XOMA LTD.
RESTRICTED SHARE PLAN
(As Restated And Amended Through May 21, 2003)
ARTICLE I
GENERAL
1. PURPOSE OF THE PLAN
This Restricted Share Plan ("Plan") is intended to promote the interests of
XOMA Ltd. (the "Company") by providing (i) those key employees of the Company
and its subsidiaries who are primarily responsible for the management, growth
and financial success of the Company or its subsidiaries and (ii) those
consultants who provide valuable services to the Company or its subsidiaries,
with the opportunity to acquire a proprietary interest, or increase their
proprietary interest, in the Company and thereby to encourage such individuals
to remain in the employ or service of the Company or its subsidiaries.
2. STRUCTURE OF THE PLAN
(a) The Plan shall be divided into two separate components: the Option
Grant Program specified in Article II and the Share Issuance Program specified
in Article III. Under the Option Grant Program, eligible individuals may be
granted options to purchase Common Shares of the Company at a discount of up to
15% of the fair market value of such shares on the grant date.
(b) The Share Issuance Program shall allow eligible individuals to acquire
Common Shares of the Company either through direct purchases or upon the
exercise of option grants. Such shares may be purchased at a discount of up to
15% of their fair market value on the issue date (for direct issuances) or 15%
of such fair market value on the option grant date (for shares acquired upon the
exercise of granted options). The purchased shares may be issued as fully-vested
shares or as shares which are to vest over time. Issuances may be effected
either through direct purchases or upon the exercise of option grants. Any or
all of the issued shares may be subject to a permanent right of first refusal
binding all holders of the shares to offer such shares for sale to the Company
at a formula price prior to any sale or other disposition to a third party. The
fair market value of shares subject to such first refusal rights shall be
appropriately discounted to reflect this non-lapse restriction.
(c) The provisions of Articles I and IV of the Plan shall apply to both the
Option Grant Program and the Share Issuance Program and shall accordingly govern
the interests of all individuals in the Plan.
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(d) For all purposes of the Plan, the following definitions shall be in
effect:
(i) An individual shall be deemed to be in the Service of the Company
for so long as he remains an employee of the Company or renders periodic
services to the Company or its subsidiaries as a consultant, advisor or
other independent service provider.
(ii) An individual shall be deemed to be an employee of the Company
for so long as he continues in the active employ of the Company or one or
more of its subsidiary corporations.
(iii) The term "subsidiary" shall mean any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company,
provided each of the corporations in the chain (other than the last
corporation) owns shares possessing 50% or more of the total combined
voting power of all classes of stock of one of the other corporations in
such chain.
3. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Company's Board of Directors (the
"Board"). The Board, however, may at any time appoint a committee ("Committee")
of two (2) or more "non-employee directors" (within the meaning of Rule 16b-3
(b)(3) of the Securities and Exchange Commission as amended in 1996 or any
successor provision thereto) to administer one or more provisions of the Plan,
including the Option Grant provisions of Article II or the Share Issuance
provisions of Article III, or to provide recommendations to the Board with
respect to the Board's administration of those provisions. It is also intended
that the non-employee directors shall also be "outside directors" (within the
meaning of Section 162(m) of the Internal Revenue Code). However, the mere fact
that a Committee member shall fail to qualify as a non-employee director or an
outside director shall not invalidate any options or shares granted by the
Committee which are otherwise validly made under the Plan. Members of the
Committee shall serve for such period of time as the Board may determine and
shall be subject to removal by the Board at any time.
(b) The Plan Administrator (either the Board or the Committee, to the
extent the Committee has been delegated responsibility for the administration of
the Plan) shall have full power and authority (subject to the provisions of the
Plan) to establish such rules and regulations as it may deem appropriate for the
proper administration of the Plan and to make such determinations under, and
issue such interpretations of, the Plan and any outstanding option grants or
share issuances as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan or any outstanding option grant or share issuance.
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4. OPTION GRANTS AND SHARE ISSUANCES
(a) Key employees (including officers and directors) of the Company (or its
subsidiaries) and consultants (other than the non-employee directors) who
provide valuable services to the Company (or its subsidiaries) shall be eligible
to receive share issuances under the Share Issuance Program ("Participant")
and/or option grants pursuant to the Option Grant Program ("Optionee").
Directors who are not employees of the Company shall not be eligible to receive
such share issuances or option grants or to participate otherwise in the Plan.
