EXHIBIT 10.3
2001 STOCK PLAN
OF
LATINOCARE MANAGEMENT CORPORATION
LATINOCARE MANAGEMENT CORP.
STOCK OPTION PLAN
FOR DIRECTORS, EXECUTIVE OFFICERS, AND EMPLOYEES OF
AND KEY CONSULTANTS TO LATINOCARE MANAGEMENT CORP.
1. PURPOSE. The purpose of this Stock Option Plan is to promote the
interests of Latinocare Management Corp. ("Company") and its shareholders by
enabling it to offer stock options to better attract, retain, and reward
directors, executive officers, and employees of and key consultants to the
Company and any other future subsidiaries that may qualify under the terms of
this Plan. The goal is to strengthen the mutuality of interests between those
persons and the shareholders of the Company by providing those persons with a
proprietary interest in pursuing the Company's long-term growth and financial
success.
2. DEFINITIONS. For purposes of this Plan, the following terms shall
have the meanings set forth below.
(a) "Board" means the Board of Directors of Latinocare Management Corp.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
Reference to any specific section of the Code shall be deemed to be a reference
to any successor provision of the Code.
(c) "Committee" means the administrative committee of this Plan that is
provided in Section 1 below.
(d) "Common Stock" means the common stock of the Company or any
security issued in substitution, exchange, or in lieu thereof.
(e) "Company" means Latinocare Management Corp., a Nevada corporation,
or any successor corporation. Except where the context indicates otherwise, the
term "Company" shall include its Parent and Subsidiaries.
(f) "Director" means any person who serves as a member of the Board of
Directors of Latinocare Management Corp. "Outside Director" means any person who
serves as a member of the Board of Directors of Latinocare Management Corp. and
is not a full-time employee of Latinocare Management Corp. or its subsidiaries.
(g) "Disabled" means permanent and total disability, as defined in Code
Section 22(e)(3).
(h) "Employee" means any person who is employed by Latinocare
Management Corp. or any Subsidiary or Parent of the Company on a full or
part-time basis, so that they have income taxes withheld and are eligible to
participate in employee benefits programs. Such person shall not cease to be an
Employee in the case of (i) any leave of absence approved by the Company or (ii)
transfers between locations of the Company or between the Company, its Parent,
any Subsidiary, or any successor. For purposes of Incentive Stock Options, no
such leave may exceed ninety days, unless re-employment upon expiration of such
leave is guaranteed by statute or contract. If employment upon expiration of
leave of absence approved by the Company IS NOT SO GUARANTEED, ON THE 181ST day
of such leave any Incentive Stock Option held by the Optionee shall cease to be
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treated as an Incentive Stock Option and shall be treated for tax purposes as a
Non-Qualified Stock Option. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.
(i) "Exchange Act" means the Securities Exchange Act of 1934.
(j) "Fair Market Value" per share means, on any given date:
(1) The last sale price of the Common Stock on the National
Association of Securities Dealers Automated Quotation National
Market System ("NMS") or in case no such reported sale takes
place, the average of the closing bid and ask prices on such
date; or
(2) If not quoted on the NMS, the average of the closing bid
and ask prices of the Common Stock on the National Association
of Securities Dealers Automated Quotation System ("NASDAQ") or
any comparable system; or
(3) If not quoted on any system, the fair market value
indicated by the last appraisal of the Company by a
professional appraiser or certified public accounting firm; or
(4) If not quoted on any system or valued by appraisal, the
fair market value determined by the Company's Board of
Directors in good faith.
(k) "Incentive Stock Option" means an option to purchase shares of
Common Stock that is intended to be an incentive stock option within the meaning
of Section 422 of the Code.
(l) "Insider" means a person who is subject to the provisions of
Section 16 of the Exchange Act.
(m) "Key Consultant" means a person who is engaged by Latinocare
Management Corp. or its Subsidiaries as a non-employee to perform tasks on a
contractual basis over a sufficient period of time that he or she satisfies the
eligibility criteria set forth by the Securities and Exchange Commission for a
non-employee to participate in a registered stock option plan.
(n) "Non-Qualified Stock Option" means any option to purchase shares of
Common Stock that is not an Incentive Stock Option.
(o) "Officer" is an employee of Latinocare Management Corp. or its
Subsidiaries who is granted the authority to commit the corporation to binding
agreements and to function as one of the executives of Latinocare Management
Corp. or its Subsidiaries.
