Exhibit 10.1
SOMANTA PHARMACEUTICALS, INC.
2005 OMNIBUS EQUITY INCENTIVE PLAN
(AS ADOPTED EFFECTIVE AUGUST 22, 2005, AS AMENDED ON OCTOBER 21, 2005
AND ASSUMED BY SOMANTA PHARMACEUTICALS, INC. ON JANUARY 31, 2006)
SOMANTA PHARMACEUTICALS, INC.
2005 OMNIBUS EQUITY INCENTIVE PLAN
ARTICLE 1. INTRODUCTION.
The Board of Somanta Incorporated adopted the Plan effective as of
August 22, 2005 and amended this Plan on October 21, 2005. Somanta
Pharmaceuticals, Inc. assumed this Plan in connection with the acquisition of
Somanta Incorporated on January 31, 2006. The purpose of the Plan is to promote
the long-term success of the Company and the creation of stockholder value by
(a) encouraging Employees, Outside Directors and Consultants to focus on
critical long-range objectives, (b) encouraging the attraction and retention of
Employees, Outside Directors and Consultants with exceptional qualifications and
(c) linking Employees, Outside Directors and Consultants directly to stockholder
interests through increased stock ownership. The Plan seeks to achieve this
purpose by providing for Awards in the form of Restricted Shares, Stock Units,
Options (which may constitute incentive stock options or nonstatutory stock
options) or stock appreciation rights.
The Plan shall be governed by, and construed in accordance with, the
laws of the State of New York (except their choice-of-law provisions).
ARTICLE 2. ADMINISTRATION.
2.1. Committee Composition. The Committee shall administer the
Plan. The Committee shall consist exclusively of two or more directors of the
Company, who shall be appointed by the Board.
2.2. Committee Responsibilities. The Committee shall (a) select
the Employees, Outside Directors and Consultants who are to receive Awards under
the Plan, (b) determine the type, number, vesting requirements and other
features and conditions of such Awards, (c) interpret the Plan and (d) make all
other decisions relating to the operation of the Plan. The Committee may adopt
such rules or guidelines as it deems appropriate to implement the Plan. The
Committee's determinations under the Plan shall be final and binding on all
persons.
2.3. Committee for Non-Officer Grants. The Board may also
appoint a secondary committee of the Board, which shall be composed of one or
more directors of the Company who need not satisfy the requirements of Section
2.1. Such secondary committee may administer the Plan with respect to Employees
and Consultants who are not considered officers or directors of the Company
under section 16 of the Exchange Act, may grant Awards under the Plan to such
Employees and Consultants and may determine all features and conditions of such
Awards. Within the limitations of this Section 2.3, any reference in the Plan to
the Committee shall include such secondary committee.
ARTICLE 3. SHARES AVAILABLE FOR GRANTS.
3.1. Basic Limitation. Common Shares issued pursuant to the Plan
may be authorized but unissued shares or treasury shares. The aggregate number
of Options, SARs, Stock Units and Restricted Shares awarded under the Plan shall
not exceed (a) eight million (8,000,000), plus (b) the additional Common Shares
described in Sections 3.2. The limitations of this Section 3.1 and Section 3.2
shall be subject to adjustment pursuant to Article 11.
3.2. Additional Shares. If Restricted Shares or Common Shares
issued upon the exercise of Options are forfeited, then such Common Shares shall
again become available for Awards under the Plan. If Stock Units, Options or
SARs are forfeited or terminate for any other reason before being exercised,
then the corresponding Common Shares shall again become available for Awards
under the Plan. If Stock Units are settled, then only the number of Common
Shares (if any) actually issued in settlement of such Stock Units shall reduce
the number available under Section 3.1 and the balance shall again become
available for Awards under the Plan. If SARs are exercised, then only the number
of Common Shares (if any) actually issued in settlement of such SARs shall
reduce the number available under Section 3.1 and the balance shall again become
available for Awards under the Plan. The foregoing notwithstanding, the
aggregate number of Common Shares that may be issued under the Plan upon the
exercise of ISOs shall not be increased when Restricted Shares or other Common
Shares are forfeited.
3.3. Dividend Equivalents. Any dividend equivalents paid or
credited under the Plan shall not be applied against the number of Restricted
Shares, Stock Units, Options or SARs available for Awards, whether or not such
dividend equivalents are converted into Stock Units.
ARTICLE 4. ELIGIBILITY.