(b) The Committee, or the Board if no Committee is appointed pursuant to
Section 3, shall have full authority to determine, (I) with respect to the
option grants made under the Plan, the number of shares to be covered by each
grant, the time or times at which each granted option is to become exercisable
and the maximum term for which the option may remain outstanding and (II) with
respect to share issuances under the Share Issuance Program, the number of
shares to be issued to each Participant, the vesting schedule (if any) to be
applicable to the issued shares, the consideration to be paid by the individual
for such shares and the appropriate formula price to be in effect for the
Company's first refusal rights.
(c) All options granted pursuant to the Plan shall be deemed to have been
granted on the date of authorization by the Plan Administrator or at any later
date specified by the Plan Administrator at the time of such authorization. Any
individual may hold more than one outstanding option under the Plan.
(d) The Plan Administrator shall have the absolute discretion either to
grant non-qualified options in accordance with Article II of the Plan or to
effect direct share issuances in accordance with Article III of the Plan.
5. SHARES SUBJECT TO THE PLAN
(a) The shares issuable under the Plan shall be shares of the Company's
authorized but unissued common shares ("Common Shares"). The maximum number of
shares issuable over the term of the Plan shall not exceed 1,500,000 shares,
subject to adjustment as provided in Section 5(c) of this Article I. In no
event, however, shall more than 11,150,000 shares (subject to adjustment under
Section 5(c) of this Article I) be issued in the aggregate over the term of this
Plan and the Company's 1981 Share Option Plan ("1981 Plan").
For any one individual, the number of shares for which options or share
appreciation rights may be granted under the Option Grant Program beginning on
October 30, 1996 and ending at the expiration of the term of the Plan may not
exceed 1,000,000.
(b) Should an option under the Plan be terminated for any reason prior to
exercise or surrender in full, the shares subject to the portion of the option
not so exercised or
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surrendered shall be available for subsequent option grant or share issuance
under the Plan or for subsequent option grant under the 1981 Plan. Shares
subject to an option (or portion of an option) surrendered under the Plan in
connection with a Control Acquisition (as defined in Article II, Section 2(d))
shall not be available for subsequent option grant or share issuance under the
Plan or for subsequent option grant under the 1981 Plan. Shares issued under the
Share Issuance Program (whether as vested or unvested shares) which are
repurchased by the Company shall not be available for subsequent reissuance
under this Plan or the 1981 Plan.
(c) If any change is made to the Common Shares issuable under the Plan by
reason of any bonus issue, share subdivision, share consolidation,
recapitalization or other change affecting the outstanding Common Shares as a
class without receipt of consideration, then appropriate adjustments shall be
made to (i) the number of shares issuable under the Plan, (ii) the number of
shares issuable in the aggregate under this Plan and the 1981 Plan and (iii) the
number and/or class of shares and the option price per Common Share subject to
each outstanding option in order to prevent the dilution or enlargement of
benefits thereunder. The adjustments determined by the Plan Administrator shall
be final, binding and conclusive.
(d) Common Shares issuable under the Plan, whether under the Option Grant
Program or the Share Issuance Program, may be subject to such restrictions on
transfer, repurchase rights or other restrictions as are determined by the Plan
Administrator.
ARTICLE II
OPTION GRANT PROGRAM
1. TERMS AND CONDITIONS OF OPTIONS
Each option granted under the Plan shall be a non-qualified option and
shall be evidenced by a share option agreement that complies with (or
incorporates) each of the terms and conditions of this Article II.
(a) Option Price.
(1) Subject to the provisions of Section (a)(2) below, the option
price per share shall be fixed by the Plan Administrator, but in no event
shall it be less than eighty-five percent (85%) of the fair market value
per Common Share on the date of the option grant.
(2) If the individual to whom the option is granted is at such time
the owner of shares (as determined under Section 425(d) of the Internal
Revenue Code) possessing 10% or more of the total combined voting power of
all classes of shares of the Company or any one of its subsidiary
corporations ("10% Shareholder"), then the option price per
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share shall not be less than one hundred ten percent (110%) of the fair
market value per Common Share on the grant date.
(3) The option price shall become immediately due upon exercise of the
option and, subject to the provisions of Article IV, Section 2, shall be
payable in one of the following alternative forms specified below (as
determined by the Plan Administrator and set forth in the instrument
evidencing the grant):
(A) Full payment in cash or cash equivalents; or
(B) Full payment in Common Shares valued at fair market value on
the Exercise Date (as such term is defined below) equal to the option
price; or
(C) Full payment in a combination of Common Shares valued at fair
market value on the Exercise Date and cash or cash equivalents, equal
in the aggregate to the option price; or
(D) Payment effected through a broker-dealer sale and remittance
procedure pursuant to which the Optionee (I) shall provide irrevocable
written instructions to the designated broker-dealer to effect the
immediate sale of the purchased shares and remit to the Company, out
of the sale proceeds, an amount equal to the aggregate option price
payable for the purchased shares plus all applicable Federal and State
income and employment taxes required to be withheld by the Company by
reason of such purchase and (II) shall provide written directives to
the Company to deliver the certificates for the purchased shares
directly to such broker-dealer.
