Exhibit 10.2
TARGETED GENETICS CORPORATION
1999 STOCK OPTION PLAN
(As restated on January 23, 2001)
SECTION 1. PURPOSE
The purpose of the Targeted Genetics Corporation 1999 Stock Option Plan
(the "Plan") is to enhance the long-term shareholder value of Targeted Genetics
Corporation, a Washington corporation (the "Company"), by offering opportunities
to selected persons to participate in the Company's growth and success, and to
encourage them to remain in the service of the Company and its Related
Corporations (as defined in Section 2) and to acquire and maintain stock
ownership in the Company.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below:
"Board" means the Board of Directors of the Company.
"Cause" means dishonesty, fraud, misconduct, unauthorized use or disclosure
of confidential information or trade secrets, or conviction or confession of a
crime punishable by law (except minor violations), in each case as determined by
the Plan Administrator, and its determination shall be conclusive and binding.
"Change in Control" has the meaning set forth in Section 11.1.4.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Common Stock" means the common stock, par value $.01 per share, of the
Company.
"Disability," unless otherwise defined by the Plan Administrator, means a
mental or physical impairment of the Optionee that is expected to result in
death or that has lasted or is expected to last for a continuous period of 12
months or more and that causes the Optionee to be unable, in the opinion of the
Company, to perform his or her duties for the Company or a Related Corporation
and to be engaged in any substantial gainful activity.
"Effective Date" means the date on which the Plan is adopted by the Board,
so long as it is approved by the Company's shareholders at any time within 12
months of such adoption.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall be as established in good faith by the Plan
Administrator or (a) if the Common Stock is listed on the Nasdaq National
Market, the closing selling price for the Common Stock as reported by the Nasdaq
National Market for a single trading day or (b) if the Common Stock is listed on
the New York Stock Exchange or the American Stock Exchange, the closing selling
price for the Common Stock as such price is officially quoted in the composite
tape of transactions on such exchange for a single trading day. If there is no
such reported price for the
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Common Stock for the date in question, then such price on the last preceding
date for which such price exists shall be determinative of Fair Market Value.
"Good Reason" means the occurrence of any of the following events or
conditions and the failure of a Successor Corporation to cure such event or
condition within 30 days after receipt of written notice from the Optionee:
(a) a change in the Optionee's status, title, position or responsibilities
(including reporting responsibilities) that, in the Optionee's reasonable
judgment, represents a substantial reduction in the status, title, position or
responsibilities as in effect immediately prior thereto; the assignment to the
Optionee of any duties or responsibilities that, in the Optionee's reasonable
judgment, are materially inconsistent with such status, title, position or
responsibilities; or any removal of the Optionee from or failure to reappoint or
reelect the Optionee to any of such positions, except in connection with the
termination of the Optionee's employment for Cause, for Disability or as a
result of his or her death, or by the Optionee other than for Good Reason;
(b) a reduction in the Optionee's annual base salary;
(c) the Successor Corporation's requiring the Optionee (without the
Optionee's consent) to be based at any place outside a 35-mile radius of his or
her place of employment prior to a Change of Control, except for reasonably
required travel on the Successor Corporation's business that is not materially
greater than such travel requirements prior to the Change of Control;
(d) the Successor Corporation's failure to (i) continue in effect any
material compensation or benefit plan (or the substantial equivalent thereof) in
which the Optionee was participating at the time of a Corporate Transaction,
including, but not limited to, the Plan, or (ii) provide the Optionee with
compensation and benefits substantially equivalent (in terms of benefit levels
and/or reward opportunities) to those provided for under each material employee
benefit plan, program and practice as in effect immediately prior to the Change
of Control;
(e) any material breach by the Successor Corporation of its obligations to
the Optionee under the Plan or any substantially equivalent plan of the
Successor Corporation; or
(f) any purported termination of the Optionee's employment or service
relationship for Cause by the Successor Corporation that is not in accordance
with the definition of Cause under the Plan.
"Grant Date" means the date on which the Plan Administrator completes the
corporate action relating to the grant of an Option and all conditions precedent
to the grant have been satisfied, provided that conditions to the exercisability
or vesting of Options shall not defer the Grant Date.