4.1. Incentive Stock Options. Only Employees who are common-law
employees of the Company, a Parent or a Subsidiary shall be eligible for the
grant of ISOs. In addition, an Employee who owns more than 10% of the total
combined voting power of all classes of outstanding stock of the Company or any
of its Parents or Subsidiaries shall not be eligible for the grant of an ISO
unless the requirements set forth in section 422(c)(5) of the Code are
satisfied.
4.2. Other Grants. Only Employees, Outside Directors and
Consultants shall be eligible for the grant of Restricted Shares, Stock Units,
NSOs or SARs.
ARTICLE 5. OPTIONS.
5.1. Stock Option Agreement. Each grant of an Option under the
Plan shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms of the Plan and
may be subject to any other terms that are not inconsistent with the Plan. The
Stock Option Agreement shall specify whether the Option is an ISO or an NSO. The
provisions of the various Stock Option Agreements entered into under the Plan
need not be identical. Options may be granted in consideration of a reduction in
the Optionee's other compensation. A Stock Option Agreement may provide that a
2
new Option will be granted automatically to the Optionee when he or she
exercises a prior Option and pays the Exercise Price in the form described in
Section 6.2.
5.2. Number of Shares. Each Stock Option Agreement shall specify
the number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 11. Options granted to any
Optionee in a single fiscal year of the Company shall not cover more than
1,000,000 Common Shares, except that Options granted to a new Employee in the
fiscal year of the Company in which his or her Service as an Employee first
commences shall not cover more than 1,000,000 Common Shares. The limitations set
forth in the preceding sentence shall be subject to adjustment in accordance
with Article 11.
5.3. Exercise Price. Each Stock Option Agreement shall specify
the Exercise Price; provided that the Exercise Price under an ISO shall in no
event be less than 100% of the Fair Market Value of a Common Share on the date
of grant and the Exercise Price under an NSO shall in no event be less than 85%
of the Fair Market Value of a Common Share on the date of grant.
5.4. Exercise Limitation. The Stock Option Agreements shall
restrict the amount of ISOs which may become exercisable in any calendar year
(under this or any other plan of the Company or an Affiliate) so that the
aggregate Fair Market Value (determined at the time each ISO is granted) of the
Common Shares with respect to which ISOs are exercisable for the first time by
an Optionee in any calendar year does not exceed $100,000.
5.5. Exercisability and Term. Each Stock Option Agreement shall
specify the date or event when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option; provided that the term of an ISO shall in no event exceed 10 years from
the date of grant. A Stock Option Agreement may provide for accelerated
exercisability in the event of the Optionee's death, disability or retirement or
other events and may provide for expiration prior to the end of its term in the
event of the termination of the Optionee's Service. Options may be awarded in
combination with SARs, and such an Award may provide that the Options will not
be exercisable unless the related SARs are forfeited.
5.6. Effect of Change in Control. The Committee may determine,
at the time of granting an Option or thereafter, that such Option shall become
exercisable as to all or part of the Common Shares subject to such Option in the
event that a Change in Control occurs with respect to the Company or in the
event that the Optionee is subject to an Involuntary Termination after a Change
in Control. However, in the case of an ISO, the acceleration of exercisability
shall not occur without the Optionee's written consent. In addition,
acceleration of exercisability may be required under Section 11.3.
5.7. Modification or Assumption of Options. Within the
limitations of the Plan, the Committee may modify, extend or assume outstanding
options or may accept the cancellation of outstanding options (whether granted
by the Company or by another issuer) in return for the grant of new options for
the same or a different number of shares and at the same or a different exercise
price. The foregoing notwithstanding, no modification of an Option shall,
3
without the consent of the Optionee, alter or impair his or her rights or
obligations under such Option.
5.8. Buyout Provisions. The Committee may at any time (a) offer
to buy out for a payment in cash or cash equivalents an Option previously
granted or (b) authorize an Optionee to elect to cash out an Option previously
granted, in either case at such time and based upon such terms and conditions as
the Committee shall establish.
ARTICLE 6. PAYMENT FOR OPTION SHARES.
6.1. General Rule. The entire Exercise Price of Common Shares
issued upon exercise of Options shall be payable in cash or cash equivalents at
the time when such Common Shares are purchased, except as follows:
(a) In the case of an ISO granted under the Plan,
payment shall be made only pursuant to the express provisions of the applicable
Stock Option Agreement. The Stock Option Agreement may specify that payment may
be made in any form(s) described in this Article 6.
(b) In the case of an NSO, the Committee may at any
time accept payment in any form(s) described in this Article 6.
