EXHIBIT 10.3
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ESSENTIAL TEC, INC.
2000 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN
1. Purpose
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This Incentive and Nonstatutory Stock Option Plan (the "Plan") is intended
to further the growth and financial success of Essential Tec, Inc., a Nevada
corporation (the "Corporation") by providing additional incentives to selected
employees, directors, and consultants to the Corporation or parent corporation
or subsidiary corporation of the Corporation as those terms are defined in
Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended (the
"Code") (such parent corporations and subsidiary corporations hereinafter
collectively referred to as "Affiliates") so that such employees and consultants
may acquire or increase their proprietary interest in the Corporation. Stock
options granted under the Plan (hereinafter "Options") may be either "Incentive
Stock Options," as defined in Section 422A of the Code and any regulations
promulgated under said Section, or "Nonstatutory Options" at the discretion of
the Board of Directors of the Corporation (the "Board") and as reflected in the
respective written stock option agreements granted pursuant hereto.
2. Administration
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The Plan shall be administered by the Board of Directors of the
Corporation; provided however, that the Board may delegate such administration
to a committee of not fewer than three (3) members (the "Committee"), at least
two (2) of whom are members of the Board and all of whom are disinterested
administrators, as contemplated by Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule 16b-3"); and provided further, that the
foregoing requirement for disinterested administrators shall not apply prior to
the date of the first registration of any of the securities of the Corporation
under the Securities Act of 1933, as amended.
Subject to the provisions of the Plan, the Board and/or the Committee shall
have authority to (a) grant, in its discretion, Incentive Stock Options in
accordance with Section 422A of the Code or Nonstatutory Options; (b) determine
in good faith the fair market value of the stock covered by an Option; (c)
determine which eligible persons shall be granted Options and the number of
shares to be covered thereby and the term thereof; (d) construe and interpret
the Plan; (e) promulgate, amend and rescind rules and regulations relating to
its administration, and correct defects, omissions, and inconsistencies in the
Plan or any Option; (f) consistent with the Plan and with the consent of the
optionee, as appropriate, amend any outstanding Option or amend the exercise
date or dates thereof; (g) determine the duration and purpose of leaves of
absence which may be granted to optionholders without constituting termination
of their employment for the purpose of the Plan; and (h) make all other
determinations necessary or advisable for the Plan's administration. The
interpretation and construction by the Board of any provisions of the Plan or of
any Option it shall be conclusive and final. No member of the Board or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option.
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3. Eligibility
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The persons who shall be eligible to receive Options shall be employees,
directors, or consultants of the Corporation or any of its Affiliates
("Optionees"). The term consultant shall mean any person who is engaged by the
Corporation to render services and is compensated for such services, and any
director of the Corporation whether or not compensated for such services;
provided that, if the Corporation registers any of its securities pursuant to
the Securities Act of 1933, as amended (the "Act"), the term consultant shall
thereafter not include directors who are not compensated for their services or
are paid only a director fee by the Corporation.
(a) Incentive Stock Options. Incentive Stock Options may only be
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issued to employees of the Corporation or its Affiliates. Incentive Stock
Options may be granted to officers, whether or not they are directors, but a
director shall not be granted an Incentive Stock Option unless such director is
also an employee of the Corporation. Payment of a director fee shall not be
sufficient to constitute employment by the Corporation. Any grant of option to
an officer or director of the Corporation subsequent to the first registration
of any of the securities of the Corporation under the Act shall comply with the
requirements of Rule 16b-3. An optionee may hold more than one Option.
The Corporation shall not grant an Incentive Stock Option under the Plan to
any employee if such grant would result in such employee holding the right to
exercise for the first time in any one calendar year, under all options granted
to such employee under the Plan or any other stock option plan maintained by the
Corporation or any Affiliate, with respect to shares of stock having an
aggregate fair market value, determined as of the date of the Option is granted,
in excess of one hundred thousand dollars ($100,000). Should it be determined
that an Incentive Stock Option granted under the Plan exceeds such maximum for
any reason other than a failure in good faith to value the stock subject to such
option, the excess portion of such option shall be considered a Nonstatutory
Option. If, for any reason, an entire option does not qualify as an Incentive
Stock Option by reason of exceeding such maximum, such option shall be
considered a Nonstatutory Option.