"Incentive Stock Option" means an Option to purchase Common Stock granted
under Section 7 with the intention that it qualify as an "incentive stock
option" as that term is defined in Section 422 of the Code.
"Nonqualified Stock Option" means an Option to purchase Common Stock
granted under Section 7 other than an Incentive Stock Option.
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"Option" means the right to purchase Common Stock granted under Section 7.
"Option Term" has the meaning set forth in Section 7.3.
"Optionee" means (a) the person to whom an Option is granted; (b) for an
Optionee who has died, the personal representative of the Optionee's estate, the
person(s) to whom the Optionee's rights under the Option have passed by will or
by the applicable laws of descent and distribution, or the beneficiary
designated in accordance with Section 10; or (c) the person(s) to whom an Option
has been transferred in accordance with Section 10.
"Parent," except as provided in Section 8.3 in connection with Incentive
Stock Options, means any entity, whether now or hereafter existing, that
directly or indirectly controls the Company.
"Plan Administrator" means the Board or any committee or committees
designated by the Board or any person to whom the Board has delegated authority
to administer the Plan under Section 3.1.
"Related Corporation" means any Parent or Subsidiary of the Company.
"Retirement" means retirement as of the individual's normal retirement date
under the Company's 401(k) Plan or other similar successor plan applicable to
salaried employees.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary," except as provided in Section 8.3 in connection with
Incentive Stock Options, means any entity that is directly or indirectly
controlled by the Company.
"Successor Corporation" has the meaning set forth in Section 11.1.2.
"Termination Date" has the meaning set forth in Section 7.6.
SECTION 3. ADMINISTRATION
3.1 Plan Administrator
The Plan shall be administered by the Board and/or a committee or
committees (which term includes subcommittees) appointed by, and consisting of
two or more members of, the Board (a "Plan Administrator"). If and so long as
the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act,
the Board shall consider in selecting the members of any committee acting as
Plan Administrator, with respect to any persons subject or likely to become
subject to Section 16 of the Exchange Act, the provisions regarding (a) "outside
directors" as contemplated by Section 162(m) of the Code and (b) "nonemployee
directors" as contemplated by Rule 16b-3 under the Exchange Act. The Board may
delegate the responsibility for administering the Plan with respect to
designated classes of eligible persons to different committees consisting of two
or more members of the Board, subject to such limitations as the Board deems
appropriate. Committee members shall serve for such term as the Board may
determine, subject to removal by the Board at any time. To the extent
consistent with applicable law, the Board may authorize a senior executive
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officer of the Company to grant Options to specified eligible persons, within
the limits specifically prescribed by the Board.
3.2 Administration and Interpretation by Plan Administrator
Except for the terms and conditions explicitly set forth in the Plan, the
Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to Options under the Plan, including the
selection of individuals to be granted Options, the type of Options, the number
of shares of Common Stock subject to an Option, all terms, conditions,
restrictions and limitations, if any, of an Option and the terms of any
instrument that evidences the Option. The Plan Administrator shall also have
exclusive authority to interpret the Plan and may from time to time adopt, and
change, rules and regulations of general application for the Plan's
administration. The Plan Administrator's interpretation of the Plan and its
rules and regulations, and all actions taken and determinations made by the Plan
Administrator pursuant to the Plan, shall be conclusive and binding on all
parties involved or affected. The Plan Administrator may delegate
administrative duties to such of the Company's officers as it so determines.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 Authorized Number of Shares
Subject to adjustment from time to time as provided in Section 11, the
number of shares of Common Stock that shall be available for issuance under the
Plan shall be 3,500,000 shares. Shares issued under the Plan shall be drawn
from authorized and unissued shares or shares now held or subsequently acquired
by the Company.
4.2 Limitations
Subject to adjustment from time to time as provided in Section 11, not more
than 200,000 shares of Common Stock may be made subject to Options under the
Plan to any individual in the aggregate in any one fiscal year of the Company,
such limitation to be applied in a manner consistent with the requirements of,
and only to the extent required for compliance with, the exclusion from the
limitation on deductibility of compensation under Section 162(m) of the Code.