6.2. Surrender of Stock. To the extent that this Section 6.2 is
applicable, all or any part of the Exercise Price may be paid by surrendering,
or attesting to the ownership of, Common Shares that are already owned by the
Optionee. Such Common Shares shall be valued at their Fair Market Value on the
date when the new Common Shares are purchased under the Plan. The Optionee shall
not surrender, or attest to the ownership of, Common Shares in payment of the
Exercise Price if such action would cause the Company to recognize compensation
expense (or additional compensation expense) with respect to the Option for
financial reporting purposes.
6.3. Exercise/Sale. To the extent that this Section 6.3 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid by delivering (on a form prescribed by the Company) an irrevocable
direction to a securities broker approved by the Company to sell all or part of
the Common Shares being purchased under the Plan and to deliver all or part of
the sales proceeds to the Company.
6.4. Exercise/Pledge. To the extent that this Section 6.4 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid by delivering (on a form prescribed by the Company) an irrevocable
direction to pledge all or part of the Common Shares being purchased under the
Plan to a securities broker or lender approved by the Company, as security for a
loan, and to deliver all or part of the loan proceeds to the Company.
6.5. Other Forms of Payment. To the extent that this Section 6.5
is applicable, all or any part of the Exercise Price and any withholding taxes
may be paid in any other form that is consistent with applicable laws,
regulations and rules.
ARTICLE 7. [INTENTIONALLY OMITTED]
4
ARTICLE 8. STOCK APPRECIATION RIGHTS.
8.1. SAR Agreement. Each grant of an SAR under the Plan shall be
evidenced by an SAR Agreement between the Optionee and the Company. Such SAR
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The provisions of the
various SAR Agreements entered into under the Plan need not be identical. SARs
may be granted in consideration of a reduction in the Optionee's other
compensation.
8.2. Number of Shares. Each SAR Agreement shall specify the
number of Common Shares to which the SAR pertains and shall provide for the
adjustment of such number in accordance with Article 11. SARs granted to any
Optionee in a single calendar year shall in no event pertain to more than
1,000,000 Common Shares, except that SARs granted to a new Employee in the
fiscal year of the Company in which his or her Service as an Employee first
commences shall not pertain to more than 1,000,000 Common Shares. The
limitations set forth in the preceding sentence shall be subject to adjustment
in accordance with Article 11.
8.3. Exercise Price. Each SAR Agreement shall specify the
Exercise Price. An SAR Agreement may specify an Exercise Price that varies in
accordance with a predetermined formula while the SAR is outstanding.
8.4. Exercisability and Term. Each SAR Agreement shall specify
the date when all or any installment of the SAR is to become exercisable. The
SAR Agreement shall also specify the term of the SAR. An SAR Agreement may
provide for accelerated exercisability in the event of the Optionee's death,
disability or retirement or other events and may provide for expiration prior to
the end of its term in the event of the termination of the Optionee's Service.
SARs may be awarded in combination with Options, and such an Award may provide
that the SARs will not be exercisable unless the related Options are forfeited.
An SAR may be included in an ISO only at the time of grant but may be included
in an NSO at the time of grant or thereafter. An SAR granted under the Plan may
provide that it will be exercisable only in the event of a Change in Control.
8.5. Effect of Change in Control. The Committee may determine,
at the time of granting an SAR or thereafter, that such SAR shall become fully
exercisable as to all Common Shares subject to such SAR in the event that the
Company is subject to a Change in Control or in the event that the Optionee is
subject to an Involuntary Termination after a Change in Control. In addition,
acceleration of exercisability may be required under Section 11.3.
8.6. Exercise of SARs. Upon exercise of an SAR, the Optionee (or
any person having the right to exercise the SAR after his or her death) shall
receive from the Company (a) Common Shares, (b) cash or (c) a combination of
Common Shares and cash, as the Committee shall determine. The amount of cash
and/or the Fair Market Value of Common Shares received upon exercise of SARs
shall, in the aggregate, be equal to the amount by which the Fair Market Value
(on the date of surrender) of the Common Shares subject to the SARs exceeds the
Exercise Price. If, on the date when an SAR expires, the Exercise Price under
such SAR is less than the Fair Market Value on such date but any portion of such
SAR has not been exercised or surrendered, then such SAR shall automatically be
deemed to be exercised as of such date with respect to such portion.
5
8.7. Modification or Assumption of SARs. Within the limitations
of the Plan, the Committee may modify, extend or assume outstanding SARs or may
accept the cancellation of outstanding SARs (whether granted by the Company or
by another issuer) in return for the grant of new SARs for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of an SAR shall, without the consent
of the Optionee, alter or impair his or her rights or obligations under such
SAR.