(b) Nonstatutory Option. The provisions of the foregoing Section 3(a)
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shall not apply to any option designated as a "Nonstatutory Stock Option
Agreement" or which sets forth the intention of the parties that the option be a
Nonstatutory Option.
4. Stock
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The stock subject to Options shall be the shares of the Corporation's
authorized but unissued or reacquired Common Stock (the "Stock").
(a) Number of Shares. Subject to adjustment as provided in Paragraph
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5(h) of this Plan, the total number of shares of Stock which may be purchased
through exercise of Options granted under this Plan shall not exceed one million
(1,000,000) shares. If any Option shall for any reason terminate or expire, any
shares allocated thereto but remaining unpurchased upon such expiration or
termination shall again be available for the grant of Options with respect
thereto under this Plan as though no Option had been granted with respect to
such shares.
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(b) Reservation of Shares. The Corporation shall reserve and keep
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available at all times during the term of the Plan such number of shares as
shall be sufficient to satisfy the requirements of the Plan. If, after
reasonable efforts, which efforts shall not include the registration of the Plan
or Options under the Act, the Corporation is unable to obtain authority from any
applicable regulatory body, which authorization is deemed necessary by legal
counsel for the Corporation for the lawful issuance of shares hereunder, the
Corporation shall be relieved of any liability with respect to its failure to
issue and sell the shares for which such requisite authority was so deemed
necessary unless and until such authority is obtained.
5. Terms and Conditions of Options
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Options granted hereunder shall be evidenced by agreements between the
Corporation and the respective Optionees, in such form and substance as the
Board or Committee shall from time to time approve. Such agreements need not be
identical, and in each case may include such provisions as the Board or
Committee may determine, but all such agreements shall be subject to and limited
by the following terms and conditions:
(a) Number of Shares: Each Option shall state the number of shares to
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which it pertains.
(b) Option Price: Each Option shall state the Option Price, which
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shall be determined as follows:
(i) Any Option granted to a person who at the time the Option is
granted owns (or is deemed to own pursuant to Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of
value of all classes of stock of the Corporation, or of any Affiliate, ("Ten
Percent Holder") shall have an Option Price of no less than one hundred ten
percent (110%) of the fair market value of the common stock as of the date of
grant; and
(ii) Incentive Stock Options granted to a person who at the time the
Option is granted is not a Ten Percent Holder shall have an Option price of no
less than one hundred percent (100%) of the fair market value of the common
stock as of the date of grant.
(iii) Nonstatutory Options granted to a person who at the time the
Option is granted is not a Ten Percent Holder shall have an Option Price
determined by the Board as of the date of grant.
For the purposes of this paragraph 5(b), the fair market value shall be as
determined by the Board, in good faith, which determination shall be conclusive
and binding; provided however, that if there is a public market for such stock,
the fair market value per share shall be the average of the bid and asked prices
(or the closing price if such stock is listed on the NASDAQ National Market
System) on the date of grant of the Option, or if listed on a stock exchange,
the closing price on such exchange on such date of grant.
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(c) Medium and Time of Payment: To the extent permissible by
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applicable law, the Option price shall be paid, at the discretion of the Board,
at either the time of grant or the time of exercise of the Option (i) in cash or
by check, (ii) by delivery of other common stock of the Corporation, provided
such tendered stock was not acquired directly or indirectly from the
Corporation, or, if acquired from the Corporation, has been held by the Optionee
for more than six (6) months, (iii) by the Optionee's promissory note in a form
satisfactory to the Corporation and bearing interest at a rate determined by the
Board, in its sole discretion, but in no event less than 6% per annum, or (iv)
such other form of legal consideration permitted by State law as may be
acceptable to the Board.