4.3 Reuse of Shares
Any shares of Common Stock that have been made subject to an Option that
cease to be subject to the Option (other than by reason of exercise of the
Option to the extent it is exercised for shares) shall again be available for
issuance in connection with future grants of Options under the Plan; provided,
however, that for purposes of Section 4.2, any such shares shall be counted in
accordance with the requirements of Section 162(m) of the Code.
SECTION 5. ELIGIBILITY
Options may be granted under the Plan to those officers, directors and
employees of the Company and its Related Corporations as the Plan Administrator
from time to time selects. Options may also be granted to consultants, agents,
advisors and independent contractors ("consultants") who provide services to the
Company and its Related Corporations; provided, however, that such
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consultants render bona fide services not in connection with the offer and sale
of the Company's securities in a capital-raising transaction.
SECTION 6. ACQUIRED COMPANY OPTIONS
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Options under the Plan in substitution for awards issued
under other plans, or assume under the Plan awards issued under other plans, if
the other plans are or were plans of other acquired entities ("Acquired
Entities") (or the parent of the Acquired Entity) and the new Option is
substituted, or the old award is assumed, by reason of a merger, consolidation,
acquisition of property or of stock, reorganization or liquidation (the
"Acquisition Transaction"). In the event that a written agreement pursuant to
which the Acquisition Transaction is completed is approved by the Board and said
agreement sets forth the terms and conditions of the substitution for or
assumption of outstanding awards of the Acquired Entity, said terms and
conditions shall be deemed to be the action of the Plan Administrator without
any further action by the Plan Administrator, except as may be required for
compliance with Rule 16b-3 under the Exchange Act, and the persons holding such
awards shall be deemed to be Optionees.
SECTION 7. TERMS AND CONDITIONS OF OPTIONS
7.1 Grant of Options
The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock
Options, which shall be appropriately designated.
7.2 Option Exercise Price
The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options and Nonqualified Stock Options. For Incentive Stock
Options granted to a more than 10% shareholder, the option exercise price shall
be as specified in Section 8.2.
7.3 Term of Options
The term of each Option (the "Option Term") shall be as established by the
Plan Administrator or, if not so established, shall be 10 years from the Grant
Date. For Incentive Stock Options, the maximum Option Term shall be as
specified in Sections 8.2 and 8.4.
7.4 Exercise of Options
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which, or the installments in which, the
Option shall vest and become exercisable, which provisions may be waived or
modified by the Plan Administrator at any time. If not so established in the
instrument evidencing the Option, the Option shall vest and become exercisable
according to the following schedule, which may be waived or modified by the Plan
Administrator at any time:
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Period of Optionee's Continuous Employment or
Service With the Company or Its Related Percent of Total Option
Corporations From the Option Grant Date That Is Vested and Exercisable
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After 3 months 6.25%
Each additional 3-month period of continuous An additional 6.25%
service completed thereafter
After 4 years 100%
The Plan Administrator may adjust the vesting schedule of an Option held by
an Optionee who works less than "full-time" as that term is defined by the Plan
Administrator.
To the extent that the right to purchase shares has accrued thereunder, an
Option may be exercised from time to time by delivery to the Company of a
written stock option exercise agreement or notice, in a form and in accordance
with procedures established by the Plan Administrator, setting forth the number
of shares with respect to which the Option is being exercised, the restrictions
imposed on the shares purchased under such exercise agreement, if any, and such
representations and agreements as may be required by the Company, accompanied by
payment in full as described in Section 7.5. An Option may not be exercised as
to less than a reasonable number of shares at any one time, as determined by the
Plan Administrator.
7.5 Payment of Exercise Price
The exercise price for shares purchased under an Option shall be paid in
full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
must be paid in cash or by check or, unless the Plan Administrator in its sole
discretion determines otherwise, either at the time the Option is granted or at
any time before it is exercised, in any combination of
(a) cash or check;
(b) tendering (either actually or, if and so long as the Common Stock is
registered under Section 12(b) or 12(g) of the Exchange Act, by attestation)
shares of Common Stock already owned by the Optionee for at least six months (or
any shorter period necessary to avoid a charge to the Company's earnings for
financial reporting purposes) having a Fair Market Value on the day prior to the
exercise date equal to the aggregate Option exercise price;
(c) if and so long as the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, delivery of a properly executed exercise notice,
together with irrevocable instructions, to (i) a brokerage firm designated by
the Company to deliver promptly to the Company the aggregate amount of sale or
loan proceeds to pay the Option exercise price and any withholding tax
obligations that may arise in connection with the exercise and (ii) the Company
to deliver the certificates for such purchased shares directly to such brokerage
firm, all in accordance with the regulations of the Federal Reserve Board; or
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(d) such other consideration as the Plan Administrator may permit.