ARTICLE 9. RESTRICTED SHARES.
9.1. Restricted Stock Agreement. Each grant of Restricted Shares
under the Plan shall be evidenced by a Restricted Stock Agreement between the
recipient and the Company. Such Restricted Shares shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various Restricted Stock
Agreements entered into under the Plan need not be identical.
9.2. Payment for Awards. Subject to the following sentence,
Restricted Shares may be sold or awarded under the Plan for such consideration
as the Committee may determine, including (without limitation) cash, cash
equivalents, full-recourse promissory notes, past services and future services.
To the extent that an Award consists of newly issued Restricted Shares, the
consideration shall consist exclusively of cash, cash equivalents or past
services rendered to the Company (or a Parent or Subsidiary).
9.3. Vesting Conditions. Each Award of Restricted Shares may or
may not be subject to vesting. Vesting shall occur, in full or in installments,
upon satisfaction of the conditions specified in the Restricted Stock Agreement.
The Committee may include among such conditions the requirement that the
performance of the Company or a business unit of the Company for a specified
period of one or more years equal or exceed a target determined in advance by
the Committee. The Company's independent auditors shall determine such
performance. Such target shall be based on one or more of the criteria set forth
in Appendix A. The Committee shall identify such target not later than the 90th
day of such period. In no event shall the number of Restricted Shares which are
subject to performance-based vesting conditions and which are granted to any
Participant in a single calendar year exceed 1,000,000, subject to adjustment in
accordance with Article 11. A Restricted Stock Agreement may provide for
accelerated vesting in the event of the Participant's death, disability or
retirement or other events. The Committee may determine, at the time of granting
Restricted Shares or thereafter, that all or part of such Restricted Shares
shall become vested in the event that a Change in Control occurs with respect to
the Company or in the event that the Participant is subject to an Involuntary
Termination after a Change in Control.
9.4. Voting and Dividend Rights. Until each Restricted Share has
vested, the holders of such Restricted Shares awarded under the Plan shall have
no voting, dividend, or other rights of the Company's other stockholders. Once a
Restricted Share has vested, the holder thereof shall have the same voting,
dividend and other rights as the Company's other stockholders. A Restricted
6
Stock Agreement, however, may require that the holders of Restricted Shares
invest any cash dividends received in additional Restricted Shares. Such
additional Restricted Shares shall be subject to the same conditions and
restrictions as the Award with respect to which the dividends were paid.
ARTICLE 10. STOCK UNITS.
10.1. Stock Unit Agreement. Each grant of Stock Units under the
Plan shall be evidenced by a Stock Unit Agreement between the recipient and the
Company. Such Stock Units shall be subject to all applicable terms of the Plan
and may be subject to any other terms that are not inconsistent with the Plan.
The provisions of the various Stock Unit Agreements entered into under the Plan
need not be identical. Stock Units may be granted in consideration of a
reduction in the recipient's other compensation.
10.2. Payment for Awards. To the extent that an Award is granted
in the form of Stock Units, no cash consideration shall be required of the Award
recipients.
10.3. Vesting Conditions. Each Award of Stock Units may or may
not be subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Stock Unit Agreement. The
Committee may include among such conditions the requirement that the performance
of the Company or a business unit of the Company for a specified period of one
or more years equal or exceed a target determined in advance by the Committee.
The Company's independent auditors shall determine such performance. Such target
shall be based on one or more of the criteria set forth in Appendix A. The
Committee shall determine such target not later than the 90th day of such
period. In no event shall the number of Stock Units which are subject to
performance-based vesting conditions and which are granted to any Participant in
a single calendar year exceed 1,000,000, subject to adjustment in accordance
with Article 11. A Stock Unit Agreement may provide for accelerated vesting in
the event of the Participant's death, disability or retirement or other events.
The Committee may determine, at the time of granting Stock Units or thereafter,
that all or part of such Stock Units shall become vested in the event that the
Company is subject to a Change in Control or in the event that the Participant
is subject to an Involuntary Termination after a Change in Control. In addition,
acceleration of vesting may be required under Section 11.3.
10.4. Voting and Dividend Rights. The holders of Stock Units
shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit
awarded under the Plan may, at the Committee's discretion, carry with it a right
to dividend equivalents. Such right entitles the holder to be credited with an
amount equal to all cash dividends paid on one Common Share while the Stock Unit
is outstanding. Dividend equivalents may be converted into additional Stock
Units. Settlement of dividend equivalents may be made in the form of cash, in
the form of Common Shares, or in a combination of both. Prior to distribution,
any dividend equivalents that are not paid shall be subject to the same
conditions and restrictions as the Stock Units to which they attach.