For purposes of this subsection (a)(3), the Exercise Date is the date on
which written notice of the exercise of the option is given to the Company.
Except to the extent the sale and remittance procedure of clause (D) above
is utilized, payment of the option price for the purchased shares shall
accompany such notice.
(4) For purposes of subsections (1), (2) and (3) above (and for all
other valuation purposes under the Plan), the fair market value per Common
Share shall be determined in accordance with the following provisions:
(A) If the Common Shares are not at the time listed or admitted
to trading on any stock exchange but is traded in the over-the-counter
market, the fair market value shall be the closing selling price per
Common Share on the date in question, as such price is reported by the
National Association of Securities Dealers through its Nasdaq National
Market or any successor system. If there is no reported closing
selling price for the Common Shares on the date in question, then the
closing selling price on the last preceding date for which such
quotation exists shall be determinative of fair market value.
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(B) If the Common Shares are at the time listed or admitted to
trading on any stock exchange, then the fair market value shall be the
closing selling price per Common Share on the date in question on the
stock exchange determined by the Plan Administrator to be the primary
market for the Common Shares , as such price is officially quoted on
such exchange. If there is no reported sale of Common Shares on such
exchange on the date in question, then the fair market value shall be
the closing selling price on the exchange on the last preceding date
for which such quotation exists.
(C) If the Common Shares are at the time neither listed nor
admitted to trading on any stock exchange nor traded in the
over-the-counter market (or if the Plan Administrator determines that
the value as determined pursuant to subsection (A) or (B) above does
not reflect fair market value), then the Plan Administrator shall
determine fair market value after taking into account such factors as
it deems appropriate, including one or more independent professional
appraisals.
(b) Term and Exercise of Options; Transferability. Each option granted
under the Plan shall be exercisable at such time or times and during such period
as is determined by the Plan Administrator and set forth in the share option
agreement evidencing such option; provided, however, that no option granted
under the Plan shall have a term in excess of ten (10) years from the grant
date.
Options may, in the discretion of the Plan Administrator, be granted on
terms which permit their transfer or assignment to the spouse of the Optionee or
a descendent of the Optionee (any such spouse or descendent, an "Immediate
Family Member") or a corporation, partnership, limited liability company or
trust so long as all of the shareholders, partners, members or beneficiaries
thereof, as the case may be, are either the Optionee or an Immediate Family
Member of the Optionee, provided that (i) there may be no consideration for any
such transfer, (ii) the share option agreement pursuant to which such options
are granted must expressly provide for transferability in a manner consistent
with the foregoing and (iii) subsequent transfers of transferred options will be
prohibited other than by will or the laws of descent and distribution. Following
transfer, any such options will continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that for
purposes of the option agreement the term "Optionee" will refer to the
transferee. The events of termination of employment will continue to be applied
with respect to the original Optionee, following which the options will be
exercisable by the transferee only to the extent, and for the periods specified,
in the option agreement.
(c) Effect of Termination of Employment.
(1) Termination Generally. Should an Optionee cease to be an employee of
the Company while the holder of one or more outstanding options granted to such
Optionee under the Plan for any reason other than as provided under subsections
(2), (3) or (4)
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below, then such option or options shall not remain exercisable for more than a
twelve (12) month period (or such shorter period as is determined by the Plan
Administrator and set forth in the option agreement) following the date of such
cessation of employee status, and each such option shall, during such twelve
(12) month or shorter period, be exercisable only to the extent of the number of
shares (if any) for which the option is exercisable on the date of such
cessation of employee status. Under no circumstances, however, shall any such
option be exercisable after the specified expiration date of the option term.
Upon the expiration of such twelve (12) month or shorter period or (if earlier)
upon the expiration of the option term, the option shall terminate and cease to
be exercisable.
(2) Termination on Death. Effective for options granted on or after
February 25, 2003, should an Optionee cease to be an employee of the Company
while the holder of one or more outstanding options under the Plan by reason of
death, then such option or options shall become fully exercisable on the date of
death even if such options were not fully exercisable prior to death, and shall
remain exercisable for a twelve (12) month period following the date of death.