In addition, to assist an Optionee (including an Optionee who is an officer
or a director of the Company) in acquiring shares of Common Stock pursuant to an
Option granted under the Plan, the Plan Administrator, in its sole discretion,
may authorize, either at the Grant Date or at any time before the acquisition of
Common Stock pursuant to the Option, (i) the payment by the Optionee of a full-
recourse promissory note, (ii) the payment by the Optionee of the purchase
price, if any, of the Common Stock in installments, or (iii) the guarantee by
the Company of a loan obtained by the Optionee from a third party. Subject to
the foregoing, the Plan Administrator shall in its sole discretion specify the
terms of any loans, installment payments or loan guarantees, including the
interest rate and terms of and security for repayment.
7.6 Post-Termination Exercises
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option whether the Option shall continue to be exercisable,
and the terms and conditions of such exercise, if an Optionee ceases to be
employed by, or to provide services to, the Company or its Related Corporations,
which provisions may be waived or modified by the Plan Administrator at any
time. If not so established in the instrument evidencing the Option, the Option
shall be exercisable according to the following terms and conditions, which may
be waived or modified by the Plan Administrator at any time:
(a) Any portion of an Option that is not vested and exercisable on the date
of termination of the Optionee's employment or service relationship (the
"Termination Date") shall expire on such date, unless the Plan Administrator
determines otherwise.
(b) Any portion of an Option that is vested and exercisable on the
Termination Date shall expire upon the earliest to occur of:
(i) the last day of the Option Term;
(ii) if the Optionee's Termination Date occurs for reasons other than
Cause, death, Disability or Retirement, the three-month anniversary of such
Termination Date; and
(iii) if the Optionee's Termination Date occurs by reason of death,
Disability or Retirement, the one-year anniversary of such Termination Date.
Notwithstanding the foregoing, if the Optionee dies after the Termination
Date while the Option is otherwise exercisable, the Option shall expire upon the
earlier to occur of (y) the last day of the Option Term and (z) the first
anniversary of the date of death.
Also notwithstanding the foregoing, in case of termination of the
Optionee's employment or service relationship for Cause, the Option shall
automatically expire upon first notification to the Optionee of such
termination, unless the Plan Administrator determines otherwise. If an
Optionee's employment or service relationship with the Company is suspended
pending an investigation of whether the Optionee shall be terminated for Cause,
all the Optionee's rights under any Option likewise shall be suspended during
the period of investigation.
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An Optionee's transfer of employment or service relationship between or
among the Company and its Related Corporations, or a change in status from an
employee to a consultant that is evidenced by a written agreement between an
Optionee and the Company or a Related Corporation, shall not be considered a
termination of employment or service relationship for purposes of this Section
7. Employment or service relationship shall be deemed to continue while the
Optionee is on a bona fide leave of absence, if such leave was approved by the
Company or a Related Corporation in writing and if continued crediting of
service for purposes of this Section 7 is expressly required by the terms of
such leave or by applicable law (as determined by the Company). The effect of a
Company-approved leave of absence on the terms and conditions of an Option shall
be determined by the Plan Administrator, in its sole discretion.
7.7 Option Repricing
In no event shall any issued and outstanding option be repriced to a lower
option price at any time during the term of such option without the prior
affirmative vote of a majority of shares of stock of the Company present at a
shareholders meeting in person or by proxy and entitled to vote thereon. Any
amendment or repeal of this provision shall require the affirmative vote of a
majority of shares of stock of the Company present at a shareholders meeting in
person or by proxy and entitled to vote thereon.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive Stock Options
shall be subject to the following additional terms and conditions:
8.1 Dollar Limitation
To the extent the aggregate Fair Market Value (determined as of the Grant
Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option. In the
event the Optionee holds two or more such Options that become exercisable for
the first time in the same calendar year, such limitation shall be applied on
the basis of the order in which such Options are granted.