10.5. Form and Time of Settlement of Stock Units. Settlement of
vested Stock Units may be made in the form of (a) cash, (b) Common Shares or (c)
any combination of both, as determined by the Committee. The actual number of
Stock Units eligible for settlement may be larger or smaller than the number
7
included in the original Award, based on predetermined performance factors.
Methods of converting Stock Units into cash may include (without limitation) a
method based on the average Fair Market Value of Common Shares over a series of
trading days. Vested Stock Units may be settled in a lump sum or in
installments. The distribution may occur or commence when all vesting conditions
applicable to the Stock Units have been satisfied or have lapsed, or it may be
deferred to any later date. The amount of a deferred distribution may be
increased by an interest factor or by dividend equivalents. Until an Award of
Stock Units is settled, the number of such Stock Units shall be subject to
adjustment pursuant to Article 11.
10.6. Death of Recipient. Any Stock Units Award that becomes
payable after the recipient's death shall be distributed to the recipient's
beneficiary or beneficiaries. Each recipient of a Stock Units Award under the
Plan shall designate one or more beneficiaries for this purpose by filing the
prescribed form with the Company. A beneficiary designation may be changed by
filing the prescribed form with the Company at any time before the Award
recipient's death. If no beneficiary was designated or if no designated
beneficiary survives the Award recipient, then any Stock Units Award that
becomes payable after the recipient's death shall be distributed to the
recipient's estate.
10.7. Creditors' Rights. A holder of Stock Units shall have no
rights other than those of a general creditor of the Company. Stock Units
represent an unfunded and unsecured obligation of the Company, subject to the
terms and conditions of the applicable Stock Unit Agreement.
ARTICLE 11. PROTECTION AGAINST DILUTION.
11.1. Adjustments. In the event of a subdivision of the
outstanding Common Shares, a declaration of a dividend payable in Common Shares
or a combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise) into a lesser number of Common Shares,
corresponding adjustments shall automatically be made in each of the following:
(a) The number of Options, SARs, Restricted Shares and
Stock Units available for future Awards under Article 3;
(b) The limitations set forth in Sections 5.2 and 8.2;
(c) The number of Common Shares covered by each
outstanding Option and SAR;
(d) The Exercise Price under each outstanding Option
and SAR; or
(e) The number of Stock Units included in any prior
Award that has not yet been settled.
In the event of a declaration of an extraordinary dividend payable in a form
other than Common Shares in an amount that has a material effect on the price of
Common Shares, a recapitalization, a spin-off or a similar occurrence, the
Committee shall make such adjustments as it, in its sole discretion, deems
8
appropriate in one or more of the foregoing. Except as provided in this Article
11, a Participant shall have no rights by reason of any issuance by the Company
of stock of any class or securities convertible into stock of any class, any
subdivision or consolidation of shares of stock of any class, the payment of any
stock dividend or any other increase or decrease in the number of shares of
stock of any class.
11.2. Dissolution or Liquidation. To the extent not previously
exercised or settled, Options, SARs and Stock Units shall terminate immediately
prior to the dissolution or liquidation of the Company.
11.3. Reorganizations. In the event that the Company is a party
to a merger or other reorganization, outstanding Awards shall be subject to the
agreement of merger or reorganization. Such agreement shall provide for (a) the
continuation of the outstanding Awards by the Company, if the Company is a
surviving corporation, (b) the assumption of the outstanding Awards by the
surviving corporation or its parent or subsidiary, (c) the substitution by the
surviving corporation or its parent or subsidiary of its own awards for the
outstanding Awards, (d) (i) immediate exercise of the vested portion or full
exercisability and accelerated vesting, and (ii) accelerated expiration of the
outstanding Awards or (e) settlement of the full value of the outstanding Awards
in cash or cash equivalents followed by cancellation of such Awards.
ARTICLE 12. DEFERRAL OF AWARDS.
12.1. The Committee (in its sole discretion) may permit or
require a Participant to:
(a) Have cash that otherwise would be paid to such
Participant as a result of the exercise of an SAR or the settlement of Stock
Units credited to a deferred compensation account established for such
Participant by the Committee as an entry on the Company's books;
(b) Have Common Shares that otherwise would be
delivered to such Participant as a result of the exercise of an Option or SAR
converted into an equal number of Stock Units; or
(c) Have Common Shares that otherwise would be
delivered to such Participant as a result of the exercise of an Option or SAR or
the settlement of Stock Units converted into amounts credited to a deferred
compensation account established for such Participant by the Committee as an
entry on the Company's books. Such amounts shall be determined by reference to
the Fair Market Value of such Common Shares as of the date when they otherwise
would have been delivered to such Participant.
