the Company may require the Awardee to satisfy any
requirements or qualifications that may be necessary or appropriate to comply
with or evidence compliance with any Applicable Law.
14. AMENDMENT OR TERMINATION OF THIS PLAN OR OUTSTANDING AWARDS.
14.1 AMENDMENT AND TERMINATION. Subject to the provisions of Section 14.2,
the Board may at any time amend, suspend, or terminate this Plan.
14.2 SHAREHOLDER APPROVAL. The Company shall obtain the approval of the
Company's shareholders for any amendment to this Plan if shareholder approval is
necessary to comply with any Applicable Law or with the requirements applicable
to the grant of Awards intended to be Incentive Stock Options. The Board may
also, but need not, require that the Company's shareholders approve any other
amendments to this Plan.
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14.3 EFFECT. No amendment, suspension, or termination of this Plan, and no
modification of any Award even in the absence of an amendment, suspension, or
termination of this Plan, shall impair any existing contractual rights of any
Awardee unless the affected Awardee consents to the amendment, suspension,
termination, or modification. Notwithstanding anything herein to the contrary,
no such consent shall be required if the Board determines, in its sole and
absolute discretion, that the amendment, suspension, termination, or
modification: (a) is required or advisable in order for the Company, this Plan
or the Award to satisfy Applicable Law, to meet the requirements of any
accounting standard or to avoid any adverse accounting treatment, or (b) in
connection with any transaction or event described in Section 10, is in the best
interests of the Company or its shareholders. The Board may, but need not, take
the tax or accounting consequences to affected Awardees into consideration in
acting under the preceding sentence. Those decisions shall be final, binding and
conclusive. Termination of this Plan shall not affect the Administrator's
ability to exercise the powers granted to it under this Plan with respect to
Awards granted before the termination of Award Shares issued under such Awards
even if those Award Shares are issued after the termination.
15. RESERVED RIGHTS.
15.1 NONEXCLUSIVITY OF THIS PLAN. This Plan shall not limit the power of
the Company or any Affiliate to adopt other incentive arrangements including,
for example, the grant or issuance of stock options, stock, or other
equity-based rights under other plans.
15.2 UNFUNDED PLAN. This Plan shall be unfunded. Although bookkeeping
accounts may be established with respect to Awardees, any such accounts will be
used merely as a convenience. The Company shall not be required to segregate any
assets on account of this Plan, the grant of Awards, or the issuance of Award
Shares. The Company and the Administrator shall not be deemed to be a trustee of
stock or cash to be awarded under this Plan. Any obligations of the Company to
any Awardee shall be based solely upon contracts entered into under this Plan,
such as Award Agreements. No such obligations shall be deemed to be secured by
any pledge or other encumbrance on any assets of the Company. Neither the
Company nor the Administrator shall be required to give any security or bond for
the performance of any such obligations.
16. SPECIAL ARRANGEMENTS REGARDING AWARD SHARES.
16.1 ESCROW OF STOCK CERTIFICATES. To enforce any restrictions on Award
Shares, the Administrator may require their holder to deposit the certificates
representing Award Shares, with stock powers or other transfer instruments
approved by the Administrator endorsed in blank, with the Company or an agent of
the Company to hold in escrow until the restrictions have lapsed or terminated.
The Administrator may also cause a legend or legends referencing the
restrictions to be placed on the certificates.
16.2 REPURCHASE RIGHTS.
(a) GENERAL. If a Stock Award is subject to vesting conditions, the
Company shall have the right, during the seven months after the Awardee's
Termination, to repurchase any or all of the Award Shares that were unvested as
of the date of that Termination. The repurchase price shall be determined by the
Administrator in accordance with this Section 16.2 which shall be either (i) the
Purchase Price for the Award Shares (minus the amount of any cash dividends paid
or payable with respect to the Award Shares for which the record date precedes
the repurchase) or (ii) the lower of (A) the Purchase Price for the Shares or
(B) the Fair Market Value of those Award Shares as of the date of the
Termination. The repurchase price shall be paid in cash. The Company may assign
this right of repurchase.