(d) Term and Exercise of Options: Any Option granted to an Employee of
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the Corporation shall become exercisable over a period of no longer than ten
(10) years, and no less than twenty percent (20%) of the shares covered thereby
shall become exercisable annually. No Option shall be exercisable, in whole or
in part, prior to one (1) year from the date it is granted unless the Board
shall specifically determine otherwise, as provided herein. In no event shall
any Option be exercisable after the expiration of ten (10) years from the date
it is granted. Unless otherwise specified by the Board or the Committee in the
resolution authorizing such option, the date of grant of an Option shall be
deemed to be the date upon which the Board or the Committee authorizes the
granting of such Option.
Each Option shall be exercisable to the nearest whole share, in
installments or otherwise, as the respective option agreements may provide.
During the lifetime of an Optionee, the Option shall be exercisable only by the
Optionee and shall not be assignable or transferable by the Optionee, and no
other person shall acquire any rights therein. To the extent not exercised,
installments (if more than one) shall accumulate, but shall be exercisable, in
whole or in part, only during the period for exercise as stated in the option
agreement, whether or not other installments are then exercisable.
(e) Termination of Status as Employee, Director, or Consultant: If
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Optionee's status as an employee, director, or consultant shall terminate for
any reason other than Optionee's death, then the Optionee (or if the Optionee
shall die after such termination, but prior to exercise, Optionee's personal
representative or the person entitled to succeed to the Option) shall have the
right to exercise any vested Options, in whole or in part, at any time within
thirty (30) days after such termination (or in the event Optionee's termination
was caused by permanent disability (within the meaning of Section 22(e)(3) of
the Code) this 30-day period shall be extended to six (6) months) or the
remaining term of the Option, whichever is the lesser; provided, however, that
with respect to Nonstatutory Options, the Board may specify such longer period,
not to exceed six (6) months, for exercise following termination as the Board
deems reasonable and appropriate. The Option may be exercised only with respect
to installments that the Optionee could have exercised at the date of
termination of employment. Nothing contained herein or in any Option granted
pursuant hereto shall be construed to affect or restrict in any way the right of
the Corporation to terminate the employee of an Optionee with or without cause.
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(f) Death of Optionee: If an Optionee dies while employed or engaged as
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a director or consultant by the Corporation or an Affiliate, the portion of such
Optionee's Option or Options which were exercisable at the date of death may be
exercised, in whole or in part, by the estate of the decedent or by a person
succeeding to the right to exercise such Option or Options, at any time within
the remaining term of the Option, but only to the extent, that Optionee could
have exercised the Option as of the date of Optionee's death; provided, in any
case, that the Option may be so exercised only to the extent that the Option has
not previously been exercised by Optionee.
(g) Nontransferability of Option: No Option shall be transferable by
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the Optionee, except by will or by the laws of descent and distribution.
(h) Recapitalization: Subject to any required action by the
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stockholders, the number of shares of common stock covered by each outstanding
Option, and the price per share thereof set forth in each such Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of common stock of the Corporation resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, or any other
increase or decrease in the number of such shares affected without receipt of
consideration by the Corporation.
Subject to any required action by the stockholders, if the Corporation
shall be the surviving entity in any merger or consolidation, each outstanding
Option thereafter shall pertain to and apply to the securities to which a holder
of shares of common stock equal to the shares subject to the Option would have
been entitled by reason of such merger or consolidation. A dissolution or
liquidation of the Corporation or a merger or consolidation in which the
Corporation is not the surviving entity shall cause each outstanding Option to
terminate on the effective date of such dissolution, liquidation, merger or
consolidation. In such event, if the entity which shall be the surviving entity
does not tender to Optionee an offer, for which it has no obligation to do so,
to substitute for any unexercised Option a stock option or capital stock of such
surviving entity, as applicable, which on an equitable basis shall provide the
Optionee with substantially the same economic benefit as such unexercised
Option, then the Board may grant to such Optionee, but shall not be obligated to
do so, the right for a period commencing thirty (30) days prior to and ending
immediately prior to such dissolution, liquidation, merger or consolidation or
during the remaining term of the Option, whichever is the lesser, to exercise
any unexpired Option or Options, without regard to the installment provisions of
Paragraph 5(d) of this Plan; provided, that any such right granted shall be
granted to all Optionees not receiving an offer to substitute on a consistent
basis, and provided further, that any such exercise shall be subject to the
consummation of such dissolution, liquidation, merger or consolidation.