Under no circumstances, however, shall any such option be exercisable after the
specified expiration date of the option term. Upon the expiration of such twelve
(12) month period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be exercisable. In the case of any option
granted to an Optionee under the Plan and exercisable following the Optionee's
death, such options shall be exercisable by the personal representative of the
Optionee's estate or by the person or persons to whom the option is transferred
pursuant to subsection (b) above, provided such exercise occurs prior to the
earlier of (i) the expiration of a twelve (12) month period following the date
of the Optionee's death or (ii) the specified expiration date of the option
term.
(3) Termination on Retirement. Effective for options granted on or after
February 25, 2003 should an Optionee cease to be an employee of the Company
while the holder of one or more outstanding options under the Plan by reason of
retirement at or after age fifty-five (55) and where the optionee's age plus
years of full-time employment with the Company exceed seventy (70)
("Retirement"), then such option or options shall become fully exercisable as of
the date of Retirement (even if such options were not fully exercisable prior to
Retirement) as if the optionee continued in employment and shall remain
exercisable for a twelve (12) month period following the date of Retirement.
Under no circumstances, however, shall any such option be exercisable after the
specified expiration date of the option term. Upon the expiration of such twelve
(12) month or shorter period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be exercisable.
(4) Termination for Cause or Unauthorized Disclosure. If (i) the Optionee's
status as an employee is terminated for cause (including, but not limited to,
any act of dishonesty, willful misconduct, fraud or embezzlement or any
unauthorized disclosure or
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use of confidential information or trade secrets) or (ii) the Optionee makes or
attempts to make any unauthorized use or disclosure of confidential information
or trade secrets of the Company or its subsidiaries, then upon the occurrence of
any such event all outstanding options granted the Optionee under the Plan shall
immediately terminate and cease to be exercisable.
(5) Discretion to Accelerate Exercisability. Notwithstanding subsection (1)
above, the Plan Administrator shall have the discretion to establish as a
provision applicable to the exercise of one or more options granted under the
Plan that during the period of exercisability following cessation of employee
status (as provided in such subsections), the option may be exercised not only
with respect to the number of shares for which it is exercisable at the time of
the Optionee's cessation of employee status but also with respect to one or more
installments of purchasable shares for which the option otherwise would have
become exercisable had such cessation of employee status not occurred.
(6) Consultant. If the option is granted to a consultant or other
independent contractor, then the instrument evidencing the granted option shall
include provisions comparable to subsections (1), (2), (3) and (4) above, and
may include provisions comparable to subsection (5) above, with respect to the
Optionee's termination of Service.
(d) Repurchase Rights. The Common Shares acquired upon the exercise of
options granted under the Plan may be subject to one or more repurchase rights
of the Company in accordance with the following provisions:
(1) The Plan Administrator may in its discretion determine that it shall be
a term and condition of one or more options granted under the Plan that the
Company (or its assigns) shall have the right, exercisable upon the Optionee's
cessation of Service, to repurchase at the original option price any or all
unvested Common Shares at the time held by such individual under the Plan. Any
such repurchase right shall be exercisable by the Company (or its assigns) upon
such terms and conditions (including the establishment of the appropriate
vesting schedule and other provisions for the expiration of such right in one or
more installments) as the Plan Administrator may specify in the instrument
evidencing such right.
(2) The Plan Administrator shall also have full power and authority to
provide for the automatic termination of the Company's outstanding repurchase
rights, in whole and in part, and thereby accelerate the vesting of any or all
purchased shares, upon the occurrence of any Corporate Transaction specified in
Article II, Section 3 below.
(e) Shareholder Rights. An Optionee shall have no shareholder rights with
respect to any shares covered by the option until such Optionee has exercised
the option, paid the option price and been issued the purchased shares.
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2. SHARE APPRECIATION RIGHTS
(a) One or more Optionees may, upon such terms and conditions as the Plan
Administrator may establish at the time of the option grant or at any time
thereafter, be granted the right to surrender all or part of an unexercised
option in exchange for a distribution from the Company in an amount equal to the
excess of (i) the fair market value (at date of surrender) of the number of
shares in which the Optionee is at the time vested under the surrendered option
or portion thereof over (ii) the aggregate option price payable for such vested
shares. No surrender of an option, however, shall be effective unless it is
approved by the Plan Administrator. If the surrender is so approved, then the
distribution to which the option holder shall accordingly become entitled under
this subsection 2(a) may be made in Common Shares valued at fair market value at
date of surrender, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.
(b) If the surrender of an option is rejected by the Plan Administrator,
then the option holder shall retain whatever rights the option holder had under
the surrendered option (or surrendered portion thereof) on the date of surrender
and may exercise such rights at any time prior to the later of (i) the
expiration of the 5 business-day period following receipt of the rejection
notice or (ii) the last day on which the option is otherwise exercisable in
accordance with the terms of the instrument evidencing such option, but in no
event may such rights be exercised at any time after ten (10) years (or five (5)
years in the case of a 10% Shareholder) following the date of the option grant.