12.2. A deferred compensation account established under this
Article 12 may be credited with interest or other forms of investment return, as
determined by the Committee. A Participant for whom such an account is
established shall have no rights other than those of a general creditor of the
Company. Such an account shall represent an unfunded and unsecured obligation of
the Company and shall be subject to the terms and conditions of the applicable
agreement between such Participant and the Company. If the deferral or
9
conversion of Awards is permitted or required, the Committee (in its sole
discretion) may establish rules, procedures and forms pertaining to such Awards,
including (without limitation) the settlement of deferred compensation accounts
established under this Article 12.
ARTICLE 13. AWARDS UNDER OTHER PLANS.
The Company may grant awards under other plans or programs. Such awards may be
settled in the form of Common Shares issued under this Plan. Such Common Shares
shall be treated for all purposes under the Plan like Common Shares issued in
settlement of Stock Units and shall, when issued, reduce the number of Common
Shares available under Article 3.
ARTICLE 14. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.
14.1. Effective Date. No provision of this Article 14 shall be
effective unless and until the Board has determined to implement such provision.
14.2. Elections to Receive NSOs, Restricted Shares or Stock
Units. An Outside Director may elect to receive his or her annual retainer
payments and/or meeting fees from the Company in the form of cash, NSOs,
Restricted Shares or Stock Units, or a combination thereof, as determined by the
Board. Such NSOs, Restricted Shares and Stock Units shall be issued under the
Plan. An election under this Article 14 shall be filed with the Company on the
prescribed form.
14.3. Number and Terms of NSOs, Restricted Shares or Stock Units.
The number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board. The Board
shall also determine the terms of such NSOs, Restricted Shares or Stock Units.
ARTICLE 15. LIMITATION ON RIGHTS.
15.1. Retention Rights. Neither the Plan nor any Award granted
under the Plan shall be deemed to give any individual a right to remain an
Employee, Outside Director or Consultant. The Company and its Parents,
Subsidiaries and Affiliates reserve the right to terminate the Service of any
Employee, Outside Director or Consultant at any time, with or without cause,
subject to applicable laws, the Company's certificate of incorporation and
by-laws and a written employment agreement (if any).
15.2. Stockholders' Rights. A Participant shall have no dividend
rights, voting rights or other rights as a stockholder with respect to any
Common Shares covered by his or her Award prior to the time when a stock
certificate for such Common Shares is issued or, if applicable, the time when he
or she becomes entitled to receive such Common Shares by filing any required
notice of exercise and paying any required Exercise Price. No adjustment shall
be made for cash dividends or other rights for which the record date is prior to
such time, except as expressly provided in the Plan.
15.3. Regulatory Requirements. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the
Plan shall be subject to all applicable laws, rules and regulations and such
10
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares pursuant
to any Award prior to the satisfaction of all legal requirements relating to the
issuance of such Common Shares, to their registration, qualification or listing
or to an exemption from registration, qualification or listing.
ARTICLE 16. WITHHOLDING TAXES.
16.1. General. To the extent required by applicable federal,
state, local or foreign law, a Participant or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any withholding
tax obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.
16.2. Share Withholding. To the extent that applicable law
subjects a Participant to tax withholding obligations, the Committee may permit
such Participant to satisfy all or part of such obligations by having the
Company withhold all or a portion of any Common Shares that otherwise would be
issued to him or her or by surrendering all or a portion of any Common Shares
that he or she previously acquired. Such Common Shares shall be valued at their
Fair Market Value on the date when they are withheld or surrendered.
ARTICLE 17. FUTURE OF THE PLAN.
17.1. Term of the Plan. The Plan, as set forth herein, shall
become effective on August 22, 2005. The Plan shall remain in effect until it is
terminated under Section 17.2, except that no ISOs shall be granted on or after
the 10th anniversary of the later of (a) the date when the Board adopted the
Plan or (b) the date when the Board adopted the most recent increase in the
number of Common Shares available under Article 3 that was approved by the
Company's stockholders.
17.2. Amendment or Termination. The Board may, at any time and
for any reason, amend or terminate the Plan. An amendment of the Plan shall be
subject to the approval of the Company's stockholders only to the extent
required by applicable laws, regulations or rules. No Awards shall be granted
under the Plan after the termination thereof. The termination of the Plan, or
any amendment thereof, shall not affect any Award previously granted under the
Plan.