(b) PROCEDURE. The Company or its assignee may choose to give the
Awardee a written notice of exercise of its repurchase rights under this Section
16.2. However, the Company's failure to give such a notice shall not affect its
rights to repurchase Award Shares. The Company must, however, tender the
repurchase price during the period specified in this Section 16.2 for exercising
its repurchase rights in order to exercise such rights.
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17. BENEFICIARIES.
An Awardee may file a written designation of one or more beneficiaries who
are to receive the Awardee's rights under the Awardee's Awards after the
Awardee's death. An Awardee may change such a designation at any time by written
notice. If an Awardee designates a beneficiary, the beneficiary may exercise the
Awardee's Awards after the Awardee's death. If an Awardee dies when the Awardee
has no living beneficiary designated under this Plan, the Company shall allow
the executor or administrator of the Awardee's estate to exercise the Award or,
if there is none, the person entitled to exercise the Option under the Awardee's
will or the laws of descent and distribution. In any case, no Award may be
exercised after its Expiration Date.
18. MISCELLANEOUS.
18.1 GOVERNING LAW. This Plan, the Award Agreements and all other
agreements entered into under this Plan, and all actions taken under this Plan
or in connection with Awards or Award Shares, shall be governed by the laws of
the State of California.
18.2 DETERMINATION OF VALUE. Fair Market Value shall be determined as
follows:
(a) LISTED STOCK. If the Shares are traded on any established stock
exchange or quoted on a national market system, Fair Market Value shall be the
closing sales price for the Shares as quoted on that stock exchange or system
for the date the value is to be determined (the "VALUE DATE") as reported in The
Wall Street Journal or a similar publication. If no sales are reported as having
occurred on the Value Date, Fair Market Value shall be that closing sales price
for the last preceding trading day on which sales of Shares are reported as
having occurred. If no sales are reported as having occurred during the five
trading days before the Value Date, Fair Market Value shall be the closing bid
for Shares on the Value Date. If Shares are listed on multiple exchanges or
systems, Fair Market Value shall be based on sales or bid prices on the primary
exchange or system on which Shares are traded or quoted.
(b) STOCK QUOTED BY SECURITIES DEALER. If Shares are regularly quoted
by a recognized securities dealer but selling prices are not reported on any
established stock exchange or quoted on a national market system, Fair Market
Value shall be the mean between the high bid and low asked prices on the Value
Date. If no prices are quoted for the Value Date, Fair Market Value shall be the
mean between the high bid and low asked prices on the last preceding trading day
on which any bid and asked prices were quoted.
(c) NO ESTABLISHED MARKET. If Shares are not traded on any established
stock exchange or quoted on a national market system and are not quoted by a
recognized securities dealer, the Administrator (following guidelines
established by the Board or Committee) will determine Fair Market Value in good
faith. The Administrator will consider the following factors, and any others it
considers significant, in determining Fair Market Value: (i) the price at which
other securities of the Company have been issued to purchasers other than
Employees, Directors, or Consultants, (ii) the Company's shareholder's equity,
prospective earning power, dividend-paying capacity, and non-operating assets,
if any, and (iii) any other relevant factors, including the economic outlook for
the Company and the Company's industry, the Company's position in that industry,
the Company's goodwill and other intellectual property, and the values of
securities of other businesses in the same industry.
18.3 RESERVATION OF SHARES. During the term of this Plan, the Company shall
at all times reserve and keep available such number of Shares as are still
issuable under this Plan.
18.4 ELECTRONIC COMMUNICATIONS. Any Award Agreement, notice of exercise of
an Award, or other document required or permitted by this Plan may be delivered
in writing or, to the extent determined by the Administrator, electronically.
Signatures may also be electronic if permitted by the Administrator.
18.5 NOTICES. Unless the Administrator specifies otherwise, any notice to
the Company under any Option Agreement or with respect to any Awards or Award
Shares shall be in writing (or, if so authorized by Section 18.4, communicated
electronically), shall be addressed to the Secretary of the Company, and shall
only be effective when received by the Secretary of the Company.
* * *
Approved by shareholders: March 17, 2005
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