8.2 More Than 10% Shareholders
If an individual owns more than 10% of the total voting power of all
classes of the Company's stock, then the exercise price per share of an
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Common Stock on the Grant Date and the Option Term shall not exceed five
years. The determination of more than 10% ownership shall be made in accordance
with Section 422 of the Code.
8.3 Eligible Employees
Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.
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8.4 Term
Except as provided in Section 8.2, the Option Term shall not exceed 10
years.
8.5 Exercisability
An Option designated as an Incentive Stock Option shall cease to qualify
for favorable tax treatment as an Incentive Stock Option to the extent it is
exercised (if permitted by the terms of the Option) (a) more than three months
after the Termination Date for reasons other than death or Disability, (b) more
than one year after the Termination Date by reason of Disability, or (c) after
the Optionee has been on leave of absence for more than 90 days, unless the
Optionee's reemployment rights are guaranteed by statute or contract.
For purposes of this Section 8.5, Disability shall mean "disability" as
that term is defined for purposes of Section 422 of the Code.
8.6 Taxation of Incentive Stock Options
In order to obtain certain tax benefits afforded to Incentive Stock Options
under Section 422 of the Code, the Optionee must hold the shares issued upon the
exercise of an Incentive Stock Option for two years after the Grant Date and one
year from the date of exercise. An Optionee may be subject to the alternative
minimum tax at the time of exercise of an Incentive Stock Option. The Optionee
shall give the Company prompt notice of any disposition of shares acquired by
the exercise of an Incentive Stock Option prior to the expiration of such
holding periods.
8.7 Promissory Notes
The amount of any promissory note delivered pursuant to Section 7.5 in
connection with an Incentive Stock Option shall bear interest at a rate
specified by the Plan Administrator, but in no case less than the rate required
to avoid imputation of interest (taking into account any exceptions to the
imputed interest rules) for federal income tax purposes.
SECTION 9. WITHHOLDING
The Company may require the Optionee to pay to the Company the amount of
any withholding taxes that the Company is required to withhold with respect to
the grant, vesting or exercise of any Option. Subject to the Plan and
applicable law, the Plan Administrator may, in its sole discretion, permit the
Optionee to satisfy withholding obligations, in whole or in part, (a) by paying
cash, (b) by electing to have the Company withhold shares of Common Stock (up to
the minimum federal tax withholding rate) or (c) by transferring to the Company
shares of Common Stock (already owned by the Optionee for such period necessary
to avoid a charge to the Company's earnings for financial reporting purposes),
in such amounts as are equivalent to the Fair Market Value of the withholding
obligation. The Company shall have the right to withhold from any shares of
Common Stock issuable pursuant to an Option (up to the minimum federal tax
withholding rate) or from any cash amounts otherwise due or to become due from
the Company to the Optionee an amount equal to such taxes. The Company may also
deduct from any Option any other amounts due from the Optionee to the Company or
a Related Corporation.
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SECTION 10. ASSIGNABILITY
No Option granted under the Plan may be assigned, pledged or transferred by
the Optionee and may not be made subject to attachment or similar proceedings
otherwise than by will or by the applicable laws of descent and distribution,
and, during the Optionee's lifetime, such Option may be exercised only by the
Optionee. Notwithstanding the foregoing, and to the extent permitted by Section
422 of the Code, the Plan Administrator, in its sole discretion, may permit such
assignment, transfer and exercisability and may permit an Optionee to designate
a beneficiary who may exercise the Option after the Optionee's death; provided,
however, that any Option so assigned or transferred shall be subject to all the
same terms and conditions contained in the instrument evidencing the Option.
SECTION 11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The aggregate number and class of shares for which Options may be granted
under this Plan, the limits set forth in Section 4.2, the number and class of
shares covered by each outstanding Option and the exercise price per share
thereof (but not the total price), and each such Option, shall all be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Company resulting from a split or consolidation of
shares or any like capital adjustment, or the payment of any stock dividend.