(p) "Option" means an Incentive Stock Option or a Non-Qualified Stock
Option.
(q) "Parent" shall mean 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 fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the
other corporations in the chain, as determined in accordance with the rules of
Section 424(e) of the Code.
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(r) "Participant" means a person who has been granted an Option.
(s) "Plan" means this Latinocare Management Corp. Stock Option Plan for
Directors, Executive Officers, and Employees of and Key Consultants to
Latinocare Management Corp. and its Subsidiaries, as it may be amended from time
to time.
(t) "Securities Act" means the Securities Act of 1933, as amended.
(u) "Severance" means, with respect to a Participant, the termination
of the Participant's provision of services to the Company as an employee and
officer and director and consultant, as the case may be, whether by reason of
death, disability, or any other reason. A Participant who is on a leave of
absence that exceeds ninety (90) days will be considered to have incurred a
Severance on the ninety-first (91st) day of the leave of absence, unless the
Participant's rights to reemployment or reappointment are guaranteed by statute
or contract.
(v) "Subsidiary" means any corporation or entity in which the Company,
directly or indirectly, controls fifty percent (50%) or more of the total voting
power of all classes of its stock having voting power, as determined in
accordance with the rules of Code Section 424(f).
(w) "Ten Percent Shareholder" means any person who owns (after taking
into account the constructive ownership rules of Section 424(d) of the Code)
more than ten percent (10%) of the stock of the Company.
3. ADMINISTRATION.
(a) This Plan shall be administered by a Committee appointed by the
Board. The Board may remove members from, or add members to, the Committee at
any time.
(b) The Committee shall be composed of the members of the Compensation
Committee of the Company's Board of Directors and any other members that the
Board of Directors sees fit to appoint.
(c) The Committee may conduct its meetings in person or by telephone. A
majority of the members of the Committee shall constitute a quorum, and any
action shall constitute action of the Committee if it is authorized by:
(i) A majority of the members present at any meeting; or
(ii) The unanimous consent of all of the members in writing
without a meeting.
(d) The Committee is authorized to interpret this Plan and to adopt
rules and procedures relating to the administration of this Plan. All actions of
the Committee in connection with the interpretation and administration of this
Plan shall be binding upon all parties.
(e) The Committee may designate persons other than members of the
Committee to carry out its responsibilities under such conditions and
limitations as it may prescribe, except that the Committee may not delegate its
authority with regard to the granting of Options to Insiders.
(f) Subject to the limitations of Section 13 below, the Committee is
expressly authorized to make such modifications to this Plan as are necessary to
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effectuate the intent of this Plan as a result of any changes in the tax,
accounting, or securities laws treatment of Participants and the Plan.
4. DURATION OF PLAN.
(a) This Plan shall be effective as of January 31, 2002, the date of
its adoption by the Board, provided this Plan is approved by the majority of the
Company's shareholders, in accordance with the provisions of Code Section 422,
on or prior to twelve (12) months after its adoption. In the event that this
Plan is not so approved, this Plan shall terminate and any Options granted under
this Plan shall be void and have no further effect.
(b) This Plan shall terminate on January 31, 2012, except with respect
to Options then outstanding.
5. NUMBER OF SHARES.
(a) The aggregate number of shares of Common Stock which may be issued
pursuant to this Plan shall be one million two hundred thousand (1,200,000)
shares of Common Stock. This aggregate number may be adjusted from time to time
as set forth in Section 13 of this Plan.
(b) Upon the expiration or termination of an outstanding Option which
shall not have been exercised in full, any shares of Common Stock remaining
unissued shall again become available for the granting of additional Options.
6. ELIGIBILITY. Persons eligible for Options under this Plan shall be
limited to the directors, executive officers, and employees of and key
consultants to Latinocare Management Corp. and its Subsidiaries.
7. FORM OF OPTIONS. Options granted under this Plan may be Incentive
Stock Options or Non-Qualified Stock Options. Options shall be subject to the
following terms and conditions:
(a) Options may be granted under this Plan on such terms and in such
form as the Committee may approve, including by not limited to the right to
exercise Options on a cashless basis, which conditions shall not be inconsistent
with the provisions of this Plan.