(c) Notwithstanding the foregoing provisions of this Section 2, should
twenty-five percent (25%) or more of the Company's outstanding voting shares be
acquired pursuant to a tender or exchange offer (I) which is made by a person or
group of related persons other than the Company or a person that directly or
indirectly controls, is controlled by or is under common control with the
Company and (ii) which the Board does not recommend the Company's shareholders
to accept (a "Control Acquisition"), then each officer or director who is
subject to the short-swing profit restrictions of the Federal securities laws
shall have the right (exercisable for a period not to exceed thirty (30) days)
to surrender any or all options held by such individual under the Plan, to the
extent such options are at the time exercisable for vested shares, and receive
in exchange an appreciation distribution from the Company calculated in
accordance with Section 2(a). The approval of the Plan Administrator shall not
be required for such surrender, and the distribution to which such individual
shall become entitled upon such surrender shall be made entirely in cash.
3. SALE, MERGER, REORGANIZATION, ETC.
(a) In the event of one or more of the following transactions ("Corporate
Transaction"):
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(i) a merger, amalgamation or acquisition in which the Company is not
the surviving or continuing entity, except for a transaction the principal
purpose of which is to change the jurisdiction of incorporation;
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Company; or
(iii) any other business combination in which fifty percent (50%) or
more of the Company's outstanding voting shares are transferred to
different holders in a single transaction or a series of related
transactions,
then each option at the time outstanding under the Plan and not then otherwise
fully exercisable shall, immediately prior to the specified effective date for
the Corporate Transaction, become fully exercisable for up to the total number
of Common Shares purchasable under such option and may be exercised for all or
any portion of the shares for which the option is so accelerated. However, an
outstanding option shall not be so accelerated if and to the extent: (i) such
option is in connection with the Corporate Transaction either to be assumed by
the successor corporation (or affiliate thereof) or be replaced with a
comparable option to purchase shares of capital stock of the successor
corporation (or affiliate thereof), such comparability to be determined by the
Plan Administrator, or (ii) the acceleration of such option would, when added to
the present value of certain other payments in the nature of compensation which
become due and payable to the Optionee in connection with the Corporate
Transaction, result in the payment to such individual of an excess parachute
payment under Section 280G(b) of the Internal Revenue Code. The existence of any
such excess parachute payment shall be determined by the Plan Administrator in
the exercise of its reasonable business judgment and on the basis of independent
tax counsel provided the Company.
(b) Upon the consummation of the Corporate Transaction, all outstanding
options under the Plan shall, to the extent not previously exercised or assumed
by the successor corporation (or its affiliate), terminate and cease to be
exercisable.
(c) If the Company is the surviving or continuing entity in any Corporate
Transaction or the outstanding options under the Plan are to be assumed in
connection with such Corporate Transaction, then each such continuing or assumed
option shall be appropriately adjusted immediately after such Corporate
Transaction to apply and pertain to the number and class of securities which
would have been issuable to the Optionee in consummation of the Corporate
Transaction, had such option been exercised immediately prior to the effective
date of such Corporate Transaction. Appropriate adjustments shall also be made
to the option price payable per share, provided the aggregate option price shall
remain the same. In addition, the class and number of securities available for
issuance under the Plan following the consummation of such Corporate Transaction
shall be appropriately adjusted.
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(d) The grant of options under the Plan shall not affect the right of the
Company to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, amalgamate, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
4. [RESERVED]
ARTICLE III
SHARE ISSUANCE PROGRAM
1. TERMS AND CONDITIONS OF SHARE ISSUANCES
Shares may be issued under the Share Issuance Program either through direct
and immediate purchases or through the exercise of options granted under the
Option Grant Program. The issued shares shall be evidenced by a Restricted Share
Purchase Agreement ("Purchase Agreement") that complies with (or incorporates)
each of the terms and conditions of this Article III.
(a) Share Price
(1) The purchase price per share shall be fixed by the Plan Administrator,
but in no event shall it be less than eighty-five percent (85%) of the fair
market value per Common Share on the date of issuance (or, if an option is
utilized, on the grant date of such option). However, if the individual to whom
the share issuance is made is at such time a 10% Shareholder (as defined in
Article II, Section 1(a)(2)), then the purchase price per share shall not be
less than one hundred ten percent (110%) of the fair market value per Common
Share on the date of issuance (or, if an option is utilized, on the grant date
of such option). Fair market value shall be determined in accordance with
Article II, Section (1)(a)(4); provided, however, if any shares issued under the
Plan are subject to the permanent right of first refusal of the Company or its
assigns under subsection 1(d) below, then the fair market value shall be
appropriately adjusted to reflect the effect of such non-lapse restriction.