In the event of a change in the common stock of the Corporation as
presently constituted, which is limited to a change of all of its authorized
shares without par value into the same number of shares with a par value, the
shares resulting from any such change shall be deemed to be the common stock
within the meaning of this Plan.
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To the extent that the foregoing adjustments relate to stock or securities
of the Corporation, such adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided in this Paragraph 5(h), the Optionee shall have no rights by
reason of any subdivision or consolidation of shares of stock or any class or
the payment of any stock dividend or any other increase or decrease in the
number of shares of stock of any class, and the number or price of shares of
common stock subject to any Option shall not be affected by, and no adjustment
shall be made by reason of, any dissolution, liquidation, merger or
consolidation, or any issue by the Corporation of shares of stock of any class
or securities convertible into shares of stock of any class.
The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Corporation to make any adjustments, reclassifications,
reorganizations or changes in its capital or business structure or to merge,
consolidate, dissolve, or liquidate or to sell or transfer all or any part of
its business or assets.
(i) Rights as a Stockholder: An Optionee shall have no rights as a
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stockholder with respect to any shares covered by an Option until the date of
the issuance of a stock certificate to Optionee for such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which the
record date is prior to the date such stock certificate is issued, except as
expressly provided in Paragraph 5(h) hereof.
(j) Modification, Acceleration, Extension, and Renewal of Options:
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Subject to the terms and conditions and within the limitations of the Plan, the
Board may modify an Option, or once an Option is exercisable, accelerate the
rate at which it may be exercised, and may extend or renew outstanding Options
granted under the Plan or accept the surrender of outstanding Options (to the
extent not theretofore exercised) and authorize the granting of new Options in
substitution for such Options, provided such action is permissible under Section
422A of the Code and state law.
Notwithstanding the foregoing provisions of this Paragraph 5(j), however,
no modification of an Option shall, without the consent of the Optionee, alter
to the Optionee's detriment or impair any rights or obligations under any Option
theretofore granted under the Plan.
(k) Investment Intent: Unless and until the issuance and sale of the
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shares subject to the Plan are registered under the Act, each Option under the
Plan shall provide that the purchases of stock thereunder shall be for
investment purposes and not with a view to, or for resale in connection with,
any distribution thereof. Further, unless the issuance and sale of the stock
have been registered under the Act, each Option shall provide that no shares
shall be purchased upon the exercise of such Option unless and until (i) any
then applicable requirements of state and federal laws and regulatory agencies
shall have been fully complied with to the satisfaction of the Corporation and
its counsel, and (ii) if requested to do so by the Corporation, the person
exercising the Option shall (i) give written assurances as to knowledge and
experience of such person (or a representative employed by such person) in
financial and business matters and the ability of such person (or
representative) to evaluate the merits and risks of exercising the Option, and
(ii) execute and deliver to the Corporation a letter of investment intent, all
in such form and substance as the Corporation may require. If shares are issued
upon exercise of an Option without registration under the Act, subsequent
registration of such shares shall relieve the purchaser thereof of any
investment restrictions or representations made upon the exercise of such
Options.
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(l) Exercise Before Exercise Date: At the discretion of the Board, the
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Option may, but need not, include a provision whereby the Optionee may elect to
exercise all or any portion of the Option prior to the stated exercise date of
the Option or any installment thereof. Any shares so purchased prior to the
stated exercise date shall be subject to repurchase by the Corporation upon
termination of Optionee's employment as contemplated by Paragraphs 5(e), 5(f)
and 5(g) hereof prior to the exercise date stated in the Option and such other
restrictions and conditions as the Board or Committee may deem advisable.