ARTICLE 18. LIMITATION ON PAYMENTS.
18.1. Scope of Limitation. This Article 18 shall apply to an
Award only if:
(a) The independent auditors most recently selected by
the Board (the "Auditors") determine that the after-tax value of such Award to
the Participant, taking into account the effect of all federal, state and local
income taxes, employment taxes and excise taxes applicable to the Participant
(including the excise tax under section 4999 of the Code), will be greater after
the application of this Article 18 than it was before the application of this
Article 18; or
11
(b) The Committee, at the time of making an Award
under the Plan or at any time thereafter, specifies in writing that such Award
shall be subject to this Article 18 (regardless of the after-tax value of such
Award to the Participant).
If this Article 18 applies to an Award, it shall supersede any contrary
provision of the Plan or of any Award granted under the Plan.
18.2. Basic Rule. In the event that the Auditors determine that
any payment or transfer by the Company under the Plan to or for the benefit of a
Participant (a "Payment") would be nondeductible by the Company for federal
income tax purposes because of the provisions concerning "excess parachute
payments" in section 280G of the Code, then the aggregate present value of all
Payments shall be reduced (but not below zero) to the Reduced Amount. For
purposes of this Article 18, the "Reduced Amount" shall be the amount, expressed
as a present value, which maximizes the aggregate present value of the Payments
without causing any Payment to be nondeductible by the Company because of
section 280G of the Code.
18.3. Reduction of Payments. If the Auditors determine that any
Payment would be nondeductible by the Company because of section 280G of the
Code, then the Company shall promptly give the Participant notice to that effect
and a copy of the detailed calculation thereof and of the Reduced Amount, and
the Participant may then elect, in his or her sole discretion, which and how
much of the Payments shall be eliminated or reduced (as long as after such
election the aggregate present value of the Payments equals the Reduced Amount)
and shall advise the Company in writing of his or her election within 10 days of
receipt of notice. If no such election is made by the Participant within such
10-day period, then the Company may elect which and how much of the Payments
shall be eliminated or reduced (as long as after such election the aggregate
present value of the Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election. For purposes of this Article 18, present
value shall be determined in accordance with section 280G(d)(4) of the Code. All
determinations made by the Auditors under this Article 18 shall be binding upon
the Company and the Participant and shall be made within 60 days of the date
when a Payment becomes payable or transferable. As promptly as practicable
following such determination and the elections hereunder, the Company shall pay
or transfer to or for the benefit of the Participant such amounts as are then
due to him or her under the Plan and shall promptly pay or transfer to or for
the benefit of the Participant in the future such amounts as become due to him
or her under the Plan.
18.4. Overpayments and Underpayments. As a result of uncertainty
in the application of section 280G of the Code at the time of an initial
determination by the Auditors hereunder, it is possible that Payments will have
been made by the Company which should not have been made (an "Overpayment") or
that additional Payments which will not have been made by the Company could have
been made (an "Underpayment"), consistent in each case with the calculation of
the Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company or
the Participant that the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant that he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant to the Company if and to the extent that such payment
would not reduce the amount that is subject to taxation under section 4999 of
12
the Code. In the event that the Auditors determine that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by the Company
to or for the benefit of the Participant, together with interest at the
applicable federal rate provided in section 7872(f)(2) of the Code.
18.5. Related Corporations. For purposes of this Article 18, the
term "Company" shall include affiliated corporations to the extent determined by
the Auditors in accordance with section 280G(d)(5) of the Code.
ARTICLE 19. DEFINITIONS.
19.1 "Affiliate" means any entity other than a Subsidiary, if
the Company and/or one or more Subsidiaries own not less than 50% of the voting
securities of such entity.
19.2 "Award" means any award of an Option, an SAR, a Restricted
Share or a Stock Unit under the Plan.
19.3 "Board" means the Company's Board of Directors, as
constituted from time to time.
19.4 "Cause" means (i) Participant's material breach of this
Plan, any Stock Option Agreement, any Restricted Stock Agreement, any Stock Unit
Agreement or any confidentiality, employment, consulting or other agreement
between the Company and Participant; (ii) Participant's willful misconduct or
gross negligence in the performance of Participant's duties as a director,
employee or consultant of the Company; (iii) the order of a regulatory agency
that Participant be removed from any office, authority, or employment with the
Company; (iv) Participant's appropriation or attempted appropriation of a
material business opportunity of the Company; or (vi) Participant's chronic
absenteeism. The foregoing, however, shall not be deemed an exclusive list of
all acts or omissions that the Company (or the Parent, Subsidiary or Affiliate
employing the Participant) may consider as grounds for the discharge of the
Participant with Cause.