(2) Shares shall be issued under the Plan for such consideration as the
Plan Administrator shall from time to time determine, provided that in no event
shall shares be issued for consideration other than:
(A) cash or cash equivalents;
(B) Common Shares valued in accordance with Article II, Section
1(a)(4);
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(C) a promissory note of the Participant payable to the Company's
order, which may be subject to cancellation by the Company in whole or in
part upon such terms or conditions as the Plan Administrator shall specify;
or
(D) payment effected through a broker-dealer sale and remittance
procedure pursuant to which the Participant (I) shall provide irrevocable
written instructions to the designated broker-dealer to effect the
immediate sale of the purchased shares and remit to the Company, out of the
sale proceeds, an amount equal to the aggregate purchase price payable for
the purchased shares plus all applicable Federal and State income and
employment taxes required to be withheld by the Company by reason of such
purchase and (II) shall provide written directives to the Company to
deliver the certificates for the purchased shares directly to such
broker-dealer.
(b) Vesting Schedule
(1) The interest of a Participant in the Common Shares issued to him under
the Plan may, in the absolute discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments in
accordance with the vesting provisions of subsection (b)(4). Except as otherwise
provided in subsection (b)(3), the Participant may not transfer any of the
Common Shares in which he does not have a vested interest; accordingly, all
unvested shares issued to him under the Plan shall bear the restrictive legend
specified in subsection (c)(1), until such legend is removed in accordance with
subsection (c)(2). The Participant, however, shall have all the rights of a
shareholder with respect to the Common Shares issued to him hereunder, whether
or not his interest in such shares is at the time vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any cash
dividends or other distributions paid or made with respect to such shares. Any
new, additional or different shares or other property (including money paid
other than as a regular cash dividend) which the holder of unvested Common
Shares may have the right to receive by reason of a bonus issue, share
subdivision, share consolidation or reclassification of Common Shares or by
reason of a merger, amalgamation , consolidation, reorganization or liquidation
shall be issued to him, subject to (i) the same vesting requirements under
subsection (b)(4) applicable to his unvested Common Shares and (ii) such escrow
arrangements as the Plan Administrator shall deem appropriate.
(2) As used in this Article III, the term "transfer" shall include (without
limitation) any sale, pledge, encumbrance, gift or other disposition of such
shares. However, the Participant shall have the right to make a gift of one or
more shares acquired under the Share Issuance Program, whether vested or
unvested and whether or not subject to the subsection (d)(1) right of first
refusal, to his spouse, parents or children or to a trust established for such
spouse, parents or children, provided the donee of such shares delivers to the
Company a written agreement to be bound by all the provisions of the Plan and
other instruments executed by the Participant to evidence his prior acquisition
of the gifted shares. Any
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gift made in accordance with the foregoing limitations shall not trigger the
exercise of the Company's repurchase rights under subsection (b)(3) or the
Company's first refusal rights under subsection (d)(1).
(3) In the event a Participant should, while his interest in the Common
Shares remains unvested, (i) attempt to transfer (other than by way of a
permissible gift under subsection (b)(2)) any of the unvested Common Shares or
any interest therein or (ii) cease to remain in Service for any reason
whatsoever, then the Company shall have the right to repurchase any or all of
the unvested shares at a price equal to the lesser of (i) the original purchase
price paid by the Participant or, if such shares are subject to the Company's
permanent first refusal right under subsection (d)(1), (ii) the fair market
value of such shares appropriately discounted to reflect the Company's right of
first refusal, and the Participant shall thereafter have no further shareholder
rights with respect to the repurchased shares.
(4) Any Common Shares issued under the Share Issuance Program which are not
vested at the time of such issuance shall vest in one or more installments
thereafter. The elements of the vesting schedule, namely the number of
installments in which the shares are to vest, the interval or intervals (if any)
which are to lapse between installments and the effect which death, disability
or any other event designated by the Plan Administrator is to have upon the
vesting schedule, shall be determined by the Plan Administrator and shall be
specified in the Purchase Agreement executed by the Company and the Participant
at the time of issuance of the unvested shares.
(5) The Plan Administrator may in its discretion elect not to exercise, in
whole or in part, its repurchase rights with respect to any unvested Common
Shares or other assets which would otherwise at the time be subject to
repurchase pursuant to the provisions of subsection (b)(3). Such an election
shall result in the immediate vesting of the Participant's interest in the
Common Shares as to which the election applies.