11.1 Effect of Liquidation, Reorganization or Change in Control
11.1.1 Cash, Stock or Other Property for Stock
Except as provided in Section 11.1.2 or Section 11.1.3, upon a merger
(other than a merger of the Company in which the holders of shares of Common
Stock immediately prior to the merger have the same proportionate ownership of
shares of Common Stock in the surviving corporation immediately after the
merger), consolidation, acquisition of property or stock, reorganization (other
than a mere reincorporation or the creation of a holding company) or liquidation
of the Company, as a result of which the shareholders of the Company receive
cash, stock or other property in exchange for or in connection with their shares
of Common Stock, each Option shall terminate, but the Optionee shall have the
right immediately prior to any such merger, consolidation, acquisition of
property or stock, reorganization or liquidation to exercise such Option in
whole or in part whether or not the vesting requirements set forth in the Option
agreement have been satisfied.
11.1.2 Conversion of Options on Stock for Stock Exchange
If the shareholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common Stock in
any transaction involving a merger, consolidation, acquisition of property or
stock, or reorganization, all Options shall be converted into options to
purchase shares of Exchange Stock unless the Company and the corporation issuing
the Exchange Stock (the "Successor Corporation"), in their sole discretion,
determine that any or all such Options shall not be converted into options to
purchase shares of Exchange Stock but instead shall terminate in accordance with
the provisions of Section 11.1.1. The amount and price of converted options
shall be determined by adjusting the amount and price of the Options granted
hereunder in the same proportion as used for determining the number of shares of
Exchange Stock the holders of shares of the Common Stock receive in such merger,
consolidation, acquisition of property or stock, or reorganization. Unless
accelerated by the Plan Administrator, the vesting
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schedule set forth in the Option agreement shall continue to apply to the
options granted for the Exchange Stock.
Any Options that are converted into options to purchase shares of Exchange
Stock that do not otherwise accelerate at that time shall be accelerated in the
event the Optionee's employment or services should subsequently terminate within
two years of any transaction described in this Section 11.1.2, unless such
employment or services are terminated by the Successor Corporation for Cause or
by the Optionee voluntarily without Good Reason.
11.1.3 Change in Control
In the event of a "Change in Control," as defined below, of the Company,
unless otherwise determined by the Board prior to the occurrence of such Change
in Control, the following acceleration and cash-out provisions shall apply:
(a) Any Option outstanding as of the date such Change in Control is
determined to have occurred that is not yet fully vested on such date shall
become immediately exercisable in full and
(b) Optionees shall have, as an alternative to the right to exercise
any Option, the right to elect within 90 days following a Change in Control, or,
if during the six months prior to the date of such Change in Control such
Optionee is subject to Section 16 of the Exchange Act, then with respect to
Options held by the Optionee, the period following the Change in Control during
which an election may be made shall be extended for one month after the end of
the six-month period required to avoid any liability under Section 16(b) of the
Exchange Act, to receive in cash an amount equal to the difference between the
Option exercise price and the Fair Market Value of the shares on the date of
exercising this election, times the number of shares subject to the Option or
portion thereof for which this election is made. The election shall be made by
delivering written notice of making such election to the Company within the 90
day period. The notice shall specify the Options or portions thereof to which
the election relates. The cash-out proceeds shall be paid to the Optionee or,
in the event of death of an Optionee prior to full payment, to the estate of the
Optionee or to a person who acquired the right to exercise the Option by
designation, bequest or inheritance.