(b) The exercise price per share of Common Stock purchasable under an
Option shall be set forth in the Option. The exercise price of an option,
determined on the date of the grant, shall be no less than:
(i) One hundred ten percent (110%) of the Fair Market Value of
the Common Stock in the case of a Ten Percent Shareholder; or
(ii) One hundred percent (100%) of the Fair Market Value of
the Common Stock in the case of any other employee.
(c) An Option shall be exercisable at such time or times and be subject
to such terms and conditions as may be set forth in the Option. Except in the
case of Options granted to Officers, Directors, and Consultants, Options shall
become exercisable at a rate of no less than 20% per year over five (5) years
from the date the Options are granted.
(d) The Committee may modify an existing Option, including the right
to:
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(i) Accelerate the right to exercise it;
(ii) Extend or renew it; or
(iii) Cancel it and issue a new Option.
(e) No modification may be made pursuant to Paragraph (d) above to an
Option that would impair the rights of the Participant holding the Option
without his or her consent. Whether a modification of an existing Incentive
Stock Option will be treated as the issuance of a new Incentive Stock Option
will be determined in accordance with the rules of Section 424(h) of the Code.
(f) The aggregate Fair Market Value (determined as of the date of
grant) of the number of shares of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by a Participant during any
calendar year shall not exceed one hundred thousand dollars ($100,000) or such
other limit as may be required by Code Section 422. Should anyone exercise
Incentive Stock Options that exceed this limit, such options will be treated as
non-qualified stock options for tax purposes.
8. ISSUANCE OF OPTIONS.
Stock Options will be granted from time to time in the future on the
terms and conditions recommended by the Committee and approved by the Company's
Board of Directors. Each Option shall be evidenced by a written stock option
agreement, in form satisfactory to the Committee, executed by the Company and
the person to whom such Option is granted. The stock option agreement shall
specify whether each Option it evidences is a Non-Qualified Stock Option or an
Incentive Stock Option.
9. VESTING REQUIREMENT AND PERFORMANCE THRESHOLD.
The vesting requirements, performance thresholds and other terms and
conditions of additional Options which may be granted under this Plan from time
to time, if any, will be determined and approved by the Committee and Board of
Directors; provided, that in all cases unvested Options will automatically
expire and be canceled on the date of the Severance of an Employee or Insider
who holds such Options.
10. TERMINATION OF OPTIONS.
(a) Except to the extent the terms of an Option require its prior
termination, each Option shall terminate on the earliest of the following dates.
(i) The date which is ten (10) years from the date on
which the Option is granted or five (5) years from
the date of grant in the case of an Incentive Stock
Option granted to a Ten Percent Shareholder.
(ii) If the Participant was Disabled at the time of
Severance, the date of the Severance of the
Participant to whom the Option was granted, with
respect to unvested Options, and the date which is
one (1) year from the date of the Severance, with
respect to vested Options.
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(iii) The date of Severance of the Participant to whom the
Option was granted, with respect to unvested Options,
and the date which is ninety (90) days from the date
of the Severance of the Participant to whom the
Option was granted, with respect to vested Options.
(iv) The date which is ninety (90) days after the death of
the Participant, with respect to vested Options, and
the date of death of the Participant, in the case of
unvested Options.
(v) In the case of any Severance other than one described
in Subparagraphs (ii) or (iii) above, the date of the
Participant's Severance, with respect to unvested
Options, and the date that is ninety (90) days from
the date of the Participant's Severance, with respect
to vested Options.
11. NON-TRANSFERABILITY OF OPTIONS.
(a) During the lifetime of the Participant, each Option is exercisable
only by the Participant.
(b) No Option under this Plan shall be assignable or transferable,
except by will or the laws of descent and distribution.
12. ADJUSTMENTS.
(a) In the event of any change in the capitalization of the Company
affecting its Common Stock (e.g., a stock split, reverse stock split, stock
dividend, combination, recapitalization, or reclassification), the Committee
shall authorize such adjustments as it may deem appropriate with respect to:
(i) The aggregate number of shares of Common Stock for
which Options may be granted under this Plan;
(ii) The number of shares of Common Stock covered by each
outstanding Option; and
(iii) The exercise price per share in respect of each
outstanding Option.
(b) The Committee may also make such adjustments in the event of a
spin-off or other distribution (other than normal cash dividends) of Company
assets to shareholders.