(c) Share Legends
(1) Each certificate representing unvested Common Shares (or other
securities) issued under the Plan shall bear a restrictive legend substantially
as follows:
"The securities represented by this certificate are subject to
repurchase by the Company pursuant to the provisions of the Restricted
Share Purchase Agreement between the Company and the registered holder of
the securities (or his predecessor in interest). Such agreement grants
certain repurchase rights to the Company in the event the registered holder
(or his predecessor in interest) terminates his employment or service with
the Company. A copy of such agreement is on file at the principal office of
the Company."
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(2) As the interest of the Participant vests with respect to any shares
acquired under the Share Issuance Program, the Company shall, upon the
Participant's delivery of the share certificate representing such shares during
the period or periods designated each year by the Plan Administrator, issue a
new certificate for the vested shares without the restrictive legend of
subsection (c)(1) and a second certificate for the balance of the shares with
such legend. If the Company repurchases any unvested shares of the Participant
pursuant to the provisions of subsection (b)(3), the Company shall at the time
the repurchase is effected deliver a new certificate, without the restrictive
legend of subsection (c)(1), representing the number of shares (if any) in which
the Participant is vested and which are accordingly no longer subject to
repurchase by the Company pursuant to the provisions of subsection (b)(3).
(d) Permanent Right of First Refusal
(1) Any and all shares issued under the Share Issuance Program may, in the
discretion of the Plan Administrator, be subject to a permanent right of first
refusal exercisable by the Company or its assigns. Should shares subject to such
restriction be issued, then the Participant (and each successor in interest or
transferee of the shares) must, prior to any subsequent sale or other transfer
of the shares for value, first offer to sell the shares to the Company or its
assigns at a price determined in accordance with the following formula:
X = M - D, where
X is the price at which the Company or its assigns may repurchase the
shares,
M is the fair market value of the shares on the date of repurchase,
determined in accordance with the provisions of Article II, Section
1(a)(4), without regard to the Company's permanent right of first refusal,
and
D is the appropriate price differential determined by the Plan
Administrator in its sole discretion at the time the shares are issued and
set forth in the written instrument evidencing such right.
(2) Each share certificate representing shares subject to the subsection
(d)(1) right of first refusal shall be appropriately legended to disclose the
perpetual existence of such right, and all transferees of the shares shall
accordingly take the shares subject to the terms and provisions of the Company's
permanent right of first refusal.
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(3) The remaining terms and provisions of the permanent right of first
refusal shall be determined by the Plan Administrator in its discretion and
specified in the written instrument evidencing such right.
(4) The Plan Administrator may, at any time in its sole discretion, cancel
(upon such terms and conditions as it deems appropriate) the Company's rights of
first refusal with respect to one or more shares issued with such restrictions
under the Share Issuance Program.
ARTICLE IV
MISCELLANEOUS
1. INVESTMENT PURPOSE
If necessary or advisable to comply with applicable Federal or State
securities laws, any option granted, or shares issued, under the Plan may be
granted or issued on the condition that the Optionee or Participant agrees that
the Common Shares purchased thereunder are for investment purposes only and not
for resale or distribution and that such shares shall be disposed of only in
accordance with such laws. As a condition to issuance of any shares purchased
upon the exercise of any option granted, or shares issued, pursuant to the Plan,
the Optionee or Participant, or his executor, administrator, heir, legatee or
transferee (as the case may be) receiving such shares may be required to deliver
to the Company an instrument, in form and substance satisfactory to the Company
and its counsel, implementing such agreement. Any such condition may be
eliminated by the Plan Administrator if the Plan Administrator determines it is
no longer necessary or advisable.
2. LOANS OR GUARANTEE OF LOANS
The Plan Administrator may, in its discretion, assist any Optionee or
Participant who is a current or former employee of the Company (including an
Optionee or Participant who is an officer or director of the Company) in the
exercise of one or more options granted to such Optionee under the Article II
Option Grant Program or the purchase of one or more shares issued to such
Participant under the Article III Share Issuance Program, including the
satisfaction of any Federal and State income and employment tax obligations
arising therefrom, by (i) authorizing the extension of a loan from the Company
to such Optionee or Participant, (ii) permitting the Optionee or Participant to
pay the option price or purchase price for the purchased Common Shares in
installments over a period of years, or (iii) authorizing a guarantee by the
Company of a third-party loan to the Optionee or Participant. The terms of any
loan, installment method of payment or guarantee (including the interest rate
and terms of repayment) shall be upon such terms as the Plan Administrator
specifies in the share option agreement or restricted share purchase agreement.