11.1.4 Definition of "Change in Control"
For purposes of this Plan, a "Change in Control" shall mean:
(a) A "Board Change" (for purposes of this Plan, a Board Change shall
have occurred if individuals who, as of the date of the adoption of this Plan,
constitute the Company's Board of Directors (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board; provided, however,
that for all purposes of this Plan any individual becoming a director subsequent
to such date whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or a threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or on behalf
of a Person (as defined below) other than the Board); or
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(b) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
of (i) 20% or more of either (A) the then outstanding shares of Common Stock
(the "Outstanding Company Common Stock") or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities"), in the
case of either (A) or (B) of this clause (i), which acquisition is not approved
in advance by a majority of the Incumbent Board, or (ii) 33% or more of either
(A) the Outstanding Company Common Stock or (B) the Outstanding Company Voting
Securities, in the case of either (A) or (B) of this clause (ii), which
acquisition is approved in advance by a majority of the Incumbent Board;
provided, however, that the following acquisitions shall not constitute a Change
in Control: (x) any acquisition by the Company, (y) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any company controlled by the Company, or (z) any acquisition by any company
pursuant to a reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in clauses
(i), (ii) and (iii) of the following subsection (c) are satisfied; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, unless, following such reorganization,
merger or consolidation, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the company resulting from such
reorganization, merger or consolidation and the combined voting power of the
then outstanding voting securities of such company entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such company resulting from such
reorganization, merger or consolidation and any Person beneficially owning,
immediately prior to such reorganization, merger or consolidation, directly or
indirectly, 33% or more of the Outstanding Company Common Stock or Outstanding
Company Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 33% or more of, respectively, the then outstanding shares of common
stock of the company resulting from such reorganization, merger or consolidation
or the combined voting power of the then outstanding voting securities of such
company entitled to vote generally in the election of directors, and (iii) at
least a majority of the members of the board of directors of the company
resulting from such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement providing
for such reorganization, merger or consolidation; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other disposition
of all or substantially all of the assets of the Company, other than to a
company, with respect to which following such sale or other disposition, (A)
more than 60% of, respectively, the then outstanding shares of common stock of
such company and the combined voting power of the then outstanding voting
securities of such company entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting
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Securities immediately prior to such sale or other disposition in substantially
the same proportion as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding the Company and
any employee benefit plan (or related trust) of the Company or such company and
any Person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 33% or more of the Outstanding Company
Common Stock or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 33% or more of, respectively, the
then outstanding shares of common stock of such company and the combined voting
power of the then outstanding voting securities of such company entitled to vote
generally in the election of directors, and (C) at least a majority of the
members of the board of directors of such company were approved by a majority of
the Incumbent Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition of assets of
the Company.
11.2 Fractional Shares
In the event of any adjustment in the number of shares covered by any
Option, any fractional shares resulting from such adjustment shall be
disregarded and each such Option shall cover only the number of full shares
resulting from such adjustment.
11.3 Determination of Board to Be Final
All Section 11 adjustments, other than those made after a Change in Control
pursuant to Section 11.1.3, shall be made by the Board, and its determination as
to what adjustments shall be made, and the extent thereof, shall be final,
binding and conclusive. Unless an Optionee agrees otherwise, any change or
adjustment to an Incentive Stock Option shall be made in such a manner so as not
to constitute a "modification" as defined in Code Section 424(h) and so as not
to cause his or her Incentive Stock Option issued hereunder to fail to continue
to qualify as an "incentive stock option" as defined in Code Section 422(b).
SECTION 12. AMENDMENT AND TERMINATION OF PLAN
12.1 Amendment of Plan
The Plan may be amended only by the Board in such respects as it shall deem
advisable; provided, however, that to the extent required for compliance with
Section 422 of the Code or any applicable law or regulation, shareholder
approval shall be required for any amendment that would (a) increase the total
number of shares available for issuance under the Plan, (b) modify the class of
persons eligible to receive Options, or (c) otherwise require shareholder
approval under any applicable law or regulation. Any amendment made to the Plan
that would constitute a "modification" to Incentive Stock Options outstanding on
the date of such amendment shall not, without the consent of the Optionee, be
applicable to any such outstanding Incentive Stock Options but shall have
prospective effect only.
12.2 Termination of Plan
The Board may suspend or terminate the Plan at any time. The Plan shall
have no fixed expiration date; provided, however, that no Incentive Stock
Options may be granted more than ten years after the later of (a) the Plan's
adoption by the Board and (b) the adoption by the Board of
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any amendment to the Plan that constitutes the adoption of a new plan for
purposes of Section 422 of the Code.
12.3 Consent of Optionee
The amendment or termination of the Plan or the amendment of an outstanding
Option shall not, without the Optionee's consent, impair or diminish any rights
or obligations under any Option theretofore granted to the Optionee under the
Plan; provided, however, that adjustments made pursuant to Section 11 shall not
be subject to these restrictions. Any change or adjustment to an outstanding
Incentive Stock Option shall not, without the consent of the Optionee, be made
in a manner so as to constitute a "modification" that would cause such Incentive
Stock Option to fail to continue to qualify as an Incentive Stock Option.