(m) Other Provisions: The Option agreements authorized under this Plan
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shall contain such other provisions, including, without limitation, restrictions
upon the exercise of the Options, as the Board or the Committee shall deem
advisable. Shares shall not be issued pursuant to the exercise of an Option, if
the exercise of such Option or the issuance of shares thereunder would violate,
in the opinion of legal counsel for the Corporation, the provisions of any
applicable law or the rules or regulations of any applicable governmental or
administrative agency or body, such as the Act, the Securities Exchange Act of
1934, the rules promulgated under the foregoing or the rules and regulations of
any exchange upon which the shares of the Corporation are listed.
6. Availability of Information
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During the term of the Plan and any additional period during which an
Option granted pursuant to the Plan shall be exercisable, the Corporation shall
make available, not later than one hundred and twenty (120) days following the
close of each of its fiscal years, such financial and other information
regarding the Corporation as is required by the bylaws of the Corporation and
applicable law to be furnished in an annual report to the stockholders of the
Corporation.
7. Effectiveness of Plan; Expiration
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Subject to approval by the stockholders of the Corporation, this Plan shall
be deemed effective as of the date it is adopted by the Board. The Plan shall
expire on March 1, 2010, but such expiration shall not affect the validity of
outstanding Options.
8. Amendment and Termination of the Plan
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The Board may, insofar as permitted by law, from time to time, with respect
to any shares at the time not subject to Options, suspend or terminate the Plan
or revise or amend it in any respect whatsoever, except that without the
approval of the stockholders of the Corporation, no such revision or amendment
shall (i) increase the number of shares subject to the Plan, (ii) decrease the
price at which Options may be granted, (iii) materially increase the benefits to
Optionees, or (iv) change the class of persons eligible to receive Options under
this Plan; provided, however, no such action shall alter or impair the rights
and obligations under any Option outstanding as of the date thereof without the
written consent of the Optionee thereunder. No Option may be granted while the
Plan is suspended or after it is terminated, but the rights and obligations
under any Option granted while the Plan is in effect shall not be impaired by
suspension or termination of the Plan.
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9. Indemnification of Board
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In addition to such other rights or indemnifications as they may have as
directors or otherwise, and to the extent allowed by applicable law, the members
of the Board and the Committee shall be indemnified by the Corporation against
the reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any claim, action, suit or
proceeding, or in connection with any appeal thereof, to which they or any of
them may be a party by reason of any action taken, or failure to act, under or
in connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Corporation) or paid by them in
satisfaction of a judgment in any such claim, action, suit or proceeding, except
in any case in relation to matters as to which it shall be adjudged in such
claim, action, suit or proceeding that such Board member is liable for
negligence or misconduct in the performance of his or her duties; provided that
within sixty (60) days after institution of any such action, suit or Board
proceeding the member involved shall offer the Corporation, in writing, the
opportunity, at its own expense, to handle and defend the same.
10. Application of Funds
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The proceeds received by the Corporation from the sale of common stock
pursuant to the exercise of Options will be used for general corporate purposes.
11. No Obligation to Exercise Option
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The granting of an Option shall impose no obligation upon the Optionee to
exercise such Option.
12. Notices
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All notice, requests, demand, and other communications pursuant this Plan
shall be in writing and shall be deemed to have been duly given on the date of
service if served personally on the party to whom notice is to be given, or on
the third day following the mailing thereof to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid.
13. Financial Statements
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Optionees under this Plan shall receive financial statements annually
regarding the Corporation during the period the options are outstanding. The
financial statements provided need not comply with Title 10, Section 260.613 of
the Nevada Code of Regulations.
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* * * * *
The foregoing Incentive and Nonstatutory Stock Option Plan was duly adopted
and approved by the Board of Directors on March 1, 2000, and approved by the
shareholders of the Corporation effective March 1, 2000.
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Imran Husain, Secretary
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