Such loans, installment payments
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and guarantees may be granted with or without security or collateral, but the
maximum credit available to the Optionee or Participant may not exceed (A) the
aggregate option price or purchase price for the shares (less their par value,
which must in all events be paid in cash) plus (B) any Federal and State income
and employment tax liability incurred by the Optionee or Participant in
connection with such exercise or purchase.
3. AMENDMENT OF THE PLAN AND AWARDS
(a) The Board has complete and exclusive power and authority to amend or
modify the Plan (or any component thereof) in any or all respects whatsoever;
provided, however, that no such amendment or modification may adversely affect
rights and obligations of an option holder with respect to options at the time
outstanding under the Plan, nor adversely affect the rights of any Participant
with respect to Common Shares issued under the Plan prior to such action, unless
the Optionee or Participant consents to such amendment. In addition, the Board
may not, without the approval of the Company's shareholders, amend the Plan to
(i) increase the maximum number of shares issuable under the Plan (except for
permissible adjustments under Article I, Section 5(c)), (ii) materially increase
the benefits accruing to individuals who participate in the Plan, or (iii)
materially modify the eligibility requirements for participation in the Plan.
(b) Options may be granted under the Plan to purchase Common Shares in
excess of the number of shares then available for issuance under the Plan,
provided (i) an amendment to increase the maximum number of shares issuable
under the Plan is adopted by the Board prior to the initial grant of any such
option and is thereafter submitted to the Company's shareholders for approval
and (ii) each option so granted is not to become exercisable, in whole or in
part, at any time prior to the obtaining of such shareholder approval.
4. EFFECTIVE DATE AND TERM OF PLAN
(a) The Plan as initially implemented became effective on December 23,
1983, upon the issuance of 92,000 Common Shares subject to the Company's
permanent rights refusal under Article III, Section 1(d). The Plan was restated
in April 1987 and approved by the Company's shareholders at the 1987 Annual
Meeting. At the 1989 Annual Meeting, the Company's shareholders approved an
increase in the number of Common Shares issuable over the term of the Plan from
200,000 shares to 300,000 shares. The Plan was restated in 1990 and approved in
1991 to extend its term to December 15, 2003 and to increase the number of
Common Shares issuable over the term of the Plan to 550,000 shares, again in
1992 to increase the number of shares to 1,000,000 shares, and again in 1996 to
increase the number of shares to 1,250,000 shares. The restatement of the Plan
was adopted by the Board on October 30, 1996 and was approved by the Company's
shareholders at the 1997 Annual Meeting. The Plan was further amended to reflect
the change of domicile from Delaware to Bermuda and the new restatement of the
Plan was adopted by the Board on February 24, 1999. Amendments to the Plan were
adopted by the Board and approved by the Company's
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shareholders on May 30, 2001 to increase the number of shares issuable under the
Plan and to extend the term of the Plan to November 15, 2011.
(b) The provisions of this restated and amended Plan shall apply only to
option grants and share issuances effected under the Plan from and after the May
30, 2001 effective date. All option grants and share issuances effected under
the Plan prior to such effective date shall continue to be governed by the terms
and conditions of the Plan (and the respective instruments evidencing each such
grant or issuance) as in effect on the date the option grant or share issuance
was previously made, and nothing in this May 30, 2001 restatement shall be
deemed to affect or otherwise modify the rights or obligations of the holders of
such option grants or share issuances with respect to the Common Shares subject
thereto.
(c) Unless sooner terminated in accordance with Section 3 of Article II,
the Plan shall terminate upon the earlier of (i) November 15, 2011 or (ii) the
date on which all shares available for issuance under the Plan have been issued
or cancelled pursuant to the exercise or surrender of options granted under
Article II or pursuant to the issuance of shares under Article III. If the date
of termination is determined under clause (i) above, then all options
outstanding on such date under Article II and all shares issued and outstanding
on such date under Article III shall not be affected by the termination of the
Plan and will thereafter continue to have force and effect in accordance with
the provisions of the share option agreements evidencing such Article II options
and the share purchase agreements evidencing the issuance of such Article III
shares.
5. USE OF PROCEEDS
Any cash proceeds received by the Company from the issuance of Common
Shares hereunder shall be used for general corporate purposes.
6. WITHHOLDING
The Company's obligation to deliver shares upon the exercise or surrender
of any options granted under Article II or upon the purchase of any shares
issued under Article III shall be subject to the satisfaction of all applicable
Federal, State and local income and employment tax withholding requirements.
7. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option under the Option
Grant Program, the issuance of any shares under the Share Issuance Program, and
the issuance of Common Shares upon the exercise or surrender of the option
grants made hereunder shall be subject to the Company's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Shares issued
pursuant to it.