SECTION 13. GENERAL
13.1 Evidence of Options
Options granted under the Plan shall be evidenced by a written instrument
that shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and that are not inconsistent with the
Plan.
13.2 No Individual Rights
Nothing in the Plan or any Option granted under the Plan shall be deemed to
constitute an employment contract or confer or be deemed to confer on any
Optionee any right to continue in the employ of, or to continue any other
relationship with, the Company or any Related Corporation or limit in any way
the right of the Company or any Related Corporation of the Company to terminate
an Optionee's employment or other relationship at any time, with or without
Cause.
13.3 Registration
Notwithstanding any other provision of the Plan, the Company shall have no
obligation to issue or deliver any shares of Common Stock under the Plan or make
any other distribution of benefits under the Plan unless such issuance, delivery
or distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act), and the applicable
requirements of any securities exchange or similar entity.
The Company shall be under no obligation to any Optionee to register for
offering or resale or to qualify for exemption under the Securities Act, or to
register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or qualifications if made.
The Company may issue certificates for shares with such legends and subject to
such restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with federal
and state securities laws.
To the extent that the Plan or any instrument evidencing an Option provides
for issuance of stock certificates to reflect the issuance of shares of Common
Stock, the issuance may be effected on a noncertificated basis, to the extent
not prohibited by applicable law or the applicable rules of any stock exchange.
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13.4 No Rights as a Shareholder
No Option shall entitle the Optionee to any cash dividend, voting or other
right of a shareholder unless and until the date of issuance under the Plan of
the shares that are the subject of such Option.
13.5 Compliance With Laws and Regulations
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator, in its sole discretion, may bifurcate the Plan so as to restrict,
limit or condition the use of any provision of the Plan to Optionees who are
officers or directors subject to Section 16 of the Exchange Act without so
restricting, limiting or conditioning the Plan with respect to other Optionees.
Additionally, in interpreting and applying the provisions of the Plan, any
Option granted as an Incentive Stock Option pursuant to the Plan shall, to the
extent permitted by law, be construed as an "incentive stock option" within the
meaning of Section 422 of the Code.
13.6 Optionees in Foreign Countries
The Plan Administrator shall have the authority to adopt such
modifications, procedures and subplans as may be necessary or desirable to
comply with provisions of the laws of foreign countries in which the Company or
its Related Corporations may operate to assure the viability of the benefits
from Options granted to Optionees employed in such countries and to meet the
objectives of the Plan.
13.7 No Trust or Fund
The Plan is intended to constitute an "unfunded" plan. Nothing contained
herein shall require the Company to segregate any monies or other property, or
shares of Common Stock, or to create any trusts, or to make any special deposits
for any immediate or deferred amounts payable to any Optionee, and no Optionee
shall have any rights that are greater than those of a general unsecured
creditor of the Company.
13.8 Severability
If any provision of the Plan or any Option is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Option under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Plan Administrator's determination, materially altering the intent of the
Plan or the Option, such provision shall be stricken as to such jurisdiction,
person or Option, and the remainder of the Plan and any such Option shall remain
in full force and effect.
13.9 Choice of Law
The Plan and all determinations made and actions taken pursuant hereto, to
the extent not otherwise governed by the laws of the United States, shall be
governed by the laws of the State of Washington without giving effect to
principles of conflicts of laws.
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SECTION 14. EFFECTIVE DATE
The Effective Date is the date on which the Plan is adopted by the Board,
so long as it is approved by the Company's shareholders at any time within 12
months of such adoption.
Adopted by the Board on January 21, 1999 and approved by the Company's
shareholders on May 5, 1999; amended by the Board on January 23, 2001 and
approved by the shareholders on May 8, 2001.
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PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS
SUMMARY PAGE
Section/Effect of Date of Shareholder
Date of Board Action Action Amendment Approval
- -------------------- ---------------------- ----------------- -------------------
January 21, 1999 Initial Plan Adoption May 5, 1999
January 23, 2001 Increase shares Section 4.1 May 8, 2001
available from
1,500,000 to 3,500,000