19.5 "Change in Control" means:
(a) The consummation of a merger or consolidation of
the Company with or into another entity or any other corporate reorganization,
if persons who were not stockholders of the Company immediately prior to such
merger, consolidation or other reorganization own immediately after such merger,
consolidation or other reorganization 50% or more of the voting power of the
outstanding securities of each of (i) the continuing or surviving entity and
(ii) any direct or indirect parent corporation of such continuing or surviving
entity; or
(b) The sale, transfer or other disposition of all or
substantially all of the Company's assets.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
13
19.6 "Code" means the Internal Revenue Code of 1986, as amended.
19.7 "Committee" means a committee of the Board, as described in
Article 2.
19.8 "Common Share" means one share of the common stock of the
Company.
19.9 "Company" means Somanta Pharmaceuticals, Inc., a Delaware
corporation.
19.10 "Consultant" means a consultant or adviser who provides
bona fide services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor. Service as a Consultant shall be considered employment
for all purposes of the Plan, except as provided in Section 4.1.
19.11 "Employee" means a common-law employee of the Company, a
Parent, a Subsidiary or an Affiliate.
19.12 "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
19.13 "Exercise Price," in the case of an Option, means the
amount for which one Common Share may be purchased upon exercise of such Option,
as specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of an SAR, means an amount, as specified in the applicable SAR Agreement,
which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.
19.14 "Fair Market Value" means the market price of Common
Shares, determined by the Committee in good faith on such basis as it deems
appropriate. Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in The Wall Street Journal. Such
determination shall be conclusive and binding on all persons.
19.15 "Involuntary Termination" means the termination of the
Participant's Service by reason of:
(a) The involuntary discharge of the Participant by
the Company (or the Parent, Subsidiary or Affiliate employing him or her) for
reasons other than Cause; or
(b) The voluntary resignation of the Participant
following (i) a material diminution in Participant's duties or a change in
Participant's direct reporting to the Board; (ii) the relocation of the
Company's headquarters to a location outside Orange County or San Diego County,
California; (iii) the failure of the Company to make any payment due to
Participant in a timely manner, provided that the Company has the ability to
make such payment to the Participant and such failure remains uncured for more
than seven (7) calendar days and (iv) a Change in Control of the Company.
14
19.16 "ISO" means an incentive stock option described in section
422(b) of the Code.
19.17 "NSO" means a stock option not described in sections 422 or
423 of the Code.
19.18 "Option" means an ISO or NSO granted under the Plan and
entitling the holder to purchase Common Shares.
19.19 "Optionee" means an individual or estate who holds an
Option or SAR.
19.20 "Outside Director" means a member of the Board who is not
an Employee. Service as an Outside Director shall be considered employment for
all purposes of the Plan, except as provided in Section 4.1.
19.21 "Parent" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be considered a Parent commencing as
of such date.
19.22 "Participant" means an individual or estate who holds an
Award.
19.23 "Plan" means this Somanta Pharmaceuticals, Inc. 2005
Omnibus Equity Incentive Plan, as amended from time to time.
19.24 "Restricted Share" means a Common Share awarded under the
Plan.
19.25 "Restricted Stock Agreement" means the agreement between
the Company and the recipient of a Restricted Share that contains the terms,
conditions and restrictions pertaining to such Restricted Share.
19.26 "SAR" means a stock appreciation right granted under the
Plan.
19.27 "SAR Agreement" means the agreement between the Company and
an Optionee that contains the terms, conditions and restrictions pertaining to
his or her SAR.
19.28 "Service" means service as an Employee, Outside Director or
Consultant.
19.29 "Stock Option Agreement" means the agreement between the
Company and an Optionee that contains the terms, conditions and restrictions
pertaining to his or her Option.
19.30 "Stock Unit" means a bookkeeping entry representing the
equivalent of one Common Share, as awarded under the Plan.
15
19.31 "Stock Unit Agreement" means the agreement between the
Company and the recipient of a Stock Unit that contains the terms, conditions
and restrictions pertaining to such Stock Unit.
19.32 "Subsidiary" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
ARTICLE 20. EXECUTION.
To record the assumption of the Plan by the Board on January 31, 2006, the
Company has caused its duly authorized officer to execute this document in the
name of the Company.
Somanta Pharmaceuticals, Inc.
By: /s/ TERRANCE J. BRUGGEMAN
----------------------------------
Title: Executive Chairman
-------------------------------
16