13. AMENDMENT AND TERMINATION. The Board may at any time amend or
terminate this Plan. The Board may not, however, without the approval of the
majority-in-interest of the shareholders of the Company, amend the provisions of
this Plan regarding:
(a) The class of individuals entitled to receive
Incentive Stock Options.
(b) The aggregate number of shares of Common Stock that
may be issued under the Plan, except as provided in
Section 12 of this Plan.
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(c) To the extent necessary to comply with Rule 16(b)
under the Exchange Act, the Board may not make any
amendment without approval of the
majority-in-interest of the shareholders of the
Company that would:
(i) Materially increase the aggregate number of
shares of Common Stock which may be issued
to Insiders (except for adjustments under
Section 12 of this Plan);
(ii) Materially modify the requirements as to the
eligibility of Insiders to participate; or
(iii) Materially increase the benefits accruing to
Insiders under this Plan.
14. TAX WITHHOLDING.
(a) The Company shall have the right to take such actions as may be
necessary to satisfy its tax withholding obligations relating to the operation
of this Plan.
(b) If Common Stock is used to satisfy the Company's tax withholding
obligations, the stock shall be valued based on its Fair Market Value when the
tax withholding is required to be made.
15. NO ADDITIONAL RIGHTS.
(a) The existence of this Plan and the Options granted hereunder shall
not affect or restrict in any way the power of the Company to undertake any
corporate action otherwise permitted under applicable law.
(b) Neither the adoption of this Plan nor the granting of any Option
shall confer upon any Participant the right to continue performing services for
the Company, nor shall it interfere in any way with the right of the Company to
terminate the services of any Participant at any time, with or without cause.
(c) No Participant shall have any rights as a shareholder with respect
to any shares covered by an Option until the date a certificate for such shares
has been issued to the Participant following the exercise of the Option.
16. SECURITIES LAW RESTRICTIONS.
(a) No shares of Common Stock shall be issued under this Plan unless
the Committee shall be satisfied that the issuance will be in compliance with
applicable federal and state securities laws.
(b) The Committee may require certain investment or other
representations and undertakings by the Participant (or other person acquiring
the right to exercise the Option by reason of the death of the Participant) in
order to comply with applicable law.
(c) Certificates for shares of Common Stock delivered under this Plan
may be subject to such restrictions as the Committee may deem advisable. The
Committee may cause a legend to be placed on the certificates to refer to these
restrictions.
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17. EMPLOYMENT OR CONSULTING RELATIONSHIP. Nothing in the Plan or any
Option granted hereunder shall interfere with or limit in any way the right of
the Company or any of its Parents or Subsidiaries to terminate any Participant's
employment or consulting at any time, nor confer upon any Participant any right
to continue in the employ of, or consult with, the Company or any of its Parents
or Subsidiaries.
18. MARKET STANDOFF. Each Participant, if so requested by the Company
or any representative of the underwriters in connection with any registration of
the offering of any securities of the Company under the Securities Act, shall
not sell or otherwise transfer any shares of Common Stock acquired upon exercise
of Options during a specified period following the effective date of a
registration statement of the Company filed under the Securities Act not to
exceed six months; provided, however, that such restriction shall apply only to
the first registration statement of the Company to become effective under the
Securities Act after the date of adoption of the Plan which includes securities
to be sold on behalf of the Company to the public in an underwritten public
offering under the Securities Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restriction
until the end of such six month period.
19. SHAREHOLDER'S AGREEMENT. Each Participant who acquires Common Stock
through the exercise of Options, if so requested by the Company, shall execute a
Shareholder's Agreement which provides for the disposition of the Common Stock
in the event the Participant seeks to dispose of his Common Stock or incurs a
Severance.
20. INDEMNIFICATION. To the maximum extent permitted by law, the
Company shall indemnify each member of the Board and of the Committee, as well
as any other Employee of or Key Consultant to the Company with duties under this
Plan, against expenses (including any amount paid in settlement) reasonably
incurred by him or her in connection with any claims against him or her by
reason of the performance of his or her duties under this Plan, unless the
losses are due to the individual's gross negligence or lack of good faith.
21. GOVERNING LAW. This Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of
California. The venue for any legal proceeding under this Plan will be in the
appropriate forum in the County of Los Angeles, State of California.
Date: January 31, 2002 Latinocare Management Corp.,
a Nevada Corporation
By: /s/Jose Gonzalez
---------------------------------------
Jose Gonzalez, President
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